Chapter leaders need to emphasize the importance of ethical standards in the preparation of financial statements, as well as the proper execution of routine chapter accounting processes through strong internal controls.
- Authorization
- Will ensure that proper “checks and balances” are in place so that all transactions are executed in accordance with approved roles and responsibilities.
- Recording
- Will ensure all authorized transactions are properly recorded and reported in the correct time period to match revenues and expenses.
- Compliance
- Will ensure that standardized and generally accepted accounting principles are applied consistently.
One key to proper internal control is making certain that various financial responsibilities are assigned to different individuals. This segregation of duties is intended to prevent a single individual from having both access to a specific role or transaction and the responsibility for maintaining the accountability for a specific role or transaction .To illustrate:
- If an individual processes vendor payments then that individual should not review and authorize that payment.
- If an individual processes vendor payments, then that individual should not also have the ability to add, remove and/or change vendors without written approval from a chapter officer (preferably of higher rank than the individual processing the payments).
Listed below are some general questions to consider when determining whether or not appropriate segregation of duties exist in the Chapter:
- Are transactions recorded and approved or reviewed by an individual who does not have unrestricted access to related assets?
- Are there different individuals involved in:
- Initiating a transaction?
- Funding the transaction?
- Recording the transaction?
- Reconciling and/or reporting the transaction?
- Writing off and/or discounting the transaction?
- Adding, changing or deleting master membership information?
- Are reconciliations performed and reviewed by individuals who do not have unrestricted access to cash?
- Are different individuals involved in:
- Ability to impact general ledger accounts?
- Reconciliation of those general ledger accounts?
- Preparation of financial statements?
- Analysis of balance sheet and/or income statements?
- Does the chapter have an annual independent review and formal reporting of the Chapter’s segregation of roles and responsibilities?
The checklist on the following page highlights the major responsibilities of the Chapter Officers and Administrator in the area of financial controls. Execution of these responsibilities will promote strong internal controls, improve accuracy, timeliness and completeness of financial reporting while minimizing the opportunity for fraud.
Role | Responsibilities |
| Council and/or Executive Council | Review of the annual budget |
| Review of significant expenditures, transactions and/or budget variances |
| Review of annual audit findings |
| Review of annual tax filings |
| Review and formal approval of all gifts, grants, engagement fees, honorariums etc. |
| President and/or President Elect | Review of the annual budget |
| Appoint Audit Committee |
| Conduct an annual review of Audit Committee’s findings with all Chapter officers |
| Conduct a quarterly review of financial results with all Chapter officers |
| Conduct a quarterly review of all significant expenditures, transactions and/or budget variances with all Chapter officers |
| President ONLY | Second signatory for all payments by check or credit card above established amount |
| Present all requests for gifts, grants, engagement fees, honoraria, and so forth |
| Secretary | Review of the annual budget |
| Member of Audit Committee |
| Participate in all Audit Committee meetings |
| Participate in quarterly review of financial results |
| Participate in quarterly review of all significant expenditures, transactions and/or budget variances |
| Review of all cash disbursements |
| Second signatory for all payments by check or credit card above established amount |
| Treasurer | Prepare the annual budget |
| Member of Audit Committee |
| Initiates opening and closing and/or revisions to all bank and/or investment accounts |
| Execute internal control procedures/checklist |
| Prepare and review monthly financial results |
| Prepare and review all Federal and State Tax forms |
| Present financial results at the President’s quarterly meeting |
| Review and approve all transactions, cash receipts and disbursements |
| Primary signatory for all payments by check or credit card |
| Review and approve all financial transactions initiated by the Chapter Secretary/Executive Secretary |
| Establish and control all responsibilities of the Chapter Secretary |
| Chapter Administrator | Responsible for administrative functions as detailed by the Treasurer, Secretary Treasurer, and the President, including primary signatory for all payments by check or credit card, as determined by the Chapter officers |
To further illustrate the importance of segregating responsibilities, the following charts outline examples of how responsibilities can be separated for Accounts Payable and Receivable:
Process Controls for Accounts Payable |
| Duty | Responsibility | Approval | Special Notes | Frequency |
| Create bank accounts | Treasurer | President | | As required |
| Create a vendor | Administrator or Treasurer | Treasurer—written authorization | Treasurer should review vendor info and payment terms before the first payment is processed | As received |
| Modify or delete vendor master data | Administrator or Treasurer | Treasurer—written authorization | Check for potential tax (W2) implications before changing or deleting | As received |
| Initiate purchase request | Administrator or Treasurer | Treasurer—written authorization | Recommend two signatures on all purchases greater than $2,000 | As received |
| Receipt of goods/ invoice approval | Requestor | | | As received |
| Matching-purchase request to signed receipt | Administrator or Treasurer | | | As received |
| Prepare check | Administrator or Treasurer | Chapter Officer and/or p.o. initiator’s signature is required on the invoice | | Per invoice |
| Change an invoice quantity or $ amount | Administrator or Treasurer | Treasurer—written authorization | Treasurer should request a new invoice from the vendor | As required |
| Invoice filing | Administrator or Treasurer | In accordance with record retention policy | | Ongoing |
| Check/voucher reconciliation | Treasurer | | Audit Committee review | Monthly |
| Follow up on open items | Treasurer | | Audit Committee review | Quarterly |
| Review, authorize or sign checks | Treasurer & Secretary, Secretary & President or Treasurer & President | Recommend two signatures on all purchases greater than $2,000 | | Ongoing |
| Mail checks | Administrator or Treasurer | None | | Ongoing |
Process Controls for Accounts Receivable |
| Duty | Responsibility | Approval | Frequency |
| Create bank accounts | Treasurer | President | As required |
| Establish and maintain roster of active dues paying chapter members | Administrator or Treasurer | | As received |
| Create and produce annual dues invoices | Administrator or Treasurer | Treasurer review | As received |
| Mail annual dues invoices | Administrator or Treasurer | | As required |
| Record receivables | Administrator or Treasurer | Treasurer review | As received |
| Record cash receipts | Administrator or Treasurer | Treasurer review | Daily |
| Create bank deposits | Administrator or Treasurer | Treasurer review | Daily |
| Deposit cash | Administrator or Treasurer | Treasurer review | Daily |
| Record credit card receipts | Administrator or Treasurer | Treasurer review | Daily |
| Record receivables to Accounts Receivable ledger | Administrator or Treasurer | Treasurer review | Daily |
| Reconcile bank accounts | Treasurer | Audit Committee review | Monthly |
| Reconcile/review Accounts Receivable ledger | Treasurer | Audit Committee review | Monthly |
