ACCOUNTING PROCEDURES

POLICY STATEMENTS

BAU uses the accrual basis of accounting. The accrual basis is the method of accounting whereby revenue and expenses are identified with specific periods of time, such as a month or year, and are recorded as incurred. This method of recording revenue and expenses is without regard to date of receipt or payment of cash.

PROCEDURES

• Throughout the fiscal year, expenses are accrued into the month in which they are incurred. The books are closed no later than ten (10) business days after the close of the month. Invoices received after closing the books will be counted as a current-month expense.
• At the close of the fiscal year, this rule is not enforced. All expenses that should be accrued into the prior fiscal year, are so accrued, in order to ensure that year-end financial statements reflect all expenses incurred during the fiscal year. Year-end books are closed no later than sixty (60) days after the end of the fiscal year.
• Revenue is always recorded in the month in which it was earned or pledged.

DEFINITIONS

Fiscal year: A fiscal year is a 12-month accounting period that a business uses for financial and tax reporting purposes. BAU’s fiscal year starts on July 1 and ends on June 30.

EXCEPTIONS

None

POLICY STATEMENT

QuickBooks Online (QB) is the system of record for BAU accounting transactions. QB is integrated with the CRM (namely Salesforce) and the Student Information System (namely MyBAU). Access to the system of record should only be provided to individuals whose jobs require access to the system and at a minimum level needed to perform the intended function. Access to the financial system must be periodically verified as staff are hired, leave, or change positions at the University. Managers must ensure User Roles and authorization reflect responsibilities of staff. A person’s responsibilities in a new position may not require the same access as their previous position or that of their predecessor. In addition, the exiting manager must remove all roles pertaining to a vacated position. When granting financial security it must be ensured that segregation of duties exists between current user roles and requested roles.

PROCEDURES

The President and the CFO has the admin system access that enables them to send money, change passwords, and add users. Not everyone should be an admin. The President authorizes other users with admin system access. Users with The Accounts Payable Manager or higher role can see and do everything with expenses, vendors, and A/P reports. Users with The Accounts Receivable Staff or higher role can see and do everything with sales, customers, and A/R reports. Users with Payroll Manager role or higher can manage employees, run payroll, and do other payroll tasks. With any new position created in the Finance Office, the President shall identify the appropriate role with functions in line with the job description and is allowed on the system of record. All users are required to complete the training to use the system of record accurately and properly.

DEFINITIONS

User Roles – Within the financial system, user roles are those functions or system features that an employee may have access to complete necessary financial tasks.

EXCEPTIONS

None

POLICY STATEMENT

BAU uses the fiscal year of July 1 to June 30.

PROCEDURES

• Annual accounting records are divided into accounting periods 01 through 12, inclusive. Each accounting period refers to a calendar month, July through June respectively.
• Accounting period 13 is utilized for year-end accounting and reporting adjustments.
• Each accounting period is closed following a month-end entry and reconciliation period, generally within ten (10) business days of the end of the calendar month (except at fiscal year-end).
• Once an accounting period is closed, it may not be reopened except in an extreme and unusual circumstance. An Accounts Receivable or an Accounts Payable Manager may request the CFO to review an entry. The CFO reviews it and presents it to the approval of the President to reopen the period.

DEFINITIONS

–

EXCEPTIONS

None

POLICY STATEMENT

Periodically journal entry “adjustment” transactions to BAU’s General Ledger (GL) are required to correct errors, transfer funds, and accrue or defer revenues and expenses. The journal entry policy requires that all journal entries be created and approved by authorized and trained users, be consistent with BAU’s accounting policies and Generally Accepted Accounting Principles in the United States (US GAAP), be posted to the appropriate cost object and GL account, incorporate sufficient supporting documentation, and comply with sponsor and donor restrictions. This policy applies only to manual journal entries.

Charges and revenues must be between the start date and end date of the cost object and GL account used. Accrual and deferral journal entries should follow US GAAP, ensuring that expenses are recorded in the period the goods or services were received, and revenues are recorded in the period earned.

PROCEDURES

• Journal entries manually entered are required to have detailed supporting documentation. Supporting documentation must be stored and available at the time the preparer submits the journal entry template for approval.
• All Journal entries must be prepared in the standard journal entry template with detailed supporting documentations (unless it contains confidential information). The entry must be signed by the preparer and approved by the CFO and the entry must have email approval and supporting documentation. Journal entries over $100,000 will be reviewed by the President.
• All journal entries must be approved timely within ten (10) days of preparation in QB.
• Evidence of journal entry approval is required to be in the form of a written signature or electronic approval via email.

DEFINITIONS

General Ledger: The General Ledger (GL) contains all BAU financial transactions. Currently, QuickBooks Online is used to keep the general ledger (system of record). A number of other “feeder systems”—for example, the payroll system—also post to the General Ledger.

Journal Entry: A journal entry records financial transactions in the general ledger. BAU utilizes the double entry accounting system, thus there are always both debit and credit journal entry lines and the total debits must equal the total credits.

Supporting Documentation: Supporting documentation consists of source documents, supportive calculations, and/or other items necessary to substantiate the accuracy and appropriateness of a journal entry. Typical supporting documents include, but are not limited to, general ledger reports (such as transaction detail report), worksheets with supportive calculations, copies of source documents such as check requests, purchase requisitions, travel expense reports, third party reports/statements, or related emails. Sensitive information (such as social security numbers and patient information) should be removed within the support, or the support should note that the initiating department has the source documentation.

Preparer: The individual who creates the journal entry and compiles the supporting documentation. The preparer with QB access may process the journals in the accounting system directly with proper supporting document attached in the system for the approver to review.

Approver: The individual who is responsible for reviewing the journal entry template and supporting documentations for validity, accuracy, and completeness prior to approving for posting it to the General Ledger. It must be different from the preparer.

EXCEPTIONS

None

POLICY STATEMENT

It is the policy of BAU that all incoming or outgoing funds to BAU’s bank accounts be recorded in the general ledger on a timely basis. Frequent bank reconciliation is essential to prevent fraud and to ensure the funds are handled with fiscal and fiduciary responsibility. This policy applies to all bank accounts held by BAU.

Bank account reconciliation is a key component of good controls over cash and should be done in a timely manner. Reconciling the bank statement balance with the book balance (general ledger) is necessary to ensure that (1) all receipts and disbursements are recorded (an essential process in ensuring complete and accurate monthly financial statements); (2) checks are clearing the bank in a reasonable time; (3) reconciling items are appropriate and are being recorded; and (4) the reconciled cash balance agrees to the general ledger cash balance.

All bank statements will be opened and reviewed in a timely manner. Bank reconciliation and approval will occur within ten (10) days of the close of the month.

PROCEDURES

• Manual processes will be utilized for reconciliation.
• Each bank account will be reconciled on a monthly basis and within ten (10) business days of the end of the month.
• Any unmatched book/bank lines or other reconciling items should be corrected within sixty (60) days of the reconciled month. Any reconciling items outstanding greater than sixty (60) days will be recorded in other operating revenue or other operating expense in BAU financials. If a check has not been cleared for more than sixty (60) days, the Accounting Staff will reach out to the vendor and if needed void out any uncleared check.
• Bank account reconciliations will be prepared by a reconciliation accountant and approved by the Chief Finance Officer. Their signatures on the bank account reconciliation summary will confirm that current procedures were followed and that the reconciliation accurately presents the status of the account at the bank as well as on the general ledger.
• By the last day of the closing of the month, the Chief Finance Officer will provide a copy of the signed bank account reconciliation summary electronically on the shared drive to the President indicating the reconciliation status.
• The original bank account reconciliation summary will be electronically filed on the shared drive of Finance Office. All supporting documentation will be maintained electronically on the same folder on the drive. The electronic files will be maintained in accordance with BAU record retention guidelines and will be made available to the CFO and the President upon request.

DEFINITIONS

Bank Statement: A paper or electronic record of all financial activity for the prior month provided by each bank.

Reconciling Item: Any activity on either the bank statement or the general ledger but not recorded in the other. Examples include:

• Bank not Book – this is an unmatched bank line that represents a deposit/withdrawal that appears on bank statement but not on general ledger
• Book not Bank – this is an unmatched book line that represents deposit/withdrawal on general ledger but not on bank statement

Bank account reconciliation: Process of confirming that the bank statement is valid and accurate, that transactions are reflected properly in the general ledger account and that the ending balance on the general ledger account is accurate. Any differences should be identified, reconciling items investigated, and balances adjusted appropriately.

Bank account reconciliation summary: A one page summary for each bank account that shows the bank balance, book balance, timing differences and all reconciling items.

EXCEPTIONS

None

POLICY STATEMENT

This policy establishes the process for creating the chart of accounts, general ledger entry procedures and preparing monthly general ledger.

The chart of accounts is the basis for the general ledger and the accounting system for BAU. General ledger accounts are used to keep track of transactions and how these transactions affect each asset, liability, revenue, expense, and net position account. Closing general ledger allows the removal of voided journal entries and old historical records.

The Chief Financial Officer (CFO) controls the chart of accounts, ensuring that the chart of accounts meets the needs of the:

• Organizational structure, divisions, and departments
• Internal financial management reporting, and
• External and regulatory reporting requirements

The Finance Office is responsible for ensuring the proper recording and classification of all revenues, expenses, assets, liabilities, and fund balances. The CFO will ensure the proper recording and
classification by properly maintaining the Chart of Accounts of the General Ledger and overseeing account setup and the assignment of attributes to accounts. All submissions by departments to the Finance Office to change attributes on accounts or to set up new accounts must be reviewed by the CFO and approved by the President.

PROCEDURES

Chart of Accounts: The President approves the chart of accounts and the CFO maintains the approved accounts, including additions and deletions, within the accounting system.

General Ledger Entry: BAU’s General Ledger is maintained by the CFO. The CFO enters all disbursements into the computerized General Ledger, maintaining one set of journals for cash disbursements and one set for payroll cash disbursements and enters all deposits into the General Ledger using a revenue receipts journal. S/he prepares a set of General Journal entries from the information provided. CFO proofs the cash receipts/accounts receivable journal and verifies month end totals and reconcile:

• Accounts receivable sales (from cash receipts/accounts receivable journal)
• Accounts payable (from list of outstanding invoices provided by the accounts payable)
• Prepaid expenses
• Salary reduction plan adjustments to employee benefits (from the payroll journal)
• Payroll taxes
• Vacation time used and accrued by employees
• Interest earned on bank accounts (from the bank statements)
• Credit card deposits and sales revenue (from the Visa/Mastercard log, with confirmation on the bank statement)
• Any other bank account activity not recorded through cash receipts or cash disbursements (such as electronic drawdowns or bank charges)
• Depreciation expense and accumulated depreciation on fixed assets
• Any adjustments to accounts receivable (from the accounts receivable reconciliation)
• Any adjustments to prior months (these are coded into the current month)

After posting these entries, the CFO reconciles the Cash in Checking account to the bank statement, verifies balances in the accounts payable, accounts receivable, prepaid expense, and payroll liability accounts, and prepares a second set of General Journal entries. These entries correct any errors in posting and record:

• Grants and contracts receivable and revenue earned for the month, based on expenses incurred in the month for each reimbursable grant or contract (this procedure is followed even if the grantor sends equal monthly payments)
• Deferred revenue recognized/grant revenue earned, based on expenses incurred in the month for each grant which has advanced the funds to BAU.

Monthly General Ledger Preparation: The A/P is responsible for preparing the materials needed by the CFO to prepare the General Ledger each month. The A/P is also responsible for initial review of the computer processed General Ledger, and for maintaining files of the electronically saved General Ledgers on the shared drive. The following data is prepared for the CFO:

• A complete set of photocopied check copies in check number sequence for the entire check range processed during the month (including voids) – all check copies must be coded to the correct line item, fund and cost center.
• Copy of the payroll journal.
• The complete set of pages of the cash receipts/accounts receivable journal for the month.
• A listing of all outstanding invoices for goods or services received prior to month- end for which payment was not made by month end, including expense account, fund and cost center information for each invoice.
• A reconciliation of accounts receivable in both accounting and student information systems for the month, including balance forward at the beginning of the month; total new sales on account (from the cash receipts/accounts receivable journal); total payments for the month (from the cash receipts/accounts receivable journal); and adjustments; ending balance; and a list of all outstanding invoices which total ties to the ending balance.
• Each staff member’s allocation of time by fund (if any).
• Vacation time accrued, and vacation time used for each employee.
• Any adjustments to prior month’s General Ledger.
• The bank statement for the checking account, and for the savings account on a quarterly basis.
• Any other information relating to transactions in that month (voided checks; deposits to the savings account; electronic drawdowns; etc.)

The CFO reviews the information and discusses any questions with the Finance Office staff. The CFO records any disbursements previously recorded as payable to the accounts payable account and makes adjustments for changes in payable amounts.

After posting these entries and proofing the financial statements, s/he electronically files a full set of financial statements.

Once the closing process is complete the Chief Finance Officer generates a set of financial reports for review by the President.

DEFINITIONS

General Ledger: The General Ledger (GL) contains all BAU financial transactions. Currently, QuickBooks Online is used to keep the general ledger (system of record). A number of other “feeder systems”—for example, the payroll system—also post to the General Ledger.

Chart of Accounts: The chart of accounts is the complete listing, by category, of every account in the general ledger. Accounts are means by which differing effects or transactions can be categorized or collected.

EXCEPTIONS

None

POLICY STATEMENT

This policy establishes BAU’s process for closing the monthly accounting period and related financial reporting to ensure the integrity of financial data within the general ledger.

The University’s reporting period for financial purposes is on an annual basis ending June 30th. The financial records are in accordance with Generally Accepted Accounting Principles (GAAP). Monthly financial records are maintained with transactions created, edited and posted on a daily basis. At the end of each month, the Chief Finance Officer performs various functions to close the current month’s accounting period by the fifteenth (15th) of each month.

During the closing process, the financial records are validated for assurance all journals have posted and have been balanced. Certain tasks are performed by the Chief Finance Officer to ensure appropriate expenses have been accrued and revenue has been recognized in accordance with GAAP.

Once the closing process is complete the Chief Finance Officer generates a set of financial reports for review by the President.

PROCEDURES

All transactions are posted and balanced prior to closing the current accounting period. Any applicable accruals and receivables are posted and balanced prior to closing the current accounting period.

Accounting Payable Manager or higher is responsible for ensuring that all transactions and any applicable accruals and receivables are posted and balanced. Revenue is always recorded in the month in which it was earned or pledged.

The Chief Finance Officer monitors daily activity for edit and budget errors to ensure all transactions are posted within the correct accounting period.

The CFO oversees closing the books and ensures that these steps are completed.

EXCEPTIONS

None

POLICY STATEMENT

According to the Sarbanes Act of 2002, which makes it a crime to alter, cover up, falsify, or destroy any document with the intent of impeding or obstructing any official proceeding, this policy provides for the systematic review, retention and destruction of documents received or created in connection with the transaction of organization business. This policy covers all financial records and documents, contains guidelines for how long certain documents should be kept and how records should be destroyed. The policy is designed to ensure compliance with federal and state laws and regulations.

This policy applies to all original or archival forms of storage media, including but not limited to: paper, CD ROM, computer or network drive, portable hard drive, cloud storage, or an enterprise content management system.

PROCEDURES

• Electronic Documents: Electronic documents will be retained as if they were paper documents. Therefore, any electronic files, including records of donations made online, that fall into one of the document types on the above schedule will be maintained for the appropriate amount of time. If a user has sufficient reason to keep an email message, the message should be printed in hard copy and kept in the appropriate file or moved to an “archive” computer file folder. Backup and recovery methods will be tested on a regular basis.
• Emergency Planning: BAU’s records will be stored in a safe, secure and accessible manner. Documents and financial files that are essential to keeping BAU operating in an emergency will be saved electronically on the shared drive.
• Document Destruction: BAU’s Chief Financial Officer is responsible for the ongoing process of identifying its records, which have met the required retention period and overseeing their destruction. Destruction of financial and personnel-related documents will be accomplished by shredding. The CFO will designate a person in the Finance Office responsible for maintaining a filing system. Document destruction will be suspended immediately, upon any indication of an official investigation or when a lawsuit is filed or appears imminent. Destruction will be reinstated upon conclusion of the investigation.
• Compliance: Failure on the part of employees to follow this policy can result in possible civil and criminal sanctions against BAU and its employees and possible disciplinary action against responsible individuals. The CFO and the designated officers will periodically review these procedures with legal counsel or the organization’s certified public accountant to ensure that they are in compliance with new or revised regulations.

It is the responsibility of departments to designate a person to be responsible for financial records retention. Many departments designate the appropriate person responsible for the business, finance, and/or operations of the department. The designated person should have appropriate knowledge of and access to departmental financial data. Designated personnel and all University staff and faculty are required to comply with the following:

Retention Periods
The required retention period for various financial documents associated with an activity is dependent upon the source of funds used to support that activity. At the end of the required retention period, documents should be destroyed in an acceptable manner (see Methods of Disposal, below). Documents of permanent historic significance should be coordinated with the President for preservation.

General rules are:

• Direct Charges to Grants or Sponsored Program Contract or Agreement: Financial records, supporting documents, statistical records and all records pertinent to a contract or grant’s activity must be retained for at least seven years after the submission of any final financial or programmatic reports to a sponsor or funding agency, unless a litigation claim, or audit is started before the expiration of this period. In these cases, records need to be retained until seven years after all litigation, claims or audit findings are resolved.
• Business Transaction Records: Records must be retained for seven years following the end of the fiscal year in which the transaction originated.
• Individual Employee Human Resources and Payroll Information: Records must be retained for seven years following the end of the calendar year in which the transaction originated.
• Taxable Income (cash receipt information and billings, and all documents for activities deemed unrelated business income): Financial records must be retained for seven years following the end of the fiscal year in which the transaction originates.

In general, the record retention period is seven years except for permanent records. See the Financial Records Retention Schedule for a listing of documents, their retention periods and responsible department.

In the event of pending or active litigation, the University President or the Legal Counsel request that financial records be maintained longer than stated in this policy.

Methods of Disposal

At the end of the required retention period, financial records may be disposed of unless they support current audit or litigation. Paper records may be disposed of via environmentally sustainable practices in accordance with the University’s sustainable practices. The only exception to this are documents containing information, such as a name or social security number, or any other personally identifiable information (PII) that could identify any individual member of the campus community. Documents containing this type of information must be disposed of via secure document destruction or pulverization. Electronic documents that are beyond the required retention period can be discarded if it is impractical to keep those documents stored on the appropriate document retention system, the University shared drives, or cloud storage.

Confidentiality

In order to safeguard the privacy of individuals, documents that contain salary information are treated in a highly confidential manner. Access to these documents is only allowed on a need-to know basis with the written approval of the CFO. Once their retention period has expired (if applicable), the documents will
be disposed of in a secure manner.

Financial Records Retention Schedule

DEFINITIONS

Financial Records: University property that includes but are not limited to: annual reports, budgets, financial statements, government and other sponsored program contract or agreement produced or received, gifts and donor agreements, bank deposits, bank statements, canceled checks, wire transfers, payment requisitions, credit card settlement reports, journal entries, spreadsheets or other electronic files that document calculations, memoranda, correspondence, planning documents and receipts, email messages to the extent they authorize or provide substantiating information, or other documentation of individual entries made in the transaction of its business.

EXCEPTIONS

None