NEIGHBORHOOD FARMERS MARKET ALLIANCE
ACCOUNTING
POLICIES AND PROCEDURES
MAY 2016
This policy manual was developed from a template provided by the Washington State
Farmers Market Association
Page 1 of 15
.
Table of Contents
Table of Contents ........................................................................................................................ 2
I. Introduction ........................................................................................................................ 3
II. Division of Responsibilities ...............................................................................................4
Board of Directors ....................................................................................................................... 4
Executive Director ....................................................................................................................... 4
Associate Director (Finance Director) ..................................................................................... 5
Bookkeeper/Bookkeeper ............................................................................................................ 5
III. Chart of Accounts and General Ledger ............................................................................6
IV. Billing/Invoicing Policies ................................................................................................. 7
V. Cash Receipts .................................................................................................................... 8
VI. Inter-Account Bank Transfers..........................................................................................9
VII. Cash Disbursements & Expense Allocations ..................................................................9
VIII. Credit Card Policy and Charges ................................................................................... 10
IX. Accruals .......................................................................................................................... 10
X. Bank Account Reconciliations ......................................................................................... 10
XI. Petty Cash Fund ..............................................................................................................11
XII. Property and Equipment ...............................................................................................11
XIII. Service Agreements and Personnel Contracts ........................................................... 12
XIV. Personnel Records ....................................................................................................... 13
XV. Payroll Processing ......................................................................................................... 13
XVI. End of Month and Fiscal Year-End Close ................................................................... 14
XVII. Financial Reports ....................................................................................................... 14
XVIII. Fiscal Policy Statements ........................................................................................... 15
Page 2 of 15
I. Introduction
The purpose of this manual is to describe the accounting policies and procedures currently in use at
Neighborhood Farmers Market Alliance (NFMA) and to ensure that the financial statements conform to
generally accepted accounting principles; assets are safeguarded; guidelines of grantors and donors are
complied with; fiscal and internal controls are the basis of all procedures being used. The important goal is
that finances are managed with accuracy, efficiency, and transparency.
The review of internal controls is one of the most important procedures the Board has for fulfilling its
fiduciary responsibilities to the Organization. The annual assessment of the financial records should
include a review of current internal controls in place. The Executive Director, Associate Director and
Executive Committee in consultation with the CPA will adhere to all internal controls pertaining to the
accounting records. These policies will be reviewed annually and revised as needed by the staff and
approved by the Executive Director and Executive Committee of the Board of Directors.
NFMA staff and Board members involved in fiscal and accounting operations are expected to comply with
the policies and procedures in this manual.
Whenever there is a change in administrative personnel or a change in the operating structure of
Organization, the Treasurer/Board President and Executive Director/Associate Director will meet to
determine that the internal control system continues to meet the needs of Organization. The changes will
be reflected in this accounting procedures manual.
There should be segregation of duties within the accounting cycle. The Bookkeeper who is responsible for
cash disbursements should not be involved with cash received, signing checks, transferring money or
establishing cash accounts or investments.
These policies will be reviewed annually and revised as needed by the Executive Director and
Treasurer/Board President, and approved by the Executive Committee of the Board of Directors.
Page 3 of 15
II. Division of Responsibilities
The following is a list of personnel who have fiscal and accounting responsibilities:
Board of Directors
1.
Reviews and approves the annual budget
2. Reviews annual and periodic financial statements and information
3. Reviews Executive Director's performance annually and establishes the salary
4. Two members of the board will be appointed by the board to be authorized signers on the bank
accounts
5.
Reviews and approves all contracts over $10,000
6. Reviews and approves all non-budgeted expenditures over $5000
7.
Reviews and advises staff on internal controls and accounting policies and procedures
8. Determines whether the organization should have an audit and, if so, chooses and contracts with
the auditor
Executive Director
1.
Reviews and approves all financial reports including cash flow projections
2. Sees that an appropriate budget is developed annually
3. Reviews and signs all issued checks
4. Reviews and approves all deposits
5.
Reviews and approves all contracts under $10,000
6. Reviews and approves payment of expenses under $5000
7.
Reviews and approves all non-budgeted expenditures over $500
8. Reviews and approves all grant submissions
9. Approves inter-account bank transfers
10. Is on-site signatory for all bank accounts
11. Opens all bank statements and reviews for any irregularities; reviews completed monthly bank
reconciliations
12. Oversees the adherence to all internal controls
Page 4 of 15
Executive Director/Associate Director
1.
Approves all program expenditures
2. Monitors program budgets
3. Reviews and approves all reimbursements and fund requests
4. Processes all inter-account bank transfers
5.
Work together to develop annual and program budgets
6. Reviews all incoming and outgoing invoices
7.
Monitors and manages all expenses to ensure most effective use of assets
8. Monitors grant reporting and appropriate release of temporarily restricted funds
9. Oversees expense allocations
10. Monitors and makes recommendations for asset retirement and replacement
11. Reviews, revises, and maintains internal accounting controls and procedures
12. Initiates donor thank you letter acknowledgements
13. Reviews all financial reports
14. Receives and opens all incoming accounting department mail including bank statements
Bookkeeper
15. Overall responsibility for data entry into accounting system and integrity of accounting system data
16. Processes invoices and prepares checks for signature; mails vendor checks
17. Prepares bank deposits
18. Maintains general ledger
19. Reconciles all bank accounts
20. Manages the petty cash fund
21. Manages Accounts Receivable; sets up customer accounts, invoices customers and members;
receives payments; processes reimbursements and refunds.
22. Prepares monthly reports of Account Receivable balances
23. Prepares all grant and contract reimbursement requests.
Page 5 of 15
III. Chart of Accounts and General Ledger
NFMA has designated a Chart of Accounts specific to its operational needs and the needs of its financial
statements. The Chart of Accounts is structured so that financial statements can be shown by natural
classification (income and expense type) as well as by functional classification (program, fundraising,
administration). The Bookkeeper/Associate Director is responsible for maintaining the Chart of Accounts
and revising as necessary. The Chart of Accounts is attached to this manual as an addendum.
The general ledger is automated and maintained using QuickBooks, our accounting software. All input and
balancing is the responsibility of the Bookkeeper with final approval by the Executive Director.
The Executive Committee should review the general ledger on a periodic basis for any unusual transactions.
Construction of Chart of Accounts
The NFMA uses numeric account codes to classify all income and expenses, as well as classes to
differentiate between program, fundraising, and administrative activities.
Funds received coded in the 4000s are earned income, 4500s are contributed income, and 4520s are
restricted funds.
Expenses coded 5100-5500 are market-related, 6200-6900s are administrative and organizational
expenses.
Employees track their time to the .15 an hour using codes in each of these areas related to their tasks, which
are then tracked in QuickBooks.
Page 6 of 15
IV. Billing/Invoicing Policies
The following is a list of items billed and/or accrued and received by NFMA:
•
•
•
•
Federal, state, county, city and private grants and contracts that usually have explicit beginning
and ending dates, specified deliverables, both programmatic and fiscal, and reporting
deadlines. Upon receipt, Bookkeeper/Associate Director will assign each grant source a Code
Number in accordance with the above Chart of Accounts, identifying restriction, if any, source,
and funds identified for specific Cost Center and/or Expense Categories, if applicable. A
Report will be prepared by the Associate Director/Executive Director with detail of required
scheduled deadlines to meet, contractual reporting requirements, and expected goals to meet.
This report will also detail the assigned staff responsible for oversight.
Each bill for grant funds will be entered into accounting records as an Account Receivable with a
journal entry.
Miscellaneous revenue such as rents, interest and dividends: Coding per above Chart of Accounts
will be made directly onto notice of receipt, and held as source document for recording transaction.
Vendor Fees: Vendor Fees will be invoiced and payment will be collected by market day staff.
Payment will be verified and recounted by bookkeeping staff. These fees represent the bulk of the
NFMAs income and will be coded as Unrestricted Funds.
Page 7 of 15
V. Cash Receipts
Cash receipts generally arise from:
1.
Vendor Stall Fees
2. Contracts and Grants
3. Sponsorship
4. Special Event Fees and Donation
The principal steps in the cash receipts process are:
The Bookkeeper receives incoming mail, opens, date stamps, and distributes the mail. The Bookkeeper logs
all cash receipts (checks, money orders, cash) on the Cash/Checks Receipt Tracking Form in the office,
stamps checks “for deposit only” on the back of the check, and receives payment against a customer invoice
in QuickBooks. If no invoice exists to which payment can be received, the Bookkeeper creates an invoice or
sales receipt and receives payment. Checks are kept in a locked cash drawer until the deposit is prepared by
the Bookkeeper.
Cash, checks and cash equivalents (“funny money”) (which includes EBT Tokens, Gift Certificate Tokens,
Market Bucks, Fresh Bucks, and Helping Harvest Vouchers) are collected from vendors onsite at the end of
each market day as payment for their stall fee. Market Managers and Assistants count, record and sign off
on all money received from each vendor. The payment is kept in an individual envelope (one per vendor)
along with the corresponding invoice. Once all payments have been collected the envelopes are transported
to the office where the Bookkeeper or Bookkeeper’s Assistant take charge of them.
Each envelope is opened and the contents checked against the included invoice. Cash, checks and coins are
counted, entered into an Excel spreadsheet and readied for deposit. “Funny Money” is counted, sorted and
entered into the spreadsheet as well. Through this process of double counting the money, if an error has
been made onsite – either over or under collection of funds – it is caught at this point. Two corrected copies
of the invoice (one for the vendor one to come back to the office) along with either a refund or a request for
more funds is returned to the vendor’s envelope to be repaid on the next market day. Once all the envelopes
have been entered in to the spreadsheet a deposit is prepared by the Bookkeeper and placed in the deposit
bag and taken to the bank. The sorted “Funny Money” is bundled and marked with the Market, date and
amount. These bundles are kept onsite for one year in case a discrepancy is later discovered. The deposit is
then entered in QuickBooks.
A weekly packet of information from each market is created which includes, the Excel spreadsheet detailing
income and fees for each vendor, a copy of the QuickBooks deposit slip, and an accounting of all “Funny
Money” is prepared and filed to be kept onsite for 7 years. The individual vendor invoices from each market
are assembled into a packet that is also kept on file for 7 years.
Weekly (or more often if necessary, particularly during the annual vendor application period), the
Bookkeeper prepares the deposit record by preparing a bank deposit slip. Then enters the deposit in
QuickBooks and prints a copy of the deposit statement. Copies are made of each endorsed check and the
bank deposit slip and are then stapled together. The bank deposit slip, 1 copy of the deposit statement and
the endorsed checks (and/or cash) are paced in a deposit bag and deposit at the bank. File copies are filed
in current year Bank Deposit file. Deposit receipt is taped to deposit record when received from bank.
All cash received will be counted, posted to the appropriate customer invoice or sales receipt and kept in
locked cash drawer until included in a deposit processed per above procedure. If no customer invoice or
sales receipt exists, one should be created.
Page 8 of 15
VI. Inter-Account Bank Transfers
The Executive Director monitors the balances in the bank accounts to determine when there is a shortage or
excess in the checking account. The Executive Director and Associate Director decide when a transfer
should be made to maximize the potential for earning interest. The Bookkeeper is directed in writing when
to make a transfer and in what amount. A copy of the transfer is given to the Associate Director.
VII. Cash Disbursements & Expense Allocations
Cash disbursements are generally made for:
1.
Market Supplies
2. Payments to vendors for goods and services
3. Taxes/license fees
4. Staff training and development
5.
Memberships and subscriptions
6. Meeting and office expenses
7.
Employee or Board reimbursements
8. Marketing/promotional materials
Checks are written each Tuesday.
Requests for cash disbursements are submitted in (three) ways:
1.
Original invoice
2. Purchase request (submitted on approved form)
3. Employee expense report or reimbursement request
Incoming invoices/account statements are received by the Bookkeeper, an electronic copy is made and
saved if needed, The Bookkeeper reviews each invoice and prepares a check for signing by the Executive
Director. The Executive Director reviews and approves each invoice before signing the check. Any questions
about posting expenses to the proper accounts and class are discussed. The Bookkeeper posts the checks in
QuickBooks and files a copy of the invoice marked “paid” along with date, check number, account and class
coding in the appropriate current year vendor file.
To post expenses paid with NFMA debit card, the same method is used, except “dc” is entered as check
number. Receipt is stapled to a blank piece of paper with account and class coding, date and description,
and filed in current year vendor file.
Page 9 of 15
VIII. Credit Card Policy and Charges
The organization credit card is maintained by the Office Manager and carried by individual staff members
only for approved, one-time use. Any staff member using the NFMA credit card will be held personally
responsible in the event that any charge is deemed personal or unauthorized. Unauthorized use of the credit
card includes: personal expenditures of any kind; expenditures which have not been properly authorized;
meals, entertainment, gifts, or other expenditures which are prohibited by budgets, laws, and regulations,
and the entities from which NFMA receives funds.
The receipts for all credit card charges will be given to the Bookkeeper within one month of the purchase
along with proper documentation and description. The Bookkeeper will verify all credit card charge receipts
with the monthly statements, attach to the monthly payment request and submit to the Executive Director
for approval to issue a payment check within payment due date.
IX. Accruals
To ensure a timely close of the General Ledger, the NFMA books accrual entries. Some accruals will be
made as recurring entries.
Accruals include:
1.
Monthly interest earned on money market accounts, certificates of deposits, etc.
2. Recurring expenses, including employee vacation accrual, prepaid insurance, depreciation, etc.
3. Grant Reimbursement Requests.
X. Bank Account Reconciliations
1.
Bank statements are reviewed by the Executive Director. The Executive Director reviews the
statements for unusual balances and/or transactions.
2. The Executive Director reviews bank statement before the Bookkeeper reconciles it in QuickBooks.
3. The Bookkeeper will verify that voided checks, if returned, are appropriately defaced and filed.
4. The Bookkeeper will investigate any checks that are outstanding over six months.
5.
The Bookkeeper will attach the completed bank reconciliation to the applicable bank statement,
along with all documentation.
6. The reconciliation report will be reviewed, approved, dated, and initialed by the Executive Director.
Page 10 of 15
XI. Petty Cash Fund
Petty cash funds are currently maintained by the organization at each of the seven markets and in the office.
The procedures are outlined below.
1.
The petty cash fund will not exceed $100 and is kept in a locked file cabinet at all times.
2. The Associate Director oversees the petty cash fund, and verifies regular reconciliation reports that
are prepared by the Bookkeeper.
3. All disbursements made from petty cash are acknowledged in writing by the receiving party.
4. All money returned to the petty cash fund is counted and verified by the Office Manager/Market
Manager and reviewed for accuracy by the Bookkeeper. Receipts for items purchased with petty
cash must be included with the return and should include appropriate account allocations as well as
supervisor approval.
5.
The Bookkeeper or Bookkeeping Assistant will count the cash in each petty cash fund weekly, and
the Bookkeeper will prepare a check request for replenishing the balance at $100.
6. Executive Director will cash the check and verify the Petty Cash fund does not exceed $100.
7.
No checks will be cashed by the petty cash fund.
XII. Property and Equipment
Property and equipment includes items such as:
1.
2.
3.
4.
5.
The Market Van
Office furniture and equipment
Computer hardware
Computer software
Leasehold improvements
It is the organization’s policy to capitalize all items which have a unit cost greater than one thousand dollars
($1,000). Items purchased with a value or cost less than one thousand dollars ($1,000) will be expensed in
the period purchased.
Depreciation is recorded at least annually. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Any impaired assets discovered during the inventory will be
written down to their actual value.
Page 11 of 15
XIII. Service Agreements and Personnel Contracts
1.
Terms and Conditions of agreements for services provided for the NFMA in any amount greater
than $10,000 annually must be pre-authorized by the Board of Directors and be recorded in the
official minutes of the Board.
2. A Contract for Services may only be approved if individual, or company, performs services free from
Executive Director, or other NFMA staff, direction and control. A contractor is either self-employed
or maintains their own business. The Contract should be able to supply copies of their business
registered with the City, State and IRS and is responsible for filing business taxes on their business
activities. A contractor requires no supervision or training, beyond establishing a schedule and
review/inspection of work performed. Contractor will provide NFMA with a completed IRS Form
W-9 for the current year, and NFMA will file the Contractor an annual Form 1099-MISC with the
IRS, unless payment is made to a corporation.
3. All agreements for services require a legal contract to be signed by both the contractor and the
authorized Board Officer or Executive Director, as approved and recorded in the Minutes of the
Meeting. A Services Contract, will include a detailed description of the Scope of Work to be
performed by the Contractor, and a Budget of intended expenses, including a list of personnel,
salary/fees, benefit/tax costs, equipment, travel, and supplies costs anticipated as an integral part
of completion of the project. A Schedule of timely billing by Contractor and payment provisions,
including a requirement of the Contractor to submit a Report of Work Status, detailing work
completed and work remaining as of date of billing, shall be included in the contract template. The
Contract will also include a requirement of ethical conduct by the Contractor, and an indemnity
clause to protect NFMA.
Page 12 of 15
XIV. Personnel Records
1.
Personnel files contain the following documents: an application and/or resume, date of
employment, position and pay rate, authorization of payroll deductions, W-4 withholding
authorization, termination data where applicable, an emergency contact form, and other forms as
deemed appropriate by the Associate Director.
2. All employees will fill out an I-9 form and submit the allowable forms of identification to the
Associate Director.
3. The completed I-9 forms will be kept in a secure location separate from the personnel files.
4. All personnel files are to be kept in a secure, locked file cabinet and accessed only by authorized
personnel.
XV. Payroll Processing
1.
Timesheets are to be prepared by all staff on the approved form and submitted monthly on the last
day of the month. If the last day of the month falls on a weekend or holiday, the timesheets are to
be submitted the day prior to the weekend or holiday, except in cases of scheduled weekend work.
Exceptions to the submittal date may occur and will be communicated accordingly.
2. Timesheets are to be kept on a daily basis and completed and submitted electronically.
3. Employees track their time to the .15 an hour using codes in each of these areas related to their
tasks, which are then tracked in QuickBooks.
4. Any corrections to timesheets are to be made in the following pay period in writing.
5.
Timesheets are to be signed and dated electronically by the employee for submission to the
Bookkeeper.
6. The Associate Director approves all timesheets and payroll by initialing NFMA copies of paystubs
before checks are printed or automatic deposits are transferred.
7.
Any changes to the standing information of the payroll register from the prior period including
addition of new employees, deletion of employees, or changes in base pay rate must be
accompanied by written notice by the Associate Director before the change can be made.
8. Paychecks are distributed by direct deposit by the 6th of the month, with pay stubs being delivered
electronically.
9. The Associate Director will review payroll expenditures and allocations monthly.
10. All quarterly federal and state payroll reports will be prepared and filed appropriately by the
bookkeeper.
11. All W-2 statements are issued to employees prior to January 31st of the following year for the prior
calendar year.
Page 13 of 15
XVI. End of Month and Fiscal Year-End Close
1.
The Executive Director will review and sign off on all monthly and year-end journal entries. They
will be printed and filed for audit trail purposes.
2. Bi- monthly and at fiscal year end, the Executive Director will review all balance sheet accounts
including verification of the following balances: cash accounts match the bank reconciliations, fixed
assets accounts reflect all purchases, write-downs and retirements, accounts receivable and payable
accounts match outstanding amounts due and owed.
3. The income and expense accounts review will include reconciliation to amounts received and
expended and verification that payroll expenses match the payroll reports including federal and
state payroll tax filings.
4. Once the final bi-monthly and fiscal year-end financial statements are run, reviewed, and approved
by the Executive Director, no more entries or adjustments will be made into that month or year’s
ledgers.
5.
At the end of the fiscal year, the outside CPA will prepare the annual tax return form 990. The
return will be presented to the Executive Director and the Executive Committee. The Executive
Director will then file the return with the Internal Revenue Service by the annual deadline.
6. All other appropriate government filings including those required by the state department of
revenue and attorney general’s office will be completed and filed with the appropriate agency.
XVII. Financial Reports
The Executive Director and the Bookkeeper will prepare bi-monthly financial reports for distribution to the
Board of Directors. The reports shall include: Balance Sheet, P & L Statement of Income and Expenses and
a Budget versus Actual report for the Organization. The Executive Committee will also review the previous
month’s transaction report, Accounts Receivable Aging, Accounts Payable Register and Aging, Cash Flow
Projection, and any other requested reports.
Periodic and annual financial reports will be submitted to the Executive Committee and Board of Directors
for review and approval.
Page 14 of 15
XVIII. Fiscal Policy Statements
1.
All cash accounts (except petty cash) owned by Organization will be held in financial institutions
which are insured by the FDIC. No bank account will carry a balance over the FDIC insured
amount.
2. All capital expenditures that exceed one thousand dollars ($1,000) will be capitalized.
3. Employee or public personal checks will not be cashed through the petty cash fund.
4. No salary advances will be made, except under special circumstances, upon approval by the
Executive Director and prepared by the bookkeeper.
5.
No travel cash advances will be made except under special conditions and pre-approved by the
Executive Director.
6. Reimbursements will be paid upon complete expense reporting and approval using the official
Organization form. Reimbursements to the Executive Director over $500 will be authorized by the
Executive Committee and signed by the Board Chair.
7.
Any donated item with a value exceeding ($50) will be recorded and a letter acknowledging the
donation will be sent to the donor within two weeks of the receipt of the donation.
8. All volunteer time shall be recorded as in-kind donations.
9. The Executive Director and one designated Board member are the signatories on the NFMA’s bank
accounts. Checks over $10,000 require approval from the Board of Directors.
10. Bank statements will be reconciled monthly.
11. Correction fluid and/or tape will never be used in preparing timesheets or any accounting
documents.
12. Accounting and personnel records will be kept in locked file cabinets in the finance office and only
parties with financial and/or HR responsibility will have access to the keys.
Page 15 of 15