Cash Handling Essentials for Municipal Governments

1. Cash Handling Essentials for Municipal Governments Presented by: The Municipal Training and Development Corporation

2. What is “CASH”? Cash is one or all of . . . • Currency (paper money and coins) • Cheques • Credit card slips • Money orders • Bank drafts • Guaranteed Investment Certificates - GIC’s

3. Cash… • Bonding Employees • Anyone who handles the cash and other financial transactions should be bonded • Commercial ‘blanket bonding’ insurance covers all staff and councillors Make sure you know the conditions and the dollar value of the bonding insurance.

4. Benefits of KnowingAbout Cash Handling Essentials Any bondable person will… • Know and understand proper cash handling practices and procedures • Be able to work more efficiently with council: • to advise council of its role in financial matters • to develop financial policies and procedures that are consistent with accepted business practices

5. Benefits of KnowingAbout Cash Handling Essentials Any bondable person will… • Detect and correct errors more quickly • Understand and appreciate the purpose of and the need for council monitoring of their work • Benefit by setting up and maintaining a “transparent” financial system

6. Benefits of KnowingAbout Cash Handling Essentials Councillors will . . . • Know and understand what proper cash handling practices and procedures are • Be able to develop, establish and adopt cash handling policies and procedures • Know how to monitor and ensure compliance and accuracy

7. Benefits of KnowingAbout Cash Handling Essentials Councillors will . . . • Know why councillors should never handle cash • Be vigilant about potential discrepancies and take quick action, if required • Ask for assistance from Municipal Affairs when unsure

8. What Puts Councils at Risk ? • Lack of knowledge of proper cash handling practices • Not establishing and monitoring financial controls . . . policies . . . procedures • Not acting promptly when discrepancies are discovered • Not asking for help when needed

9. Why is Council at Risk? • Council, as a whole, COULD be held liable for any losses that occur • Depending on the circumstances, councillors, as individuals, COULD be held personally liable for financial losses

10. Why is Council at Risk? • Loss of credibility • Loss of faith in the leadership capability of council on the part of residents of the town

11. Did you know that . . . ? The mayor, or any other councillor, for that matter, cannot act legally on behalf of council without the knowledge and approval of council

12. What can council and administrators do to protect themselves and take responsibility for the town’s financial matters?

13. Council Financial Responsibilities The Town Council Should: • Establish financial policies and procedures • Council has a moral and legal obligation to the people of the town to manage assets wisely • Regular monitoring of financial records ensures compliance, accuracy and accountability

14. Council Financial Responsibilities Councillors must never perform, hinder or interfere with the regular work of the council staff

15. Council Financial Responsibilities • Establish a Finance Committee • To ensure council will make informed and timely financial decisions • There will be less time spent in council meetings bogged down in detail • Makes recommendations to council for action on financial matters • Usually made up of three councillors • Should NOT be a quorum • Staff act as “ex-officio” members

16. Council Financial Responsibilities • Know where to get assistance • Municipal Affairs • Municipal Reviews • Recommends improvements to financial systems • Assists with the setting up best financial practices • Provides training and advice • No charge for services

17. Council Financial Responsibilities • Council’s independent auditor • Some firms will conduct training, review practices and procedures and make recommendations when asked • Allow time for staff to do the work • Bookkeeping • Cash handling • Maintenance of cash records • Banking • All the other required duties • Ample staff to do the job

18. Council Financial Responsibilities • Do not condone “borrowing” of council funds from any source • “Borrowing” means the taking of cash from any or all of the town’s sources with the intention of paying it back later

19. AdministratorFinancial Responsibilities Town Treasurer or Town Clerk: • Arranges the safekeeping of town funds and securities • Is responsible for receiving all money paid to the town • Disburses funds at the direction of and according to procedures set by council • Keeps and maintains the financial records of the town

20. AdministratorFinancial Responsibilities Town Treasurer or Town Clerk: • Compiles, as directed by either the council or the town manager (if there is one), financial statement and reports • At year end, prepares a full and detailed balance sheet and statement of revenue and expenditure • Carries out other duties, as assigned by council • Prepares and/or assists with the budget • Ensures that anyone handling cash should be bonded

21. Did you know that . . . ? The town clerk or designate must supervise the inspection of the public documents authorized for viewing No one may take away original documents from the council office or chambers unless authorized by law or a vote of council

22. Did You Know That . . . ? One of the best ways for council to be more financially responsible is to develop written policies and procedures

23. Policies and Procedures Policies . . . • Are written statements of accepted and approved methods of action to guide present and future decisions • Are like a set of “rules” for dealing with issues and situations that commonly arise • Tell employees and the public “what” the council will or will not do given a certain set of circumstances

24. Policies and Procedures Procedures . . . • Are “how” the organization will carry out the policies • Are the specific steps to be taken to follow the policies Council needs to be aware of proper procedures, set them in place and monitor compliance

25. Policies and Procedures Policies and procedures should be: • Clearly stated in written form • Approved by council at a regular meeting • Reasonable and workable • Applied fairly and equitably • Reviewed from time to time to ensure relevancy and usefulness

26. Policies and Procedures No policies? Unwritten Policies? Unsure? • Write things down: • Record the commonly accepted ways and practices of dealing with finances and other municipal matters • Review the results and decide if they are still relevant, fair, reasonable etc. • Keep the good ones, modify the questionable ones, if possible, or rescind and develop new ones • Suggestion: anything not in a policy, create a policy

27. Policies and Procedures • Research the Council Minutes • Many good policy and procedural decisions get “buried” in the minutes of previous council meetings and can get forgotten • Time passes • Councils and staff changes • Researching the minutes can reveal the details of these decisions • The results can be reviewed and adjusted or discarded as council determines

28. Policies and Procedures • Contact Municipal Affairs • The department can assist a council to: • Review existing policies and procedures (especially financial) and • Establish new ones if needed • Develop and use a Policies and Procedures Manual

29. Policies and Procedures • The Policies and Procedures Manual • As policies and procedures are approved by council and recorded in the minutes, ALSO record them SEPARATELY in a Polices and Procedures Manual • A simple manual can be developed and easily maintained by: • Using a standard format for recording • Storing in a three ring binder

30. Monthly Financial Reports EVERY MONTH, Council should review the: • Financial Transactions Summary • Cash Inflow Report • Cash Outflow Report • Total Adjustments Report • Monthly Bank Reconciliation • Budget Variance Report • Petty Cash Fund Report (not always monthly)

31. Auditing Issues • Audits must be done annually • Auditors must be qualified and licensed • Must be completed and submitted to council before June 1 and a copy sent to the Minister not more than 30 days later • If you change auditor, notification must be submitted to the Minister of Municipal Affairs

32. Auditing Issues • Audits alone cannot prevent or stop mismanagement or theft of council funds • Typical municipal audits are helpful, to a point • Benefits depend on what tests are applied and what information is given to the auditor

33. Auditing Issues • Council needs to: • Request audits as early in the new year as possible . . . This makes the discovery and correction of problems easier • Insist on a “Management Letter” and a meeting with the auditor to discuss the audit and any recommended improvements

34. Auditing Issues • Statistical & forensic audits • Statistical - normal audit procedure • Forensic - special detailed and complete audit

35. What to Expect from the Auditor • Auditor’ Report . . . includes: • How the audit was done and what was reviewed • Expresses an opinion as to the financial position of the town as of December 31

36. What to Expect from the Auditor • Management Letter . . . includes: • Detailed information on the deficiencies, if any, in accounting, cash handling and bookkeeping practices discovered during the audit • Remedies are also recommended

37. Think about it . . . If money goes missing or financial records are tampered with . . . ALL the people that have access to the safe, the locked cupboards, cash boxes and the financial records . . . …COULD be suspects in a police investigation! Safety and Security

38. Safety and Security • The town must have a safe: • Of high quality • Fireproof • Of sufficient size to handle the requirements • Security of the combination or key(s) is important: • Only the clerk or the designated acting clerk should have the combination or the key(s)

39. Safety and Security • Council needs a contingency plan • Used when the clerk or designate is not available due to incapacity and access to the contents of the safe or other secured documents is needed

40. Safety and Security • Contingency plan should be established by a resolution of council . . . • Spelling out details of who and under what circumstances • Communicated to the appropriate people i.e. those who will be implementing the plan

41. adopted minutes of council assessment rolls regulations municipal plans opened public tenders financial statements auditor’s reports adopted budgets contracts orders permits all documents tabled or adopted at a public meeting Safety and Security Documents for Public Inspection

42. Safety and Security Documents for Public Inspection These documents shall be made available for public viewing during the normal business hours and under the supervision of the clerk or designate at her/his convenience • Copies can be made of documents available for public viewing • Council can charge a fee

43. Safety and Security Access to Documents • Council authority required for access to official documents NOT part of public domain • This means that neither the public nor individual council members can access the confidential documents of the town without the authority of council

44. Safety and Security • Documents cannot be taken from the town office, with the following exceptions: • Municipal Analysts - Municipal Affairs Act • Court order • Council approval (auditors)

45. Procedural “Best Practices”

46. Accepting Cheques Acceptable cheques • Council approved 1st party • Personal cheque drawn on bill payers bank account, payable to the town . . . amount not to exceed amount of payment on bill • A provincial or federal government cheque payable to the town (e.g.. MOG) • Personal cheques to make donations

47. Accepting Cheques • Council approved 2nd party • Drawn on a known, established business account and payable to the bill payer • Government cheque, payable to bill payer

48. Accepting Cheques • Never “change a cheque” for cash unless receiving a bill payment • 3rd party cheques are a risk and should not be accepted • Always issue a receipt • Establish policies: • List and approve types of acceptable cheques • Limit the cash that can be returned to a taxpayer if cheque amount > bill payment

49. Issuing Receipts - General • A receipt is a written verification that money has been received on behalf of the town • Always issue a receipt for any cash received whether one was requested or not . . . even for government cheques • Accept money only during regular council office hours • Use a receipt approved for use by council • Safeguard all UNUSED receipts!

50. Issuing Receipts - Best Practices Procedures when cheque/money order is received: • Stamp the back – “for deposit only to the credit of <name of your municipality>” • Use pre-printed receipt books • Four or five to a page • Pre-numbered sequentially i.e. 001, 002 • Self-duplicating (can use carbon paper) • Receipt amount recorded in ‘Cash Receipts Journal’ in numerical order