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HomeMy WebLinkAboutBack-Up Documents101 k. A GFOA Best Practice Presenting Official Financial Documents Online Background. A revenue control and management policy establishes proper control over all receipts and receivables and helps ensure sound financial management practices. Governments should adopt a revenue control and management policy over revenues as an integral component of their overall financial policies. A formal manual that documents the entity's revenue control and management procedures can facilitate policy implementation, as well as serve as an effective internal control in and of itself. Recommendation. GFOA recommends governments establish a revenue control and management policy and review it on an annual basis. This policy should be customized for the size and resources of the government. The following factors should be considered in developing a general revenue control and management policy: ■ Internal controls - Management should establish controls, and ensure they are documented and followed. All aspects of cash receipting and accounts receivables should be subject to proper internal controls including: • Segregation of duties such as initiation and authorization of transactions, execution of transactions (receipting and disbursement), recording transactions, reconcilement, and maintaining custody. • Daily processing and timely deposit of receipts. Ideally, all funds should be deposited within 24 hours of receipt. • Timely reconciliation to applicable ledgers. • Physical security procedures. This is especially important for funds not deposited day of receipt. • Fraud reporting procedures. • Use of integrated receipt and accounting systems wherever practical and cost-effective. ■ Accounting practices — All receipts and receivables should be recorded in accordance with generally accepted accounting principles (GAAP). ■ Billing and collection practices - Accounts receivable should be established for services provided in advance of payment and terms for collection should be established. In accordance with established procedures, bills should be initiated, recorded in an accounts receivable system, and generated within an established timely manner after initial service delivery. Effort should be made to ensure that receivables are collected in a timely fashion. A policy 203 North LaSalle Street, Suite 2700 1 Chicago, Illinois 60601-1210 C phone 312.977.9700 1 fax 312.977.48061 www.gfoo.org Government Finance Officers Association Best Practice should be established to provide for 'write-offs' of accounts receivable, including timeframe, dollar thresholds and decision-making authority. ■ Methods of payment — A policy outlining the acceptable methods of payment for the governments should be established. This policy should include the method of access (as well as method of payment) while promoting electronic methods of access and payment when feasible and cost-effective to reduce overall risk and increase cash flow. ■ Depositing of received funds - Treasury management should serve as the primary recipient for all revenue collection sites. There should be timely recognition and depositing of revenue collected. Smaller governments that do not have a formal treasury function are encouraged to establish a formal single point of receipt or cashier function to control access to received funds. ■ Due to the special nature of funds received from grants, developers, partners and other entities, governments should consider whether separate procedures should be established for recording and depositing these funds. ■ Returned checks — Procedures for processing and collection of returned checks should be established, including the assessment of fees to offset the costs associated with the returned items. ■ Accounts receivable management — All accounts receivable should be recorded in a manner that allows for aging analysis. After reviewing available collection options, governments should establish procedures that maximize collections. Collection agencies that are familiar with federal, state, and local notice requirements and regulations should be considered when their use proves cost-effective. Bad Debts — An allowance for doubtful accounts and a write-off policy should be established. Bad debt expense should be estimated based upon a documented method of calculation. An allowance for doubtful accounts should be recorded. Write-offs should be performed periodically to ensure that accounts receivable and allowance balances are not overstated. Efforts should be made to pursue the timely collection of delinquent accounts. Budgetary review responsibilities — Revenue collections and accounts receivable should be monitored in a timely manner. Both actual and budgeted or forecast revenues should be monitored. Any significant variance of actual from the forecast or budgeted revenues should be investigated thoroughly. ■ Compliance - Governments should ensure their revenue control and management policy and procedures are in full compliance with any federal, state, local or other applicable laws or requirements. References. Financial Policies, Shayne Kavanagh, GFOA, 2012. GFOA Best Practice, Adopting Financial Policies, 2001. An Elected Official s Guide to Internal Controls and Fraud Prevention, Stephen Gauthier,GFOA,1994. Government Finance Officers Assoc[ation Best Practice Revenue Collection Administration: A Guide for Smaller Governments, Ian J. AIIan, GFOA, 1993. Approved by the GFOA's Executive Board, October 2012.