Pub. 1 2011-2012 Issue 2

7 2. Internal Controls. Also sometimes called separation of duties, internal controls are policies that prevent any individual from having full control over school funds and accounting. For example, the person who reconciles the bank statement should be different from the person who has authority to authorize payments or create new vendor accounts. Good internal controls also create processes that reveal wrongdoing sooner rather than later, such as monthly reviews of certain documents (e.g., school credit card statements) rather than say, quarterly reviews. 3. Approval for Reimbursement of School Leader Expenses. One charter school recently drew negative media coverage because its (now former) school leader allegedly spent more than $100,000 of the school’s money on personal travel expenses. While such cases are rare, they do occur, which is why every board needs to make sure that it has an expense reimbursement policy and that it is being followed. Where the school leader is concerned, occasional overnight or even out of state travel, such as to a conference, or entertaining others, such as taking school constituents to dinner, are normal business activities. But it is prudent for the board to have policies stipulating limits (i.e., a nightly maximum for lodg- ing, etc.), conditions for reimbursement (i.e. receipts required), as well as the process for reimbursement (e.g., board member review of the school leader’s expense reports, confirming that all policy requirements have been met). 4. Bank Statements. Financial statements can be easily falsified; bank statements can- not. Requiring the board treasurer to review bank statements every month is a sound practice that can be very beneficial. For example, any payment over a certain amount, such as $5,000 or $10,000, is easily noticed and can be subjected to further evalu- ation as to its legitimacy, if need be. 5. Credit Cards. If your school is to have one or more credit cards (a decision that should be made by the board and recorded in its minutes), limiting credit lines helps limit the school’s potential exposure to improper purchases. In other words, don’t allow cards that have high, or worse, no, spending limits. And as with bank statements, a board member should review monthly credit card statements. 6. Annual Disclosure Statements. Every officer and director in your school (i.e., school leader, busi- ness manager, and board members) should be required to submit a signed annual statement disclosing relationships and situations that could give rise to a conflict of interest. If your school is classified as IRS 501(c)(3) tax-exempt, it is required to indicate on its Form 990 (yearly tax return) whether it has a policymandating such disclosures. continued on page 8...