R-86-11 Res Adopting Revenue & Cash Management Policy , Procedures and Internal Control ManualRESOLUTION NO. U1, -4
A RESOLUTION ADOPTING A REVENUE AND CASH MANAGEMENT POLICY;
AND REVENUE AND CASH MANAGEMENT PROCEDURES AND INTERNAL
CONTROL MANUAL
WHEREAS, the Village of Lemont desires to adopt a Revenue and Cash Management Policy
and Revenue and Cash Management Procedures and Internal Control Manual ; and,
WHEREAS, the President and Board of Trustees find that adopting the attached Village
of Lemont Revenue and Cash Management Policy and Revenue and Cash Management
Procedures and Internal Control Manual is in the interest of the public.
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD
OF TRUSTEES as follows:
SECTION 1: That the Village of Lemont Revenue and Cash Management Policy and Revenue
and Cash Management Procedures and Internal Control Manual, attached as Exhibit A hereto is
hereby adopted.
SECTION 2: This Resolution shall be in full force and effect from and after its passage
as provided by law.
SECTION 3: The Village Clerk of the Village of Lemont shall certify to the adoption of
this Resolution and cause the same to be published.
PASSED AND APPROVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF LEMONT, COUNTIES OF COOK, WILL AND DUPAGE,
ILLINOIS on this 28th day of November 2011.
Debby Blatzer
Paul Chialdikas
Clifford Miklos
Ron Stapleton
Rick Sniegowski
Jeanette Virgilio
PRESIDENT AND VILLAGE BOARD MEMBERS:
AYES: NAYS: ABSENT: ABSTAIN
c/
BRIAN K. REAVES
President
ATTEST:
CHARLENE M. SMOLLEN
Village Clerk
Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
TABLE OF CONTENTS
A. Scope .................................................................................... ..............................1
B. Internal Controls .................................................................... ..............................1
C. Accounting Procedures .......................................................... ..............................1
D. Invoicing Procedures ............................................................. ..............................2
1. General Accounts Receivable .......................................... ..............................2
2. Water and Sewerage Receivable ...................................... ..............................2
E. Receipt of Funds .................................................................... ..............................3
F. Remote Sites .......................................................................... ..............................3
G. Collections ............................................................................ ..............................4
H. Returned Checks ................................................................... ..............................4
I. Bad Debt ............................................................................... ..............................5
J. Budgetary Review ................................................................ ..............................5
K. Escrowed Funds ................................................................... ...........................:..6
L. Bond Payable Funds ............................................................. ..............................6
M. As set Forfeiture Proceeds ..................................................... ..............................6
N. Records Retention ................................................................ ..............................7
Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
A. Scope
The Revenue and Cash Management Policy applies to all revenue collected, except where state or
federal laws supersede. Major revenue sources for the Village of Lemont include real estate
taxes, franchise revenues, state shared revenues, utility usage, licenses and permits, fines, and
charges for services. Proper controls over revenue are essential to maintaining strong financial
management practices.
B. Internal Controls
All aspects of cash receipts and accounts receivable shall be subject to proper internal controls.
Management of each department shall be familiar with the Revenue and Cash Management Policy
and established internal controls that are properly documented and followed by staff members.
Internal controls include:
1. Segregation of duties for authorization, recording and custodian functions.
2. Daily processing of cash receipts and accounts receivable transactions.
3. Timely deposit of funds.
4. Timely reconciliation to the general ledger and other supporting ledgers.
5. Establishment of physical security procedures.
6. Notification of management upon suspicion of fraud. Management shall then notify the
appropriate authorities (e.g., law enforcement, state agencies) in a timely manner for further
investigation.
See Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
for additional documentation of procedures and controls.
C. Accounting Procedures
All receipts and receivables shall be recorded in keeping with current authoritative standards and
practices, including:
1. Revenue shall be recorded in the proper general ledger account by fund and revenue source.
2. Revenue shall be recorded in-the proper fiscal accounting period in accordance with the
modified accrual basis of accounting for governmental funds and the accrual basis of
accounting for enterprise and internal service fund and governmental and business type
activities. The Village will strive to minimize differences in revenue recognition for
governmental funds and governmental activities.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
D. Invoicing Procedures
1. General Accounts Receivable
Accounts receivables shall be established for services provided in advance of payment. The
Village maintains accounts receivable for business licenses, liquor licenses, cigarette licenses,
scavenger licenses, health inspection licenses and amusement licenses. These accounts are
invoiced in advance on an annual basis covering the period May 1 to April 30, with the
exception of liquor licenses which are invoiced on a semi - annual basis. In addition, the Village
invoices for Police Special Details. The Police Special Details bills represent reimbursements
for services performed and are billed when incurred.
a) All initiated bills shall have a due date of 30 days from the bill date, unless otherwise
stated per ordinance or resolution. Invoices for license renewals shall be generated by
April 1, allowing 30 days for payment prior to due date of May 1. Police Special Detail
bills shall be generated within 30 days after the payroll date that identifies the special
detail assignment.
b) All invoices for license renewals and Police Special Details shall be produced and
maintained by the Finance Department.
c) Bills shall be generated in the accounting system software accounts receivable module.
The accounts receivable module automatically updates the general ledger upon
generation
2. Water and Sewerage Receivable
The Village maintains accounts receivable for water and sewerage services. The Village is
divided into two sections. Each section is invoiced every other month for a two month billing
period. The sections are rotated to allow for monthly billing process representing half of the
households.
a) All initiated bills are dated the 1st day of the month, covering usage for the two months
ended the last day of the prior month. Bills have a due date on the 20th day of the
month.
b) An accounts receivable aging for all water and sewer billings is maintained by the
Water Billing Supervisor.
c) Bills shall be generated using the accounting system software utility billing module.
The meter readings automatically update the utility billing module. The utility billing
module automatically updates the general ledger.
Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
E. Receipt of Funds
The Finance Department shall serve as primary recipient for all revenue collection sites. Each
department with remote collection responsibility shall utilize a separate cash register and establish
and maintain an adequate system of internal controls for receipts. Controls shall include, at a
minimum, the following:
1. The method of payment (e.g., cash, check or credit card) shall be indicated on the receipt.
This is entered into the accounting system software at time of transaction.
2. Identification of the individual receiving payment on receipt. The accounting system
software identifies the Finance Department Clerk who is logged onto the computer to
process the receipts.
3. Wherever possible, the receipt shall allow for immediate revenue account classification in
conformance with the established chart of accounts. If not possible, the department and
fund shall be indicated.
4. Restrictively endorsement (stamped for deposit only) of checks at the point and time of
collection.
5. Reconciliation of collections by an individual not involved in the receipting or posting
process or establishment of mitigating controls.
6. Recording of receipts in the financial accounting system on a timely basis.
7. Timely posting of adjustments with supervisory approval required
8. Timely reconciliation and deposit of funds received.
See Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
for additional documentation of current procedures and controls.
F. Remote Sites
Remotes sites for the Village include the Police Department. In addition, customers may pay
for vehicle stickers at the local bank. Controls shall include, at a minimum, the following:
1. Dollar Threshold: At any such point a remote collection site accumulates in the
aggregate over $1,000 in cash and /or $2,500 in checks, such funds shall be deposited by
the beginning of the next business day.
2. Timely Threshold: All collections shall be deposited within five business days of
receipts.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
3. Un- deposited funds will be secured in a locked drawer or the safe.
4. Any differences in the cash reconciliation process will be investigated and resolved.
5. Personnel are prohibited from using change drawer to cash personal checks.
G. Collections
Each department shall establish and maintain an adequate system of internal control to provide
for timely collection of receivables.
1. All accounts receivable shall be recorded in the accounting system software. The Water
Billing Supervisor will maintain the Water and Sewerage Aged Trial Balance and the
Village Treasurer will maintain the General Accounts Receivable Aged Trial Balance. The
Village Treasurer will reconcile each subsidiary ledger to the general ledger on a monthly
basis.
2. For those accounts that become past due, proper delinquent notice shall be provided to the
payee.
3. For those accounts that are greater than 270 days past due and over $1,000, notice and
supporting detail shall be provided to the appropriate collection division for further
collection efforts.
4. Assignment to a collection agency shall be considered. When cost effective, the
government -wide selected collection agency shall be utilized to assure maximum
collections.
H. Returned Checks
Each department shall establish and maintain an adequate system of internal controls for
returned checks.
1. Unless otherwise stated per ordinance or resolution, all checks returned due to insufficient
funds shall be processed by the Finance Department with assistance from the Water Billing
Supervisor for those returned checks for water and sewerage billing.
2. Fees shall be charged for the returned check in accordance with applicable statutes or
established practices. Returned checks shall be processed at least twice through the
Village's financial institution.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
I. Bad Debt
Each department shall maintain an adequate system of internal controls to provide for the
accurate and timely recognition of an allowance for doubtful account and bad debt expense.
1. The amount of the allowance for doubtful accounts shall be based upon the percentage of
receivable method.
2. The computation of the allowance for doubtful accounts shall be performed annually based
upon the aging of the receivables and recent history of write -offs at fiscal year end, subject
to concurrence by the external auditors.
3. For write -offs; accounts with balances less than $1,000, 360 days delinquent and with no
payment activity for 360 days shall be eligible for write -off upon approval by the Village
Board of Trustees.
4. For write -offs, balances greater than $1,000, collection efforts shall be performed for a
period equivalent to the statute of limitations or less if bankruptcy has been discharged for
an account, business no longer exists, or individual is deceased, at which point such
amounts shall be written -off upon department head's written concurrence.
5. For any account written -off, such customer information shall be retained for five years and
service denied on credit until previously written -off balances have been satisfied, unless
specifically approved by the Village Administrator.
J. Budgetary Review
Revenue collections and accounts receivable shall be monitored in a timely manner.
1. Revenue initiating departments shall have oversight in the formulation of revenue budgets.
2. Revenue budget estimates shall be supported with documented variable assumptions (base,
rate, etc).
3. Monitoring of revenue budget shall be performed in a timely manner throughout the fiscal
year and shall include an analysis of actual versus budgeted variances. Revised forecasts
shall be communicated to the Budget Officer on a timely basis.
4. Continued compliance of revenue with all laws and /or regulations shall be the
responsibility of the revenue initiating department.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
K. Escrowed Funds
Funds received by the Village in advance of revenue recognition or funds anticipated to be
remitted back to the payee shall be recorded in an escrow liability account. The Village escrow
agreement does not provide for the establishment of interest bearing accounts. The Village
Planning Department maintains the Escrow Casetask File by Client, which includes an excel
summary of escrow account activity. The Village will not maintain a receivable balance for
developers. In the event of a net receivable, the developer will be required to replenish the
escrow fund within a 30 day time period. The Finance Department reconciles the detail to the
general ledger on a monthly basis.
L. Bond Payable Funds
Funds received by the Village as insurance of performance and anticipated to be remitted back
to the payee shall be recorded in a bond payable account. The Village maintains a detail listing
of funds received and returned by permit number. The Finance Department reconciles the
detail to the general ledger on a monthly basis.
M. Forfeited Asset Proceeds
The Village shall maintain an adequate system of internal controls for proceeds from asset
forfeitures to ensure compliance with applicable laws and regulations.
1. A separate bank account will be maintained for forfeited asset proceeds. A separate
revenue general ledger account will be maintained for each type of forfeiture proceeds.
2. All interest income generated by forfeiture accounts must be deposited and recorded into
the corresponding bank and general ledger account on a timely basis.
3. The Finance Department and Police Department will maintain procedures to ensure
expenditures of proceeds are in accordance with applicable laws and regulations.
4. The Finance Department will reconcile the forfeiture general ledger accounts on a monthly
basis.
5. All required reports must be completed and filed with the appropriate authority on a timely
basis.
NOTE: See Asset Forfeiture Procedures Manual for additional documentation of procedures
and controls.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: November 28, 2011
N. Record Retention
The Village shall retain all records related to revenue and cash management for a period of
seven years. All records sent for destruction will be documented and approved by the Village
Administrator prior to destruction.
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Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
TABLE OF CONTENTS
A. Objective ...........................................................................:. ..............................1
B. Segregation of Duties for Authorization, Recording and Custodian Functions 1
C. Daily Processing and Recording of Cash Receipts .............. ..............................1
1. Real Estate Taxes ........................................................... ..............................1
2. State Shared Revenues ................................................... ..............................2
3. Franchise Revenues and Utility Taxes .......................... ..............................2
4. Water Bills, License, Permits, Fines and Other Miscellaneous ...................2
5. E -Pay Receipts .............................................................. ..............................3
D. Revenue Recognition Guidelines ......................................... ..............................3
1. Property Taxes ............................................................... ..............................3
2. Income and Personal Property Replacement Tax .......... ..............................3
3. Use and Sales Taxes ....................................................... ..............................3
4. Charge for Services ....................................................:... ............................:.4
5. Franchise Fees, Telecommunications Tax and Utility Taxes ......................4
6. Fines and Permit Revenue ............................................. ..............................4
7. Intergovernmental Revenues ......................................... ..............................4
E. Timely Deposit of Receipts ................................................. ..............................4
F. Reconciliation Procedures ................................................... ..............................4
G. Physical Safeguarding .......................................................... ..............................5
H. Suspicion of Fraud ............................................................... ..............................5
Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
A. Objective
The Revenue and Cash Management Procedures and Internal Control Manual provides an outline
for revenue transactions. This manual shall be reviewed on a yearly basis for possible revisions
by the current Assistant Village Administrator and Village Treasurer to ensure that the manual is
current with industry standards and practices.
The responsibility for the administration of the revenue management procedures has been
delegated to the Assistant Village Administrator and the Village Treasurer, who shall implement
the following revenue procedures and internal controls, as prescribed by the Revenue and Cash
Management Policy.
B. Segregation of Duties for Authorization, Recording and Custodian Functions
All Village personnel, but in particular Finance Department personnel shall observe proper
segregation of duties while engaged in revenue and cash receipts activities. The Finance
Department clerks responsible for processing cash receipts will not be engaged in activities
related to the recording of journal entry transactions in the financial records or the reconciliation
of bank accounts. The Village Treasurer will be responsible for reviewing the daily cash
reconciliation and recording transactions, but will have no responsibility for daily cash receipts
processing. An independent finance department consultant will prepare the bank reconciliations.
C. Daily Processing and Recording of Cash Receipts
1. Real Estate Taxes
The Village principally receives real estate tax distributions from Cook County, but does
receive property tax distributions from the counties of Will and DuPage, which combined
represent less than 1% of total collections. These distributions are deposited directly into
the Village bank account. US Bank (Illinois Funds) sends a fax notification upon receipt
of an ach deposit. The Village Treasurer then obtains the supporting distribution
documentation from the Office of the Cook County Treasurer website at
www .cookcountytreasurer.comitae. The Village Treasurer and Assistant Village
Administrator maintain the logon information for this account. The supporting
documentation identifies the tax levy year for the deposit. The Village Treasurer prepares
a journal entry using a template for the year that allocates the tax deposit according to the
levy percentages applicable for that tax year. The Village Treasurer enters the journal
entry in the accounting system software using the General Ledger Manual Journal Entry
Process. All journal entries are reviewed and approved by an independent finance
department consultant.
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Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
2. State Shared Revenues
The Village receives revenue from the State of Illinois for Income Tax, Sales Tax, Use
Tax, Personal Property Replacement Tax and MFT Allotments. These payments are
automatically deposited in the Village bank account via ach transaction. US Bank (Illinois
Funds) sends a fax directly to the finance department upon receipt of an ach transaction.
The Village Treasurer obtains the corresponding voucher from the Illinois Department of
Revenue website www. revenue .state.il.us /localgovenunent /disbursements /. The Treasurer
matches the voucher to the ach transaction amount and records the transaction in the
accounting system software using the General Ledger Manual Journal Entry Process. All
journal entries are reviewed and approved by an independent finance department
consultant.
3. Franchise Revenues and Utility Taxes
The Village receives utility tax payments from Excelon via ach and receives
telecommunication tax payments from the State of Illinois via ach. Processing for these
transactions is consistent with the procedures for State Shared Revenues (see #2 above).
All other franchise revenue and utility tax payments are received via check. These checks
are processed through the Village Hall cash receipts window (see #4 below).
4. Water Bills, License, Permits, Fines, and other Miscellaneous
The Village maintains a cash register window at the Village Hall for cash, check or credit
card payments. All payments received for water bills, license and permit fees, fines,
certain utility tax payments and other miscellaneous receipts are processed at the Village
Hall cash receipts window. This includes all payments received in person, by mail or in
the drop box.
The Finance Department Clerk opens the mail and receives payments from customers.
The receipts are stamped paid and entered into the cash register, which automatically
updates the cash receipts in the accounting system software. Receipts for any amounts that
were invoiced, including water bills and police department tickets, are recorded in a
holding account.
The Finance Department forwards all supporting documentation for water billing and
police department billing to the respective departments. The departments have the
responsibility of allocating the payment to the customer account in the accounting system
software. The Village Treasurer reviews these holding accounts at the end of each month
and notifies the appropriate department if any unallocated amounts remain.
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Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
5. E -Pay Receipts
The Village provides customers with the option of paying their water bill and fines through
the E -pay system. The E -pay system is maintained by Gateway, an independent processer.
E -pay transactions are initiated by the customers, who enter their customer information,
payment amount and transaction reference (i.e., invoice number). On a daily basis, the
Finance Department Clerk accesses the E -pay system and prints out the E -pay activity
report. This report includes water payments and fines activity.
The Water Billing Supervisor logs onto the E -pay website to download a file of
transactions. This file is then used to automatically update the accounting system
software, creating the posting to the customer account and the general ledger cash account.
The Finance Department Clerk reconciles the water payment activity from the daily
printout to the amounts reported by the Water Billing Supervisor.
All fine activity is recorded by the Finance Department Clerk and the supporting detail is
forwarded to the Police Department who reconciles the amount to their supporting
information.
D. Revenue Recognition Guidelines
The Village records revenue when received throughout the year. For preparation of the
governmental fund financial statements at fiscal year -end, the Village uses the current financial
resources measurement focus and modified accrual basis of accounting for governmental funds
and the accrual basis of accounting for governmental activities and will minimize differences in
revenue recognition between governmental funds and governmental activities. Specific
guidelines for revenue recognition are as follows:
1. Property Taxes - property taxes are recognized as revenues in the year for which they
are levied (i.e., intended to finance). The Village currently finances a fiscal year with a
portion of two separate tax levy years (i.e., FY 2011 was financed with half of 2009 tax
levy and half of 2010 levy). Property taxes are recognized as a receivable when levied
by the Village instead of when the tax attaches as a lien as the amount of the levy that
attached as a lien at January 1 is not at fiscal year end.
2. Income and Personal Property Replacement Tax - income and personal property
replacement taxes are considered payable to the Village upon certification by the State.
The voucher date is evidence of this certification. Therefore, receivable and revenue
recognition is based on the voucher date.
3. Use and Sales Taxes - use taxes and sales taxes are considered payable to the Village at
the point of transaction. The liability month represents taxes payable when collected by
the vendor (i.e., date of transaction). The State voucher identifies the liability and
collection months. Receivable and revenue recognition is based on the liability month.
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Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
4. Charges for Services - charges for services, including water and sewer, are recognized
as revenue at the time the goods or services are provided to the user.
5. Franchise Fees, Telecommunication Tax and Utility Taxes — Receivable and revenue
recognition for franchise fees, telecommunication tax and utility taxes is based on the
month the tax becomes payable to the utility or state (the liability month), or date of
transaction.
6. Fines and Permit Revenue — fines and permit revenue are considered to be measurable
and available only when cash is received by the Village.
7. Intergovernmental Revenues - grants and similar items are recognized as revenue as
soon as all eligibility requirements imposed by the provider have been satisfied. For
expenditure driven grants this is the period when the qualifying expenditure is
recognized.
E. Timely Deposit of Receipts
1) Village Hall Receipts
At the end of each business day, the Finance Department Clerk prepares the deposit slip
for all cash payments received then reconciles the deposit slip to the accounting system
software Cash Receipts Register Report. This is forwarded to the Village Treasurer
who is responsible for reviewing the reconciliation and making the deposit. Cash
receipts are automatically recorded in the accounting system software at the time of
transaction.
2) Police Department (Remote Site) Receipts
The Police Department Record Clerk prepares the deposit when the amount reaches the
threshold established in the Revenue and Cash Management Policy. The deposit is
given to the Community Service Officer who makes the deposit. The Cash Receipts
Register, deposit slip and all supporting documentation is forwarded to the Finance
Department for review by the Village Treasurer. Cash receipts are automatically
recorded in the accounting system software at the time of transaction.
F. Reconciliation Procedures
Cash receipts are reconciled to the cash drawer by the Finance Department Clerk or Police
Department Record Clerk when preparing the deposit. All reconciliations are forwarded to the
Village Treasurer who reviews the information for proper recording.
On a monthly basis, an independent finance department consultant prepares the bank
reconciliation. All cash, ach and credit card receipts are included in this process. The Village
Treasurer is responsible for recording any adjustments to receipts noted during the bank
reconciliation process.
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Village of Lemont
Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
Adopted November 28, 2011
G. Physical Safeguarding
The Village maintains appropriate controls over the physical safeguarding of all cash receipts,
as follows:
1) Village Hall Cash Receipts — All checks are restrictively endorsed upon receipt. The cash
and checks are kept in the locked cash register drawer at the Village Hall. Access to the
drawer key is limited to the Village Treasurer and Finance Department Staff.
2) Police Department Receipts — All checks are restrictively endorsed upon receipt. The cash
and checks are kept in a locked cash register drawer at the Police Station. Access to the
drawer key is limited to the Police Department Records Clerks.
H. Suspicion of Fraud
The Village administration shall maintain governance practices that encourage ethical behavior.
Any transactions related to the revenue and cash management procedures of the Village that
indicate the possibility of fraud should be reported, either verbally or in writing, to the Village
Administrator or Assistant Village Administrator.
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