OAK LAWN PARK DISTRICT INTERNAL CONTROL DOCUMENT

____________________________________________ Financial Statement and Accounting Process Descriptions and Internal Control Documentation

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 1

Introduction ..........................................................................................................................................................................4 Internal Control Evaluation ................................................................................................................................................4 COSO Integrated Framework.............................................................................................................................................4 Control Types .....................................................................................................................................................................6 Organization of the Park District Finance Manual...........................................................................................................6 Accounting Process Description.........................................................................................................................................6 Financial Statement Description .........................................................................................................................................6 Combined Balance Sheet......................................................................................................................................................8 Balance Sheet Detail .............................................................................................................................................................8 Statement of Revenues, Expenditures and Changes in Fund Balance...........................................................................11 All Governmental Funds ..................................................................................................................................................11 Statement of Revenues, Expenses and Changes in Retained Earnings..........................................................................12 Proprietary (Enterprise) Funds .........................................................................................................................................12 Statement of Revenues and Expenditures / Expenses Detail ..........................................................................................13 Cash Process Description ...................................................................................................................................................14 Administration Office.........................................................................................................................................................14 Collateral Insurance ...........................................................................................................................................................14 Cash Control Procedures ...................................................................................................................................................14 Bank Reconciliations........................................................................................................................................................15 Petty Cash .........................................................................................................................................................................16 Investment Process Description.........................................................................................................................................16 Administration Office Procedures ....................................................................................................................................17 Debt Issuance Process Description....................................................................................................................................17 Debt Issuance Procedures ..................................................................................................................................................17 Revenue Process Description .............................................................................................................................................18 Description of the Revenue Process ..................................................................................................................................18 Administration Office.........................................................................................................................................................18 Credit Card Receipts..........................................................................................................................................................18 Administration Office - Property and Replacement Taxes ............................................................................................18 Fees and Admissions...........................................................................................................................................................19 Administration ..................................................................................................................................................................19 Oakview............................................................................................................................................................................19 Pavilion.............................................................................................................................................................................20 Pools .................................................................................................................................................................................21 Golf...................................................................................................................................................................................21 Ice Arena...........................................................................................................................................................................21 Racquet Club ....................................................................................................................................................................22 Rentals .................................................................................................................................................................................23 Oak View..........................................................................................................................................................................23 Pavilion.............................................................................................................................................................................24 Golf...................................................................................................................................................................................24 Ice Arena...........................................................................................................................................................................24 FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 2

Other ....................................................................................................................................................................................24 Administration ..................................................................................................................................................................24 Payroll Process Description ...............................................................................................................................................25 Description of the Payroll Process....................................................................................................................................25 Payroll Check Issuance Process........................................................................................................................................25 Non-Salary Process Description ........................................................................................................................................26 Description of the Non-Salary Process.............................................................................................................................27 Purchase Orders................................................................................................................................................................27 Check Requests.................................................................................................................................................................27 Vouchers ..............................................................................................................................................................................28 Procurement Card Program ..............................................................................................................................................28 General Information .........................................................................................................................................................28 Acceptable MasterCard Purchase Card Purchases ...........................................................................................................29 Unacceptable MasterCard Purchase Card Purchases........................................................................................................29 Program Restrictions ........................................................................................................................................................29 Reconciliation and Payment .............................................................................................................................................30 Misuse of the MasterCard Purchase Card includes: .........................................................................................................30 When The Records Do Not Agree with The Monthly Statement.....................................................................................30 Lost or Stolen Cards .........................................................................................................................................................31 Sales Tax..............................................................................................................................................................................31 Check Disbursement Procedures ......................................................................................................................................31 Bid Process ..........................................................................................................................................................................32 Goods or Services greater than $10,000 ...........................................................................................................................32 Responsible Bidder’s Ordinance ......................................................................................................................................32 Fixed Asset / Capital Outlay Process Description............................................................................................................33 Funding Process..................................................................................................................................................................34 Long-term .........................................................................................................................................................................34 Capitalization Policies and Procedures ............................................................................................................................34 Equipment Classifications .................................................................................................................................................36 Depreciation Expense Policies ...........................................................................................................................................36 Physical Inventory of Fixed Asset Procedures .................................................................................................................36 Disposal of Buildings and Equipment...............................................................................................................................37 Donated Equipment............................................................................................................................................................37 Forms ...................................................................................................................................................................................38

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 3

Introduction This Manual documents the District’s internal controls, processes and procedures. Internal Control Evaluation

Management of the Park District is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the District are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. COSO Integrated Framework

Management is the key to an effective internal control structure. No system of internal controls, no matter how well designed, can function properly without the knowledge and support of management at all levels. This fact was made clear in the report “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission; also know as the COSO Report. (COSO is a voluntary private-sector organization dedicated to improving the quality of financial reporting through business ethics, effective internal controls and corporate governance. The sponsoring organizations are the American Institute of Certified Public Accountants, the Institute of Internal Auditors, Financial Executives International, Institute of Management Accountants and the American Accounting Association.) This report established the framework which organizations look to for structuring and evaluating their internal controls. The conceptual framework for internal controls outlined in the COSO Report is the basis for the GFOA’s publication “Evaluating Internal Controls – A Local Government Manager’s Guide”. The COSO Internal Controls – Integrated Framework defines internal control as a “process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • • •

Reliability of financial reporting Effectiveness and efficiency of operations Compliance with applicable laws and regulations”

The Integrated Framework uses three dimensions that provide management with criteria by which to evaluate internal controls. The first dimension is objectives. Internal controls are designed to provide reasonable assurance that objectives are achieved in the following categories: effectiveness and efficiency of operations (including safeguarding of assets), reliability of financial reporting, and compliance with applicable laws and regulations. The second dimension required by COSO is an entity-level focus and an activity-level focus. Internal controls must be evaluated at two levels: at the entity level, and at the activity or process level. The third dimension includes the five components of internal controls:

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 4

•

•

•

•

•

Control environment - The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include: the integrity, ethical values and competence of the entity’s people; management’s philosophy and operating style; the way management assigns authority and responsibility, and organizes and develops its people; and the attention and direction provided by the board of directors. Risk assessment - Every entity faces a variety of risks from external and internal sources that must be assessed. A precondition of risk assessment is establishment of objectives, linked at different levels and internally consistent. Risk assessment is the identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed. Because economic, industry, regulatory and operating conditions will continue to change, mechanisms are needed to identify and deal with the special risks associated with change. Control activities - Control activities are the policies and procedures that help ensure management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the entity’s objectives. Control activities occur throughout the organization, at all levels and in all functions. They include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties. Information/communication - Pertinent information must be identified, captured, and communicated in a form and timeframe that enables people to carry out their responsibilities. Information systems produce reports containing operational, financial and compliance-related information that make it possible to run and control the business. They deal not only with internally generated data, but also information about external events, activities and conditions necessary to informed decision-making and external reporting. Effective communication also must occur in a broader sense, flowing down, across and up the organization. All personnel must receive a clear message from top management that control responsibilities must be taken seriously. They must understand their own role in the internal control system, as well as how individual activities relate to the work of others. They must have a means of communicating significant information upstream. There also needs to be effective communication with external parties, such as customers, suppliers, regulators and shareholders. Monitoring - Internal control systems need to be monitored, a process that assesses the quality of the system’s performance over time. This is accomplished through ongoing monitoring activities, separate evaluations or a combination of the two. Ongoing monitoring occurs in the course of operations. It includes regular management and supervisory activities, and other actions personnel take in performing their duties. The scope and frequency of separate evaluations will depend primarily on an assessment of risks and the effectiveness of ongoing monitoring procedures. Internal control deficiencies should be reported upstream, with serious matters reported to top management and the board.

These three dimensions represent the Integrated Framework. The framework works in the following manner. For any given objective, such as reliability of financial reporting, management must evaluate the five components of internal control at both the entity level and at the activity (or process) level. According to COSO, determining whether a particular internal control system is “effective” is a subjective judgment resulting from an assessment of whether the five components are present and functioning effectively. Their effective functioning provides reasonable assurance that one or more of the primary objectives is achieved. These components are therefore also criteria for effective internal control.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 5

Control Types

In addition to determining that the internal controls identified fall within one of the five COSO internal control components, each identified control is also evaluated to determine what type of control it is, and if that type of control is appropriate for the related activity or process being evaluated. The internal controls have been classified into one the following nine types: • Authorization controls • Management review • Reconciliation • Segregation of duties (Note: The underlined number is used in the process descriptions to identify controls.) Organization of the Park District Finance Manual

The Park District Office Finance Manual is organized into three main sections. The first section displays the 2003 annual financial statements. Each line item in the financial statements is a result of an accounting process or specific procedures. The financial statement line is referenced either to a process description, or to a detailed schedule. If referenced to a detailed schedule, the amounts in the schedule are referenced to a process description. The second section consists of our process descriptions and the third section includes forms. This manual is a work in process. As discussed in the Internal Control Component – Monitoring above, the effectiveness of controls require ongoing monitoring. Annually the financial statement section of this report should be updated and the process description reviewed. As processes change or are updated, or new descriptions are developed, this manual should be updated descriptions are developed, this manual should be updated. Accounting Process Description The process description describes how the process is performed, the staff performing each task and the manager or supervisor who reviews or reconciles information. The process descriptions include a reference to the control type and internal control component as listed above (i.e. “A – Control Activities” means “Authorization controls with the control activities component”)

Financial Statement Description

The Oak Lawn Park District 2006 annual financial report is used as a reference for the documenting of our processes. Each line item in the financial statements is a result of an accounting process or specific procedures. The financial statement line is referenced either to a process description, or to a detailed schedule. If referenced to a detailed schedule, the amounts in the schedule are referenced to a process description. By cross-referencing financial statement line items to its process description, an evaluation of internal controls can be made for all major financial statement lines. The financial statements included are the balance sheet, FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 6

statement of revenues, expenditures and changes in fund balance – all governmental funds and the statement of revenues, expenses and changes in retained earnings – proprietary (enterprise) funds.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 7

Combined Balance Sheet 2006

Assets Current Assets Cash And Cash Equivalents Cash In Escrow Property Tax Receivable Accounts Receivable Interfund Receivable Inventory Prepaid Expenses Deposits Total Current Assets Non-Current Assets Capital Assets Capital Assets Not Being Depreciated Other Capital Assets, Net Of Depreciation Total Non-Current Assets Total Assets Liabilities Current Liabilities Accounts Payable Bonds Payable Notes Payable Accrued Payroll Unearned Revenue Interfund Payable Accrued Vacation Total Current Liabilities Non-Current Liabilities Bonds Payable Notes Payable Total Non-Current Liabilities Total Liabilities Net Assets Invested In Capital Assets, Net Of Related Debt Restricted Net Assets Unrestricted Net Assets Total Net Assets

$ $ $ $ $ $ $ $ $

5,860,016 1,361,026 2,319,007 107,037 136,841 62,364 31,818 2,235 9,880,344

$ 22,937,272 $ 10,821,021 $ 33,758,293 $ 43,638,637

$ 932,665 $ 2,353,900 $ 463,843 $ 150,518 $ 240,383 $ 136,841 $ 106,084 $ 4,384,234

Balance Sheet Detail

Reference Page 11-13 Page 11 Page 15

Page 6

Page 6 Page 6

Page 6-7 Page 6-7

$ 3,115,000 $ 4,920,000 $ 8,035,000 $ 12,419,234

Page 6-7 Page 6-7

$ 22,905,550 $ 1,361,026 $ 6,952,827 $ 31,219,403

Derived Derived Derived

2006

Reference

Inventories

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 8

Golf Course And Driving Range Ice Rink Racquet Club Total Inventories Fixed Assets Governmental Activities Assets Not Being Depreciated Land Construction In Progress Sub-Total Assets Subject To Depreciation Building & Improvements Equipment Sub-Total Less Accumulated Depreciation Building & Improvements Equipment Sub-Total Total Business Activities Assets Not Being Depreciated Land & Land Improvements Construction In Progress Sub-Total Assets Subject To Depreciation Building & Improvements

$ $ $ $

Machinery & Equipment Sub-Total Less Accumulated Depreciation Building & Improvements Equipment Sub-Total Total Total Net Assets General Obligation Bonds General Obligation Bonds - Alternate Revenue Source, Due December 2011 General Obligation Bonds - Installment Purchase Agreement, Due June 1, 2009 General Obligation Bonds - Alternate Revenue Source, Due December 15, 2006 Total

59,281 3,083 62,364

$ 9,857,734 $ 3,012,540 $ 12,870,274

Page 28

$ 9,396,186 $ 2,487,053 $ 11,883,239

Page 28-29 Page 29

$ (4,861,872) $ (1,843,552) $ (6,705,424) $ 18,048,089

Page 30 Page 30

$ 8,909,656 $ 1,157,342 $ 10,066,998

Page 29

$ 8,848,233

Page 28-29 Page 29-30

$ 725,834 $ 9,574,067 $ (3,373,583) $ (557,278) $ (3,930,861) $ 15,710,204 $ 33,758,293

Page 30 Page 30

$ 2,480,000

Page 14

$ 1,000,000

Page 14

$ 1,710,000 $ 5,190,000

Page 14

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 9

Notes Payable First Midwest Bank, due December 1, 2006 JP Morgan Trust Co., due April 4, 2015 Total

$ 292,743 $ 5,370,000 $ 5,662,743

Total Bonds and Notes Payable

$ 10,852,743

Page 14 Page 14

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 10

Statement of Revenues, Expenditures and Changes in Fund Balance

All Governmental Funds 2006

Reference

REVENUES Property Taxes

$ 4,522,103

Page 15

Replacement Taxes

$

145,899

Page 15

Program and Operating Fees

$ 1,988,979

Page 15

Property rental

$

169,891

Interest

$

191,954

Miscellaneous

$

150,062

Page 20-21

$ 7,168,888

TOTAL REVENUES EXPENDITURES Current Recreation Administration

$ 2,031,073

Page 10

Program

$ 3,007,461

Page 10

Principal

$ 2,822,363

Page 10

Interest

$

385,504

Page 10

Legal Fees

$

4,390

Page 10

$ 4,110,363

Page 10

Debt Service

Capital Outlay

$ 12,361,154

TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF

$ (5,192,266)

REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Issuance of Debt

$ 7,080,000

Transfers In

$

Transfers Out

$ (1,226,366)

Page 14

302,569

TOTAL OTHER FINANCING $ 6,156,203

SOURCES (USES)

$

NET CHANGE IN FUND BALANCES

963,937

FUND BALANCE BEGINNING OF YEAR

$ 5,212,509

END OF YEAR

$ 6,176,446

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 11

Statement of Revenues, Expenses and Changes in Retained Earnings

Proprietary (Enterprise) Funds

2006 OPERATING REVENUES Charges for Services Program and Operating Fees Rentals Other TOTAL OPERATING REVENUES

$ 1,579,637 $ 634,136 $ 458,029 $ 2,671,802

Reference

Page 15 Page 20-21 Page 21

DIRECT OPERATING REVENUES Administration and Operations $ 2,496,208 Depreciation $ 276,429 TOTAL DIRECT OPERATING REVENUES $ 2,772,637 OPERATING LOSS

$ (100,835)

NON-OPERATING INCOME (EXPENSES) Interest Income Parking Lot Rental Income TOTAL NON-OPERATING INCOME

$ $ $

4,207 40,555 44,762

LOSS BEFORE TRANSFERS

$

(56,073)

TRANSFERS

$

923,797

TOTAL TRANSFERS

$

923,797

CHANGE IN NET ASSETS

$

867,724

NET ASSETS BEGINNING OF YEAR PRIOR YEAR ADJUSTMENT BEGINNING OF YEAR, RESTATED

$ 14,698,074 $ 45,264 $ 14,743,338

END OF YEAR

$ 15,611,062

Page 10 Page 10

Page 20

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 12

Statement of Revenues and Expenditures / Expenses Detail

Salaries, wages, benefits Contractual Materials & Supplies Insurance Utilities Other Capital Outlay Sub-total Debt Service Principal Interest and Fiscal Charges Capital Outlay Depreciation Total

General Government $ 1,380,496

2006 Recreation Enterprise Total $ 1,619,237 $ 1,238,421 $ 4,238,154

$ 179,663 $ 143,162 $ 314,902 $ 59,509 $ (46,659) $ $ 2,031,073

$ 430,560 $ 351,716 $ 103,685 $ 259,740 $ 242,523 $ $ 3,007,461

$ 127,191 $ 486,727 $ 39,629 $ 432,685 $ 113,643 $ 57,912 $ 2,496,208

$ 737,414 $ 981,605 $ 458,216 $ 751,934 $ 309,507 $ 57,912 $ 7,534,742

$ 2,822,363 $ 389,894 $ 4,015,331 $ $ 9,258,661

$ $ $ 95,032 $ $ 3,102,493

$ $ $ $ 276,429 $ 2,772,637

$ 2,822,363 $ 389,894 $ 4,110,363 $ 276,429 $ 15,133,791

Reference Page 21-22 Page 22 Page 22 Page 22 Page 22 Page 22 Page 22

Page 22

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 13

Cash Process Description

Programs are offered by the Park District to meet the recreational and cultural needs of the citizen of Oak Lawn community and property tax receipts are the primary sources of funds for the Park District. Property taxes are levied against the real estate property within the Park District’s boundaries. Registration for programs is offered to residents of Oak Lawn as well as non-residents. To register, a registration form is completed and is either brought to, mailed, or faxed to a facility. Payment by cash, check or credit card, must accompany the registration form. Financial statement accounts that are included in the cash process description include: • •

Cash and cash equivalents Restricted cash Administration Office

The District maintains approximately 11 bank accounts, each having a specific purpose (disbursements, investing, checking, depository, etc). The District utilizes a cash management system that “sweeps” daily balances to / from the operating account from the various accounts at Founder’s Bank. Accordingly, the District’s bank accounts are zero-balance, noninterest bearing accounts. The main check signer for the District is the Director of the District. The President of the Board of Commissioners is also an authorized signer. Collateral Insurance

Deposits with financial institutions are classified into three categories. • • •

Deposits covered by federal depository insurance, or by collateral held by the Park District or its agent in the Park District’s name. Deposits covered by collateral held by pledging financial institution, or its trust department, or its agent in the Park District’s name. Deposits covered by collateral held by the pledging financial institution, or its trust department, or its agent but not in the Park District’s name, and deposits that are uninsured and uncollateralized.

The District maintains funds in banks with FDIC insurance coverage. All funds in excess of the FDIC insurance coverage limitation of $100,000 are collateralized in our name by the financial institution. Cash Control Procedures

Uniform cash control procedures were adopted by the District in order to minimize the risk that money is not placed in deposit envelopes, that the deposit envelope is not placed in the drop safe daily, and that the deposit is not deposited in the bank. Facility managers and department heads are informed of these procedures and implement them to the extent possible at their facility. These procedures are classified as: cash drawer, deposit, and deposit pick-up procedures. Cash Drawer FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 14

Start shift / day Cashier and facility manager/supervisor verify count in cash drawer. All transactions are recorded through the cash register and a receipt is generated for each transaction. All checks received should be immediately and restrictively endorsed. End shift / day Cashier and facility manager/supervisor verify count in cash drawer and complete cash drawer log. Funds are to be matched to register tape. Make the deposit including a completed deposit slip. Overages/shortages are noted. Complete deposit log. Cashier and facility manager/supervisor initial deposit envelope across the seal. Deposit envelope placed in drop safe. Deposit Each facility identifies people responsible for handling cash and access to safe key. All registrations/receipts must be entered into computer upon receipt. If no computer is available for input, transfer the receipt information onto a spreadsheet. (Deposit detail would be entered into the computer when it becomes available.) Record the deposit in the deposit log and place in drop safe. Each deposit is entered into the deposit log. If there is no deposit for a given day, it would also be noted on the deposit (and courier) log(s). Registrations being sent to Oak View / Administration should be entered onto the registration log. The person at Oak View / Administration responsible for entering registrations will verify receiving the registrations by initialing the registration log sheet. The registration log sheet would be returned to the originating facility as proof of receipt. Deposit Pick-up The first stop for the courier is the Administration Building to pick-up drop safe keys (the second key required to open safe) for each facility. The courier and administration staff person complete the key log and initial / sign as evidence that the keys were signed out. The courier and administration staff would also initial / sign the key log when the keys are returned that same day. The courier and the facility manager / supervisor (or other designated staff) are required to jointly retrieve the deposits from the drop safe. The facility manager / supervisor removes the deposits from the drop safe and the courier enters the following information into the courier log: Facility name and bag number Envelope number (# 1, 2, 3, etc., representing each envelope entered in the courier log. Amount of deposit in each envelope. Initials of facility manager / supervisor and courier indicating receipt of envelopes. The courier places deposit envelopes into the deposit bag and locks it. The courier takes all deposit bags to the bank (Founders). When the courier receives the bank deposit slips, he/she places a check mark next to the appropriate deposit information on the courier log. The bank deposit slips are delivered to Administration. Bank deposit slips are matched to deposit detail sheets by the front desk staff at Administration. Bank Reconciliations Bank reconciliations are prepared by the Controller. Reconciliations are performed on a monthly basis for all accounts. The bank statements usually arrive between the 5th and 10th of the following month, and reconciliations are usually completed by the end of that month. (R-Control Activities) FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 15

Accounts have outstanding items each month. They are mainly outstanding checks, deposits in transit, and occasionally differences in deposits between the bank and the District. The accounts with outstanding checks are the payroll disbursement account (#5069402 – Founder’s Bank) and the vendor check account (#5069403 – Founder’s Bank). The bank sends a list of paid checks to the District every month. Once received, the paid checks are entered into the computer system by the front desk staff in Administration. The in-house computer system would then generate the cumulative list of outstanding checks. Since some checks are never cashed, this account is ‘cleaned’ up by canceling the outstanding check from the outstanding list. Those checks are transferred to a liability account for record-keeping and properly remitted to the state after seven years. Petty Cash The Administration Office is responsible for approving the establishment of all petty cash funds. (A-Control Activities) Accountability in each facility is assigned to the facility manager who is responsible for safeguarding the fund. The maximum amount in the fund is limited to $800.00. Petty cash funds are maintained on an ‘imprest’ basis, meaning that the amount of the fund should remain constant. Currency + coin + petty cash receipts = authorized maximum amount for the fund. Original receipts must accompany all reimbursement requests. (RControl Activities) Petty cash may not be used to cash personal or payroll checks. The Administration Office conducts surprise petty cash audits semi-annually and verifies each fund when the fund is replenished. (M-Control Activities) Investment Process Description

State Statutes authorize the Park District to invest in obligations of the U.S. Treasury; federally insured bank accounts, credit union accounts or money markets; high-rated short-term corporate obligations; repurchase agreements; and the Illinois Fund administered by the State of Illinois Treasurer. The Park District’s bank accounts are zero-balance, non-interest bearing accounts. On a daily basis, the bank “sweeps” daily balances from the various operating bank accounts into the District’s operating account. Any funds in excess of our compensating balance amount (currently at $380,000) are swept into an interest bearing repurchase agreement account. The District Controller periodically receives interest rate quotes via the telephone for Certificates of Deposits at financial institutions approved to do business with the District. (M-Control Activities) Depending on the current interest rate market, funds may be invested in certificates of deposit or repurchase agreement (money market) account. Replacement tax deposits made by the Illinois Department of Revenue to the District are deposited directly into the Illinois Fund. Depending on interest rates, the funds may remain in this fund or transferred to our operating account at Founders Bank. Financial statement accounts that are included in the investment process description are cash and cash equivalents.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 16

Administration Office Procedures

Investment accounting procedures in the Administration Office are focused on maximizing the return on our investments in compliance with the State Statutes. Certificate of Deposits, the Repurchase Agreement account at Founder’s Bank, and the Illinois Fund are the primary investment vehicles used by the District. Depositing funds in one of these vehicles involve the following procedures: (1) The Controller or Superintendent of Finance and Personnel would review or obtain current interest rate quotes from local financial institutions and or the Illinois Fund. (2) The Controller or Superintendent of Finance and Personnel, based on an assessment of our cash needs and the prevailing interest rates, would wire transfer funds to / from the Repurchase Agreement, or other investment account to the investment vehicle that offers the best interest rate. Debt Issuance Process Description

The issuance of debt by the District is governed by the State of Illinois. The use of general obligation debt by park districts is principally governed by two Illinois State Statutes: 1. Outstanding general obligation bonds may not exceed .575% of the assessed valuation of a district. 2. Total general obligation indebtedness may not exceed 2.875% of the assessed valuation of a district unless an increase is approved by referendum. In addition to the State Statutes, the Property Tax Extension Limitation Act (PTELA) or “Tax Caps” limits the annual debt service tax levy which is used to repay obligations of the district. Financial statement accounts that are included in the debt issuance process description include: • •

General obligation bonds Notes payable Debt Issuance Procedures

The Oak Lawn Park District typically issues general obligation bonds each year to fund capital improvements and to provide for the debt service on existing obligations. Each fall an assessment is made by the Superintendent of Finance and Personnel and the Park District Treasurer as to the funding needs of the District. The Treasurer makes an assessment of the interest rate markets in order to determine the annual general obligation bond amount. The Treasurer would recommend the amount to the Board. He would also notify the Park District Attorney of this amount in order for him to prepare the necessary bid documents that are sent to financial institutions. Bid documents are opened at the December board meeting at which time the Board would formally approve the lowest interest rate bid. (M-Control Activities)

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 17

Revenue Process Description

Programs offered by the Park District are continually evaluated in order to best meet the recreational and cultural needs of the citizen of Oak Lawn community. New programs are added while others are cancelled depending on enrollment and demand. Brochures are issued four times throughout the year listing all programs offered through the Park District. The registration process occurs several weeks before the programs start. Registration for programs is first open to residents of Oak Lawn and opens to non-residents approximately two weeks later. Registrations are accepted through the starting date of the program or up until the program is filled or cancelled, or until the registration deadline. To register, a registration form must be completed and depending on the program, may either be brought, mailed, or faxed to a facility. Unless otherwise arranged, payment by cash, check or credit card, must accompany the registration form. Financial statement accounts that are included in the revenue process description include: • •

Taxes Program and operating fees Description of the Revenue Process Administration Office

The District maintains 7 bank accounts that are used as depository accounts for Administration, Recreation, Pavilion, Ice Rink, Racquet Club, Swimming Pools, and the Golf Course. The respective facility deposits funds into their account to facilitate the accounting of their receipts. The funds are then swept out daily to the Districts operating account. Credit Card Receipts

The District accepts credit card payments from patron for registration fees. Amounts received via credit cards are deposited directly into the each facilities bank account as discussed above. Administration Office - Property and Replacement Taxes

Property Taxes - The Park District files its levy for property taxes with the County each December. Property tax receipts are received primarily in two installments, in March and September or beyond, in the year following our levy (i.e. the taxes levied for 2003 are received in 2004). The Cook County Treasurer’s Office wire transfers property tax payments directly into the “Administration Account” (account # 5069410) at Founders Bank. The Cook County Treasurer’s Office notifies the Park District of all tax payments via an email sent to the Controller. Upon notification, the Controller would record the tax payment in the accounting records of the district. (MInformation/Communication) Replacement Taxes - Annually the Park District is notified by the Illinois Department of Revenue of the estimated amount of Personal Property Replacement Taxes we will receive based on the State fiscal year which begins on July 1 and ends on June 30. Payments are made in January, March, April, May, July, August, October, and December each year. The Illinois Office of the Comptroller electronically transfers the Park Districts allocation to our Illinois Fund account managed by the State of Illinois Treasurer. The State Comptroller notifies the Park District via fax when funds have been deposited into our account. Based upon interest rates and our liquidity, the Superintendent of Finance and Personnel will evaluate whether the funds should be transferred to our Administration Account at Founders Bank or leave on deposit in the Illinois Fund. Upon notification, Superintendent of Finance and Personnel would record the tax payment in the accounting records of the district. (M-Information / Communication) FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 18

Fees and Admissions

Fees and admissions are collected for participation in programs and classes. Programs include both those that require advance registration and “drop-in” programs such as open gym. These fees and admissions are accepted at numerous locations throughout the district and can be paid, with some exceptions, in person, by mail, or by fax. Most fees and admissions are collected in advance or at the time the program takes place. Under limited circumstances, fees are paid in installments. With the exception of the cash register at the Golf Course Clubhouse (see Rentals – Golf), all cash registers are tied into the Districts accounting system for recording the transaction in the Districts books and records. Administration Administration does not offer programs but will accept non-credit card registrations. Patrons wishing to register and make payments generally see the front desk staff, however anyone in Administration can accept registrations. The Administration Office does not maintain a cash drawer so payments must be for the exact amount. Patrons are given a receipt for all transactions. The receipt is initialed by Administration staff accepting the payment, dated, and they enter the program code and participant’s name. Administration however does not keep a duplicate copy of this receipt nor are they pre-numbered. A money receipt book is kept for all non-registration payments (i.e. entertainment books, freedom of information act requests, NSF check payments, etc.) which does contain a duplicate copy maintained by Administration.

Oakview Registration forms are date and time stamped and placed into a drop safe for delivery to Oak View for processing the next morning. Registration forms are entered into a registration log which lists the facility, program number, amount paid, and the participant’s name. This log is initialed by the courier the next morning when the forms are removed from the drop safe (see cash control procedures). Registration takes place at the front desk at Oak View. All front desk staff are permitted to accept registrations. The standard registration forms are used for all programs except the programs listed below. These payments are taken through the cash register: General Gift Certificates Pool memberships Mom’s time out Concert Income Theatre Donations Dance Recitals Spec. Rec. Fund Raiser Nature Tours Super Cooker Games Galore Co-op Support Rev.

Donations for theatre ad books Open Gym OV Babysitting Video income Season Tickets-gift certificate Senior Co-op Spec. Rec. Donations Oak View Facility Rentals Park Permits Pool Coupon Books Make-up/costume fees (theatre)

Pool Coupons – Adult, Child, Senior, Family, Camp

The cash register is located behind the front desk and its access is limited to the front desk staff. When not in use, it is under lock and key. Normally there are two front desk staff for each shift. Since there is only one cash register, it is shared by the front desk staff. At the beginning of each shift the cash drawer is counted and balanced (balance in drawer is $150.00). The drawer is also balanced at the end of the shift by one of the front desk staff and verified by the second. (R-Control Activities) If a discrepancy exists with the count, the drawer is reverified. A cash drawer log is completed, indicating any over / shortage, and initialed by the parties involved. FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 19

Receipts are not issued for registrations being paid via check or credit card. The cancelled check or credit card receipts serve as the patrons receipt. Patrons paying by cash are issued a hand written receipt. The front desk staff however does not keep a duplicate copy of this receipt nor are they pre-numbered. Once the registration process is completed, the forms are entered into a registration log. A three part deposit slip is prepared by the front desk staff, one part accompanies the deposit to the bank, one part remains at Oak View as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures) and the deposit is placed in the drop safe. (R-Control Activities) Deposits from Oak View are deposited into the Recreation Account (account #5069404) at Founders Bank. Dance, pre-school, and summer camp programs allow patrons to pay their fees in two installments. One-half of the fee is due at the time of registration and the balance is due at a specified date. Supervisors of the programs are responsible for verifying these class lists for timely payments. Second notice letters are sent out by the program supervisor for delinquent accounts. Late fees are assessed by the supervisor of a given program. Pavilion All programs, classes, and leagues run by the Pavilion require a registration form and they are processed by the front desk staff at the Pavilion. The Pavilion does utilize a cash register which is located behind the front desk and its access is limited to the front desk staff. When not in use, it is under lock and key. With only one cash register, it is shared by the front desk staff. Due to overlapping shifts, the drawer is closed out at the following intervals: Weekdays (Open-Noon), (Noon-3pm), (3pm-6pm), (6pm-Close) Weekends (Open-Noon), (Noon-5pm), (5pm-Close) The cash drawer is counted and balanced (balance in drawer is $100.00) in the break room behind the front desk and is verified by a second individual. If a discrepancy exists with the count, the drawer is re-verified by the front desk staff counting the drawer. A cash drawer log is completed, indicating any over / shortage, and initialed by the parties involved. Receipts are given to all customers. The receipt depends on the transaction. Receipts are not issued for registrations being paid via check or credit card. The cancelled check or credit card receipts serve as the patrons receipt. Hand written receipts are given to all customers that pay with cash. These receipts are not pre numbered. Adult league registrants are given a copy of the registration form because it is in triplicate. Another copy goes to Oak View for processing, and the final copy is given to the league supervisor. Transactions through the point of sale register print a receipt that is given to the customer. Point of sale transaction receipts are kept at the facility. Once the registration process is completed, the registration forms are entered into a registration log and placed in a drop safe for delivery the next day to Oak View for processing. A three part deposit slip is prepared by the front desk staff, one part accompanies the deposit to the bank, one part remains at the Pavilion as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures) and the deposit is placed in the drop safe. (R-Control Activities) Deposits from the Pavilion are deposited into the Pavilion Account (account #5069405) at Founders Bank. High school competitive soccer and sport camp programs allow patrons to pay their fees in installments. For soccer, $100.00 is required at the time the registration is accepted and the balance must be paid before the start of the league. Sports camp is paid in three installments. One-third of the fee is due at the time of registration, onethird is due the third week of camp and the balance is due the seventh week of camp. Supervisors of the programs are responsible for verifying that all payments are made. They also conduct follow up and make calls to delinquent accounts. Soccer teams cannot compete in the league if their fees have not been paid. FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 20

Pools The pool locations do not accept registrations for aquatic programs, only the outdoor pools accept daily fees. Each outdoor pool has one cash register located at the entrance to the pool which is shared by staff. Only the cashier and manager on duty are allowed to accept payments (cash and checks only), all of which are rung-up on the cash register. Due to the location of the cash register, it is not allowed to be unattended at anytime the pool is open to the public. The drawer is balanced (balance in drawer is $100.00 at Central and Centennial and $150.00 at Memorial) at the end of the shift by the manager on duty in the presence of the cashier(s). If a discrepancy exists with the count, the drawer is re-verified. A cash drawer log is completed, indicating any over / shortage, and initialed by the parties involved. It is also entered on the manager’s pool log. (M-Control Activities) Patrons generally discard receipts which create unsafe conditions when mixed with water. Accordingly, receipts are not issued unless the patron requests one. A three part deposit slip is prepared by the cashier. The deposit slip is initialed by the cashier and the manager on duty. One part of the deposit slip accompanies the deposit to the bank, one part remains at the pool as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures). The manager will then seal the deposit in an envelope, initial it across the seal and place it in a drop safe in the presence of the cashier. (R/MControl Activities) Golf All greens fees, and payments for cart rentals, golf outings, league play, simulators, etc. are taken by the cashiers in the pro shop. The golf course utilizes a cash register which is located in the pro shop and can be accessed by all cashiers. With the exception of golf outings which require a contract and leagues that have a sign-in sheet, all other programs are rung through the cash register. The cash drawer is counted and balanced (balance in drawer is $150.00) each shift by a cashier or supervisor but is not verified by a second individual. Register tapes are matched to the deposit slip to verify accuracy. If a discrepancy exists with the count, the drawer is re-verified by a second individual, either another cashier or by a supervisor. A cash drawer log is completed, indicating any over / shortage, and initialed by the parties involved. Receipts are given to all patrons golfing or renting a cart. These receipts are presented to the Starter as proof that fees have been paid. Golf outings require a contract, a copy of which is given as a receipt to the organizer of the outing. These contracts are pre-numbered. The golf course copy of the contract is filed in a contract binder. The cashier on duty is responsible for preparing deposits. A three part deposit slip is prepared by the cashier, one part accompanies the deposit to the bank, one part remains at the golf course as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures) and the deposit is placed in a safe. (R-Control Activities)Deposits from the Golf Course are deposited into the Golf Course account (account #5069408) at Founders Bank. Ice Arena Registration takes place at the front desk in the Ice Arena. All front desk attendants are trained in accepting and entering the registrations into the cash register. Class registrations are accepted only during office hours, so only the attendants or program managers handle the registrations and fees. Registration forms are used for all programs that have a class code to be entered into the system. The ice arena utilizes a cash register that is used to record registrations and all other transactions, including Open skate and skate rental fees and freestyle payments for punch cards or drop-in fees. There are two cash registers are located behind the front desk with access limited to the front desk staff and Office Manager. One register is used for open skate and has a balance of $100.00. The other register is used for registrations and has a balance of $200.00. When not in use, they are under lock and key. The cash registers are usually used by only one person at a time. The drawers are balanced at the beginning and end of each shift by the FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 21

front desk staff using the drawer and are verified by a supervisor. The ice arena uses a log for the cash register and the computer terminal to document the drawer balance, any over / shortage, and every person on every shift each day. Two part receipts are given for all freestyle payments, contract and rental payments, birthday party payments, and room rentals. One copy is given to the patron and one copy is kept on file at the ice arena. Receipts for registration transactions are only given for cash payments. Receipts are not issued for registrations being paid via check or credit card. The cancelled check or credit card receipts serve as the patrons receipt. Any payments that are accepted after hours, i.e. rental payments, concession deposits, are deposited in the safe and the paperwork is left at the front office to be entered into the system the next day by the Office Manager. A separate cash register is located behind the counter in the concession area. All concession workers have access to the cash register. The drawer is balanced (balance in drawer is $100.00) each night unless there is no activity. The drawer is balanced by the concession staff cashier and is verified by a supervisor. The drawer is recounted the next morning by the concession staff cashier before using the drawer. At the end of each shift, the front desk staff prepares the bank deposit. The deposit is verified by a supervisor before being sealed in an envelope. A three part deposit slip is prepared by the front desk staff, one part accompanies the deposit to the bank, one part remains at the ice arena as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures) and the deposit is placed in a safe. The Office Manager would also verify the deposits on a daily basis. (R-Control Activities) Deposits from the Ice Arena are deposited into the Ice Rink account (account #5069406) at Founders Bank. The house league hockey program allows patrons to pay their fees in two installments. One-half of the fee is due at the time of registration and the balance is due at a specified date. The Office Manager is responsible for verifying that all payments are received. Players whose payment is not made (or arrangements for payment) are suspended from participating until the fee is paid. Racquet Club Registration takes place at the front desk of the Racquet Club. The only exception is four days when the gymnastics department has a separate table set up to accept registration. All front desk staff can accept registration. Registration forms are used for all programs and are entered into a registration log. There are separate logs for tennis, gymnastics, and any registration going to Oak View for processing. After the registration is logged, the payment is attached to the registration form and the registrations for gymnastics and those going to Oak View for processing are put in the drop safe. Tennis registrations are put in the locked box bolted to the floor (located next to the safe). The only people able to open the locked box are the Director of Tennis, the Racquet Club Manager and the Assistant Manager. Registration for tennis programs are done by the Assistant Manager at the Racquet Club. On a daily basis the Director of Tennis opens the locked box and verifies the registrations with the tennis registration log sheet. Because many patrons are placed in progressional tennis programs by the Director of Tennis, it is necessary for her to review the registrations for placement in the correct level / class. Once she has reviewed the registrations, she initials the registration log to verify all registrations are intact. She then puts the registrations and log sheet back in the locked box. The Assistant Manager then takes the registrations and log sheet and enters the registration batch into the computer and makes the deposit for the batch. Original registration forms are sent to the Administration Office along with the batch and deposit paperwork. A second copy of the paperwork is kept at the Racquet Club. The cash register is located at the front desk and is accessible by the front desk staff, manager, assistant manager, gymnastics manager, and gymnastics assistant manager. The cash register is used to record all payments received FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 22

by the Racquet Club. The cash drawer is closed out by the employee who worked that shift and is not verified by a second individual. In the event it is very busy, the new shift may start while the previous shift closes out behind the front counter. As a rule, the drawer is balanced (balance in drawer is $100.00) after each shift. In very slow times (summer), two shifts may be combined together. (The back-up drawer is kept at $250.00.) The printer prints a start of shift receipt, a receipt for each transaction and an end of shift receipt, each of which are three part receipts. (R-Information / Communication) These receipts, along with a daily cash report form is used in balancing each shift. (R-Control Activities) One complete receipt tape is sent to administration with a copy of the daily cash report form and copies of all credit card transactions. A duplicate copy of all this is kept at the Racquet Club. The third copy of each transaction receipt goes to the patron. Deposit logs and a log of starting amounts of the front and back-up drawers are kept at the front desk and filled out for every shift. Each employee is responsible to verify the amounts in the drawer before they start their shift. A record of this is also on the daily cash report form. Deposits are prepared by the front desk staff. Deposits are not verified by a second individual as there is only one person on duty at a time. A three part deposit slip is prepared by the front desk staff, one part accompanies the deposit to the bank, one part remains at the Racquet Club as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures). (R-Control Activities) Deposits from the Racquet Club are deposited into the Racquet Club account (account #5069407) at Founders Bank. Extended payment plans are not offered at the Racquet Club except for tennis members who are charged monthly dues as part of their membership plan. If these members fall two months behind in dues, their membership is suspended and they are not allowed to use the facility until their dues are up-to-date. Letters are sent to members behind in their monthly dues. Rentals

Rental fees are collected primarily from the rental of rooms and parking lots at various facilities throughout the district. Oak View Oak View offers various rooms for rentals. Patrons requesting a room rental fill out a four part rental form. A room deposit is received at the time the rental form is received. The patron is given one copy as their receipt. The deposit check is attached to the rest of the forms and is placed in the safe in the front office. Each morning a Registration Imputer opens the safe and retrieves the registration forms and gives them to the Facility Manager. If the Facility Manager is not there, the room rental forms go back in the safe. The Facility Manager enters the date in the facility reservation system. Once entered the Facility Manager signs and puts an “O” in the right hand corner of the rental form. She/he gives the one copy to the maintenance department, the one copy she/he keeps and one copy is put at the front desk in chronological order. He/she then logs the deposit check and places it in the safe in the inner office, where the bank deposits are kept (see cash control procedures). (MControl Activities) When the front desk receives a payment on the rental, they attach the check, cash or charge to the copy maintained at the front desk and puts it in the front desk safe for the Facility Manager. When the Facility Manager receives the copy with the payment attached, she/he puts an “X” in the “O” on the copy he/she maintains and returns the front desk copy with the payment to the front desk where it is rung up in FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 23

the cash register. These payments would then be included in the daily deposits prepared by the front desk staff. (M-Control Activities) Security checks received are sent to Administration where they are logged. After the rental is over and there has been no damage, etc to the room, the Facility Manager e-mails the Superintendent of Finance and Personal to inform him that it is alright to send the deposit checks back to the renters. (S-Control Activities) Pavilion The Pavilion provides rentals for shows and expos. The Pavilion Manager handles all arrangements and is responsible for issuing invoices and assuring payments are received. When payments are received, they are recorded through the cash register and the payment is processed along with other cash drawer amounts. Golf Party rentals take place at the clubhouse and are handled by the Clubhouse Manager or Assistant Manager. Each rental requires a contract, a copy of which is given to the renter. The original is maintained by the Clubhouse Manager who would issue a separate room rental receipt at the conclusion of the rental. The room rental receipt is a two part receipt, one copy is given to the renter and one copy is attached to the original contract and filed at the clubhouse. Deposits of room rental deposits and final payments are rung up on the cash register behind the bar area by the Manager or Assistant Manager. The payment is then deposited with all other receipts for the day. The cash register in the Clubhouse is not tied into the Districts accounting system. Accordingly, a “Z” reading is taken and the information is entered onto a spreadsheet. The information on the spreadsheet is then entered into the accounting system by someone other than the person completing the spreadsheet. The cash register located in the bar area is also used to record food and beverage purchases in the dining room. The register can only be used by one person at a time. During the slow season, the drawer is closed at the end of the day. During the peak season, it is closed at the end of each shift. The cash drawer is counted and balanced using a prescribed form (balance in drawer is $150.00) generally by the person who used the drawer but is not verified by a second individual. If a discrepancy exists with the count, the drawer is re-verified by the person counting the drawer. A cash drawer log is completed, indicating any over / shortage, and initialed by the parties involved. A three part deposit slip is prepared by the person who closed out the drawer, one part accompanies the deposit to the bank, one part remains at the golf course as a copy, and one part is sent to Administration for verification against the accounting records and for bank reconciliation purposes. The deposit is then entered in the deposit log (see cash control procedures) and the deposit is placed in a safe. (R-Control Activities) Ice Arena Room rentals are handled by the office manager and require that the fee be paid in full at the time the room is rented. Each rental requires a completed facility rental form along with a $ 50 deposit. The original is filed in the Ice Arena Office and a copy is given to the customer. Deposits of room rental fees are made by the office manager or in their absence, the supervisor on duty by entering them into the cash register. Birthday party fees are collected by the hostess at the completion of the party. The hostess prepares the deposit by completing a deposit slip in the presence of the front desk staff, attaching the payment to the deposit slip and placing it in the drop safe. Other

Administration Beyond the recording of receipts for taxes and parking lot rental, Administration is responsible for the recording of receipts based upon contractual arrangements such as vending commissions. Deposits are made primarily by the Superintendent of Finance and Personnel. A three part deposit slip is prepared, one part accompanies the deposit to the bank, one part remains in the deposit book as a copy, and one part is given to the Controller as documentation to prepare the journal entry to record the receipt in the accounting records. Once prepared, the FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 24

Superintendent of Finance and Personnel gives the deposit and the deposit slips for the bank and for the journal entry to the Controller who would verify the deposit and enters the deposit into the deposit log (see cash control procedures). At month’s end and as part of the bank reconciliation process, the Controller would verify that all deposits have been recorded properly in the financial records. (R/S-Control Activities) Payroll Process Description

This process identifies the procedures for hiring employees and the issuance of payroll checks. Financial statement accounts that are included in this process are salary, wages, and benefits. Description of the Payroll Process The payroll department at the Park District is comprised of three individuals. Payroll is processed on a biweekly basis is for all employees. Overall payroll processes checks for approximately 55 full-time employees and 260 part-time employees (as of 4/30/03). The District has recently initiated a direct deposit option for all employees. Every employee, whether they are being hired for the first time, or rehired, must complete the following steps before they can begin working at the Park District: Complete application form. The completion of the form is self-explanatory. The applicant must complete the type of work they are applying for. If this section is left blank or a generic response such as “anything” or “open” is indicated, the application will be disqualified. The applicant also must complete the section for references including the phone numbers for each reference. The applicant must sign and date the security release form included in the application. Complete the Payroll Status/Change form. The completed form must be signed / approved by the Department Head responsible for the employee, the Superintendent of Finance and Personal, and the Director of the Park District. Complete tax forms W-4 Employee’s Withholding Allowance Certificate and IL-W- 4 Employee’s Illinois Withholding Allowance Certificate I-9 Employment Eligibility Verification form with either of the following forms of identification: a. Driver’s License or State I.D. with photo or school I.D. with photo and b. Social Security card or birth certificate c. A U.S. passport or alien registration card is sufficient identification by itself Other forms of identification are acceptable but these are the most common ones given. A list of acceptable forms of identification for the Form I-9 is available in the payroll department. Orientation (Employee) procedure (Full time and Part Time employees) Employee pre employment physical (Full time employees only) Employee background check Driver Abstract The paperwork is reviewed for completeness by the Office Manager before employment begins. Completed paperwork received by the Tuesday proceeding the pay week will be paid on the next payday. Completed paperwork received after Tuesday proceeding the payroll week will delay the employee’s check until the following payday. (M-Control Activities) Payroll Check Issuance Process Employee timesheets are printed and delivered to each department via inter-office mail. The department head or supervisor fills out employee timesheets based on time cards, time sheets and salary agreements. Except for exempt staff, administration front desk staff and instructors, virtually all other employees use time cards. Instructors use either a time sheet or salary agreement (salary agreement is used when an FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 25

instructor gets paid per class or per class participant rather than on an hourly basis). Administration front desk staff (and Oak View front desk staff when they work in a different department) completes time sheets. Exempt staff time is recorded in the payroll system via an auto post function. Salary agreements are signed by the employee at the time they are entered into, time sheets are signed by the employee at the time of completion. Employee timesheets are signed by the department head or supervisor who completed them and are delivered to the payroll department beginning 5:00 pm Monday of the payroll week. The payroll clerk audits/edits the time cards and salary agreements against the employee timesheets and verifies that the timesheets have been signed. Any questions are directed back to the department head or supervisor. (R-Control Activities) The payroll clerk takes an adding machine tape of the hours for each department. The payroll clerk enters the employee information from the timesheets into the computer. The only pay information that the payroll clerk does not enter is the administration department payroll. After the entire payroll information is input, a Gross Earnings Report is run. The Gross Earnings Report lists each employee, the hours worked and the rate per hour and the department totals hours. The payroll clerk compares total hours by department from the Gross Earnings Report to the adding machine tapes taken earlier; any discrepancies are reconciled. Before payroll checks are run, the Superintendent of Finance and Personnel checks the Gross Earnings Report for anything unusual. If nothing unusual is spotted the checks are printed by the Office Manager. Once the checks are given to the Administration Office Manager, the payroll clerk does not handle the checks again. (M/S-Control Activities) The Office Manager takes the printed payroll checks and runs them through the check-signing machine. When all the checks have been signed, the Office Manager gives the checks to receptionist for bursting and stuffing into the payroll envelopes. (S-Control Activities) The completed checks are then locked in the safe where only the Superintendent of Finance and Personnel, the Controller/Accounting Supervisor and /or the Office Manager can retrieve them. Every other payroll period, each department will receive a copy of their department’s gross earnings report. The department head or supervisor will check the hours and rates for each employee for accuracy. Any discrepancies or differences are reported to the business office. Non-Salary Process Description

A purchase order, check request or voucher must accompany every purchase. Purchase orders are required for those items that have a long-range effect on the budget. Electricity or other utilities do not require a purchase orders, but purchase of equipment or contractual services that will be received and paid for at a later date would require a purchase orders. A check request will be used to reimburse expenses already incurred, emergency purchases or day to day purchases with immediate receipt of goods. This would include, but is not limited to, purchases for supplies, emergencies, repairs, subscription, registration, maintenance agreements, petty cash, mileage reimbursements etc. Vouchers are used to affect payment such as monthly service payments to utility companies or other fixed monthly bills that do not affect the encumbrance accounts but post directly to the proper expense accounts. Financial statement accounts that are included in this process include: • Contractual services • Materials and supplies • Insurance • Utilities • Other • Capital outlay

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 26

Description of the Non-Salary Process Purchase Orders The purchase orders are completed by Supervisors or above based upon their program / departmental needs. The person completing the purchase order indicates what is being purchased along with the purchase price and reviews the budget in order to ascertain that the purchase is within the budget. If the purchase is within budget, the purchase order must be approved by the manager whose budget is being charged and the request is forward to the Business Office. (M-Control Activities) If the purchase is not within the budget, the purchase cannot be made unless it is demonstrated that the purchase is covered by additional revenues or is a necessary and/or an unforeseen expense. In these cases, the additional revenues or explanation as a necessary and/or unforeseen expense is verified by the Controller and / or Superintendent of Finance and Personnel by discussing with the appropriate supervisor and by verifying the budget. The purchase order and supporting documentation is then approved by the manager whose budget is being charged and the request is forwarded to the Business Office. (MControl Activities) Absent the purchase being in budget, being funded through additional revenues, or a necessary or unforeseen expense, the purchase cannot be made. In the Business Office, all purchase orders are given to an Accounts Payable Clerk who reviews them for vendor information, appropriate signatures, account number(s), assigns a purchase order number and obtains the Controllers approval for purchase orders less than or equal to $1,000 and the Directors approval for purchase orders more than $1,000. This approval is indicated by the signature of the Controller and / or Director. Once the purchase order is approved, it is returned to the Accounts Payable Clerk who distributes them to the appropriate staff. (M-Control Activities) Check not required – the Accounts Payable Clerk maintains the administration copy of the purchase order, places the journal copy in the purchase order file, and sends the vendor copy, Business Office copy, receiving copy and originator’s copy to purchase order originator. The purchase order originator would then be allowed to order items on the purchase order. When goods are received, goods received are checked against purchase order. If everything ordered has been received, the receiving copy of the purchase order is signed by the employee who received and verified the goods. The packing slip and signed receiving copy are then sent to the Accounts Payable Clerk in the Business Office. If the order is incomplete, the packing slip is filed until the rest of the goods are received. If it is determined that the remaining goods will be delayed, a partial payment for the goods can be requested. In this case, the packing slip for the goods received is marked “OK to pay for these items only”, signed by the employee who received and verified the goods, and sent to the Accounts Payable Clerk in the Business Office. The Accounts Payable Clerk would enter the completed purchase orders into the accounts payable system in order to issue a check. Once entered into the accounts payable system but before the check is issued, all completed purchase orders are inspected by the Controller for compliance with the outlined procedures. Purchase orders not in compliance with the Park District procedures are returned to staff for an explanation. (M-Control Activities) Check Requests A check request is used for expense reimbursement or a purchase; therefore there should be an invoice or receipt. Forms can be downloaded from the computer and available to be printed when a check request is needed. The original invoice or receipt is attached to the check request form, the check request form is approved by the appropriate manager, and sent to the Accounts Payable Clerk in the Business Office for payment. When the check request is received by the Accounts Payable Clerk, it is checked for completeness, assigned a voucher number and forwarded to the Superintendent of Finance and Personal or Controller for approval if $1,000 or less and the Director if it is over $1,000.00. (M-Control Activities) A copy of the approved check request will be sent to the originator for his/her file. All requests should be given at least 5 business days before a check will be printed and in the case of a check over $1,000.00, allow 7 business days.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 27

Vouchers

A voucher is used for the payment of regular monthly bills such as utilities, waste removal, health insurances, etc. The Accounts Payable Clerk in the Business Office is responsible for all voucher payments. The Accounts Payable Clerk checks the invoice for accuracy, assigns a voucher number, and gives to the Controller for review and signature. Vouchers are approved by the Controller if under $1,000 and by the Director if over $1,000 before a check is issued. Procurement Card Program The MasterCard Procurement Card (P-Card) program is a simplified and cost-effective method of purchasing and remitting payment for approved expenditures. The P-Card can be used for retail purchases in person, by telephone or by fax. The P-Card will be used in accordance with the guidelines established in the Procurement Card Procedures Manual and this document. A copy of the manual will be given to each employee that is issued a PCard. The P-Card is to be used with the same sense of responsibility and security that would be used with a personal credit card. All credit cards will be issued at the request of the Oak Lawn Park District and card usage will be audited and may be restricted at any time. Only the employee whose name is on the P-Card is authorized to use the card. (RControl Activities) This document, and the Procurement Card Procedures Manual, provides the guidelines under which the P-Card may be used. Each employee that receives a P-Card will be given a copy of the Procurement Card Procedures Manual. After reading the manual the employee must sign Cardholder Authorization Form (located in the back of the manual) stating that they understand and will comply with the guidelines of the program. The Business Office will schedule training sessions for all employees before they receive their P-Card. (AInformation/Communication) Once the employee receives their card they must fill out the Acknowledgment Form (located in the back of the manual) for the receipt of their card and then call the Harris Bank activation number to activate the card. Record keeping will be essential to ensure the success of the program. This is not an extraordinary requirement since standard reimbursement policies require the retention of all receipts. (Refer to the NON-SALARY PROCESS DESCRIPTION section of this document beginning on page 26). General Information • The Purchase Card may be used at any merchant that accepts MasterCard credit cards. • The Purchase Card is not to be used for personal purchases. • The employee is responsible for the security of their card and any transactions made against the card. The Purchase Card is issued in the employee’s name and it will be assumed that any purchases made against the Purchase Card will have been made by that employee. • Use of the Purchase Card not in accordance with the guidelines established for this program will result in revocation of the card. • The employee will not be charged an annual fee for their card. • Harris Bank will pay merchants within 48 hours of (the merchants’) posting of the transaction to MasterCard. • The appropriate department budget is reduced by each transaction and reflected by the financial statements of the following month. • Original receipts and a copy of the Monthly Card member Activity Report (printed from Harris details Online Website) should be forwarded to the Business Office each month. (R-Control Activities) • All purchasing procedures and guidelines are to be adhered to. (Refer to the Oak Lawn Park District Financial Procedures Manual). FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 28

•

•

The Purchase Card program has been established as another method of payment for eligible purchases. It does not eliminate the District’s purchasing policy or procedures. It is intended to increase efficiency and reduce costs. No circumvention of the purchasing procedures by the improper use of the Purchase Card shall be tolerated. Finally, it is intended that the guidelines established herein be viewed as the minimum standards for departments, who may wish to establish additional controls beyond these guidelines. Contact the Business Office regarding establishing additional internal controls.

Acceptable MasterCard Purchase Card Purchases The following information provides examples of purchases that are appropriate for the Purchase Card: • Purchases of a small dollar amount • Fuel • Approved supplies • Conference/Seminar registrations (Board Members and Director only) • Travel/Conference expenses, including lodging (Board Members and Director only) • Hardware stores

Unacceptable MasterCard Purchase Card Purchases The following items define where the Purchase Card is not an appropriate choice: • Alcoholic beverages/tobacco • Lottery tickets • Technology related products • Cash advances or ATM’s • Services • Gift certificates

Department specific regulations may add further restrictions to this list so the employee must check with their supervisor for any additional restrictions. This list is not intended to be all-inclusive. If there are specific questions, please call the Business Office for assistance. Program Restrictions Each MasterCard Purchase Card has been assigned a monthly credit limit determined by the Director, Department Head and Superintendent of Finance & Personnel. Harris Bank will only take directions from the authorized program administrator. The program administrator (i.e., Business Office) must approve all requests and limit changes or Harris Bank will not make those changes. (A-Control Environment) The MasterCard will be accepted for purchases of generally approved Park District commodities. Businesses and services not determined to offer products commonly accepted for Park District use have been blocked from accepting the Purchase Card. (A-Control Activities) Limiting the acceptable Merchant Category Codes does this. The Merchant Category Code is a four (4)-digit classification code used in the authorization and settlement systems to identify the type of merchant (commonly known as Standard Industrial Code “SIC”). FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 29

Levels of credit authorization are in place to clearly define the individual purchasing limit controls. We have chosen to define our control limits by levels. Each designated level will have a transaction limit, daily limit and monthly limit. Each Department Head and the Superintendent of Finance & Personnel will determine the assigned levels. If a merchant declines an employee’s card and that employee feels the decline should not have occurred, contact the Business Office or Corporate Client Services at 1-800-263-2263 within 24 hours. Request for transaction, daily and monthly limit changes are to be made by each Department Head to the Superintendent of Finance & Personnel. (A-Control Environment) Reconciliation and Payment The MasterCard Purchase Card program carries corporate, not individual, liability. A single invoice covering all Park District purchases using the Purchase Card program will be paid each month by the Business Office. It is required that all original receipts for goods purchased are retained. (R-Control Activities) If purchases via phone or mail, the merchant will be required to include a receipt with the goods when the product is shipped. If that is not possible, a packing slip must be obtained when the shipment is received to document the purchase. Each cardholder will need to review their statement (at a minimum of one time per month) for all transactions made against their MasterCard Purchase Card during the previous billing cycle. (R-Control Activities) Each cardholder will be notified by e-mail to review and approve their transactions on the last working day of the month. Original receipts and a copy of the Harris Bank statement (printed from the website), with each purchase coded to the appropriate general ledger number should be forwarded to the department manager, superintendent and/or department head for their review and signature each month. The approved statements should then be forwarded to the Business Office. (M/R-Control Activities) The cardholder may keep a transaction log of all receipts and statements. The log serves to remind cardholders of transactions and assists in reconciliation of the monthly statements. A periodic audit will be conducted of card activity, retention of receipts, reconciled detail and signed monthly statements. Misuse of the MasterCard Purchase Card includes: • • • •

Using the Purchase Card for personal purchases Purchase of unauthorized items Use of the Purchase Card by someone other than the cardholder Fraudulent or inaccurate record keeping

In the case of misuse, the appropriate Supervisor, Department Head and/or Business Office staff shall document the occurrence on the Cardholder Misuse Report and forward it to the Superintendent of Finance & Personnel for further action. (M-Control Activities) When The Records Do Not Agree with The Monthly Statement There may be an occasion when items found on the transaction log do not correlate with the retained receipts or monthly cardholder statement. Reconciliation of the monthly statement is very important to determine if the employee has made a particular transaction, the amount of the transaction is correct, or there is a quality or service issue. (R-Control Activities) The first recourse is to contact the merchant involved to try to resolve the error. If the merchant agrees that an error has been made, the account will be credited. The transaction in question is to be highlighted on the statement as a reminder that the item is still pending resolution. The statement should be checked to ensure that the credit is received on the next monthly statement. (R-Control Activities) FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 30

If unable to resolve the issue directly with the merchant, contact the customer service department at Harris Bank, 1-800-263-2263 and immediately notify the Business Office. When calling be sure to have detailed information regarding the dispute. State that you would like to dispute a charge on your Purchase Card. You are required by law to submit the information in writing to initiate a claims dispute with Harris Bank. The amount of the next monthly statement will be reduced by the amount of the disputed item until the question is resolved. (See Cardholder Dispute Form at the back of the manual). Any charge that a cardholder wishes to dispute must be identified in writing within 30 days of the statement date to Harris Bank. Each cardholder is responsible for the transactions identified on their statement. When an audit is conducted on each account, each cardholder must be able to produce receipts that a Park District approved transaction occurred. If an error is discovered the cardholder is responsible to show that the error or dispute resolution process has been followed. Lost or Stolen Cards The MasterCard Purchase Card is the property of the Oak Lawn Park District and should be secured just as you would secure your personal credit cards. (A-Control Activities) If your card is lost or stolen contact Harris Bank customer service number (1-800-263-2263) immediately, then notify the Business Office. When calling customer service, be prepared to provide your social security number. Upon notifying Harris Bank, the card will be deactivated immediately. If the card is reported lost or stolen and is later used, the Merchant will decline it. Prompt action in these circumstances is very important to reduce Park District liability for fraudulent charges. Sales Tax

Merchants are usually required by taxing authorities to include sales tax when goods are purchased. The amount is dependent on a variety of factors, including the state and city where the goods are purchased. Purchases of items by public entities for their own use are generally exempt from sales tax. The exemption applies to the public entity, not to the individual. It is the cardholder’s responsibility to notify the merchant the Park District is tax exempt. The Park District Illinois state tax-exempt number is “E9997-9942-05” and a copy of the Park District tax-exempt form is included in the back of this manual. You may need to make a copy of the form, insert the vendor name, and then date the form prior to issuance (i.e., faxing or mailing). Do not distribute this form to any other employee in the organization. If they need one, they have been provided with a copy. Should you have additional questions, please contact the Business Office for assistance. Check Disbursement Procedures

All open blank check stock is kept in the safe in the Administration Office. Access is restricted via key or combination access. Blank check stock is taken to the computer for printing as needed and is generally run weekly by the Accounts Payable Clerk. The Office Manager places one of two signatures on the checks using a signature plate. The checks, if under $1,000 are given to the Controller or Superintendent of Finance and Personnel who places the second signature on the check using a signature stamp (S-Control Activities). If the check is $1,000 or more they are held for the manual signature of the President of the Board of Commissioners. The President signs checks on a weekly basis. If a check greater than $1,000 is needed immediately, the President’s signature is affixed using the signature stamp and a copy of the check is kept for the President’s review. Once signed, checks are given to the front desk staff that either mail them directly to the vendors or holds FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 31

the check to be picked up by the person requesting it, based on instructions on the original disbursement document. All checks are processed via the above procedure; accordingly no manual checks are prepared. Bid Process Where advertised bids are required by the State Code, the advertisement shall describe the character of the undertaking in sufficient detail to enable bidders thereon to know that their obligations will be either from the advertisement itself or by reference to detailed plans and specifications on file with the District at the time of the publication of the advertisement. The advertisement shall state the date; time and place of the opening of the bids, and no bid shall be received subsequent to the time set forth in said advertisement. The Business Department shall also invite bids by mail, telephone or otherwise. All bids shall be sealed and opened at the time and place indicated in said advertisement and shall be open to public inspection. If two or fewer bids are received, the bids will not be opened and the following occurs:

1. The bid opening date is extended by ten (10) days 2. Staff contacts all potential bidders to solicit bids for the new date. 3. Vendors who submitted sealed bids for the original date are contacted and offered the option of submitting a new bid and having the original bid forfeited, or keeping the original bid. 4. The bid opening proceeds on the second date according to the original specifications regardless of the number of bids received. Goods or Services greater than $10,000 All contracts in excess of $10,000 (except as otherwise authorized herein) shall be awarded by the Board and to the lowest responsible bidder. In determining the responsibility of any bidder, the Board may take into account other factors in addition to financial responsibility, such as past records of transactions with the bidder, experience, adequacy of equipment, ability to perform, time limits, services to be rendered by the bidder, location of bidder, conformity with specifications, terms of delivery and other pertinent considerations. Any and all bids reviewed in response to an advertisement or otherwise may be rejected by the Board if the bidder is not determined responsible or the character or quality of the services, supplies, materials, equipment or labor does not conform to the Board’s requirements or if the public interest may otherwise be served thereby. The Board reserves the right to award a contract for all or only a portion of the specified bid work. Responsible Bidder’s Ordinance In determining which bidder is a “responsible bidder” on Oak Lawn Park District projects, the bidder must comply with the following criteria and submit an affidavit of compliance, in addition to any other requirements as determined from time to time by the park district for the specific type of work to be performed. District attorney shall promulgate an affidavit, which shall be executed with the park district contract and which shall require the following certifications: A.

Compliance with all applicable laws and codes and ordinances prerequisite to doing business in Illinois and the Village of Oak Lawn, including Village licenses:

B.

Affidavit of compliance with: 1.

Submittal of Federal Employer Tax Identification Number or Social Security Number (for individual):

2.

Provisions of Section 2000(e) of Chapter 21, Title 42 of the United States Code and Federal Executive Order No. 11375 (known as the Equal Opportunity Employer provisions);

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 32

C.

Certificate of insurance indicating at least the following coverage at minimum limits established by the park district; general liability, worker’s compensation, completed operations, automobile, hazardous occupation, product liability and professional liability;

D.

Compliance with all provisions of the Illinois Prevailing Wage Act, including wages, medical and hospitalization insurance and retirement for those trades as covered by the Act;

E.

Participation in apprenticeship and training programs approved and registered with United States Department of Labor’s Bureau of Apprenticeship and Training;

F.

Compliance with the applicable provisions of the Illinois Human Rights Act and the rules of the Illinois Human Rights Commission;

G.

Adoption of a Sexual Harassment Policy pursuant to Illinois Public Act 87-1257’

H.

Furnishing of required Performance and Payment Bonds:

I.

Certificate of no delinquency in the payment of any tax administered by the Illinois Department of Revenue;

J.

Certificate that the bidder is not barred from bidding or contracting as a result of a violation of either Section 33E of 33E-4 of Ch. 720, Article 5 of the Illinois Compiled Statutes;

K.

Affidavit that the bidder has not only the financial responsibility but also the ability to respond by the discharge of the contractor’s obligations in accordance with that which is expected or demanded under the terms of the contract;

L.

Compliance with a Contractor’s Drug-Free Workplace Certification;

M.

Submission of an Indemnity and Hold Harmless Agreement; and

N.

An Anti-collusion Affidavit of Compliance;

This ordinance shall be in full force and effect from and after its passage and approval in the manner provided by law. PASSED THIS 13TH day of August, 2007 Oak Lawn Park District Board of Commissioners Fixed Asset / Capital Outlay Process Description

This process assesses the need for facilities and equipment, determines how best to acquire them, oversees their design and construction and operates and maintains them. Financial statement accounts that are covered by the internal controls listed on the Internal Control Grid include the following: • •

Land, building, machinery and equipment and improvements Accumulated depreciation

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 33

•

Depreciation expense Funding Process

Annual Annual capital projects are funded based upon the availability of proceeds from the annual general obligation bonds. The proceeds from the annual general obligation bonds issued are first designated for the retirement of alternative revenue bonds, installment purchase contracts, mortgages and any other non-general obligation debt payments. Of the remaining funds, the Treasurer would recommend an amount that would be available for the current year capital projects. Long-term Projects that are larger in nature and require funding in excess of the funding provided for annual projects are the result of extended discussions between the Board and staff. These discussions focus on the feasibility and scope of the project. Once the scope and cost of the project is determined, the Treasurer and or the Superintendent of Finance and Personnel would determine the financing option that would best serve the District. The Park District Attorney is responsible for preparing the necessary documents to issue the debt necessary to fund the project.

Capitalization Policies and Procedures

The Park District establishes a capitalization policy for financial accounting purposes for land, buildings, and equipment used in the operations of the District. Assets are capitalized based on the following criteria: 1. Land – Cost to be capitalized includes all costs connected with the acquisition of land and costs incurred in preparing the land for its ultimate use. These include but are not limited to the cost of purchase, appraisals, professional services, and title insurance. 2. Land Improvements – Improvements to be capitalized include the value of permanent improvements having a cost in excess of $ 5,000. Examples included fences, roads, lighting systems curbs, sidewalks, pavements, gutters, tunnels and bridges. All costs of land improvements associated with newly constructed buildings will be capitalized. 3. Buildings – Cost to be capitalized includes all costs related to the acquisition or construction of buildings. Acquisition cost includes but is not limited to the cost of purchase, professional services, appraisals and title insurance. Construction costs include but are not limited to the cost of professional services, materials, labor and site preparation. 4. Building Improvements – Building Improvements to be capitalized are significant alterations or structural changes that a) cost in excess of $5,000 and b) meet one or more of the following conditions: a. The project extends the useful life of the building beyond what was originally scheduled. b. The project substantially changes the use or purpose of the original space. c. The project expands the total square footage of the building. Note: As part of the annual budget process, the Board of Commissioners approves funding for repairs and maintenance. This would include the funding of new repairs and maintenance projects as well as carryover projects. (M-Control Activities)

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 34

5. Demolition of Buildings – The book value of the building will be written off when a building is demolished. If the land is maintained and the original value cannot be determined, the land will be recorded at no value. 6. Purchased Equipment – Purchased Equipment to be capitalized is any article of nonexpendable tangible personal property with a useful life of one year or more and a cost of $5,000 or more. 7. Software – Operating software included in the price of the hardware will be capitalized. When purchased separately, software will be capitalized if the cost exceeds $5,000. 8. Donated Assets – Land, buildings, and books received as a gift will be capitalized at the fair market or appraised value at the date of the gift. If market value or appraised value is not available, the gifts will be recorded at no value or the acquisition cost incurred by the District. Equipment received as a gift having a fair market value or appraised value of $ 5,000 or more will be capitalized. 11. Sales or Disposals of Capitalized Assets – The book value of land, building, and equipment will be removed from the accounting system when sold, disposed of, or declared surplus property by the Board of Commissioners.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 35

Equipment Classifications

The following is a listing of the different equipment classifications: Computer Equipment: Includes all data processing, word processing, computing, microcomputers and operating software only when included with the purchase of the hardware. Office Equipment: copiers, fax machines, and audio visual equipment, etc. Furniture and Fixtures: Includes general purpose furniture such as desks, cabinets, and tables. Vehicles: Includes light and heavy-duty vehicles such as trucks, tractors, and rider-mowers. Miscellaneous Equipment: Includes all items that meet the capitalization criteria but do not fall into any of the other equipment classifications.

Depreciation Expense Policies

Fixed assets used in governmental fund types of the Park District have been recorded in the general fixed assets account group. As such, no depreciation is provided on general fixed assets. The District will implement GASB Statement 34 for the year ended April 30, 2004. This statement requires the depreciation expenses on these assets to be included as either a direct expense of a function or as an allocated expense for shared assets. The general guidelines for the depreciation procedures of the District apply only to the costs associated with buildings, property, equipment and other physical assets used in the operations of the District. Assets are depreciated according to the following policy: 1. Depreciation on capitalized assets will be calculated over the estimated useful life on a straight-line basis. 2. Land improvements, buildings, equipment, and books will be depreciated using the straight-line method over a useful life as determined by the Administration Office. 3. A prorated year’s depreciation will be recorded for buildings, building renovations, equipment, and land improvements in the year they are capitalized. 4. Depreciation of newly constructed buildings will commence in the first month of useful occupancy. Physical Inventory of Fixed Asset Procedures

Maintenance conducts and annual inventory of all vehicles owed by the District. Computer equipment inventory is updated as equipment is added, moved or replaced and is tracked on-line with software.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 36

Disposal of Buildings and Equipment

Disposals include equipment which is stolen, destroyed, discarded as surplus property, or otherwise legally disposed of. The Superintendent of Finance and Personnel is responsible for accounting for the disposal of all equipment at the time of disposal. The Oak Lawn Police Department is notified when equipment is stolen. Purchase order requests and purchase orders must indicate if equipment is being traded in as part of the purchase. Donated Equipment

When a gift of equipment is made to the Park District, the Superintendent of Finance and Personnel will make certain that the proper accounting entries are made to record the gift if it has a value of $5,000 or more.

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 37

Forms

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 38

FINANCIAL STATEMENT AND ACCOUNTING PROCESS DESCRIPTIONS AND INTERNAL CONTROL DOCUMENTATION 39