The FinanceStandards Guidefor LCVPs FMy entity’s contribution tostrategy #5 of the A2020roadmap!
but why?“To Ensure we (AIESEC) are 100%legal and sustainable in our operationsat all levels.”Concretely to: Align quality among different realitiesEasier education and collecting dataEnsure legality, protect organization and customerConsolidate dataSet expectations, ensure that minimum ofoperations is happeningEnsure financial and legal sustainability of ourorganization
We need standards to align quality amount differentrealities and to enable a sustainable growth.LegalityAccountingReporting6There areFinance StandardsFortunately most of them are an easy guess basedon its name. Nevertheless, over the next few pageswe’re gonna explain what is each one of them andwhat does it mean for your as thee CFO of yourentity.BudgetingAuditingSustainabilityIf you read all of them carefully you will: Make your decisions more informed from alegal and sustainable point of view. Let’s just say you will be able to call yourself aCFO ;)
LegalityWhat does it mean to be legal?1Operating and behaving according to the national law2Operating and behaving according to the Global /NationalCompendium3Ensuring we have external legal advice to protect ourentities and the brand-Using the right work permits for GT interns, reporting to fiscal authorities,signing contracts for our exchange partners and our EPs.-Fulfilling global membership criteria, having democratic elections for MC.-By having a probono lawyer, inhouse lawyer or a lawyer in the BoA.Let’s behonestIf demonstrating integrity is oneof AIESEC Values, are wesupposed to even need this slide?Unfortunately WE DO as beinglegal is still an issue in lots ofentities.Being legal means demonstratingintegrity in everything we do,complying with the national lawand with organizationalguidelines and rules, andprotecting the organizationalbrand and the integrity of theentity.
WhyA legal organization ensures its brand name &reputation - AIESEC as a similar organizationneeds to ensure legal profile as well.Considering the products and the issues wecater we cannot take risks of sending ourExchange participants illegally.How does it helpyou with?Think about what needs to be coveredfor external and also internalenvironment to ensure basic legalityand governance integrity.Compendium and constitutionTrademark registrationLegal representative inside the LCExchange contractsGlobal membership criteriaPD and sponsorships contractsEntity membership criteria (for LCs)VisasLegal registrationProfessional legal adviceTax status is defined
The Legality checklist for LCVP F!Compendium and constitutionEvery entity needs to have a compendium orconstitution of the entity that fits the followingdescriptions (only if you have a separate legal entityfrom the MC): It needs to fulfill conditions of external lawIt needs to follow AIESEC GlobalCompendiumIt needs to be approved by national plenaryIt needs to include the following contents(suggested structure):22.214.171.124.5.6.Subject and goals of AIESEC activitiesThe election of BoardsRole of EB definitionWay of managing with finance and legalitiesEntity membership criteriaDefine who would be accountable forFinance and legal affairsLegal representative inside the EBOfficial document from competent authority which indicateswho has power to represent the legal entity.For internal global membership criteria: there needs to be adocument signed by general assembly which confirms who waselected as president for the association (in LC and MC)Must doEnsure that all legal representatives understand theconsequences of that role and have established expectationson how to act and react on different scenarios.Have clear who can sign what, what needs to go throughyour MCP approval and what through you!
The Legality checklist for LCVP F!Entity Membership Criteria (LCs)Ensure you are fulfilling the National membershipcriteria for local committees in Compendium orConstitutions and have at least one legislative meetingduring the year to review the fulfillment.Legal RegistrationThis is only needed if you have a separate legal entityfrom the MC: registering a legal establishment in yourcountry/territoryTax Status is definedThis is only needed if you have a separate legal entityfrom the MC: Registration with the tax officeaccording to external laws. All taxes paid as due.Trademark RegistrationThis is only needed if you have a separate legal entityfrom the MC: you have an authorization letter fromthe MC to use their trademarkMust doUnderstand the Entity Membership Criteria. Talk tothe Entity MSC and understand your responsibilitiesas LCVP Finance during transition.Make sure you have legal registration, tax statusdefined and trademark registration. This is only yourresponsibility. Make it a priority if you don’t have it.
The Legality checklist for LCVP F!Exchange contractsContracts must be signed for GT OPs, GV OPs, GE OPs, GTEPs, GV EPs, GE EPs. Contract must include: Subject of contractPriceDetails of the organization/EPDatesSignatures of both endiumPD and sponsorship contractsAll sponsorships like in kind donations or YouthSpeaksponsorships should be in a contract, stating everythingyou do in exchange contract plus details of the partner.Must doAs silly as it sounds - READ the exchangecontracts - you will be asked by a lot of peopleto sign them so know what you commit andthat they do!Adjust if needed, check with lawyers or createthem if you still don’t have one!
The Legality checklist for LCVP F!VisasAll international CEEDers must have a valid visa if the lawdoesn't say anything different.Visas for EPs of all exchange products and Trainees mustbe compliant with external law.For example: IGV interns should have a volunteering visainstead of a tourist visa in case the law of your country orterritory requires it. Your international MC members or IGTinterns, should have a work visa .Professional legal adviceEnsuring we have external legal advice to protect ourentities and the brand (e.g. by having a pro-bono lawyer orlaw firm, in-house lawyer or a lawyer in the BoA).Must doCoordinate checking the visas -you would besurprised how often immigration law changes!Have a lawyer phone number in yourcellphone, call him/her and introduce yourself.Hopefully you will never use it again, but incase you have a safe solution to jump into!
AccountingWhat is accounting?1It is the process of collecting, recording, classifying,interpreting and communicating financial information2It reveals profit or loss for a given period, and the value andnature of an organization's assets, liabilities and equity.3It shows overall wealth, profitability and liquidity(cash-flow).4It shows the resources available, how those resources arefinanced and the results achieved through using them.The lawis the lawEven though we live in digitalage, the law is still the law. Pleasebear in mind, that receipts andinvoices for purchases and salesneed to be kept and theaccounting records should matchthese physical receipts.Without ensuring all of that is inplace, you shouldn’t be happywith the current state of yourentity!
How does it helpyou with?WhyAIESEC as any other organization needs to doaccounting to collect information aboutoperations to be able to evaluate financialstatus and performance for making decisionsand to fulfil criteria set by law.Way and principles needed to befollowed in accounting/bookkeepingprocess.Requirements of accountingdocuments documents whichprove accounting transactionsDouble entry bookkeeping systemAccounting principlesAlignment between accounting andbudgetFinancial statements shouldgenerated at least once per yearbeArchiveallaccountingdocuments physically or virtuallyAlign your chart of accounts withGFB list of accounts
The Accounting checklist for LCVP F!Double entry bookkeeping systemEach legal entity which is obliged by law to do accountingneeds to have a proper bookkeeping system.Entities who needn't to do accounting by law, they shoulddo their own bookkeeping management and storage all theaccounting documents.Double entry bookkeeping system is based on the fact thatevery financial transaction has equal and opposite effectsin at least two different accounts. It is used to satisfy theequation Assets Liabilities Equity, whereby each entryis recorded so as to maintain the relationship.Basically, you not only look at the bank statement which ispart of the assets, but you also look at who owns themoney. So, then you classify receivables and liabilities.Align your chart of accounts withGFB list of accountsIn order to provide data for GFB survey, your accountsneed to be aligned to the structure, which GFB provide.Must doIf you still don’t have one, get an accountingsystem as soon as possible. Even if your don’thave money you can use Wave (for free) ofQuickbooks (low fee).If you have an accountant, talk to him/her assoon as possible to align your chart of accounts.It’s super simple and it will make a difference!
The Accounting checklist for LCVP F!Accounting principlesAccrual principle: Your transactions should berecorded in the period in which they actuallyoccur, rather than the period in which the cashflows related to them occur.Consistency principle: Once an accountingprinciple or method is adopted, continue to followit consistently in future accounting periods. Onlychange an accounting principle or method if thenew version in some way improves reportedfinancial results.Cost principle: It is also known as the historical costprinciple. The cost principle requires that assets berecorded at the cash amount (or its equivalent) atthe time that an asset is acquired.Economic entity principle: The transactions of abusiness should be kept separate from those of itsowners and other businesses. This preventsintermingling of assets and liabilities amongmultiple entities, which can cause considerabledifficulties when the financial statements of afledgling business are first audited.Full disclosure principle: You should include in anentity's financial statements all information thatwould affect a reader's understanding of thosestatements.Going concern principle: The assumption is that acompany or other entity will be able to continueoperating for a period of time that is sufficient tocarry out its commitments, obligations, objectives,and so on.
The Accounting checklist for LCVP F!Accounting principles (Part 2)Monetary unit principle: Record only businesstransactions that can be expressed in terms of acurrency.Reliability principle: You can record only transactions inthe accounting system that you can verify withobjective evidence (accounting document).Revenue and costs recognition principle: Theaccounting guideline requiring that revenues (costs)be shown on the income statement in the period inwhich they are earned (spent), not in the period whenthe cash is collected.Time period principle: You should report the financialresults of its activities over a standard time period,which is usually monthly, quarterly, or annually.Must doStart recording your transactions! It’s easierthan you think. Approach GFB if you have anyquestions or concerns about any accountingprinciple!
The Accounting checklist for LCVP F!Alignment between accountingand budgetCosts & revenues in real budget needs to be equal costs &revenues in accounting.Financial statements should begenerated at least once per yearBalance Sheet & Profit and Loss StatementRequirementsofaccountingdocuments documents whichprove accounting transactions The identification number of the vendor.The amount to be paid.The date on which payment should be made.The accounts to be charged to record the liability.Archive all accounting documentsphysically or virtuallyHave these accounting documents according to nationallaw, but no less than 5 years:A.Invoices created and receivedB.Reimbursement forms and all receipts,C.Bank statements,D.Cashbook (petty cash)E.List of transaction from the year,F.Balance Sheet & Profit and Loss StatementMust doEstablish clear rules to your LCs and to your MC Teamabout reimbursements only with the correspondingdocument. It will take some time for people to get usedto your rules, but it will be worth it!
ReportingWhat is reporting?1Is providing organized information in the form of adocument.2Financial reporting refers mainly to external financialstatements (balance sheet, income statement,statement of cash-flows).3Other reports may be monthly, quarterly and annualreports (performance and financial) to the nationalplenary and AI.Let’s actsustainablyWe do reporting so ourstakeholders can easilyunderstand the financial positionand performance of AIESEC andour products so we can makedata-driven decisions.Only if you make sure that allfinances are reported and youknow the current state, you cansay that you “act sustainably”.Most of MC members will be outin 365 days and the least you cando for next team is ensure theyhave proper financial data tomake informed decisions!
WhyReporting is a tracking tool, which help us tocheck the current financial status andperformance of the entity, keep theorganisation accountable, ensure it isoperating legally, and be transparent withhow the organisation is using its resources.Monthly reporting of executedbudget for incomes and expenses.Reporting ProcessAll reports include structure of AIESECInternational financial statementsStoring the reportsHow does it helpyou with?How your reports andprocess should look like.reporting
The Reporting checklist for LCVP F!Monthly Reporting of executedBudget for incomes and expenses LC reports to MC monthly on Budget execution(for Incomes and Expenses)LC VP F reports to LC EB monthly about the LCfinancial situationLC sends to MC all the physical documentation forcash and bank payments and invoicesReporting Process to plenary ofBudget LC EB Reports to local Plenary every q
It needs to follow AIESEC Global Compendium It needs to be approved by national plenary It needs to include the following contents (suggested structure): 1. Subject and goals of AIESEC activities 2. The election of Boards 3. Role of EB definition 4. Way of managing with finance and legalities 5. Entity membership criteria 6. Define who would be accountable for Finance and legal affairs Legal .