FINANCIAL OPERATIONS

ACCOUNTING AND FINANCIAL

POLICIES AND PROCEDURES

NSU Accounting & Financial Policies and Procedures Manual 02/28/2007

NOVA SOUTHEASTERN UNIVERSITY

FINANCIAL OPERATIONS
POLICIES AND PROCEDURES

GENERAL POLICIES

100 Index

101 Financial Operations

101.1 Overview
101.2 Responsibilities of Financial Operations
101.3 Organizational Chart

102 General Ledger and Chart of Accounts

102.1 Introduction
102.2 Policy
102.3 Chart of Accounts Overview
102.4 Distribution of Chart of Accounts
102.5 Control of Chart of Accounts
102.6 Fund Format – General Ledger
102.7 Account Code Structure for General Ledger
102.8 Organization Format – Subsidiary Ledger
102.9 Account Code Structure for Subsidiary Ledger – Income & Expense
102.10 Fiscal Year of Organization
102.11 Accounting Estimates
102.12 Journal Entries

REVENUES AND CASH RECEIPTS

103 Revenue
103.1 Revenue Recognition Policies

104 Contributions
104.1 Definitions
104.2 Distinguishing Contributions from Exchange Transactions
104.3 Accounting for Contributions
104.4 Receipts and Disclosures
104.5 Disclosures of Promises to Give
104.6 Gift Acceptance Policy

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EXPENDITURES AND DISBURSEMENTS

105 Accounts Payable Management

105.1 Overview
105.2 Policy
105.3 Vendor Master List
105.4 Verification of New Vendors
105.5 Receipt and Recording of Payment Requests
105.6 Independent Contractor Agreements
105.7 Processing of Invoices
105.8 Vendor Discounts
105.9 Processing of Checks/ACH Payments
105.10 Manual Checks
105.11 Voided Checks
105.12 Unclaimed Property
105.13 Electronic (E-Drives)
105.14 Reconciliation of A/P Subsidiary Ledger to General Ledger
105.15 Additional Accounts Payable Operating Procedures

106 Travel Policy

106.1 Overview
106.2 Policy
106.3 Travel Expense Reports

107 Cash Disbursements (Check-Writing) Policies

107.1 Policy
107.2 Check Preparation
107.3 Check Signing
107.4 Use of Positive Pay System
107.5 Mailing of Checks
107.6 Voided Checks and Stop Payments
107.7 Record-Keeping Associated with Independent Contractors

108 Petty Cash

108.1 Policy
108.2 Opening a Petty Cash Fund Account
108.3 Replenishing a Petty Cash Fund
108.4 Closing a Petty Cash Fund

109 Credit Cards

109.1 Policy
109.2 Issuance of Corporate Credit Cards

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109.3 Cardholder Responsibilities

109.4 Revocation of Corporate Credit Cards

110 Payroll and Related Polices

110.1 Classification of Workers as Independent Contractors or Employees
110.2 Payroll Administration
110.3 Changes in Payroll Data
110.4 Payroll Taxes
110.5 Preparation of Timesheets
110.6 Processing of Timesheets
110.7 Review of Payroll
110.8 Distribution of Payroll
110.9 Internal Audit of Payroll Data
110.10 Additional Payroll Operating Procedures

ASSET ACCOUNTS

111 Cash and Cash Management

111.1 Policy
111.2 Overview
111.3 Establishment of Accounts
111.4 Authorized Signers
111.5 Bank Reconciliations
111.6 Cash Flow
111.7 Wire Transfers
111.8 Additional Treasury Operating Procedures

112 Inventory
112.1 Policy
112.2 Description of Inventory
112.3 Accounting for Inventory
112.4 Physical Counts
112.5 Contributed Inventory

113 Prepaid Expenses

113.1 Policy
113.2 Procedures
113.3 Prepaid Insurance
113.4 Prepaid Property Taxes

114 Investments
114.1 Policy
114.2 Delegation of Authority

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114.3 Accounting Treatment

114.4 Invested Funds
114.5 Short Term Investments
114.6 Long Term Investments
114.7 Other Investments
114.8 Additional Investment Operating Procedures

115 Property and Equipment

115.1 Policy
115.2 Depreciation and Useful Life
115.3 Fixed Assets

116 Leases
116.1 Classification of Leases
116.2 Accounting for Leases
116.3 Scheduled Increases in Rent Payments
116.4 Rent Abatements and Other Lease Incentives
116.5 Changes in Lease Terms

LIABILITY AND NET ASSET ACCOUNTS

117 Accrued Liabilities

117.1 Policy
117.2 Accrued Leave

118 Note/Bonds Payable

118.1 Policy
118.2 Accounting and Classification
118.3 Non-Interest-Bearing Notes Payable
118.4 Bonds Payable

119 Net Assets

119.1 Policy
119.2 Reclassifications from Restricted to Unrestricted Net Assets
119.3 Reclassifications from Unrestricted to Restricted Net Assets
119.4 Disclosures

FINANCIAL AND TAX REPORTING

120 Financial Statements

120.1 Policy
120.2 Standard Financial Statements of the University
120.3 Review and Distribution of Financial Statements

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121 Tax Reporting

121.1 Overview
121.2 Filing of Returns
121.3 Public Access to Information Returns

FINANCIAL MANAGEMENT

122 Budgeting
122.1 Overview
122.2 Preparation and Adoption
122.3 Monitoring Performance
122.4 Budget Modification

123 Annual Audit

123.1 Policy
123.2 How Often to Review the Selection of the Auditor
123.3 Selecting an Auditor
123.4 Preparation for the Annual Audit
123.5 Concluding the Audit

124 Insurance
124.1 Policy
124.2 Coverage Guidelines
124.3 Actuary Studies

125 Record Retention

125.1 Policy

126 Functional Expense Allocations

126.1 Overview
126.2 Direct Charging of Costs
126.3 Allocation of Overhead Cost
126.4 Accounting for Joint Activities That Include Fund-Raising

FEDERAL AWARDS

127 Administration of Grant and Contracts

127.1 Overview
127.2 Policy
127.3 Compliance with Laws, Regulations and Provisions of Awards
127.4 Preparation and Review of Proposals
127.5 Post-Award Procedures
127.6 Billing and Financial Reporting

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127.7 Cash Draw Downs Under Letters of Credit

127.8 Procurement Under Awards
127.9 Equipment and Furniture Purchased with Federal Funds
127.10 Standards for Financial Management Systems
127.11 Budget and Program Revisions
127.12 Close Out of Federal Awards

BOARD GOVERNANCE

128 Finance Committee

128.1 Purpose
128.2 Authority
128.3 Membership
128.4 Responsibilities

129 Audit Committee

129.1 Purpose
129.2 Authority
129.3 Membership
129.4 Responsibilities

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101 Financial Operations

101.1 Overview

The Vice President for Finance, as the university’s chief financial officer, together with the
assistance of his staff, is responsible for preparing financial reports for appropriate institutional
officials, board officers, and outside agencies. Written monthly operating reports are provided to
the University president, the Board of Trustees Finance Committee, and the full Board of
Trustees. The Vice President for Finance together with NSU management is responsible for
preparing the University’s annual audited financial statements which are certified by an
independent Certified Public Accountant firm.

Monthly reports are also produced for academic deans and administrative department heads for
the purpose of reviewing the accuracy and propriety of revenue and expense transactions made to
their accounts. These reports show monthly and year-to-date revenues, expenditures, and net
revenues by account. Additionally, they present the original annual budget and revised budgets
for these accounts.

The Vice President for Finance oversees the following departments:

Budget Administration
Risk Management
Treasury Operations
Controller’s Office
Accounts Payable
Fixed Assets
Contract and Grant Accounting
Payroll
Taxation and Special Funds Reporting
Financial Reporting/General Accounting/Auditing

101.2 Responsibilities of Financial Operations

The primary responsibilities of Financial Operations consist of :

General Ledger
Budgeting
Cash and Investment Management
Asset Management
Grants and Contracts Administration
Cash Receipts

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Cash Disbursements
Accounts Payable
Payroll
Financial Statement Processing
External Reporting of Financial Information
Bank Reconciliations
Reconciliation of Sub-Ledgers
Compliance with Government Reporting Requirements
Annual Audit
Leases
Insurance

101.3 Organization Chart

Financial Operation’s organization chart follows:

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102 General Ledger and Chart of Accounts

102.1 Introduction

The general ledger is defined as a group of accounts that supports the information shown in the
major financial statements. The general ledger is used to accumulate all financial transactions of
Nova Southeastern University, Inc. (the “university”), and is supported by a subsidiary ledgers
that provide details for certain accounts in the general ledger. The general ledger is the
foundation for the accumulation of data and reports.

NSU uses the Banner Software System to record accounting transactions. Banner provides for
separate, self-balancing sets of accounts in accordance with generally accepted accounting
principles and procedures for colleges and universities. The accounting system was purchased
from SunGard SCT.

102.2 Policy

NSU’s policy is to establish a chart of accounts which accumulates all financial transactions of
the university. The chart of accounts includes fund/account codes for general ledger activity and
organization/account codes for subsidiary ledger entries.

102.3 Chart of Accounts

The chart of accounts is the framework for the general ledger system, and therefore the basis for
NSU’s accounting system. The chart of accounts consists of account titles and account numbers
assigned to the titles. General ledger accounts are used to accumulate transactions and the
impact of these transactions on each asset, liability, net asset, revenue, expense and gain and loss.

NSU’s chart of accounts is comprised of six types of accounts:

1. Assets
2. Liabilities
3. Net Assets
4. Revenues
5. Expenses
6. Gains and Losses

102.4 Distribution of Chart of Accounts

All NSU employees involved with account coding responsibilities or budgetary responsibilities
will be issued a current chart of accounts. On a monthly basis, as the chart of accounts is
revised, an updated copy is distributed to these individuals.

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102.5 Control of Chart of Accounts

NSU’s chart of accounts is monitored and controlled by the University Budget Director.
Responsibilities include the handling of all account maintenance, such as additions and deletions.
Any additions or deletions of accounts should be approved by the University Controller, who
ensures that the chart of accounts is consistent with the organizational structure of NSU and
meets the needs of each division and department.

102.6 Fund Format – General Ledger

Each six digit general ledger fund account always starts with zero and is followed by five digits
which identify the ledger’s purpose.

General ledger funds consist of:

0-1XXXX Current Unrestricted Funds (Education & General)

0-2XXXX Current Unrestricted Funds (Auxiliary Enterprises)
0-3XXXX Current Restricted Funds
0-4XXXX Loan Funds
0-5XXXX Endowment Funds
0-6XXXX Annuity & Life Income
0-7XXXX Plant Funds
0-8XXXX Library Funds
0-9XXXX Agency Funds

102.7 Account Code Structure for General Ledger

For the general ledger, there are four digit account codes which identify specific assets,
liabilities, and net assets.

The general ledger codes follow this pattern:

1XXXX Assets
0XXX Cash (Interfund)
11XX Cash (Non Interfund)
12XX Investments
13XX Receivables
14XX Loans
15XX Inventories
16XX Prepaid and Clearing
17XX Fixed Assets

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2XXXX Liabilities
21XX Accounts Payable
22XX Payroll-Related Payables
24XX Accruals
26XX Long Term Debt

3XXXX Fund Balance

9XXXX Controls
91XX Current Budgets
92XX Future Budgets
93XX Actual YTD
95XX Prior Year Accruals

A complete list of account codes is available by generating Banner’s Account Hierarchy Report,
FGRACTH. The report also shows how codes are grouped and totaled for various reporting
purposes.

102.8 Organization Format – Subsidiary Ledger

The subsidiary ledger records actual revenue and expenditures, budgets, and commitments. The
subsidiary ledger is structured as follows:

1-XXXXX Current Unrestricted

2-XXXXX Current Unrestricted Auxiliaries

3-XXXXX Grants and Contracts

3-31XXX Federal
3-32XXX Other Government
3-33XXX Private
3-36XXX Gifts
3-38XXX Endowment Income

7-70XXX Plant – Unexpended

7-73XXX Plant – Renewal and Replacement
7-76XXX Plant – Debt Service
7-77XXX Plant – Investment

8-8XXXX Library

9-9XXXX Agency Funds

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102.9 Account Code Structure for Subsidiary Ledger – Income & Expense

Account codes are used for income or expenses and permit sorting for various purposes. The
format is as follows:

0XXX Income

01XX Tuition and Fees

03XX Gifts and Grants Revenue
04XX Investment Income
06XX Educational Activities Income
07XX Auxiliary Services Income
08XX Interdepartmental Income
09XX Miscellaneous Income

XXXX Expense

1XXX Salaries Expense

2XXX Fringe Benefit Expense
3XXX Supplies and Purchased Services
4XXX Travel and Entertainment Expense
5XXX Minor Equipment Expense
6XXX Resale Purchases
7XXX Transfers and Debt Service
8XXX Student Aid Expense
9XXX Capital Expense and Other

A complete list of account codes is available by generating Banner’s Account Hierarchy Report,
FGRACTH. The report also shows how codes are grouped and totaled for various reporting
purposes. An income and expense code directory with explanations for each is available on the
web at http://www.nova.edu/cwis/fop/budget/codes.html

102.10 Fiscal Year of Organization

NSU’s fiscal year begins July1 and ends June 30. Any changes to the fiscal year of the
organization must be ratified by majority votes of NSU’s Board of Directors.

102.11 Accounting Estimates

NSU utilizes numerous estimates in the preparation of its interim and annual financial
statements. Some of those estimates include:

1. Useful lives of property and equipment

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2. Adequacy of receivables and promises to give

3. Fair market values of investments

4. Fair market values of donated assets

5. Values of contributed services

6. Allocations of income between contribution income and exchange transactions

7. Joint cost allocations

8. Allocations of certain indirect costs

9. Allocations of time/salaries

It is NSU’s policy that all such estimates shall be reassessed, reviewed, and approved by the
University Controller on an annual basis. Documentation shall be maintained supporting all key
conclusions, bases, and other elements associated with each accounting estimate. All material
estimates, and changes in estimates from one year to the next, shall be disclosed to the
Organization’s Finance Committee, the Audit Committee, and NSU’s external audit firm.

102.12 Journal Entries

All general ledgers entries that do not originate from a subsidiary ledger shall be supported by
journal vouchers or other documentation, which shall include a reasonable explanation of each
such entry. Examples of such journal entries include:

1. Recording of non-cash transactions

2. Corrections of posting errors
3. Non-recurring accruals of income and expenses

Certain journal entries, called recurring journal entries, may occur in every accounting period,
quarterly, or annually. These entries may include, but are not limited to:

1. Depreciation of fixed assets

2. Amortization of prepaid expenses
3. Accretion of discounts on promises to give
4. Accruals of recurring expenses
5. Amortization of deferred revenue

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Support for recurring journal entries shall be in the form of a schedule associated with the
underlying asset or liability account or, in the case of short-term recurring journal entries or
immaterial items, in the form of a journal voucher.

It is the policy of NSU that all journal entries not originating from subsidiary ledgers shall be
authorized in writing by the University Controller by initialing or signing the entries.

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103 Revenue

103.1 Revenue Recognition Policies

NSU receives revenue from several types of transactions. Revenue for each of these types is
recognized in the financial statements in the following manner:

1. Tuition and Fees

The tuition and fees category includes all tuition and fees assessed for educational
purposes. Tuition and fees revenue is recognized on the accrual basis, that is, as the
revenue is earned by the institution.

A special situation arises at fiscal year end, June 30, because tuition and fees for certain
programs are assessed for an academic term that encompasses more than one fiscal year.
In this instance, NSU apportions revenue on a pro-rata-basis using the class dates of each
course.

Tuition and fees are reported net of exchange transactions, such as discounts or
scholarship allowances. Unearned student tuition and fees relating to future instructional
periods are recorded as current deferred revenue.

2. Contributions
Contributions are recognized as revenue when received, unless accompanied by
restrictions or conditions. Unconditional contributions are recorded as unrestricted
support. Unconditional contributions with donor-imposed stipulations are reported as
temporarily restricted and reclassified to unrestricted assets when conditions are satisfied.
Contributed assets to be maintained in perpetuity are classified as permanently restricted.
Income from permanently restricted assets is classified according to the terms of the
contribution.

Conditional pledges are not recognized until the conditions are met. Contributions to be
received more than on year in the future are discounted based on the expected date of
receipt. Amortization of the discount is recorded as contribution revenue and used in
accordance with donor-imposed stipulations, if any. Please refer to Section 104
Contributions for additional discussion and disclosures on contributions.

3. Government Grants
Government grants includes all amounts received or made available by grants, contracts,
and cooperative agreements from government agencies that are not considered to be
contributions. Revenue from grants is recognized as expenses when incurred. Grant
revenue received and expended within the same fiscal year is included as temporarily
restricted revenue and net assets released from restrictions in the Statement of Activities.

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4. Auxiliary Operations
Auxiliary operations exists predominantly to furnish goods or services to students,
faculty, or staff. Auxiliary operations include residence halls, food services,
intercollegiate athletics, college unions, and college stores. Revenues are recognized
when earned, and expenses are recognized when incurred. Revenue is considered earned
as expenses are incurred.

5. Interest and Dividends

Revenue is recognized when cash is received.

6. Loan Program Income

NSU created a loan program through the establishment of an Eligible Lender Trust
(ELT). The ELT is an eligible lender under the Higher Education Act and originates
federally guaranteed student loans on behalf of NSU to its graduate Stafford Loan
borrowers. Proceeds to fund the loans are received pursuant to a loan origination
agreement with a financial institution. NSU receives income on the sale of the loans to
the purchaser, an affiliate of the financial institution,

7. Educational Activities
Educational activity revenue is income received from the university’s medical clinics,
including Medicare and Medicaid payments, client fees and insurance payments.
Revenue is recognized when services are performed.

8. Net Unrealized Gain (Loss) On Securities

Net unrealized gain or loss represents the difference between the cost basis of the
securities and the market value on the statement date, either quarterly or at fiscal year
end.

9. Net Realized Gain (Loss) On Securities

Realized gain and losses are recognized when an exchange takes place. The specific
identification method is used in computing the realized gain or loss on sale of securities.

10. Realized Gain (Loss) On Sale Of Property

Recognition of gain or loss is realized when all services that need to be performed by the
sell are made.

11. Other
All other income not categorized above is reported as other income. This includes rental
income, such as rent of physical facilities, and consulting services.

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104 Contributions

104.1 Definitions

The following definitions shall apply with respect to the policies described in this section:

Contribution – An unconditional transfer of cash or other assets to NSU, or a settlement or

cancellation of NSU’s liabilities, in a voluntary nonreciprocal transfer by another entity acting
other than as an owner.

Condition – A donor-imposed stipulation that specifies a future and uncertain event whose
occurrence or failure to occur gives the promisor a right of return of the assets it has transferred
to NSU or releases the promisor from its obligation to transfer the asset.

Restriction – A donor-imposed stipulation that specifies a use for the contributed asset that is
either limited to a specific future time period or is more specific than the broad limits resulting
from the nature of NSU, the environment in which it operates, and the purposes specified in
NSU’s articles of incorporation and bylaws. Restrictions of NSU’s use of an asset may be
temporary or permanent.

Promise to Give – A written or oral agreement to contribute cash or other assets to NSU.

Exchange Transaction – A reciprocal transaction in which NSU and another entity or person
each receive and sacrifice something of approximately equal value.

104.2 Distinguishing Contributions from Exchange Transactions

NSU receives income in the form of contributions, revenue from exchange transactions, and
income from activities with characteristics of both contributions and exchange transactions.
NSU considers the following criteria, and any other relevant factors, in determining whether
income will be accounted for as contribution income, exchange transaction revenue, or both:

1. NSU’s intent in soliciting the asset, as stated in the accompanying materials;

2. The expressed intent of the entity or person providing resources to NSU (i.e. does the
resource provider state its intent is to support NSU’s programs or that it anticipates
specified benefits in exchange);

3. Whether the method of delivery of the asset is specified by the resource provider
(exchange transactions) or is at the discretion of NSU (contribution);

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4. Whether payment received by NSU is determined by the resource provider (contribution)

or is equal to the value of the assets/services provided by NSU, or the cost of those assets
plus a markup (exchange transaction);

5. Whether there are provisions for penalties (due to nonperformance) beyond the amount of
payment (exchange transaction) or whether penalties are limited to the delivery of assets
already produced and return of unspent funds (contribution); and

6. Whether assets are to be delivered by NSU to individuals or organizations other than the
resource provider (contribution) or whether they are delivered directly to the resource
provider or to individuals or organizations closely connected to the resource provider.

104.3 Accounting for Contributions

NSU recognizes contribution income in the period in which NSU receives restricted or
unrestricted assets in nonreciprocal transfers, or unconditional promises of future nonreciprocal
asset transfers, from donors. Contribution income shall be classified as increases in unrestricted,
temporarily restricted, or permanently restricted net assets based on the existence or absence of
such restrictions.

Unconditional promises to give shall be recorded as assets and increases in temporarily restricted
net assets (contribution income) of NSU in the period that NSU receives evidence that a promise
to support the university has been made. Unconditional promises to give that are to be collected
within one year shall be recorded at their face value, less any reserve for uncollectible promises,
as estimated by management.

Unconditional promises to give that are collectible over time periods in excess of one year shall
be recorded at their discounted net present value. Accretion of discount on such promises to give
shall be recorded as contribution income in each period leading up to the due date of the promise
to give. The interest rate that shall be used in calculating net present values of unconditional
promises to give is the risk-free rate of return, compiled based on an average of rates applicable
to the current year.

When the final time or use restriction associated with a contributed asset has been met, a
reclassification between temporarily restricted and unrestricted net assets is recorded.

When support in the form of volunteer labor is received, NSU shall record contribution income
and assets or expenses, if one of the following two criteria is met:

1. The contributed service creates or enhances a non-financial asset (such as a building or

equipment), or

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2. The contributed service possesses all three of the following characteristics:

a. It is the type of service that would typically need to be purchased by NSU, if it

had not been contributed,
b. It requires specialized skills (i.e. formal training in a trade or profession), and
c. It is provided by an individual possessing those specialized skills.

Contributed services that meet either one of the two preceding criteria shall be recorded at the
fair market value of the service rendered.

Contributions of non-cash assets (artifacts, food, clothing, etc.) shall be recorded at fair market
value as of the date of the gift. The value assigned to such non-cash assets shall be determined
by NSU’s Director of Institutional Advancement. Values provided by donors shall be considered
in establishing these valuations, however, the final value used for accounting purposes shall be
the value determined by NSU. Further, it is the policy of NSU not to certify any valuation of
non-cash assets provided by donors.

104.4 Receipts and Disclosures

NSU and its donors are subject to certain disclosure and reporting requirements imposed under
the Internal Revenue Code and the underlying Regulations. To comply with those rules, NSU
shall adhere to the following guidelines with respect to contributions received by the university.

For any separate contribution received by NSU, it shall provide a receipt to the donor. The
receipt shall be prepared by the Office of Institutional Advancement. All receipts prepared by
NSU shall include the following information:

1. The amount of cash received and/or a description of any non-cash property received;
2. A statement of whether NSU provided any goods or services to the donor in
consideration, in whole or in part, for any of the cash or property received from the
donor, and
3. If any goods or services were provided to the donor by NSU, a description and good faith
estimate of the value of those goods or services.

104.5 Disclosures of Promises to Give

As stated earlier, NSU shall record an asset and an increase in net assets for unconditional
promises to give. In addition, in connection with its annual financial statements, NSU shall
prepare a schedule of unconditional promises to give that discloses the annual amounts to be
collected in each of the next five years, and a total amount due thereafter, less the amount
representing interest as a result of discounting long-term promises to give to net present value.

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In connection with conditional promises to give, which shall not be recorded on the financial
statements, NSU shall nonetheless prepare a similar schedule of future payments for disclosure
in the university’s annual financial statements.

104.6 Gift Acceptance Policy

NSU shall accept charitable contributions of all types of assets from any type of donor, with the
following exceptions:

1. Contributions of non-liquid assets or assets possessing legal or other characteristics

rendering the asset difficult to sell or convert to liquid assets, as determined by the
Director of Institutional Advancement;

2. Contributions with donor-imposed restrictions that provide excessive control to the donor
over future uses of the donated asset(s), as determined by the Director of Institutional
Advancement;

3. Contributions with donor-imposed restrictions that violate or involve uses that go beyond
the university’s current mission statement and tax-exempt purposes, as determined by the
Director of Institutional Advancement; and

4. Contributions from donors involved in businesses or activities that are deemed

inconsistent with NSU’s mission.

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105 Accounts Payable Management

105.1 Overview

NSU strives to maintain efficient business practices and good cost control. The accounts payable
function assists in accomplishing this goal through processing invoices and making payment for
authorized transactions.

The recording of assets or expenses and the related liability is performed by an employee
independent of ordering and receiving. The amounts recorded are based on the vendor invoice
for the related goods or services. The vendor invoice is supported by an approved purchase
order where necessary, and is reviewed and approved by a center/department head prior to being
processed for payment. Invoices and related general ledger account distribution account codes
are reviewed prior to posting to the subsidiary system.

105.2 Policy

NSU policy related to processing and payment of invoices requires that:

 The vendor master file be maintained and updated on a regular basis.

 Only original invoices will be accepted for payment.
 Disbursements be properly authorized.
 Invoices be processed in a timely manner.
 Duplicate payments be avoided.
 Vendor credit terms and operating cash be managed for maximum benefits.

105.3 Vendor Master File

NSU academic and administrative departments are responsible for obtaining appropriate
documentation to establish new vendors. When payment is submitted for a new vendor or
person, the department will forward the appropriate documentation to Accounts Payable for
processing. Accounts Payable personnel will check to see that the following information is
provided:

 Completed IRS Form-1099 for domestic payments.

 Completed IRS Form-W-8-Ben for foreign payments.
 Vendor’s legal name and any DBA name(s)
 Street Address
 Telephone Number
 Fax number, if applicable
 Contact name.

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When the preceding information is not complete, all paperwork will be returned to the originator
for completion.

On an annual basis, vendors that have not been utilized over the preceding [24-month] period
will be frozen in Banner. In addition, on an ongoing basis, the Manager of Accounts Payable
should perform the following procedures:

 Cross-check vendors for matching street or P.O. Box addresses.

 Review payment histories for signs of repeat invoice numbers or other signs of duplicate
payments.

105.4 Verification of New Vendors

NSU performs additional procedures on a random basis to validate the legitimacy of new
vendors that will be paid one-time or when the payment exceeds $100,000. For such vendors,
the Accounts Payable Manager will perform a limited public records search and shall contact the
vendor to validate the vendor’s existence.

105.5 Receipt and Recording of Payment Requests

Invoices with a value of $200 or must be approved by the Budget Office prior to processing by
accounts payable. All invoices received by accounts payable, including those under $200 will be
date stamped with the date of receipt. The accounts payable clerk forwards all documentation to
the Manager of Accounts Payable for review and approval. The Manager distributes invoices to
appropriate personnel for processing.

All accounts payable transactions must be supported by adequate documentation that explains
the nature and purpose of the expense. Accounts payable transactions are processed for payment
on the next check run, unless a future date is specified. Information is entered into the accounts
payable Banner module from approved invoices or disbursement vouchers with appropriate
documentation attached.

When the original invoice is not available, a duplicate copy may be submitted to process the
payment. The duplicate copy must be approved by the Accounts Payable Manager and
verification must be made that the invoice has not been paid previously. Vendor statements shall
not be used to support payments.

Vendor invoices that are received, approved and supported with proper documentation by the last
business day of each month will be recorded as an accounts payable liability at the end of that
month, providing the invoice pertains to goods and services delivered by month-end.

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105.6 Independent Contractor Agreements

Goods and services performed by independent contractors under non-grant agreements up to

$10,000 should be processed using the Independent Contractor Agreement form located on
accounts payable’s website at :

http://www.nova.edu/cwis/fop/accntpay/forms/independent_contractor_agreement.xls

Non-grant agreements in excess of $10,000 must be submitted to NSU’s Vice President for
Legal Affairs for review prior to execution. For independent contractor services under grant and
contract agreements, a consultant agreement available from the Office of Grants and Contracts
(OGC) must be completed and signed by appropriate parties. This form can be downloaded from
OGC’s website under Independent Consultant Agreement at:

http://www.nova.edu/ogc/forms.html.

Independent Contractor Agreements processed by accounts payable are forwarded to the payroll
office to determine whether the payee is a university employee. Agreements for personnel that
are on the university’s payroll are returned to the originating department. They must submit the
payment request to the payroll office for processing through NSU’s Banner payroll system.
Payment requests for individuals not on the payroll are handled by accounts payable.

105.7 Processing of Invoices

The accounts payable clerk should perform the following steps to process invoices for payment:

 Check the mathematical accuracy of each vendor invoice

 Compare the nature, quantity and prices of all items ordered per the vendor invoice to the
purchase order, if applicable.
 Verify the general ledger distribution, using the university’s current chart of accounts.
 Verify the approval of the center/department head (or their designee) associated with the
goods or services purchased. Approvals shall be documented with initials or signatures
of the approving individual.

105.8 Vendor Discounts

To the extent practical, NSU shall take advantage of all prompt payment discounts offered by
vendors. When availability of such discounts is noted, and all required documentation in support
of payment is available, payments will be scheduled so as to take full advantage of the discounts.

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105.9 Processing Checks/ACH Payments

Checks and ACH payments are processed on a daily basis using positive pay. All checks greater
than $24,999 require two signatures. Vendor payments are processed on Monday, Wednesday
and Friday and people payments on Tuesday and Thursday. After processing the check run, the
Accounts Payable System Coordinator performs the following steps:

 Forwards printed checks over $ 25,000 to the Accounts Payable Manager for review and
approval. Then, approved checks are given to authorized check signers for signature.
 Sends the approved check run to SunTrust Bank via online transmission.
 Reconciles the disbursement report provided to the bank to the bank’s mismatched and
rejected items. All imbalances are investigated.

Prior to mailing each check and transmitting the ACH Payment run to SunTrust Bank, an
Accounting Assistant matches the vendor name and the amount on the check (or ACH print run),
to supporting documentation for each payment. Supporting invoices and a copy of the check are
stamped for proof of payment.

105.10 Manual Checks

The following procedures apply to the issuance of manual checks.

 The Manager of Accounts Payable approves manual checks.

 The Accounts Payable Systems Coordinator notifies SunTrust Bank of each check
issued, providing check number, date, payee, and amount.
 The Accounts Payable Systems Coordinator enters each check’s data in the Banner
Accounts Payable System.

105.11 Voided Checks

Checks issued by the university that need to be voided must be approved by the Accounts
Payable Manager. The Accounts Payable Systems Coordinator provides SunTrust Bank with
data on each void, including check number, date, payee, and amount.

105.12 Unclaimed Property

NSU complies with the State of Florida laws regarding unclaimed property. Accordingly, if
uncashed checks are subject to state reporting and transfer requirement, the university will file
timely all appropriate forms and remit unclaimed property to the appropriate jurisdiction.

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105.13 Electronic (E-Drives)

Payments to certain university vendors with multiple monthly invoices are processed on
electronic (E-drives) to reduce the volume of payments entered in the Banner accounts payable
system. Charges to the user department for each invoice are credited to a clearing account
periodically, during the month. Checks are issued debiting the clearing account on the next
business day following recording of activity. The number of checks issued to a vendor is based
on the monthly volume of activity.

105.14Reconciliation of A/P Subsidiary Ledger to General Ledger

On a monthly basis, amounts due to vendors per the accounts payable subsidiary ledger are
reconciled to the total per the accounts payable general ledger account (control account). All
differences are investigated and adjustments are made as necessary. The reconciliation and the
results of the investigation of differences are reviewed and approved by the university controller.

105.15 Additional Accounts Payable Operating Procedures

Please click the icon below to access additional accounts payable operating procedures for the
accounts payable department. Topics discussed include:

People and Vendor Payments

Rush Payments
Utility Payments
Car Leases
Apartment Leases
Building (classroom) Leases
DME’s
Construction
Fixed Assets
Vendor/People Payment Maintenance
Senior Accounts Payable Systems Coordinator
Unclaimed Property
Outstanding Airfares
SunTrust Visa Cards (Corporate)
Accounts Payable Systems Coordinator
Check Runs
SunTrust Online Treasury
Manual Checks
Voided Checks
E Drives
Records Coordinator
Accounting Assistants

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106 Travel Policy

106.1 Overview

Nova Southeastern University recognizes that, for many employees, travel expenses are incurred
in order to further the mission of the university. By setting forth the requirements necessary for
obtaining approvals and reimbursement of these expenses, the university endeavors to assist its
travelers.

106.2 Policy

University policy reimburses employees for those ordinary and necessary expenses incurred
while traveling on official university business. Employees will utilize the most economical
means to travel consistent with the nature of the trip.

106.3 Travel Expense Reports

The university uses an Internal Revenue Service “Accountable Plan” for reimbursement of actual
travel expenses. Reimbursements for travel expenses, business meals, or other approved costs
will be made only upon the receipt of a properly approved and completed travel expense report.

The maximum actual daily limit for meals is limited to $50 per day. All expenses incurred within
this limit require detailed itemized receipts. The full text of NSU’s Travel Policy can viewed at
http://www.nova.edu/cwis/hrd/emphanbk/travel.html

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107 Cash Disbursements (Check-Writing) Policies

107.1 Policy

NSU’s policy is to print vendor checks and expense reimbursement checks on a daily basis.
Checks shall be prepared by persons independent of those who initiate or approve expenditures,
as well as those who are authorized check signers. NSU policy requires that each check shall be
signed by an individual other than the one who approved the transaction for payment.

107.2 Check Preparation

All vendor and expense reimbursement checks shall be produced in accordance with the
following guidelines:

1. Expenditures must be supported in conformity with the purchasing, accounts payable,

and travel and business entertainment policies described in this manual.

2. Timing of disbursements should generally be made to take advantage of all early-

payment discounts offered by vendors.

3. Generally, all vendors should be paid by the corresponding due date shown on the
invoice after delivery of the requested goods or services.

4. Total cash requirements associated with each check run is monitored in conjunction with
available cash balance in bank prior to the release of any checks.

5. All supporting documentation is attached to the corresponding check prior to forwarding

the entire package to an authorized check signer.

6. Checks shall be utilized in numerical order (unused checks are stored in a locked safe in
the accounts payable department).

7. Checks will never be made payable to “bearer” or “cash”.

8. Checks will never be signed prior to being prepared.

9. Upon the presentation of a check, vendor invoices and other supporting documentation
will immediately be canceled in order to prevent subsequent reuse.

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107.3 Check Signing

Checks of less than $25,000 require a single signature. Checks of $25,000 or more require two
signatures. No checks will be signed prior to the check being completed in its entirety (no
signing of blank checks).

Check signers should examine all original supporting documentation to ensure that each item has
been properly reviewed prior to signing a check. Checks should not be signed, if supporting
documentation is missing or there are any questions about the disbursement.

107.4 Use of Positive Pay System

NSU utilizes a “Positive Pay” system with its financial institution, SunTrust Bank, for all checks
drawn on the accounts payable account. Under this Positive Pay system, the Accounts Payable
Department (APD) electronically transmits to the financial institution a list of check numbers,
amounts, and vendors in connection with each check run. The financial institution then notifies
the APD, if any check is presented for payment that does not match the three characteristics for
valid checks.

107.5 Mailing of Checks

Checks are returned to the accounts payable individual who prepared them for signature. This
person then forwards these checks immediately to the mailroom. Checks are not mailed by or
returned to individuals who authorize expenditures.

107.6 Voided Checks and Stop Payments

Checks may be voided due to processing errors by making proper notations in the check register
and defacing the check by clearly marking it as “VOID”. All voided checks shall be retained to
aid in preparation of bank reconciliation.

Stop payment orders are made for checks lost in the mail or other valid reasons. Stop payments
are communicated electronically to the bank by the Assistant Accounts Payable Manager and/or
an accounts payable person with this authority. Either employee records the stop payment in the
banner system to void the transaction.

107.7 Record-Keeping Associated with Independent Contractors

NSU shall obtain a completed IRS FORM-1099 or W8-BEN accompanied with a signed
Independent Contractor Agreement. A record shall be maintained of all vendors to whom an IRS
Form-1099 is required to be issued at year end. Payments to such vendors shall be accumulated
over the course of a calendar year.

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108 Petty Cash

108.1 Policy

It is the policy of NSU to use petty cash for small purchases. NSU provides imprest funds (for
minor office expenditures, not for travel or employee advances). Accounts Payable replenishes
these funds up to its authorized balance.

108.2 Opening a Petty Cash Fund Account

Departments that need a petty cash fund to support operations must provide accounts payable
with justification for the account and designate an employee as custodian of the monies.
Subsequent to opening an account, departments may request an increase or decrease of their
fund, providing the reason for the change.

All disbursements from the petty cash fund must be accompanied by a completed and approved
petty cash voucher. Receipts are required for all disbursements from petty cash. It is the
responsibility of the petty cash custodian to ensure that the petty cash fund is locked at all times.

108.3 Replenishing a Petty Cash Fund

It is suggested that custodians replenish petty cash funds when approximately fifty per cent of
the funds have been expended. However, at fiscal year end, custodians should replenish funds
within two weeks of the close of each fiscal year, to ensure expenditures are recorded in the
proper fiscal year. Custodians and department heads periodically need to review the frequency of
replenishments to determine whether a fund needs to be increased, decreased, or closed.

108.4 Closing a Petty Cash Fund

Reconciliation of petty cash funds must be made whenever the current custodian is no longer
responsible for the funds for whatever reason. If the department’s need for the fund still exists, a
new custodian must be designated.

When a petty cash fund is being closed, all outstanding receipts need to be forwarded to accounts
payable to be booked and any unused funds must be forwarded to the cashier in the Bursar’s
Office. Accounts payable is not permitted to accept cash.

Forms and more detailed procedures to open, replenish, and close petty cash funds are provided
at accounts payable’s web site at http://www.nova.edu/cwis/fop/accntpay/forms.html.

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109 Credit Cards

109.1 Policy

It is the policy of the university to issue a corporate credit card to all employees who frequently
travel on university business.

109.2 Issuance of Corporate Credit Cards

NSU employees who travel frequently on university business may request a corporate credit card
by contacting the Business Services Department. Cardholders are required to sign a statement
acknowledging that the card shall be used exclusively for legitimate university-related business
purposes and that the cardholder agrees to take reasonable precautions to protect the card from
loss or theft by storing it in a secure location. Upon approval from the credit card company, a
card will be issued bearing the names of both the individual and NSU.

109.3 Cardholder Responsibilities

Every month, each cardholder will receive a statement detailing the current month’s
expenditures. The cardholder is expected to review this statement timely. Any fraudulent or other
unauthorized charges should be immediately reported to the credit card company and the
manager of accounts payable.

Employees must pay each statement in full monthly to the credit card company. Any unpaid
balance that is carried forward to the next billing cycle will be assessed a late fee. Cardholders,
not the University, are responsible for this fee.

Cardholders should report the loss or theft of a corporate credit card immediately by notifying
the credit card company, as well as, the Business Services Department. Cardholders are
reimbursed for expenses by submitting a properly completed Travel Expense Report to the
Accounts Payable Department.

109.4 Revocation of Corporate Credit Cards

Employees that fail to comply with any of the policies related to the University’s corporate credit
cards shall be subject to revocation of credit card privilege. The Director of Business Services
determines whether credit cards should be revoked.

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110 Payroll and Related Policies

110.1 Classification of Workers as Independent Contractors or Employees

It is the policy of NSU to consider all relevant facts and circumstances regarding the relationship
between NSU and the individual in making determinations about the classification of workers as
independent contractors or employees. This determination is based on the degree of control and
independence associated with the relationship between NSU and the individual. Facts that
provide evidence of the degree of control and independence fall into three categories:

1. Behavioral control

2. Financial control

3. The type of relationship of the parties

Facts associated with each of these categories that will be considered by NSU in making
employee/contractor determinations shall include:

1. Behavioral control:

a. Instructions given by NSU to the worker that indicate control over the worker
(suggesting an employee relationship), such as:
(1) When and where to work
(2) What tools or equipment to use
(3) What workers to hire or assist with the work
(4) Where to purchase supplies and services
(5) What work must be performed by a specified individual
(6) What order or sequence to follow

b. Training provided by NSU to the worker (i.e. employees typically are trained by
their employer, whereas contractors typically provide their own training).

2. Financial control:

a. The extent to which the worker has unreimbursed business expenses (i.e.
employees are more likely to be fully reimbursed for their expenses than is a
contractor).

b. The extent of the worker’s investment in the facilities/assets used in performing

services for NSU (greater investment associated with contractors).

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c. The extent to which the worker makes services available to the relevant market.

d. How NSU pays the worker (i.e. guaranteed regular wage for employees vs. flat
fee paid to some contractors).

e. The extent to which the worker can realize a profit or loss.

3. Type of Relationship:

a. Written contracts describing the relationship that NSU and the individual intend
to create.

b. Whether NSU provides the worker with employee-type benefits, such as

insurance, paid leave, etc.

c. The permanency of the relationship.

d. The extent to which services performed by the worker are a key aspect of the
regular business of NSU.

If an individual qualifies for independent contractor status, the individual will be sent a Form
1099 if total compensation paid to that individual for any calendar year, on the cash basis, is
$600 or more. The amount reported on a Form 1099 is equal to the compensation paid to that
person during a calendar year (on the cash basis). Excluded from “compensation” are
reimbursements of business expenses that have been accounted for by the contractor by
supplying receipts and business explanations.

If an individual qualifies as an employee, a personnel file will be created for that individual and
all documentation required by NSU personnel policies shall be obtained. The policies described
in the remainder of this section shall apply to all workers classified as employees.

110.2 Payroll Administration

NSU operates on a bi-weekly payroll. For all NSU employees, an official personnel file is
established and maintained in Human Resources, that includes payroll data, such as Form W-4,
Employee Federal Withholding Certificate, approved salaries, and payroll account distribution.
The employee personnel file shall also indicate whether the employee is exempt or non-exempt
under the provisions of the Fair Labor Standards Act.

The following forms, documents and information shall be obtained and included in the payroll
files of all new employees:

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1. Direct Deposit Forms

2. Changes to W-4 form

3. Supporting documentation for payroll adjustment

4. Documentation for all student hires, such as a SEAF

5. Leave and absentee forms on all employees

110.3 Changes in Payroll Data

It is the policy of NSU that all of the following changes in payroll data are to be authorized in
writing:

1. New hires

2. Terminations

3. Changes in salaries and pay rates

4. Voluntary payroll deductions

5. Changes in income tax withholding status

6. Court-ordered payroll deductions

New hires, terminations, and changes in salaries or pay rates shall be authorized in writing by the
appropriate department director.

Voluntary payroll deductions and changes in income tax withholding status shall be authorized
in writing by the individual employee.

Documentation of all changes in payroll data will be maintained in each employee’s personnel
file. Additionally, all changes to payroll data processed by Human Resources are audited by
payroll staff.

110.4 Payroll Taxes

The Payroll Department is responsible for ensuring all required tax forms are properly completed
and submitted, and that all required taxes are withheld and paid, including state and federal taxes.
State taxes are remitted to respective states bi-weekly, monthly, or quarterly.

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110.5 Preparation of Timesheets

Non-exempt employees must submit a signed and approved timesheet to payroll no later than
12:00 noon on Thursday prior to the close of each pay period. Timesheets should be prepared in
accordance with the following guidelines:

1. Each timesheet should reflect all hours worked during the pay period (time actually spent
on the job performing assigned duties), whether compensated or not

2. Timesheets should be prepared in ink.

3. Errors should be corrected by crossing through the incorrect entry, filling in the correct
entry, and placing the employee’s initials next to the change (i.e. employees should not
use “white out” or correction tape).

4. Employees should identify and record hours worked based on the nature of the work
performed

5. Compensated absences (vacation, holiday, sick leave, etc.) should be clearly identified as
such

6. Timesheets should be signed by the employee prior to submission

After preparation, timesheets should be approved by department heads or their designees, prior
to submission to the payroll department. Corrections identified by an employee’s supervisor
shall be authorized by the employee by placing the employee’s initials next to the change.

A university employee who is on leave, on travel, or is ill on the day that timesheets are due may
telephone or e-mail timesheet information to his or her supervisor (or designated alternate).
Time so submitted must reflect the actual time worked and the appropriate classifications. The
employee must initial a timesheet submitted in this manner immediately upon his/her return to
the office. Timesheets submitted in this manner shall bear the notation, “time reported by
telephone or e-mail by (employee) to (supervisor or designated alternate).” The timesheet should
be signed by the supervisor or the designated alternate.

For further instructions, click on the following link:

http://www.nova.edu/cwis/fop/payroll/forms/instructions.pdf

***SEE LINK ON PAYROLL WEBSITE REGARDING TIMESHEET

INSTRUCTIONS***

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110.6 Processing of Timesheets

Processing of timesheets in the payroll department is performed by payroll specialists. They

check all timesheets for mathematical accuracy, then input all timesheets data into the payroll
system.

Payroll specialists may not change or correct timesheets. When errors are noted, if a corrected
and approved timesheet is not re-submitted in time to the payroll specialist, the employee may
not receive a pay check until the next pay period.

Tampering with, altering, or falsifying time records, recording time on another employee’s time
record, or willfully violating any other timesheet policy or procedure may result in disciplinary
action, up to and including discharge.

110.7 Review of Payroll

Upon production of all payroll reports and checks, the Payroll Manager reviews payroll prior to
its distribution to employees. The Payroll Manager should sign the payroll register, indicating
approval of the payroll.

110.8 Distribution of Payroll

Payments to employees for salary earned are made either directly to their bank(s) account (direct
deposit) or by check mailed directly to an address provided by the employee. No checks may be
picked up in the payroll department or forwarded to the employees home department.

110.9 Internal Audit of Payroll Data

It is the policy of NSU to conduct an annual internal audit (if scheduling permits) of certain
payroll data. This internal audit shall be performed by the university’s internal audit department.
The purpose of this internal audit is to determine the integrity of the university’s payroll records,
including regular salary, overloads, deductions, and net payments to employees.

110.10 Additional Payroll Operating Procedures

Please click on the icon below to access additional operating procedures for the payroll
department. Topics discussed include:

Tuition Waivers
Payroll Process
Foreign Payroll
Labor Distribution Report

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Reverse Direct Deposits

Returned Direct Deposits
Stop Payments
Overpayments
Employee Reimbursement (to the university)
Garnishments
Moving Expenses
State Taxes
Quarterly State Unemployment Taxes & Workers Compensation
Labor Statistics
United Way
Unclaimed Property
941Reports

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111 Cash and Cash Management

111.1 Policy

The university seeks to maximize its return on surplus operating funds. To meet this objective,
the master depository account maintains only those funds sufficient to cover immediate needs.
Excess surplus funds are transferred to Trusco, for short-term investment.

111.2 Overview

Treasury Operations maintains, monitors, and directs accounting functions related to cash and
cash management. The university’s banking system maintains 22 memo bank accounts,
including payroll and Grande Oaks that sweeps daily activity (zero-balance account, ZBA) into
the master depository account. Also, 22 individual accounts are maintained, including three in
Jamaica and two in the Bahamas, to handle cash receipts and disbursement transactions related to
operational activities and emergency loans. Daily, excess funds in the master depository account
are transferred into an over night repo account.

111.3 Establishment of Accounts

The Treasurer establishes and maintains all university bank accounts. Requests for new accounts
forwarded to the Treasurer for review and approval must include the purpose and justification for
the account. Once the request has been reviewed and the need determined, the Treasurer
processes approved request, as follows:

 Contacts the bank and makes the necessary arrangements to open the account.
 Obtains bank resolutions and signature cards and signs the appropriate forms.
 Forwards the resolutions and signature cards to the President for his signature.
 Obtain the signature of other designated person to sign on the account.
 Return resolutions and signature cards to the bank.

111.4 Authorized Signers

Personnel in the following positions at NSU are authorized to sign checks and approve ACH and
wires drawn on the general operating and payroll accounts. Those positions are:

President/CEO
Executive Vice President/COO
Vice President for Legal Affairs
Vice President for Finance
University Controller

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It is the policy of NSU to promptly notify the university’s financial institution of changes in
authorized signatures upon the departure/resignation of any authorized signer.

111.5 Bank Reconciliations

The Treasury Department receives bank statements directly form the university’s financial
institution, usually within three business following the close of each month. The employee
assigned to reconcile a bank account opens the statement and reviews its contents for unusual or
unexplained items, such as unusual endorsements on checks, indications of alterations to checks,
etc. Unusual and unexplained items shall be reported to the Treasurer immediately.

The employee assigned to reconciling bank accounts should not have check signing authority,
check preparation responsibilities, or cash recording responsibilities.

All bank reconciliations are reviewed and approved by the Treasurer on a monthly basis. Any
adjusting journal entries resulting from preparing bank reconciliations are approved by the
University Controller. Reconciling items that require research are followed up by the individual
performing the reconciliation with the appropriate department.

111.6 Cash Flow

The Treasurer monitors cash flow needs on a daily basis to eliminate idle funds and to ensure
that payment obligations can be met. Cash transfers between accounts are performed on an as-
needed basis.

111.7 Wire Transfers

Employees authorized to approve wire transfers from university bank accounts for vendor related
payments are included in section 111.4. Vendor payments are not to be made via wire unless
required by the vendor (e.g. international vendor). All other vendor payments are to be made via
ACH or check.

For wire transfers related to (1) investment of NSU funds or (2) transfers among NSU bank
accounts, authorized individuals and applicable thresholds are set forth via corporate resolution.
Appropriate treasury staff may enter/initiate wires for processing; however, only the individuals
listed below may approve and release the wires through the bank’s system. The treasurer may
only approve and release in the bank’s system after the necessary approvals have been obtained
from authorized individuals. Personnel in the following positions have the limits stated below:

President - Unlimited
Chief Operating Officer - Unlimited
Vice President for Finance - Unlimited
University Controller - $30 Million
University Treasurer - $30 Million
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111.8 Additional Treasury Operating Procedures

Please click the icon below to access additional Treasury (Cash Management) operating
procedures.

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112 Inventory

112.1 Policy

It is the policy of NSU to accurately account for all inventories on a quarterly and year end basis
and to price them in accordance with GAAP.

112.2 Description of Inventory

NSU maintains an inventory of goods for resale. Specifically, items that are held in inventory
for resale include:

Printing Supplies
Computer Supplies
Contact Lens
Eye Glass Frames and Lens
Dental Implants
Prescription Drugs
Hearing Aids

112.3 Accounting for Inventory

It is the policy of NSU to account for purchased inventory items at cost, using the first-in, first-
out method of valuation. Unit cost shall be computed by adding freight, insurance and other
shipping costs to the actual cost of purchased inventory, dividing this total amount by the number
of units purchased.

112.4 Physical Counts

It is the policy of NSU to perform a physical count of inventory on a quarterly and annual basis.
Any inventory items that appear damaged, obsolete or otherwise unable to be sold will be
excluded from the counts. A detailed record of the physical count will be kept by the individuals
involved in taking the inventory.

At the conclusion of the physical count, the inventory count sheets will be extended by applying
the most recent unit costs to the physical quantities of each item on hand. The general ledger
balance will be adjusted to reflect the total inventory on hand as determined by the physical
count.

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112.5 Contributed Inventory

Inventory items donated to NSU shall be recorded as assets or the university at the fair market
value as of the date of the contribution, unless the university is acting as an agent in connection

with a contribution by a donor through the university to another charity specifically identified by
the donor. Contributed inventory items will be subject to the same physical counting and other
policies as purchased inventory items.

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113 Prepaid Expenses

113.1 Policy

It is the policy of NSU to treat payments of expenses that have a time-sensitive future benefit as
prepaid expenses, such as insurance and taxes, and to amortize these items over the
corresponding time period. For purposes of this policy, payments of less than $500 will be
expensed as paid and not treated as prepaid expenses, regardless of the existence of a future
benefit.

Prepaid expenses with future benefits that expire within one year from the date of the financial
statements will be classified as current assets. Prepaid expenses that benefit future periods
beyond one year from the financial statement date will be classified as non-current assets.

113.2 Procedures

As part of the account coding process performed during the processing of accounts payable, all
incoming vendor invoices will be reviewed for the existence of time-sensitive future benefits. If
future benefits are identified, the payment will be code to a prepaid expense (asset) account code.

Financial Operations will maintain a schedule of all prepaid expenses. The schedule will
indicate the amount and date paid, the period covered by the prepayment, the purpose of the
prepayment, and the monthly amortization. This schedule will be reconciled to the general
ledger balance as part of the monthly closeout process.

113.3 Prepaid Insurance

NSU typically pays for insurance premiums when coverage begins. Usually, coverage is bought
for a year in advance. NSU records prepaid insurance premiums as an asset, reflecting insurance
coverage for the future that has already been paid. Premiums are amortized monthly to the
center/department that receives the insurance coverage.

113.4 Prepaid Property Taxes

Prepaid property taxes with benefit in a future fiscal year will be amortized monthly over
the period covered by the tax assessment.

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114 Investments

114.1 Policy

NSU’s investment policy is to preserve and protect the university’s assets, as well as the
maintenance of liquid reserves to meet obligations arising from unanticipated activities, by
earning an appropriated return on investments.

114.2 Delegation of Authority

NSU’s board of directors has delegated supervisory authority over its investing activities to the
Investment Sub-Committee of the Finance Committee. The Investment Sub-Committee is
responsible for regularly reporting on the university’s investments to the Finance Committee and
the board of directors.

114.3 Accounting Treatment

NSU records investments in equity securities with readily determinable market values, debt
securities, and assets held in trust at fair market value. Investments received as gifts are recorded
at fair market value at the date of donation.

Permanently restricted investments are subject to restrictions requiring that the principal be
invested in perpetuity. Income and net realized and unrealized gains or losses from these
investments are classified based on donor restrictions, if any.

114.4 Invested Funds

NSU has established separate investment policies for its Endowment Funds and monies invested
at Trusco, including investment objectives, diversification, and excluded investments. The full
text of these policies are provided below, please click icon.

114.5 Short Term Investments

Short-term investments generally have a maturity of three months to one year from the purchase
date. NSU has investments classified as short-term with maturities beyond one-year due to their
highly liquid nature. All short-term investments are recorded at market value using the specific
identification method; unrealized gains and losses are reflected in net unrealized gain or loss on
securities.

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114.6 Long Term Investments

Long-term investments have a maturity beyond one-year from the purchase date, except as noted
above. Long-term investments are subject to market and credit risks customarily associated with
debt, equity, and real estate.

114.7 Other Investments

Non-exempt entities owned by the university with a greater than 50 percent ownership shall be
consolidated into NSU’s financial statements. A non-exempt entity here means any for-profit
entity that is not exempt for federal income taxes, such as corporations, limited partnerships, s-
corporations, LLPs, and LLCs.

114.8 Additional Investment Operating Procedures

Please click the icon below to access additional investment operating procedures.

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115 Property and Equipment

115.1 Policy

It is the policy of NSU to capitalize property and equipment with a unit cost of $1,000 or higher,
in accordance with OMB Circular A-110. Items with a unit cost below this threshold shall be
expensed in the year purchased.

NSU complies with FASB 93, of the Financial Accounting Standards Board in recognizing
depreciation on long-lived assets and providing proper disclosure in the financial statements.

115.2 Depreciation and Useful Life

Both real and personal property are recorded at cost and depreciated using the straight-line
method of depreciation. NSU uses a half-year convention in the year of acquisition and
disposition. This means depreciation is calculated for a half year only, in the year of acquisition
and disposition, regardless of how long the asset is held that year. Estimated useful lives are
established by class of asset and range from 5 to 50 years.

115.3 Fixed Assets

The full text of NSU’s policies and procedures regarding Fixed Assets are provided in detail
below.

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116 Leases

116.1 Classification of Leases

Prior to assessment of whether a lease is capital or operating, NSU shall determine whether the
lease involves a construction project. Construction costs related to a lease shall be accounted for
as a capital asset. NSU shall refer to Emerging Issues Task Force 97-10, The Effect of Lessee
Involvement in Asset Construction for guidance on this issue.

It is the policy of NSU to classify all leases in which the university is a lessee as either capital or
operating leases. NSU shall utilize the criteria described in Statement of Financial Accounting
Standards No. 13 in determining whether a lease is capital or operating in nature. Under those
criteria, a lease shall be treated as a capital lease if, at the time of entering into the lease, any of
the following factors are present:

1. The lease transfers ownership to NSU at the end of the lease term;
2. The lease contains a bargain purchase option;
3. The lease term is equal to 75% or more of the estimated economic life of the lease
property; or
4. The present value of the minimum lease payments is 90% or more of the fair value of the
leased property (using, as the interest rate, the lesser of NSU’s incremental borrowing
rate or, if known, the lessor’s implicit rate).

All leases that do not possess any of the four preceding characteristics shall be treated as
operating leases. In addition, all leases that are immaterial in nature shall be accounted for as
operating leases.

116.2 Accounting for Leases

All leases that are classified as operating leases and immaterial capital leases shall be accounted
for as expenses in the period in which the obligation to make a lease payment is incurred. For
leases with firm commitments for lease payments that vary over the term of the lease (i.e. a lease
with fixed annual increases that are determinable upon signing the lease), the amount that NSU
shall recognize as monthly lease expense shall equal the average monthly lease payment over the
entire term of the lease. Differences between the average monthly payment and the actual
monthly payment shall be accounted for as an asset or liability of NSU.

All leases that are classified as capital leases shall be treated as fixed asset additions of NSU. As
such, upon the inception of a capital lease, NSU shall record a capitalized asset and a liability
under the lease, based on the net present value of the minimum lease payments (or the fair value
of the leased asset, if it is less than the present value of the lease payments). Periodic lease
payments shall be allocated between a reduction in the lease obligation and interest expense.
The capitalized asset recorded under a capital lease shall be depreciated over the term of the
lease, using the straight-line method of depreciation.

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NSU shall maintain a standard checklist to facilitate the steps to be performed to identify leases
related to construction and to determine proper classification between operating and capital
leases. In addition, NSU shall also maintain a control list of all operating and capital leases.
This list shall include all relevant lease terms, including a schedule of future annual lease
payment obligations.

NSU shall also maintain a control list of all operating and capital leases. This list shall include
all relevant lease terms, including a schedule of future annual lease payment obligations.

116.3 Scheduled Increases in Rent Payments

Leases with fixed (determinable amounts stated in the lease) increases in monthly rental
payments shall be accounted for in a manner that results in an equal monthly rent expense being
reported in each month over the entire initial lease term. Accordingly, monthly rent expense in
the first year of such leases shall be greater than the monthly cash payment, with the difference
being recorded as a liability. This liability will be reduced in the later years of the lease when the
monthly cash rent payment is less than the monthly rent expense. To the extent future rent
increase are not determinable at the beginning of the lease (because they are based on inflation or
other factors), the preceding policy shall not apply and monthly rent expense shall be equal to the
monthly cash payment, except as noted below.

116.4 Rent Abatements and Other Lease Incentives

Abatements of monthly rent payments, cash incentives, and other lease incentives shall be
accounted for in a manner that results in an equal amount of monthly rent expense over the term
of the lease agreement (before considering the effects of inflation-based rent increases, which
will increase rent expense over the term of a lease). As a result, incentives received up front or
over the early months of a lease, shall be established as a liability in NSU’s accounting records
(as deferred lease incentives or some similar name). This liability shall be amortized as an offset
(credit) to rent expense over the term of the lease agreement.

116.5 Changes in Lease Terms

Leasehold improvements and deferred rent incentives are amortized over the initial lease term.
If such lease term is changed prior to the expiration of the initial lease term, it is the policy of
NSU that such amortization be revised to reflect the remaining lease term as of the effective date
of the lease modification.

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117 Accrued Liabilities

117.1 Policy

The accounting department shall establish a list of commonly incurred expenses that may need to
be accrued at the end of an accounting period. Expenses that shall be accrued by NSU at the end
of an accounting period include:

Salaries and wages Interest on notes payable

Payroll taxes Property taxes
Vacation pay Self-Originating loan program
Rent Leases
Interest on bonds payable Utilities and other accounts payable

NSU records a liability for deferred revenue (revenue received but not yet earned) in accordance
with the revenue recognition policies described in the Revenue section of this manual.

117.2 Accrued Leave

Vacation Pay
Personnel policies of NSU permit employees to carry forward up to one week of unused leave
per year. Any unused leave is payable to an employee upon termination of employment.
Accordingly, NSU’s records a liability for accrued leave to which employees are entitled. The
total liability at the end of the fiscal year shall equal the total earned but unused hours of leave,
up to a maximum of 37.5 hours, multiplied by each employee’s current hourly pay rate.

Sick Leave
Sick leave that is not used at the end of each fiscal year shall not be accrued as a liability of
NSU.

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118 Notes/Bonds Payable

118.1 Policy

It is the policy of NSU to maintain a schedule of all notes and bonds payable, mortgage
obligations, lines of credit, and other financing agreements. This schedule shall be based on the
underlying loan documents and shall include all of the following information:

1. Name and address of lender

2. Date of agreement or renewal/extension

3. Total amount of debt or available credit

4. Amounts and dates borrowed

5. Description of collateral, if any

6. Interest rate

7. Repayment terms

8. Maturity date

9. Address to which payments should be sent

10. Contact person at lender

118.2 Accounting and Classification

An amortization schedule shall be maintained for each note and bond payable. Based upon the
amortization schedule, the principal portion of payments due with the next year shall be
classified as a current liability in the statement of financial position of NSU. The principal
portion of payments due beyond one year shall be classified as long-term/non-current liabilities
in the statement of financial position.

Demand notes and any other notes without established repayment dates shall always be classified
as current liabilities.

Unpaid interest expense shall be accrued as a liability quarterly and at fiscal year end.

A detailed record of all principal and interest payments made over the entire term shall be
maintained with respect to each note payable. Periodically, the amounts reflected as current and

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long-term notes payable per the general ledger shall be reconciled to these payment schedules
and the amortization schedules, if any, provided by the lender. All differences shall be
investigated.

118.3 Non-Interest-Bearing Notes Payable

For demand loans, recording of interest expense and contribution income shall be performed
quarterly and at fiscal year end, based on the outstanding principal balance of the loan during
that period, multiplied by the difference between a normal interest rate for that type of loan and
the rate, if any, that is required to be paid by NSU.

For loans with fixed maturities or payment dates, the note payable shall be recorded at the
present value of the future principal payments, using as a discount rate the difference between a
normal interest rate for that type of loan and the rate, if any, that is required to be paid by NSU.
The difference between the cash proceeds of the note and the present value shall be recorded as
contribution income in the period the loan was made. Thereafter, interest expense shall be
recorded in each accounting period using the effective interest method, with the corresponding
credit entry increasing the note payable account to reflect the amounts(s) that shall be repaid.

118.4 Bonds Payable

NSU issues bonds through the Broward Educational Facilities Authority (BCEFA). BCEFA was
established by Ordinance Number 86-15 of the Broward County Commission for the purpose of
assisting institutions of higher education in the construction, financing, and refinancing of
projects for public purposes. BCEFA bonds are issued on behalf of the university and are direct
obligations of NSU.

NSU has established reserve requirements for debt service and a reserve for renewal and
replacement on the BCEFA Series 2000A bonds. Interest is paid semi-annually on all issues.
Additionally, interest costs are capitalized during the construction period of the facility for which
the debt is issued.

The objective of capitalizing interest is to obtain a measure of acquisition cost that more closely
reflects the institution’s total investment in the asset and to charge a cost that relates to the
acquisition of a resource that will benefit future periods against the revenues of each of those
future periods. The amount of interest capitalized should theoretically be the amount of interest
charged during the assets’ acquisition period that could have been avoided if the assets had not
been acquired.

NSU amortizes bond issuance cost, such as underwriting costs, over the life of the bonds. The
effective interest method is used.

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119 Net Assets

119.1 Policy

It is the policy of NSU to classify net assets based upon the existence or absence of donor-
imposed restrictions as follows:

Unrestricted Net Assets – Net assets that are not subject to donor imposed stipulations.

Temporarily Restricted Net Assets – Net assets subject to donor imposed stipulations
that may or will be satisfied through the actions of NSU and/or the passage of time.

Permanently Restricted Net Assets – Net assets subject to donor imposed stipulations
that the university permanently maintain certain contributed assets. Generally, donors of
such assets permit the university to use all or part of the income earned from permanently
restricted net assets for general operations or for specific purposes. Permanent
restrictions do not pass with the expiration of time, nor can they be removed through the
organization’s actions.

Net assets accumulated by NSU that are not subject to donor imposed restrictions, but which the
board of directors of the university has earmarked for specific uses, are segregated in the
accounting records as “board-designated” funds within the unrestricted category of net assets.

Restrictions may be associated with either a time period (e.g. a particular future time period) or a
purpose (e.g. specific programs). A purpose stipulation will be considered a restriction only if it
is more specific than the broad limits resulting from the nature of the university, the environment
in which it operates, and the purposes specified in NSU’s articles of incorporation and bylaws.

119.2 Reclassification from Restricted to Unrestricted Net Assets

The university shall report in its statement of activities a reclassification from restricted to
unrestricted net assets if any of the following events occur:

1. Fulfillment of the purpose for which the net assets were restricted (e.g. spending
restricted funds for the stipulated purpose)

2. Expiration of time restrictions imposed by donors

3. Death of an annuity beneficiary

4. Withdrawal by the donor (or by a court) of a time or purpose restriction

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If a donor stipulates multiple restrictions, such as a purpose and a time restriction, the
reclassifications from temporarily restricted to unrestricted net assets shall be reported only upon
the satisfaction of the final remaining restriction.

119.3 Reclassification from Unrestricted to Restricted Net Assets

If the university receives a restricted contribution from a donor who further stipulates that the
university set aside a portion of its unrestricted net assets for that same purpose, the organization
shall report in its statement of activities a reclassification of net assets from unrestricted to
temporarily or permanently restricted, based on the specific nature of the restriction.

119.4 Disclosures

It is the university’s policy to provide within its financial statements footnote disclosures that
describe the different types of temporary and permanent restrictions associated with the
university’s net assets as of the end of each fiscal year.

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120 Financial Statements

120.1 Policy

NSU’s policy is to prepare accurate financial statements in accordance with generally accepted
accounting principles and distribute them in a timely and cost-effective manner.

The standard set of financial statements described below will be produced on a quarterly and
annually basis. These financial statements shall be prepared on the accrual method of
accounting.

120.2 Standard Financial Statements of the University

Preparing financial statements and communicating key financial information is a necessary and
critical accounting function. Financial statements are management tools used in making
decisions, in monitoring the achievement of financial objectives, and as a standard method for
providing information to interested parties external to the organization. Financial statements
may reflect year-to-year historical comparisons or current budget to actual comparisons.

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America, requires NSU to make estimates and assumptions
about the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these estimates.

The basic financial statements of NSU that are maintained on an organization-wide basis are:

1. Statement of Financial Position – reflects assets, liabilities and net assets of the
organization and classifies assets and liabilities as current or non-current/long-term.

Assets are probable future economic benefits obtained or controlled by the

organization as a result of past transactions or events. Assets of NSU are classified as
current assets, fixed assets, contra-assets, and other assets.

Current assets are assets that are available or can be made readily available to meet
the cost of operations or to pay current liabilities. Some examples are cash,
temporary investments, and receivables that will be collected within one year of the
statement of financial position date.

Fixed assets (property and equipment) are tangible assets with a useful life of more
than one year that are acquired for use in the operation of the organization and are not
held for resale.

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Contra-assets are accounts that reduce asset accounts, such as accumulated

depreciation and reserves for uncollectible accounts receivable.

Other assets include long-term assets that are assets acquired without the intention of
disposing them in the near future. Some examples are security deposits, property, and
long-term investments.

Liabilities are probable future sacrifices of economic benefits arising from present
obligations of the organization to transfer assets or provide services to other entities

in the future as a result of past transactions or events. Liabilities of NSU are

classified as current or long-term.

Current liabilities are probable sacrifices of economic benefits that will likely occur
within one year of the date of the financial statements or which have a due date of one
year or less. Common examples are accounts payable, accrued liabilities, short-term
notes payable, and deferred revenue.

Long-term liabilities are probable sacrifices of economic benefits that will likely
occur more than one year from the date of the financial statements. An example is
the non-current portion of a mortgage loan.

Net assets are the difference between total assets and total liabilities.

2. Statement of Activities – presents revenues, gains, and other support, expenses, and
changes in net assets of the university, by category of net assets (unrestricted,
temporarily restricted and permanently restricted), including reclassifications between
categories of net assets.

Revenues are inflows of the university or other enhancements of assets, or settlements

of liabilities, from rendering services, delivering or producing goods, or other
activities that constitute the university’s ongoing major or central operations.
Examples include tuition and fees, contributions, investment income, government
grants, and auxiliary operations.

Expenses are outflows or other using up of assets or incurrences of liabilities from

rendering services, delivering or producing goods,, or carrying out other activities that
constitutes NSU’s ongoing major or central operations. Expenses are classified by
functions, such as, program expense, management and general expense, and fund-
raising expense.

Program expense includes the following categories:

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a. Instruction – includes expenses for all activities that are part of the
university’s instruction program.
b. Academic Support – includes expenses incurred to provide support services
for the university’s primary missions of instruction, research, and public
service.
c. Student Aid – includes expenses for activities that provide financial aid
services and assistance to students.
d. Student Services – includes expenses for organized administrative activities
that provide assistance and support (excluding academic support) to the needs
and interests of students.
e. Auxiliary Enterprises – includes expenses relating to the operation of auxiliary
enterprises, including expenses for operation and maintenance of plant,
depreciation and administration.
f. Educational Activities –
g. Research – includes all expenses for activities specifically organized to
produce research, whether commissioned by an agency external to the
university or separately budgeted by an organizational unit within the
university.
h. Public Services – includes expenses for activities established primarily to
provide noninstructional services beneficial to individuals and groups external
to the institution.

Management and general expense includes the following categories:

a. Operation and Maintenance – includes all expenses for the administration,

supervision, operation, maintenance, preservation, and protection of the
university’s physical plant.
b. Institutional Support – includes expenses for central, executive-level activities
concerned with management and long-range planning for the entire university.

Fund-raising expenses are those amounts used to bring in additional revenue,

typically (but not only) through public donations. An example of fund-raising
expenses are the costs of printing and mailing to the general public flyers that
encourage them to support the university’s mission by sending a donation.

3. Statement of Cash Flows – reports the cash inflows and outflows of the organization
in three categories: operating activities, investing activities, and financing activities.

120.3 Review and Distribution of Financial Statements

Quarterly and annual financial statements and supporting schedules shall be reviewed and
approved by the Vice President for Finance prior to being issued by Financial Operations.

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Once approved, a complete of set of quarterly and annual financial statements shall be
distributed to the Finance Committee pf the Board of Directors and the full Board of Directors
for approval by each body.

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121 Tax Reporting

121.1 Policy

It is the policy of the university to comply with all obligations for tax and information returns
filed with federal, state and local jurisdictions, including federal income tax returns for NSU, two
Area Health Education Centers, the Health Professions Division Foundation, Inc., and NSU
Grande Oaks LLC. NSU’s also files periodic tax and information returns for property taxes, sales
taxes, retirement and other fringe benefit plans, and payroll tax withholding.

121.2 Filing of Returns

The University Controller shall be responsible for identifying all filing requirements and assuring
that NSU is in compliance with all such requirements. NSU shall file complete and accurate
returns with all authorities.

Specific filings made by NSU are as follows:

1. Form 990 – Annual information return of tax-exempt organizations, filed with the IRS.
Form 990 for NSU is due on the fifteenth day of the fifth month following year-end. An
automatic 3-month extension of time to file Form 990 may be obtained by filing Form
8868. Upon expiration of the first 3-month extension, a second 3-month extension may
be requested using Form 8868.

2. Form 990-T – Annual tax return to report NSU’s unrelated trade or business activities (if
any), filed with the IRS. Form 990-T is due on the fifteenth day of the fifth month
following year-end. An automatic 6-month extension of time to file Form 990-T may be
obtained by filing Form 8868.

3. Form 5500 – Annual return for NSU’s employee benefit plans. Form 5500 is due July
31, but a request for extension of time to file may be filed.

4. Personal Property Tax Return – Filed with the State of Florida to report personal
property and officers of the corporation. NSU’s personal property tax return is due April
15.

5. W-2’s and 1099’s – Annual report of employee and non-employee compensation, based
on calendar-year compensation, on the cash basis. These information returns are due to
employees and independent contractors by January 31 and to federal government by
February 28.

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6. Form 940 – Annual federal unemployment tax return filed with IRS for Grande Oaks
LLC. The return is due January 31.

7. Form 941 – Quarterly payroll tax return filed with IRS to report wages paid to
employees and federal payroll taxes. Form 941 is due by the end of the month following
the end of each quarter, or 10 days later if all payroll tax deposits have been made in a
timely manner during the quarter.

Federal and all applicable state payroll tax returns are prepared by the payroll office of the
university. NSU complies with all state payroll tax requirements by withholding and remitting
payroll taxes to the state of residency of each NSU employee.

NSU’s fiscal and tax year-end is June 30. All annual tax and information returns of NSU,
including Form 990, and Form 990-T, are filed on the accrual basis of accounting.

121.3 Public Access to Information Returns

Under regulations that became effective in 1999, NSU is subject to federal requirements to make
the following forms “widely available” to all members of the general public:

1. The three most recent annual information returns (Form 990), excluding the list of
significant donors (Schedule B) that is attached to the Form 990, but including the
accompanying Schedule A, and

2. NSU’s original application for recognition of its tax-exempt status (Form 1023 or Form
1024), filed with the IRS, and all accompanying schedules and attachments.

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122 Budgeting
122.1 Overview

Budgeting is an integral part of managing NSU and is concerned with meeting organizational
goals and objectives. The budget is designed and prepared to direct the efficient and prudent use
of the university’s financial and human resources. The budget is management’s commitment to
a plan for present and future organizational activities to ensure a going concern. It provides an
opportunity to examine the composition and viability of the university’s programs and activities
simultaneously in light of available resources.

122.2 Preparation and Adoption

It is the policy of NSU to prepare a budget annually. The university Budget Director gathers
proposed budget information from all department directors and prepares the first draft of the
budget. Budgets proposed and submitted by each department should be accompanied by a
narrative explanation of the sources and uses of funds and explaining all material fluctuations in
budgeted amounts from prior years.

After appropriate revisions and a compilation of all department budgets, a draft of the university-
wide budget, as well as individual departmental budgets, is presented to the Chief Operating
Officer and Vice President for Finance for discussion, revision, and initial approval. The final
draft is then submitted to the Finance Committee of the Board of Directors, and finally to the
entire Board of Directors for adoption.

It is the policy of NSU to adopt a final budget about 90 days before the beginning of the
university’s fiscal year. The purpose of adopting a final budget at this time is to allow adequate
time for the accounting department to input the budget into the accounting system and establish
appropriate accounting and reporting procedures (including any necessary modifications to the
chart of accounts) to ensure proper classification of activities and comparison of budget versus
actual once the year begins.

122.3 Monitoring Performance

It is the policy of NSU to monitor its financial performance by comparing and analyzing actual
results with budgeted results. This function shall be accomplished in conjunction with the
monthly financial reporting process.

On a monthly basis, financial reports comparing actual year-to-date revenues and expenses with
budgeted year-to-date amounts shall be produced by the budget department and distributed to
each department head with budgetary responsibilities. Also, financial operating reports
summarizing activity by academic and administrative centers are distributed to Executive
Management and the full board of directors.

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122.4 Budget Modification

After the budget has been approved by the Board of Directors and adopted by the university,
reclassification of budgeted expense amounts within a single department may be made by the
department head, with approval from the university Budget Director. Reclassifications of
budgeted expense amounts across departments may be made only with approval of the Chief
Operating Officer. Also, reclassification and any budget modification resulting in an increase in
budgeted expenses or decrease in budgeted revenues can be made only with approval of the
Chief Operating Officer.

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123 Annual Audit

123.1 Policy

It it’s the policy of NSU to arrange for an annual audit of the university’s financial statements to
be conducted by an independent accounting firm. The independent accounting firm selected by
NSU will be required to communicate directly with the university’s audit committee upon the
completion of their audit. In addition, members of the audit committee are authorized to initiate
communication directly with the independent accounting firm.

123.2 How Often to Review the Selection of the Auditor\

NSU will review the selection of its independent auditor in the following circumstances:

1. Anytime there is dissatisfaction with the service of the current firm.

2. When a fresh perspective and new ideas are desired.

3. Every 5 years to ensure competitive pricing and a high quality of service. This is not a
requirement to change auditors every five years, simply to re-evaluate the selection.

123.3 Selecting an Auditor

The selection of an accounting firm to conduct the annual audit is a task that should be taken
very seriously. The following factors will be considered by NSU in selecting an accounting
firm:

1. The firm’s reputation in the nonprofit community.

2. The depth of the firm’s understanding of and experience with not-for-profit organization
and federal reporting requirements under OMB Circular A-133.

3. The firm’s demonstrated ability to provide the services requested in a timely manner.

4. The ability of firm personal to communicate with NSU’s personnel in a professional and
congenial matter.

If NSU decides to prepare and issue a written Request for Proposal (RFP) to be sent to
prospective audit firms, the following information will be included:

1. Period of services required.

2. Type of contract to be awarded (fixed fee, cost basis, etc.)

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3. Complete description of the services requested (audit, management letter, tax returns,
etc.)

4. Identification of meetings requiring their attendance, such as staff or Board of Director

meetings.

5. Organization chart of NSU

6. Chart of account information.

7. Financial information about the university.

8. Copy of prior year reports (financial statements, management letters, etc.)

9. Other information considered appropriate.

10. Description of proposal and format requirements.

11. Due date of proposals.

12. Overview of selection process.

13. Identification of criteria for selection.

Minimum Proposal Requirements from prospective CPA firms will be:

1. Firm background.

2. Biographical information (resumes) of key firm members who will serve NSU.

3. Client references.

4. Information about the firm’s capabilities.

5. Firm’s approach to performing an audit.

6. Copy of the firm’s most recent quality/peer review report, including any accompanying
letter of findings.

7. Other resources available with the firm.

8. Expected timing and completion of the audit.

9. Expected delivery of reports.

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10. Cost estimate including estimated number of hours per staff member.

11. Rate per hour for each auditor.

12. Other information as appropriate.

In order to narrow down the proposals to the top selections, the Vice President for Finance will
meet with the prospective engagement teams from each proposing firm to discuss their proposal.
Copies of all proposals will be forwarded to each member of the Audit Committee. After the
Vice President for Finance narrows down the field of prospective auditors to three firms, final
interviews of each firm are conducted by the Audit Committee, who makes the final
recommendation to the board of directors for approval.

123.4 Preparation for the Annual Audit

NSU will be actively involved in planning and assisting the university’s independent accounting
firm in order to ensure a smooth and timely audit of its financial statements. In that regard, the
accounting department will provide assistance to the independent auditors in the following areas:

Planning – The University Controller is responsible for delegating the assignments and
responsibilities to accounting staff in preparation for the audit. Assignments will be based on the
list of requested schedules and information provided by the independent accounting firm.

Involvement – University staff will do as much work as possible in order to assist the auditors
and, therefore, reduce the cost of the audit.

Interim Procedures – To facilitate the timely completion of the annual audit, the independent
auditors may perform selected audit procedures prior to the university’s year-end. By
performing significant portions of the audit work as of an interim date, the work required
subsequent to year-end is reduced. University staff will assist as much as possible in order to
provide requested schedules and documents to auditors during any interim fieldwork that is
performed.

Throughout the audit process, it will be the policy of NSU to make every effort to provide
schedules, documents and information requested by the auditors in a timely manner.

123.5 Concluding the Audit

Upon receipt of a draft of the audited financial statements of NSU from its independent auditor,
the University Controller will perform a detailed review of the draft, consisting of the following
procedures:

1. Carefully read the entire report for typographical errors.

2.

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3. Trace and agree each number in the financial statements and accompanying footnotes to
the accounting records and/or internal financial statements of NSU.

4. Review each footnote for accuracy and completeness.

Any questions or errors noted as part of this review will be communicated to the independent
auditor in a timely manner and resolved to the satisfaction of the Vice President for Finance.

It will also be the responsibility of the University Controller to review and respond in writing to
all management letter or other internal control and compliance report findings and
recommendations made by the independent auditor.

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124 Insurance

124.1 Policy

NSU’s policy is to maintain an active risk management program that includes a comprehensive
insurance package. This will ensure the viability and continued operations of NSU. The
university seeks to maintain adequate insurance against general liability, as well as coverage for
buildings, contents, fine arts, equipment, machinery and other items of value.

124.2 Coverage Guidelines

As a guideline, NSU will arrange the following types and level of insurance at a minimum:

General Liability $ 1,000,000

Excess Liability $45,000,000
Automobile (Owned, leased, borrowed) $ 1,000,000
Crime (Employee dishonesty) $ 1,000,000
Property $ 1,000,000
Educators Legal Liability $10,000,000
Worker’s Compensation Statutory Limits
Worker’s Compensation (Other States) Statutory Limits
Medical Mal Practice $ 1,000,000 Primary/$10,000,000 Excess
Professional Liability $ 3,000,000 Primary/$ 3,000,000 Excess
Marine Policy $ 1,000,000 P&I/Property
Foreign Liability $ 1,000,000
Pollution $ 1,000,000
Bonds (Various States) Varies

NSU should maintain a detailed listing of insurance policies in effect. This listing should include
the following information, at a minimum:

1. Description (type of coverage)

2. Agent and insurance company, including all contact information
3. Coverage and deductibles
4. Premium amounts
5. Policy effect dates

NSU should maintain an accounting breakdown of all insurance premiums and the allocations of
those premiums.

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124.3 Actuary Studies

The Director of Risk Management should obtain actuarial studies each fiscal year to determine
that the university has adequate reserves or funding for the following exposures. The Medical
Mal Practice Policy and the Educators Legal Liability Policy are claims made, therefore it is
required that the university have reserves for the tail coverage.

1. Medical Mal Practice (HPD)

a. Funding of the $250,000 per occurrence deductible into the Captive

b. Reserves for extended reporting period (tail coverage, claims made policy)

2. Educators Legal Liability

a. Funding of the $250,000 per occurrence deductible into the Captive

b. Reserves for extended reporting period (tail coverage, claims made policy)
c. Reserves for the $250,000 deductible to cover claims not through the Captive

3. Workers’ Compensation

a. Reserves for those claims under the self-insured program

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125 Record Retention

125.1 Policy

NSU retains records as required by law and destroys them when appropriate. The destruction of
records must be approved by the appropriate department head. The formal records retention
policy of NSU is as follows:

Accident reports/claims (settled cases) 7 Years

Accounts payable ledgers and schedules 7 Years
Accounts payable unclaimed property 5 Years (updated 06/11/12)
Accounts receivable ledgers and schedules 7 Years
Annual audit reports Permanently
Bank reconciliations 3 Years
Bank statements 3 Years
Chart of accounts Permanently
Cancelled checks 7 Years
Contracts, mortgages, notes and leases:
Expired 7 Years
Still in effect Permanently
Correspondence:
General 2 Years
Legal and important matters only Permanently
Routine with customers and/or vendors 2 Years
Deeds, mortgages and bills of sales 7 Years Following Sale
Depreciation schedules Permanently
Duplicate deposit slips 3 Years
Expense analyses/expense distribution schedule 7 Years
Financial statements:
Year end Permanently
Quarterly 7 Years
Garnishments 7 Years
General ledgers/year end trial balance 7 Years
Insurance policies (expired) 3 Years
Insurance records (policies, claims, etc.) Permanently
Internal audit reports 3 Years +
Internal reports 3 Years
Inventories of products, materials and supplies 7 Years
Invoices (to customers, from vendors) 7 Years
Journals 7 Years
Minute books of directors, bylaws and charters Permanently
Notes receivable ledgers and schedules 7 Years

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Payroll records and summaries 7 Years

Petty cash vouchers 3 Years
Physical inventory tags 3 Years
Property records (incl. depreciation schedules) Permanently
Purchase orders:
Purchasing department copy 7 Years
Other copies 1 Year
Subsidiary ledgers 7 Years
Tax returns and worksheets, examination reports and other
documents relating to determination of income tax liability Permanently
Time sheets/cards 7 Years
Trademark registrations and copyrights Permanently
Training manuals Permanently
Voucher register and schedules 7 Years
Withholding tax statements 7 Years

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126 Functional Expense Allocation

126.1 Overview

It is the policy of NSU to charge expenses to the appropriate category of program service or
supporting activity. Expenses that serve multiple functions or are not readily identifiable with
one function will be allocated between functions whenever possible. As one of its financial
management objectives, NSU strives to determine the actual costs of carrying out each of its
program service and supporting activities.

Program and supporting service functions of NSU are:

Programs:

Instruction – includes expenses for all activities that are part of the university’s instruction
program.

Academic Support – includes expenses incurred to provide support services for the university’s
primary missions of instruction, research, and public service.

Student Aid – includes expenses for activities that provide financial aid services and assistance to
students.

Student Services – includes expenses for organized administrative activities that provide
assistance and support (excluding academic support) to the needs and interests of students.

Auxiliary Enterprises – includes expenses relating to the operation of auxiliary enterprises,

including expenses for operation and maintenance of plant, depreciation and administration.

Research – includes all expenses for activities specifically organized to produce research,
whether commissioned by an agency external to the university or separately budgeted by an
organizational unit within the university.

Public Services – includes expenses for activities established primarily to provide

noninstructional services beneficial to individuals and groups external to the institution.

Supporting Services:

Operation and Maintenance – includes all expenses for the administration, supervision,
operation, maintenance, preservation, and protection of the university’s physical plant.

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Institutional Support – includes expenses for central, executive-level activities concerned with
management and long-range planning for the entire university.

Fund-raising – expenses incurred to bring in additional revenue, typically (but not only) through
public donations. An example of fund-raising expenses are the costs of printing and mailing to
the general public flyers that encourage them to support the university’s mission by sending a
donation.

126.2 Direct Charging of Costs

Certain internal costs will be directly charged to the appropriate NSU function based upon
underlying documentation. The following costs shall be charged directly based on the
documentation or factor listed next to each:

Cost Basis For Charge

Salaries Timesheets (hours) or number of employees in a function
Occupancy (facilities) costs Actual square footage used by each function
Long-Distance Telephone Actual use, based on codes
Photocopying Actual use, based on codes
Postage Actual, per postage log
Supplies Actual, per usage forms

With the exception of salaries, which are recorded with each payroll cycle, and occupancy costs,
which are charged to an operation and maintenance account and then allocated during the year
end institutional cost allocation, all other costs identified above will be initially charged to one
account when incurred, then allocated and recorded to the appropriate functions by a monthly
journal entries.

126.3 Allocation of Overhead Cost

On a monthly basis, an allocation of overhead to each program service and supporting activity
area will be recorded by a journal entry. Overhead will be allocated based on [direct salaries
charged to each function]. Costs included in overhead to be allocated include all costs associated
with building occupancy, building and equipment maintenance, and any other cost that benefits
all functions of the university.

General and administrative costs shall not be allocated to program service or other supporting
functions of the university.

126.4 Accounting for Joint Activities that Include Fund-Raising

NSU engages in certain activities that simultaneously accomplish a programmatic purpose and a
fund-raising purpose. It is the policy of NSU to account for such activities in accordance with
the AICPA’s Statement of Position (SOP) 98-2.

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One hundred percent of the costs of each such activity will be accounted for a fund-raising costs
unless all three of the criteria described in SOP 98-2 are met with respect to that individual
activity. The three criteria that must met are:

1. The purpose criterion

2. The audience criterion

3. The content criterion

A complete explanation of these criteria goes beyond the scope of this policy statement.
However, generally, the purpose criterion involves a call for programmatic action by the
recipient (beyond simply making a donation to the university), as well as a “compensation” test
and a “comparison” test. The audience criterion requires that if the audience includes prior
donors or is otherwise selected (even in part) based on a perceived ability or likelihood to make a
contribution, the audience must either have a need for or use of the call to action described in the
purpose criterion or have the ability to take that action (i.e. the audience criterion necessitates
that proper targeting of a message to individuals). The content criteria is met if the call for
action helps to accomplish NSU’s specifically stated tax-exempt mission by benefiting either the
recipient or society.

It is the policy of NSU not to apply the provisions of SOP 98-2 to activities or communications
that are predominantly programmatic or management and general in nature, with only an
incidental element of fund-raising.

For joint activities that meet all three SOP 98-2 criteria, the university will identify costs as 1)
exclusively associated with the programmatic portion of the activity, 2) exclusively associated
with the fund-raising element of the activity, or 3) joint costs of the joint activity. For all joint
costs associated with a joint activity, the university will develop and utilize cost allocation
methods that are appropriate for the nature of the cost and activity involved. One example of
joint cost allocation method used by NSU is the physical units method, in which joint costs are
allocated between program and fund-raising costs in proportion to the number of units of output
that can be attributed to each purpose.

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127 Administration of Grant and Contracts

127.1 Overview

Contract and Grant Accounting (CGA) reports to the University Controller and is responsible for
all post award accounting activities related to sponsored projects. This office also maintains
accounting control over all university gifts and internally designated research. CGA is entrusted
with ensuring that all budget, revenue, and expense transactions for restricted accounts are
properly recorded.

CGA works closely with the Office of Grants and Contracts (OGC) in the financial
administration of awards made to NSU. The accounting staff becomes involved when a
sponsored agreement is fully executed and forwarded from OGC. CGA remains involved until
an agreement is financially closed.

Policies and procedures issued by OGC related to post award activities are incorporated in the
Accounting & Financial Policies and Procedures Manual. Following is a list of those policies and
procedures with a link to the documentation http://www.nova.edu/ogc/policies.html.

Cost Sharing on Sponsored Projects

Time and Effort Reporting on Grant and Contract/Restricted Accounts

Salaries on Sponsored Agreements

Request for Use of Unobligated Balance from a Fixed-Price Grant/Contract

Independent Consultant Sample Agreement

Financial Conflict of Interest with Respect to Sponsored Projects

Waiver of Facilities and Administration Costs (Indirect Costs)

NSU receives financial assistance from several agencies including federal, state, and local
governments, and private foundations. Types of funding support include:

Grants: A financial assistance award given to the organization to carry out its programmatic
purpose.

Contracts: A mutually binding legal agreement where the organization agrees to provide
supplies or services and the donor agrees to pay for them.

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Cooperative Agreements: A legal agreement where the organization implements a program

with the direct involvement of the donor. This type of agreement is a grant-type instrument.

127.2 Policy

It is the policy of NSU to maintain a financial management system that provides accurate,
current, and full disclosure of operating results. This will assist in ensuring compliance with
laws, regulations, and provisions of awarding agencies and to ensure bills and required reports
are filed timely.

127.3 Compliance with Laws, Regulations and Provisions of Awards

NSU recognizes that as a recipient of funds, the university is responsible for compliance with all
applicable federal and state laws, regulations, and provisions of contracts and grants. To ensure
that the university meets this responsibility, the Manager of CGA must be familiar and comply
with directives of the Office of Management and Budget (OMB) and other publications,
including:

1. OMB Circular A-21 – establishes principles for determining allowable costs

applicable to grants, contracts, and other agreements with educational institutions.
All federal agencies that sponsor research and development, training, and other work
at educational institutions apply the provisions of this circular in determining
allowable costs.

2. OMB Circular A-110 – establishes uniform administration requirements for federal

grants and agreements awarded to institutions of higher education, hospitals, and
other non-profit organizations.

3. OMB Circular A-133 – establishes audit requirements for federally sponsored

awards and defines federal responsibilities for implementing and monitoring higher
education and other non-profit institutions that receive federal awards.

4. Rules of the Auditor General - Chapter 10-650 – establishes audit requirements

for state of Florida sponsored awards for nonprofit and for-profit organizations.

5. The Blue Book – provides guidance to financial accounting staff who handle fiscal
recordkeeping, accounting, and reporting functions for federally funded student
financial aid programs.

The Manager of CGA will cooperate with the university’s independent Auditors by informing
the CPA firm as to applicable laws, regulations, and provisions of contracts and grants. Also, he
should communicate known instances of noncompliance with laws, regulations, and provisions
of contracts and grants to the auditors.

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127.4 Preparation and Review of Proposals

Individual departments are responsible for preparing proposals for projects that the department
intends to pursue. All proposals shall be reviewed by OGC prior to submission to government
agencies or other funding sources. Final proposals shall be reviewed and approved in writing by
either the Executive Director of Contracts and Grants, Vice President for Finance, or Chief
Operating Officer.

127.5 Post-Award Procedures

After an award has been received, the following steps should be taken by Contract and Grant
Accounting staff:

1. Verify specifications of the grant or contract. Compare the terms, time periods, award
amounts and expected expenditures per the award with data included in the project digest
forwarded by OGC. A CFDA (Catalog of Federal Domestic Assistance) number must be
provided for each federal award. All reporting requirements under the contract or award
should also be reviewed.

2. Create new general and subsidiary ledger account numbers. Review the propriety of
budgeted account codes established for all receipt and expenditure categories.

3. Gather documentation and establish a file for each grant or contract. The file should
contain the proposal, all correspondence regarding the grant or contract, the final signed
award document and all reports submitted to the funding sources.

127.6 Billing and Financial Reporting

NSU strives to provide management, staff and funding sources with timely and accurate financial
reports applicable to all institutional awards. These reports include monthly and cumulative
expenditures, a project budget, and a balance remaining column.

NSU will prepare and submit financial reports as specified by the financial reporting clause of
each grant or contract award document. Preparation of these reports will be the responsibility of
staff in Grant and Contract Accounting.

The following policies shall apply to the preparation and submission of billings to agencies under
awards made to NSU:

1. It is the policy of the university to request reimbursement after expenditures have been
incurred, unless an award specifies another method.

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2. Each award normally specifies a particular billing cycle; therefore, a schedule will be
established for each grant and contract to ensure that reimbursement is made on a timely
basis along with any other reporting that is required in addition to the financial reports.

3. Requests for reimbursement of award expenditures will use the actual amounts posted to
the subsidiary ledger as the source for all invoice amounts.

4. All financial reports required under each award will be prepared and filed on a timely
basis. To the extent the year-end audit results in adjustments to amounts previously
reported to agencies, revised reports will be prepared and filed in accordance with the
terns of each award.

The university will maintain separate billing records in addition to the official general ledger
accounting records. Billing records will be reconciled to the general ledger on a monthly basis.

If an award authorizes the payment of cash advances to the university, the Manager of Contracts
and Grants may request such advance funds. Upon receipt of the cash advance, the university
shall recognize revenue equal to the advance. As part of the quarterly and year end close-out
process, revenue will be reduced and a liability established in an amount equal to the amount of
unspent funds.

127.7 Cash Draw Downs Under Letters of Credit

NSU has established letters of credit (LOC) with several federal agencies, including the National
Science Foundation, Office of Education, and the Department of Health and Human Services.
Cash draw downs under LOC’s will be made bi-weekly. All federal funds will be deposited into
an interest-bearing cash account under the cash receipts policies and procedures described in this
manual.

The following schedule will be completed to reconcile federal cash on hand and to estimate the
organization’s need for additional federal funds:

+ Federal cash drawn to date

- YTD expenses as of the end of the prior month
- Estimated disbursements this month to date
= Subtotal (Estimated cash on hand today)
- Estimated disbursements for the biweekly period
= Amount to be requested

127.8 Procurement Under Awards

Procurement of goods and services whose costs are charged to awards received by the university
are subject to all of the specific purchasing policies established by NSU. In addition,

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procurements associated with grants and contracts are subject to the following supplemental
policies:

1. NSU will avoid purchasing items that are not necessary for the performance of the
activities required by the award.

2. Where appropriate, an analysis will be made of lease and purchase alternatives to

determine which would be the most economical and practical procurement method.

3. Documentation of the cost and price analysis associated with each procurement decision
will be retained in the procurement files pertaining to each award.

4. Specific policies and procedures exist for goods and services up to $5,000 between
$5,000 and $25,000, between $25,000 and $250,000, and purchases in excess of
$250,000. Goods and services purchased between $25,000 and $250,000 require the
approval of either the Chief Operating Officer or the Associate Vice President of
Business Services.

5. NSU will make all procurement files available for inspection upon request by an
awarding agency.

NSU does not purchase goods and services from companies or individuals where there is a
recognized potential for conflict of interest. Also, it is contrary to university policy for any
university employee to personally solicit, demand or receive any gratuity of any kind from a firm
or individual in connection with any decision affecting a university purchase.

127.9 Equipment and Furniture Purchased with Federal Funds

NSU may occasionally purchase equipment and furniture that will be used exclusively on a
program funded by a federal agency. For purposes of federal award accounting and
administration, "equipment" shall include all assets with a unit cost equal to or greater than
$1,000.

All purchases of “equipment” with federal funds shall be approved in advance in writing by the
federal awarding agency. In addition, the following policies shall apply regarding equipment
purchased and charged to federal awards:

1. Any equipment that is owned by the federal government and given to NSU for use in a
program shall be marked as such.

2. Adequate insurance coverage will be maintained with respect to equipment and furniture
charged to federal awards.

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3. A physical inventory of all equipment purchased with federal funds shall be performed at
least once every two years. The results of the physical inventory shall be reconciled to the
accounting records of and Federal reports filed by NSU.

127.10 Standards for Financial Management Systems

In accordance with OMB A-110, it is the policy of NSU to maintain a financial management
system that provides for the following:

1. Accurate, current and complete disclosure of the financial results of each federally-
sponsored project or program in accordance with the reporting requirements of Circular
A-110 and/or the award.

2. Records that identify adequately the source and application of funds for federally-
sponsored activities. These records shall contain information pertaining to Federal
awards, authorizations, obligations, unobligated balances, assets, outlays, income and
interest.

3. Effective control over and accountability for all funds, property and other assets. NSU
shall adequately safeguard all such assets and assure they are used solely for authorized
purposes.

4. Comparison of outlays with budget accounts for each award. Whenever possible,
financial information shall be related to performance and unit cost data.

5. Written procedures to minimize the time elapsing between the transfer of funds to NSU
from the U.S. Treasury and the issuance or redemption of checks, warrants or payments
by other means for program purposes by the recipient.

6. Written procedures to determine whether costs are reasonable, allocable and allowable in
accordance with the provisions of the applicable Federal cost principles and the terms and
conditions of the award.

7. Accounting records including cost accounting records that are supported by source
documentation.

127.11 Budget and Program Revisions

It is the policy of NSU to request prior approval from federal awarding agencies for any of the
following programs or budget revisions:

1. Change in the scope or objective of the project or program, even if there is no associated
budget revision requiring prior written approval.

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2. Change in a key person (project director, etc.) specified in the application or award
document.

3. The absence for more than three months, or a 25 percent reduction in time devoted to the
project, by the approved project director or principal investigator.

4. The need for additional Federal funding.

5. The transfer of amounts budgeted for indirect costs to absorb increases in direct costs, or
vice versa, if approval is required by the Federal awarding agency.

6. The inclusion, unless waived by the Federal awarding agency, of costs that require prior
approval in accordance with OMB Circular A-122.

7. The transfer of funds allotted for training allowances (direct payment to trainees) to other
categories of expense.

8. Unless described in the application and funded in the approved awards, the sub-award,
transfer or contracting out of any work under an award (however, this provision does not
apply to purchases of supplies, materials, equipment or general support services).

127.12 Close Out of Federal Awards

NSU shall follow the close out procedures described in OMB Circular A-110 and in the grant
agreements as specified by the granting agency. University financial records on federal contracts
and grants generally must be closed within 90 days, state contract 45 days, of the stated
termination date in the awarding document. Upon termination, no further expenses or
encumbrances should be charged to the project account number. Also, university staff and all
sub-recipients shall liquidate all federal obligations within 90 days and state obligations within
45 days of the end of the grant or contract agreement.

The CGA accountant will prepare the final fiscal report after consultation with the Principal
Investigator (PI) and the appropriate departmental fiscal person, to determine that all appropriate
expenditures have been charged against the account, including both direct and indirect costs.
When cost sharing is included as part of the agreement, the accountant must determine that the
university has met cost share requirements. For fixed price agreements, the CGA accountant will
notify the PI that residual funds may be transferred to another restricted account.

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128 Finance Committee

128.1 Policy

The primary responsibility for the university’s financial reporting and management rests with
senior operating management, as overseen by the university’s Board of Directors (the “Board”).
The purpose of the Finance Committee (the “Committee”) is to assist the Board in fulfilling this
responsibility by providing oversight of the financial management and financial reporting
function.

128.2 Authority

The Finance Committee should have the resources and authority necessary to discharge its duties
and responsibilities. The Committee has sole authority to retain and terminate outside counsel or
other experts or consultants, as it deems appropriate, including sole authority to approve the
firm’s fees and other retention terms. The Committee may form and delegate authority to
subcommittees and may delegate authority to one or more members of the Committee.

128.3 Membership

The Finance Committee should be a standing committee of the Board of Directors, comprised of
not less than 10 members of the Board. Members of the Committee should:

1. Have no relationship to the university that may interfere with the exercise of their
independence from management and the university; and

2. Be financially literate regarding the specialized matters of the university or shall acquire
such financial literacy within a reasonable time period after appointment to the
Committee.

128.4 Responsibilities

The Finance Committee’s role is one of oversight, recognizing that the university’s management
is responsible for financial management and for preparing the university’s financial statements.
The Committee should have oversight responsibilities in certain areas of financial management
and reporting as follows:

1. Oversee the university’s assets, including policies associated with safe-keeping and
protection of those assets.

2. Review and evaluate the university’s financial viability.

3. Review the annual budget and recommend it to the full Board for approval.

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4. Review new initiatives involving request for funding.

5. Review the university’s cash flow management.

6. Review the financial impact of agenda items being considered by the full Board.

7. Monitor budget implementation and accounting and financial policies and procedures.

8. Prepare a report, signed by the chair of the Committee, for presentation to the full Board
of Directors, describing the activities and responsibilities of the Committee.

9. Review overall organizational risk management and adequacy of insurance carried by the
university (and report annually to the board of directors on the university’s risk
management function).

10. Review all borrowing arrangements of the university.

11. Review annual income tax and information returns filed with the Internal Revenue
Service and State government agencies.

12. Review this Charter on an annual basis and propose any recommended changes to the
Board.

13. Oversee the management of the university’s investments, including review of investment
policies, use of external investment managers, and other matters associated with
investment management.

The Committee should meet on a regular basis and call special meetings as deemed necessary in
fulfilling the responsibilities described above. For duties related to the audit committee, refer to
section 129, Audit Committee.

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129 Audit Committee

129.1 Policy

The primary responsibility for the university’s financial reporting and internal controls rests with
senior operating management, as overseen by the university’s Board of Directors (the “Board”).
The purpose of the Audit Committee (the “Committee”) is to assist the Board in fulfilling this
responsibility by providing oversight of the university’s audit functions (external and internal),
as well as other investigations (external and internal).

129.2 Authority

In fulfilling its responsibilities, the Committee is empowered to retain the university’s external
auditors. The Committee is further authorized to investigate any matter brought to its attention
with complete and unrestricted access to all books, records, documents, facilities, and personnel
of the university. The Committee also has the sole authority to retain outside counsel, auditors,
investigators, or other experts in the fulfillment of its responsibilities, including the sole authority
to approve the firm’s fees and other retention terms. The Board will review the adequacy of this
Charter on an annual basis. The Committee may form and delegate authority to subcommittees
and may delegate authority to one or more members of the Committee.

129.3 Membership

The Audit Committee shall be a standing committee of the Board of Directors, comprised of not
less than three members of the Board. Members of the Committee shall:

1. Have no relationship to the university that may interfere with the exercise of their
independence from management and the university;

2. Be financially literate regarding the specialized matters of the university or shall acquire
such financial literacy within a reasonable time period after appointment to the
Committee.

In addition, at least one member of the Committee should be a financial expert possessing the
following characteristics:

1. An understanding of generally accepted accounting principles applicable to the university

and financial statements;

2. The ability to assess the application of generally accepted accounting principles in

connection with accounting for estimates, accruals, and reserves of the university.

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3. Experience preparing, auditing, analyzing, or evaluating financial statements of

comparable complexity to those of the university;

4. Understanding of internal controls and procedures for financial reporting; and

5. Understanding of audit committee functions.

129.4 Responsibilities

The Committee’s role is one of oversight, recognizing that the university’s management is
responsible for preparing the university’s financial statements and that the external auditors are
responsible for auditing those financial statements. The Committee recognizes that the
university’s internal financial management team, as well as, the external auditors, have more
time and detailed information about the university than do Committee members. Consequently,
in discharging its oversight responsibilities, the Committee is not providing expert advice or any
assurances as to the university’s financial statements or nay professional certification as to the
external auditor’s services.

The Committee should have certain responsibilities in the areas of financial reporting, internal
control, and organizational governance.

In the areas of financial reporting and internal control, the Committee should:

1. Oversee the external audit process, including nomination of the external audit firm,
auditor engagement letters and fees, timing and coordination of audit fieldwork visits,
monitoring of audit results, review of auditor’s performance, and review of non-audit
services provided by the external audit firm for compliance with professional
independence standards.

2. Review accounting policies.

3. Review the university’s financial statements, including year-end and interim financial
statements, other reports requiring approval by the Board before submission to
government agencies, and auditor opinions and management letters.

4. Determine that all required tax and information return filings with Federal, State and
local government agencies are current and in compliance with reporting requirements.

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5. Receive and review any other communications from the external auditors that the
external auditors are required to submit to the Board or Committee under currently
applicable professional auditing standards.

6. Review and discuss with management the findings and recommendations communicated
by the external auditor.

7. Inquire about the existence and nature of significant audit adjustments proposed by the
external auditors and significant estimates made by management.

8. Meet privately with the external auditors to discuss the quality of management, financial,
accounting, information technology and internal audit personnel, and to determine
whether any restrictions have been placed by management on the scope of their external
audit or if there are any other matters that should be discussed with the Committee.

9. Review the letter of management representation provided to the external auditors as part
of the annual audit and inquire as to whether any difficulties were encountered in
obtaining the representation letter.

10. Prepare a report, signed by the chair of the Committee, for presentation to the full Board
of Directors, describing the activities and responsibilities of the Committee.

11. Direct special investigations into significant matters brought to its attention within the
scope of its duties.

12. Review this Charter on an annual basis and propose any recommended changes to the
Board.

The following area addresses organizational governance. Steps 5 through 10 relate to the internal
audit function which is the responsibility of the internal audit sub-committee of the Finance
Committee. The Committee should:

1. Review university policies regarding compliance with laws and regulations, ethics,
employee conduct, conflicts of interest, and the investigation of misconduct or fraud.

2. Review current and pending litigation or regulatory proceedings impacting organizational

governance in which the university is a party.

3. Establish and monitor university procedures for receiving and handling complaints about
accounting and auditing matters.

4. Review significant cases of employee or director conflict of interest, misconduct or fraud.

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5. Review and approve the internal audit charter, which explains the framework for
providing internal audit services to management and the Committee.

6. Review and approve management’s appointment and termination of the university’s

Director of Internal Auditing.

7. Review plans and budgets associated with the internal audit function to determine that
audit objectives, plans, financial budgets, and schedules provide for adequate support of
the Audit Committee’s goals and objectives.

8. Require the Director of Internal Auditing to prepare a written report on an annual basis
describing the scope and results of internal audit procedures.

9. Discuss with the Director of Internal Auditing and the external audit firm the reliability of
the university’s information technology system and any specific security measures in
protecting the university against fraud and abuse.

10. Meet regularly with the university’s general counsel to discuss legal matters that may
have a significant impact on the university.

The Committee should meet on a regular basis and call special meetings as deemed necessary in
fulfilling the responsibilities described above.

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