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Finanical Regulations

VERSION 1.0 as of November 14, 2002

CONTENTS

1. Purposes

2. General Rules

3. Funding

4. Funds

5. Budget

6. Income and Receipts

7. Disbursements

8. Banking and Checking

9. Fixed Assets Management

10. Loan

11. Bookkeeping and Reporting

12. The Treasurer

13. Financial Audits

14. Implementation

1. Purposes

1.1. Under the YingHua Language School Bylaws (the "Bylaws"), the YingHua Language School Financial Regulations (the "Regulations") are set forth to establish general rules, control policies, administrative procedures, and accountabilities of financial matters of the YingHua Language School (the "School").

2. General Rules

2.1. The Schools funds and other assets shall only and all be used to serve the School under the objectives defined in the Bylaws.

2.2. The School managements decisions on financial matters shall be made in the best interests of the School as a whole.

2.3. The Schools financial operation shall be transparent to the general public.

2.4. The Principal has the full responsibility to manage the Schools financial activities in accordance with the Bylaws and the Regulations.

2.5. The Principal is responsible to implement control policies and administrative procedures provided in the Regulations.

2.6. The Board of Trustees ("Board") shall approve plans and actions on the Schools major and important financial matters.

2.7. The Board has the responsibility to enforce and attest the compliance of the Regulations.

2.8. The Board may make decisions on financial matters that are not explicitly covered by the Regulations.

2.9. Functions of authorization, spending, and record-keeping shall be segregated from each other. No overlapping of these functions is allowed in job assignment within the school administration.

3. Funding

3.1. Sources of funding to the Schools operation include, but not limited to, tuition, registration fees, donations, surplus from the Schools auxiliary activities, and any money raised through the School fund raising activities.

3.2. Tuition rates shall be proposed by the Principal and approved by the Board.

3.3. The School accepts donations or private grants that are not conditioned by any political, religious, or other requirements that are contradictory to the Schools general objectives and well-being.

3.4. All auxiliary activities shall not be conducted for profit-seeking purposes without prior approval from the School or the Board.

3.4.1. Auxiliary activities include those cultural, social, and non-curriculum activities organized, conducted, or participated by the School.

3.5. The Principal shall take lead to organize annual fund-raising activities. The Board shall work with the Principal to conduct targeted fund raising activities.

4. Funds

4.1. All funding shall be categorized as Current Fund, Reserve Fund, Auxiliary Fund, and Special Fund.

4.2. Current Fund

4.2.1. Current Fund is the amount of funding appropriated for the budgeted expenditures of current school year operation, auxiliary activities, and other expenditures under Special Fund and Reserved Fund approved by the Board.

4.2.2. Sources of the Current Fund include

4.2.2.1. All tuition and fees collected for the current school year and the amount of funding from Reserved Fund appropriated for current school year operation.

4.2.2.2. Funding appropriated from Auxiliary Fund for current school year auxiliary activities.

4.2.2.3. Funding appropriated from Special Fund or Reserved Fund for expenditures proposed by the Principal and approved by the Board for current school year special expenditures.

4.2.2.4. Donation or grants received and approved by the Board for current school year spending.

4.2.2.5. Interest income generated from bank deposits approved by the Board for current school year spending.

4.2.3. Budgeted spending of Auxiliary Fund, Reserved Fund, and Special Fund shall be appropriated and transferred to Current Fund before expending.

4.2.4. The balance of the Current Fund, after closing the book of the school year, shall be transferred to

i. Reserve Fund for the balance from school operation,

ii. Auxiliary Fund for the balance from auxiliary activities, or

iii. Special Fund for the balance from special expenditures.

4.3. Reserve Fund

4.3.4. Reserve Fund is established to supplement insufficient tuition and dues funding to the School operation and any special non-budgeted spending approved by the Board.

4.3.5. Reserve Fund is funded by surplus from previous periods Current Funds, the general donations and grants (e.g. United Way, parent donation, etc.) whose usage is not restricted by donors or grantors.

4.3.6. Spending and Appropriation of Reserve Fund shall be proposed by the Principal and approved by the Board.

4.3.7. The Reserved Fund is allowed in no case to be used for any commercial or business investment.

4.3.8. The Reserved Fund shall be saved in bank deposits with least financial risk.

4.4. Auxiliary Fund

4.4.4. Auxiliary Fund includes surplus or residual money of the fund pooled (other than the amount of fund appropriated from the existing school Funds) for special school events or auxiliary activities (e.g., library late fees and fines).4.4.5. Auxiliary Fund is established to subsidize the auxiliary activities.4.4.6. The Principal is responsible for managing the spending of the Auxiliary Fund.4.4.7. Appropriation of Auxiliary Fund shall be reported to the Board.

4.5. Special (or Restricted) Fund

4.5.4. Special Fund includes donations and grants for activities, project, assets expenditure specified by donors or grantors.4.5.5. Spending of the Special Fund shall be in conforming to the donor's request.4.5.6. Disbursement of the Special Fund shall be directed by special resolutions of the Board.

4.6. Transfer between Funds

4.6.4. Unless otherwise specified by the Regulations, Funds and fund surplus within each category cannot be diverted into a different category without approval from the Board.

5. Budget

5.1 The Principal shall propose budget for the school. The Board may approve, reject, or instruct revision of the budget. The Treasurer shall work with the Principal on the budget by providing financial statements.

5.2 Budgeting and Tuition collection may be conducted under a semi-annual basis if deemed appropriate and necessary by the Principal.

5.3. Budget shall include estimated tuition and fee income, proposed appropriation of other Funds for the current year (or semester); projected payroll and stipend expenses, rental and facility expenses, auxiliary activity expenses, proposed equipment purchases, estimated other administrative expenditures, and estimated curriculum and non-curriculum activity expenditures.

5.4. Wage rates and fixed stipend shall be reviewed and adjusted periodically by the Principal.

5.5. An amount of the Current Fund not less than $1,000 shall be set aside for each semester as a contingency reserve for unexpected fluctuation of expenditures.

5.6. Total expenditures, including the flexible reserve, shall not exceed the total amount of funds available for the budget period.

5.7. Explanation and justification shall be presented in the budget with any proposed major equipment or assets purchase.

5.8. Explanation and justification shall be presented in the budget with any significant increase of pay rates.

5.9. The Principal may amend the budget during the budget period if the surrounding circumstance or any operating factors have been changed significantly beyond the control of the school administration.

5.9.1. Procedures for amending budget shall generally follow the regular budgeting procedures.

6. Income and receipts

6.1. All tuition and other fees or deposit payments are due at the time of registration.

6.1.1. Delinquency or default in payment may cause suspension or termination of student enrollment.

6.2. Tuition shall be collected only by the Assistant Principal or a school staff member as Registrar.

6.3. Tuition received or refunded shall be logged into the student registration file (i.e. student enrollment for the year or semester.)

6.4. Total tuition and fee income shall be reconciled to the total students admitted for the year or the semester.

6.5. Collected tuition checks shall be forwarded to the Treasurer, who is not the Registrar, for bank deposit within two weeks.

6.6. A copy of bank deposit slip for the tuition and fees deposits shall be retained for record.

6.7. Subsections 6.1, 6.2, 6.3, 6.4, 6.5 and 6.6 also apply to collection of other fees or deposits (e.g. registration fee, late fee, etc.)

6.8. Any contributions or donations to the School shall be recorded in the book and deposited before its disbursement.

6.9. The School shall provide valid receipt or letter of acknowledgement to donors or grantors.

6.10. Tuition refund shall be approved by the Registrar.

6.10.1. In case the student applying for refund is a family member or relatives of the Registrar, the review and approval procedures shall be conducted by the Principal.

6.11. A written explanation and justification shall be provided by the Registrar and recorded on the registration file for the tuition refund.

7. Disbursements

7.1. The Principal has the overall responsibility and authority

i) to execute the budget,

ii) to authorize spending, and

iii) to ensure that spending is within the budget.

7.2. The Principal may approve non-budgeted spending during the semester for a total amount not more than $300 provided that

i) such spending can be covered by the funds available for the current budget period, andii) such spending can be justified by reasonable school operation needs.

7.3. Payroll expenses shall not exceed the budgeted amount without approval of the Board.

7.4. The surplus of auxiliary activities shall be generally used to subsidize certain school events under the discretion of the Principal.

7.5. Authorization of disbursement and reimbursement procedures

7.5.1. All non-routine disbursement shall be pre-approved by the Principal or his/her designee in lieu of school curriculum, administrative, or auxiliary activity expenses.

7.5.1.1. Non-routine disbursements are expenses other than routine disbursements that include pre-determined stipend to school administrative personnel, wages to teachers, rents for school facilities, and other fixed, determinable and periodical payments for the school ordinary operation.

7.5.2. It is the approving persons (i.e. the Principal, or his/her designees) responsibility to check the availability of the fund before they approve purchases or disbursement.

7.5.3. Non-routine disbursement shall be generally handled on a reimbursement basis.

7.5.4. The Treasurer shall not issue a reimbursement payment unless the following information is logged into the reimbursement record file:

i) the purposes of the disbursement;

ii) the applicants name;

iii) the name of the related managing personnel who has reviewed and approved the reimbursement;

iv) the disbursed fund;

7.5.4.1. the original receipt shall be retained for record.

7.5.4.2. a notice shall be given to the applicant and is signed and returned when he or she receives the payment.

7.5.5. The Treasurer may reject an approved reimbursement application based upon his/her judgment of appropriateness of the disbursement. After the rejection, the Treasurer shall ask the approving person for reconsideration. If the Treasurer and the approving person cannot resolve the issue, either one of them can bring the issue to the Board for final decision.

7.6. Teacher attendance sheets shall be maintained by an Assistant Principal or his/her designee as an evidential document for payroll purposes.

7.7. The Principal has full discretion to determine bonus or award payment to teachers and administrative staff provided that the total amount of such payments for the semester (or the school year) is within the budget.

7.8. Awards or bonus to school officers shall be determined by the Board.

8. Banking and checking

8.1. At least one bank account shall be maintained for the School.

8.2. The Principal may open additional accounts (e.g. short-term certified deposit account) as deemed necessary for special purposes.

8.3. The Principal shall inform the Board of the purposes and the benefits of opening or closing such additional bank accounts.

8.4. All tuition and fees shall be deposited into the bank account when they are collected.

8.5. Monthly bank statement reconciliation shall be completed before the banks deadline for notification of fraudulence and discrepancy.

8.6. The Principal and the Assistant Principal shall register their signatures with the bank for authorization of withdrawal and disbursement of money from the bank and other banking activities.

8.6.1. The Principal or the Assistant Principal shall sign all disbursement checks, except the reimbursement and stipend checks to himself or herself.

9. Fixed assets management

9.1. Fixed assets include equipment, appliances, tools, separately purchased computer software, tapes and CD, collection of books and audio/visual materials, textbook and supplies inventories, and other valuable assets of the School.

9.2. An asset log sheet for equipment, appliance, tools, and software shall be established.

9.2.1. The log sheet shall include assets information, such as

i) date of purchase

ii) costs

iii) current condition (workable or with defects)

iv) the current users

v) date of obsolete

9.3. All users must sign in the log sheet when he or she is assigned an asset using for school operation.

9.4. The user shall return such assets to the School and sign off the log sheet when he or she no longer serves the duty.

9.5. All users of school assets shall exercise his or her due care to properly use and handle the assets.

9.6. All users shall report any damage or lost of the assigned assets to the School timely.

9.7. The Assistant Principal or his/her designee shall be responsible for managing the school assets, control the log-in and log-out of school assets.

9.7.1. The assets logged onto the log sheet shall be reconciled to the amount of assets as recorded on accounting records at once a year.

9.8. Asset obsolete shall be concurred by the Principal by signing a written explanation from the responsible school officer.

9.9. A responsible school staff member shall maintain proper records and log sheet to track the use for school supplies and the inventory movement of the textbooks.

10. Loan

10.1. Generally, the School shall not borrow or assume any loan or debt for the Schools operation.

10.2. If the Principal determines that borrowing is necessary, under unusual circumstance, to maintain the Schools operation for a certain period of time, the borrowing must be approved by the Board.

10.3. In case a loan is deemed necessary, loan agreement shall be in place and it must be reviewed and approved by the Board.

10.4. The loan agreement shall be signed and executed by the Principal.

11. Bookkeeping and reporting

11.1. The School shall maintain complete and accurate records of its financial activities

11.2. Records

11.2.1. The financial records include, but not limited to

i) Tuition check log-in sheets with copies of bank deposition slip

ii) Disbursement records and attached original receipts or other proof of disbursement

iii) Payroll sheets and related attendance sheets

iv) Invoices or receipts of school expenses

v) Canceled check and check stub

vi) Bank deposit sheets and bank statements

vii) Any other records or proof of disbursement and/or revenue receipts

viii) Ledger

ix) Financial statements

x) Budget plan, related board resolution, and amendments to the budget

xi) Asset log sheet

11.2.2 In addition to hard copies of financial records, any school financial information in electronic format, including computerized records and files, are the Schools financial records.

11.3. General Ledger

11.3.1. A general ledger shall be maintained to record accounting transactions on a daily basis.

11.4. Chart of Accounts

11.4.1.The Chart of accounts shall include at least the following separate accounts:

i) cash balance

ii) fixed assets (equipment, appliance, tools, software, etc.)

iii) textbook inventory

iv) payroll/stipend expenses

v) rental and facility expenses

vi) supplies and teaching expenses

vii) textbook expenses

viii) other activity expenses

ix) auxiliary activity expenses

x) other administrative expenses

xi) tuition revenue

xii) fees (registration, late, etc.)

xiii) textbook fees

xiv) tuition and fee receivable

xv) deposits

xvi) accrued expenses

xvii) Current Fund

xviii) Reserve Fund

xix) Auxiliary Fund

xx) Special Fund

11.4.2. The Treasurer may set up additional accounts as deemed necessary.

11.5. Financial statements

11.5.1. The School shall prepare the following statements at least once a year.

i) Operating statement

ii) Balance sheet

iii) Change in fund balance or Cash flow statement.

11.5.2. The financial statements shall be prepared using accrued method.

11.6. Records keeping

11.6.1 All financial records and books are the exclusive assets of the School.

11.6.2 At the end of each school year, all financial records, files and documents for the year shall be sealed and stored in a safe place for a period not less than five years.

11.6.3 The seal shall be signed by the Treasurer for the period and two school officers.

11.6.4 A hard copy of financial statements and general ledger shall also be kept for each semester.

11.6.5 In an event that the sealed package needs to be opened, the package shall be re-sealed after the use and it shall be re-sealed by the user and two school member witnesses (at least one of the witnesses shall be a school officer).

11.6.6 At the termination of the Treasurers service, all financial records and books under the Treasurers care shall be returned to the School.

12. The Treasurer

12.1. The Treasurer has full responsibility in maintaining complete and accurate records of the Schools financial activities and assisting the Principal to prepare budget and financial statements.

12.2. The Treasurer shall conduct his or her duties fully in accordance with the financial control policies and administrative procedures provided in the Regulations.

12.3. If the Treasurer can not resolve his or her disagreement with school officers on financial matters, the Treasurer has the right to bring the issue directly to the attention of the Board for further resolution.

12.4. If the Treasurer, based upon his or her judgment, believes that irregularity or misconduct exists in the School financial operation, he/she shall bring the concern to the attention of the Board.

12.5. In the event that the Principal dismisses the Treasurer, an explanation must be provided to the Board

12.5.1. The Board may, at its discretion, verify the causes of the dismissal and override the Principals decision.

12.5.2. The dismissed Treasurer may appeal to the Board.

12.6. In transition of treasurers, the predecessor shall provide all school financial records and files under his or her care to the successor.

12.7. The predecessor shall provide full cooperation to the successor during the transition.

12.8. The departure Treasurer shall assist the new Treasurer in learning operating the Schools computerized accounting and bookkeeping system.

12.9. The predecessor shall reply subsequent inquiries, after the transition, from the successor or school officers for the issues related to the period when predecessor was in service.

13. Financial Audit

13.1. Internal audit

13.1.1. Financial Audit. The Board shall conduct audit of financial statements on an annual basis to attest the fairness, completeness and accuracy of the financial statements reported by the Principal or Treasurer.

13.1.1.1. An interim audit for the first semester of the academic year may be conducted at the discretion of the Board.

13.1.2. Compliance Audit. The Board may, at its discretion, conduct an audit of compliance to attest whether the school financial operations are in compliance with the Bylaws and the Regulations.

13.1.2.1. Such compliance audit shall be generally conducted as a part of the annual financial statement audit unless the Board deems as necessary to carry out a separate compliance audit.

13.1.3. Departure Audit. The Board may, at its discretion, conduct an audit of financial activities, when a school officer or staff departs from his or her position before the end of his or her service term, to clarify the Schools financial condition at that time for transition purposes, or to clarify other transition-related financial issues under the consideration of the Board.

13.1.4. Special Audit. The Board may, at its discretion, conduct a special audit to investigate financial matters concerned by the Board.

13.2. Audit and audit report

13.2.1. Audits shall be conducted generally in compliance with audit procedures promulgated by relevant professional organizations.

13.2.2. The School officers and staff must provide full cooperation to auditors and provide, in his/her best knowledge, all necessary information requested by the auditors.

13.2.3. Auditors may suggest adjustments to the book for incorrect book entries or accounting treatment.

13.2.4. Auditors shall report any uncovered irregularity or misconduct in the School financial operation immediately to the Board before the conclusion of the audit.

13.2.5. The audit team shall issue audit reports for all types internal audits to the Board to render auditors opinion on the matters under audit.

13.2.5.1. The format of audit opinion on financial statements shall generally follow the standard format provided by relevant professional organization.

13.2.5.2. The format of audit report for all other internal audits shall be determined based upon the request and the satisfaction of the Board.

13.2.6. The audit team shall report its findings only to the Board.

13.2.7. Auditors shall not release any financial and audit related information, records, or reports to any persons or parties without written authorization of the Board.

13.2.8. The Board shall reach a resolution to an audit after review the audit report.

13.3. Auditors

13.3.1. All internal audits shall be conducted by an audit team with at least two trustees or their designees.

13.3.2. The audit team shall be appointed by the Board.

13.3.3. No school officers, staff, or their family members or relatives shall be appointed as audit team members.

13.3.4. The individual who is appointed as auditor shall have sufficient relevant professional experiences.

13.3.5. Auditors shall exercise their due diligence in conducting the audit.

13.4. External audit

13.4.1. In the event that audited financial statements are required for any external purposes, the Board shall appoint an independent external qualified professional to conduct a financial statements audit to satisfy such external needs.

14. Implementation

14.1. The Board is the only authority that has the right to interpret the Regulations.

14.2. The Board may amend the Regulations under the Bylaws.

14.3. The initial promulgation and thereafter amendments of the Regulations shall be announced to the general public.

14.4. Newly appointed Principal, Assistant Principal, and Treasurer shall study the Regulations thoroughly before carrying out their financial duties and authorities.

14.5. It is the responsibility of all school personnel, including trustees, to understand the related provisions of the Regulations before conducting any financial related activities.

14.6. The Board shall maintain a folder for all school Bylaws and regulations for the purposes of school permanent records.

14.7. The Principal shall maintain a separate copy of the Bylaws and regulations for daily operation reference. Such file shall be transferred by the departing Principal to the succeeding Principal as one of the required transition procedures.

14.8. The Treasurer shall maintain a separate copy of the enforced Regulations for his or her working reference. Such folder shall also be transferred to the succeeding Treasurer by the departing Treasurer as one of the required transition procedures.