Book Closure Circular
Book
closure requirements needs to be intimated to all the relevant departments in
the organization.
Book Close Check List
Detailed
checklist to be sent to all the branch accountants. Since the corporate
office relies on the branch to close the
books properly it has to take adequate
measures and provided guidance and established internal control on the branch
level book closing
Ledger scrutiny
Ensure that
the ledger balances are correctly updated to show the true state of affairs as
on date of closing.
Can be
achieved through various cross verifications like
Bank
Reconciliation
Balance
confirmation
Reconciliation
of purchases and sales
Prepaid and Outstanding Expenses
All expenses relating to the Period for which books are being closed are to be booked. Make sure , that proper supportings are available with you for the provision entry passed.
Match the expense with income
To ensure
that when an expense is recognized in a period the corresponding income is also
recognized and vice versa
Accrual for
unbilled Revenue
Provision
for expenses where goods/service is received but expense account is not yet
debited
Revenue Exp Vs Deferred Revenue Exp Vs Capital Expenditure Exp
Review
whether the expense booked is commensurate with the income booked. Where the
benefits accrued are spread over a period transfer the expense to prepaid
expense account.
If certain
expesne resulted in capital asset being created or enhanced substantially
capitalise the same
Accounting for every stage of transaction: through control accounts
Having control accounts which are like in between accounts helps track the actual movement along each step of transaction. These are more in prevalence in ERP softwares. Useful in Non-ERP Scenario also.
Analytical Review
Idnetify
linkages between various income and expense heads and make ratio analysis to
ensure that there are no abnormal variations in the ratios or the variations
are sufficiently explained
Accounting Standard Check List
Take a list
of mandatory requirements relating to treatment of various issues as required
by accounting standards and answer whether each of them are either complied or
not applicable
Your trail balance is ready but Financial Statements need more….
With the
above steps the trail balance is ready. The next steps are
The
Presentation Requirements
The Disclosure Requirements
Once the TB
is ready Financial Statements are automatically ready except that
Some of the
presentation and disclosure requirements go beyond the trail balance figures
and need to refer the ledgers again.
Data other than Closing ledger Balance from TB : No 1: Bucketing
Certain
closing ledger balances are required to be split into current and non current
based on ageing of the each line item which contributed to the closing balance
Data other than Closing ledger Balance from TB : No.2 :Notes
Notes to
accounts require various disclosures to be picked not just from closing
balances but from individual transactions
Accounting Policies
Accounting
policies adopted by the company and estimates and choices made by the
enterprise
While
recording the transaction
While
summarizing & classifying
needs to be
disclosed.
This is
actually the first step. This is something like the assumptions list in a
projections statement
Internal Control on Book close process
Just like
the internal controls in transactions like procure to pay, order to cash make
those processes capable of facing audit
trail,
Book
closure process needs to be documented and process needs to stand the audit
trail.
The auditor
is not only relying on the internal controls in the transactions but also the
controls in closing process.
Corporate
Governance compliance requires CFO certicate that proper internal controls
exist not only in business transactions but also in financial statement
preparation process
Book closure-Annual audit circular to all department heads in company
In connection with the annual closing of accounts the sectional heads are requested to ensure compliance with the following
ADVANCES TO EMPLOYEES
1)A list of advance payments is being sent every month to purchase dept. for follow up action.PD has to follow up with the suppliers for supplies/replacements/refunds and ensure that all advance payments made before 28th Feb are regularized by 31st march by raising GRNs or by obtaining refunds.
STORES
2)The stores dept.shall ensure that GRNs are invariably generated on the date of receipt of materials.For the GRNs that are pending for inspection,the stores shall follow up with the concerned dept. and ensure that the inspection is completed before 29th march and the GRNs should be released to accounts latest by 31st march.
3)The user depts are requested to return the unused materials if any to stores immediately.The stores dept. shall account for the return of such material on or before 31st march at the rate the item is issued.
ACCRUED AMOUNTS
4)In respect of contracts for services the user depts. are requested to furnish details of work done upto 31st march indicating the amount even if bills are not received before 31st march.The list should be sent to accounts before 10th April making adequate provision in the books of accounts.
CUT OFFS
5)Stores dept shall confirm the first and last GRN and also the last issue of materials for the year after accounting all transactions.
ADVANCES TO EMPLOYEES
6)No fresh advance payments to suppliers or imprest to employees will be made in the current financial year
7)The employees who have taken floating imprest should submit proper claims before 31st march and refund the balance amount on the same date.A fresh floating imprest will be provided on or after 1st April if required on receipt of requisition for the same.
8)The employees who have taken imprest for specific purposes should regularize the same by proper claims or refund the amount on or before 29th March 06
9)The employees who have taken travel advance should submit claims or refund the amount on or before 29th march
10)The accounts dept. will ensure that in case any imprest or travel advance is not regularized by 29th march the amount is recovered from the salary of concerned employees.
CLAIMS/REIMBURSEMENTS
11)If any employee has spent any amount on behalf of the company the reimbursement for the same should be claimed on or before 31st march. No claims relating to the current Financial year will be admissible on or after1st April
12)The employees shall submit all their claims for reimbursement of conveyance ,travel and other expenses on or before 29th .No claims relating to the current financial year will be admissible on or after 1st April
CAPITAL WORKING PROGRESS : Details of CWIP if any to be capitalised
Circular to branch accountants
Dear All Accounts Manager's
Thank you for excellant cooperation extended for the year 20XX on compliance of various Managment information well in time. Now the final task for every Accounts Manager is to complete the Annual Statutory Audit as per HO schedule dates.
In view of the Annual Audit , we request you to kindly oganise and get ready for the Audit to complete smoothly by Statutory Auditor's
- Obtain Bank Balance Confirmation certificate as on 31.03.06 for All Bank Accounts( CC, Current A/c, Term Loan etc)
- Supplier A/c, Deposit Balances with various Govt. Agencies, Advance balance details as on 31.03. 06 confimation to be obtained. You should send a letter to all these parties.
- All OSL /Prepaid entries are to be passed in Period 12 istself. Make sure , that proper supportings are available with you for the provision entry passed by you.
- All Balance sheet items , schedule to be prepared in PWC/Lodha formats only.
- For all revenue items, such as sales/Purchases both quantitative /value details shchedule to be prepared and should tally with SAP/Oracle GL balances.
- Schedules for Rent, Licence Fee, Sales Tax Payments, TDS/TCS payments are to be prepared
- Quantitative details are to be prepared in the Annual Accounts Format
- Any old outstanding Balances not payable or receivable and needs to be writte back/off , the list to be sent to RPC with duly signed by Unit chief.
- All obsolete and write off of PM/FF/RM /E. stores items etc. , the list in the format duly signed by unit chief along with proper justification to be sent to RPC Mfg. Head to arrange necessary approval from COO/President.
- A confirmation with regard to Physical verification of Inventory/ Fixed Asset duly signed by unit chief/ you are tobe sent to RPC .
- All the Shortages/ Excess of Physical verification of Inventory has to be accounted in the books after the same is approved by COO.
- Inventory schedule to be prepared for RM/PM/ES/FG with itemwise movement & summary .
- Cash verification to be done on closing hours on 31.03.06 and denomination details are tobe mentioned on the cash certificate.
- Pl ensure to account all Stock in Transit / Goods in transit entries , before accounting the Security gate entries to be verified for upto 15th April for the bills dt. 31.03.06 recd after 01.04.06.
- WIP Schedule to be prepared along with the status of pending capex.
- Fixed Asset schedule with the details of FA Additions/Deletions and appropriate depreciation entires are included in the schedule.
- Staff Advance/Vehicle Advance/Furniture Advance schedule to be prepared ason 31.03.06
- OSL/Prepaid /PF/FPF/ESI/TDS/TCS payable accounts to be reoconciled and only Mar. bal should be outstanding as on 31.03.06
BOOK CLOSE CHECKLIST 2019
\below are some of the points that shall be kept in mind prior to 31st March 2019:
1. Accounting related:
a) All Bank Accounts should be reconciled with bank statement.
b) Depreciation to be charged in books of accounts as per Companies Act 2013 / Income Tax Act 1961, as applicable.
c) Analysis of long outstanding debtors, that shall be written off as ‘Bad Debts’.
d) Provisions shall be made for all expenses for m/o March’ 2019, such as Telephone Expenses, Rental Expenses, Electricity Expenses, etc.
e) In case of any Fixed Deposits, etc, interest income should be booked for the year on accrual basis, Interest Certificate shall also be obtained from Bank.
f) All Long outstanding payables / receivables shall be cleared to the maximum extent.
g) In case of Unsecured Loans, interest should be booked on accrual basis for the year.
h) All services rendered / sales done to be recorded in books of accounts and reported in GST Returns accordingly.
i) All expenses pertaining the year should be accounted for in books.
j) Cash in hand balance in books as on 31.03.2019, should be an appropriate amount. Any excess cash should be deposited in Bank account.
k) Physically verify and value inventories/stock as on 31st March 2019, for valuing in bo
k) Any other income / expenses/ other transaction pertaining to the year should be accounted in books.
l) Physical Verification of cash to be done by management as on 31.03.2019
m) Ledger scrutiny of all ledger (specially sundry debtors & sundry creditors) should be done thoroughly.
n) Foreign debtors & Foreign creditors, should be re-valued at exchange rates at 31st March 2019
2. Reconciliations / Third party confirmations
a) Prepare GST Reconciliations – between GSTR 1, GSTR 3B and books of accounts & ITC availed in GSTR 3B, accounted in books of accounts and reflecting in GSTR 2A
b) Confirmations to be obtained from respective debtors / creditors / parties to whom loans given / taken , for outstanding balance, so that accounts can be reconciled.
c) TDS Receivable should be reconciled with Form 26AS, and Form 16A shall be obtained from respective persons for all quarters.
d) Prepare TDS payable reconciliations between books of accounts and Form 26Q/24Q/27Q and make relevant revisions , if required.
3. Goods & Services Tax (GST)
a) Pending GST liabilities to be taken care of.
b) GST Dept also has given last chance to rectify mistakes relating to GST Returns of FY 2017-18 & ITC for that year, till 31st March 2019. Hence, same should also be taken care of while filing GST Returns of March’ 2019
c) Reconcile the Cash ledger, Credit Ledger and Liability ledger on GSTN Portal with books of accounts.
d) All the entries should be done before the year-end relating to Debit notes, credit notes, rate difference, discount, etc should be reconciled.
4. Tax Deducted at Source (TDS)
a) TDS deduction on Salaried employees to be considered before crediting salary for month of March’ 2019
b) Analyse expense on which TDS has not been deducted, and deduct & deposit TDS thereon, with interest.
5. Advance Tax
a) 100% of Advance Tax for the year is to be paid till 15th March 2019, as reduced by amount of advance tax paid in earlier instalments
b) If in case you have not paid any Advance tax during whole financial year, you are advised to pay atleast 90% of your advance tax liability, latest by 31st March 2019, in order to avoid Interest for default in payment of Advance tax u/s 234B of Income Tax Act 1961. Kindly note that Interest for deferment of Advance tax u/s 234C of Income tax Act 1961, shall continue to be levied.
6. Miscellaneous
a) Individuals are advised to make investments under LIC , Fixed deposits, Mediclaim, etc, if they want to claim deductions under Section 80C / 80D / etc
b) Salaried Individuals are advised to submit all investments proofs (Housing loan certificates , Mediclaim and LIC receipts, house rental receipts for claiming HRA, proofs of any other investments done, etc) to their employers, so that TDS can be deducted accordingly.
ACCOUNTING MANUAL
TATVA
Technologies India Private Ltd
Accounting Policies Manual
Effective Date(s) of Accounting Policies
The effective date of all accounting
policies described in this manual is 04/01/06. If a
policy is added or modified subsequent to this date, the effective date of the
new/revised policy will be indicated parenthetically immediately following the
policy heading.
TABLE OF CONTENTS
Accounting Department
Access to Electronically Stored Accounting Data
Storage of Back-Up Files
General Office Security
POLICIES ASSOCIATED WITH REVENUES AND CASH
RECEIPTS
REVENUE
Revenue Recognition Policy
Collections
Credits and Other Adjustments to Inter-company billing
POLICIES
PERTAINING TO SPECIFIC ASSET AND LIABILITY ACCOUNTS
POLICIES
ASSOCIATED WITH FINANCIAL AND TAX REPORTING
Purpose
Responsibility
Introduction
This accounting manual is intended to provide an overview of the accounting policies and procedures applicable to the TATVA, which shall be referred to as “TATVA” or “the Company” throughout this manual.
TATVA
Technologies India Private Limited is a 100% subsidiary of TATVA Technologies
Inc a
Company incorporated in the state of Washington, USA having its principal place of business at 3101
Jay Street, Suite 101, Santa Clara, California, USA 95054 .
This manual shall document the financial
operations of the Company. Its primary
purpose is to formalize accounting policies and selected procedures for all
staff with financial management responsibilities and to document internal
controls.
The contents of this manual were
approved as official policy of the Company by the Chief Executive Officer and
the Chief Financial Officer. All TATVA
staff is bound by the policies herein, and any deviation from established
policy is prohibited.
GENERAL
POLICIES
ACCOUNTING/FINANCE
DEPARTMENT OVERVIEW
Company
The accounting/finance department
consists of 4 staff who manage and
process financial information for TATVA. The positions comprising the
finance department of TATVA are as follows:
Chief Financial
Officer (CFO)
Deputy Manager
- Finance & Accounts
Senior Accounts
Executive
Accounts
Executive
Other officers and employees of TATVA,
who have financial responsibilities, are as follows:
Chief Executive
Officer (CEO)
VP – Global
Human Resources
Senior Manager
– Facilities & Administration
Director – IT
Operations
VP – Delivery
Solutions
Centre Head
Audit/Finance
Committee
Responsibilities
The primary responsibilities of the
accounting department consist of:
General Ledger
Budgeting
Cash and
Investment Management
Asset
Management
Purchasing
Accounts Receivable and
Billing
Cash Receipts
Accounts Payable
Cash Disbursements
Payroll and Benefits
Financial Statement
Processing
External
Reporting of Financial Information
Bank
Reconciliation
Reconciliation
of Sub-Ledgers
Account
reconciliation of Assets and Liabilities
Government
Reporting Requirements
Annual Audit
Risk management
BUSINESS
CONDUCT
Practice of Ethical Behavior
Unethical actions, or the appearance of
unethical actions, are unacceptable under any conditions. The policies and
reputation of TATVA depend to a very large extent on the following
considerations.
Each employee must apply her/his own
sense of personal ethics, which should extend beyond compliance with applicable
laws and regulations in business situations, to govern behavior where no
existing regulation provides a guideline. It is each employee's responsibility
to apply common sense in business decisions where specific rules do not provide
all the answers.
Each director, manager and supervisor is
responsible for the ethical business behavior of her/his subordinates.
Directors, managers and supervisors must weigh carefully all courses of action
suggested in ethical as well as economic terms, and base their final decisions
on the guidelines provided by this policy as well as their personal sense of
right and wrong.
Compliance with Laws,
Regulations and Company Policies
TATVA does not tolerate the willful violation
or circumvention of any central, state, local, or foreign law by an employee
during the course of that person's employment; nor does the Company tolerate
the disregard or circumvention of TATVA policy or engagement in
unscrupulous dealings. Employees should not attempt to accomplish by indirect
means, through agents or intermediaries, that which is directly forbidden.
Implementation of the provisions of this
policy is one of the standards by which the performance of all levels of
employees will be measured.
Disciplinary Action
Failure to comply with the standards
contained in this policy will result in disciplinary action that may include
termination, referral for criminal prosecution, and reimbursement to the Company
or to the government, for any loss or damage resulting from the violation. As
with all matters involving disciplinary action, principles of fairness will
apply. Any employee charged with a violation of this policy will be afforded an
opportunity to explain her/his actions before disciplinary action is taken.
Disciplinary action will be taken:
1. Against any employee who authorizes or
participates directly in actions that are a violation of this policy.
2. Against any employee who has deliberately
failed to report a violation or deliberately withheld relevant and material
information concerning a violation of this policy.
3. Against any director, manager or supervisor
who attempts to retaliate, directly or indirectly, or encourages others to do
so, against any employee who reports a violation of this policy.
FRAUD
POLICY
Scope
This policy applies to any
fraud or suspected fraud involving employees, officers or directors, as well as
members, vendors, consultants, contractors, funding sources and/or any other
parties with a business relationship with TATVA. Any investigative activity
required will be conducted without regard to the suspected wrongdoer’s length
of service, position/title, or relationship with TATVA.
Policy
Management is responsible for
the detection and prevention of fraud, misappropriations, and other
irregularities. Fraud is defined as the intentional, false representation or
concealment of a material fact for the purpose of inducing another to act upon
it to his or her injury. Each member of the management team will be familiar
with the types of improprieties that might occur within his or her area of
responsibility, and be alert for any indication of irregularity.
Any fraud that is detected or
suspected must be reported immediately to the Chief Financial Officer or,
alternatively, to the Chair of the TATVA Audit/Finance Committee, who coordinates
all investigations.
Actions Constituting Fraud
The terms fraud, defalcation,
misappropriation, and other fiscal irregularities refer to, but are not limited
to:
1. Any dishonest or fraudulent act
2. Forgery or alteration of any document or account
belonging to TATVA
3. Forgery or alteration of a check, bank draft,
or any other financial document
4. Misappropriation of funds, securities,
supplies, equipment, or other assets of TATVA
5. Impropriety in the handling or reporting of
money or financial transactions
6. Disclosing confidential and proprietary
information to outside parties
7. Accepting or seeking anything of material
value from contractors, vendors, or persons providing goods or services to TATVA
other than promotional items of insignificant value.
8. Destruction, removal or inappropriate use of
records, furniture, fixtures, and equipment
9. Any similar or related irregularity
Other Irregularities
Irregularities concerning an
employee’s moral, ethical, or behavioral conduct should be resolved by the
departmental management and the Human Resources Department.
If there is a question as to
whether an action constitutes fraud, contact the Chief Financial Officer or the
Chair of the Audit/Finance Committee for guidance.
Investigation
Responsibilities
The Audit/Finance Committee
has the primary responsibility for the investigation of all suspected
fraudulent acts as defined in the policy. The Audit/Finance Committee may
utilize whatever internal and/or external resources it considers necessary in
conducting an investigation. If an investigation substantiates that fraudulent
activities have occurred, the Audit/Finance Committee will issue reports to
appropriate designated personnel and, if appropriate, to the TATVA
Board of Directors and/or the Executive Committee.
Decisions to prosecute or
refer the examination results to the appropriate law enforcement and/or
regulatory agencies for independent investigation will be made in conjunction
with legal counsel and senior management, as will final dispositions of the
case.
Confidentiality
The Audit/Finance Committee and the
Chief Financial Officer treat all information received confidentially. Any
employee who suspects dishonest or fraudulent activity will notify the CFO or
the Audit/Finance Committee Chair immediately, and should not attempt to
personally conduct investigations or interviews/interrogations related to any
suspected fraudulent act (see Reporting Procedures section below).
Investigation results will
not be disclosed or discussed with anyone other than those who have a
legitimate need to know. This is important in order to avoid damaging the
reputations of persons suspected but subsequently found innocent of wrongful
conduct and to protect TATVA from potential civil liability.
Authority for Investigation
of Suspected Fraud
Members of the TATVA
Audit/Finance Committee will have:
1. Free and unrestricted access to all TATVA
records and premises, whether owned or rented; and
2. The authority to examine, copy, and/or remove
all or any portion of the contents of files, desks, cabinets, and other storage
facilities on the premises without prior knowledge or consent of any individual
who may use or have custody or any such items or facilities when it is within
the scope of their investigations.
Reporting Procedures for Suspected Fraud
Great
care must be taken in the investigation of suspected improprieties or
irregularities so as to avoid mistaken accusations or alerting suspected
individuals that an investigation is under way.
An employee who discovers or
suspects fraudulent activity will contact the Chief Financial Officer or the
Chair of the Audit/Finance Committee immediately. The employee or other
complainant may remain anonymous. All inquiries concerning the activity under
investigation from the suspected individual(s), his or her attorney or
representative(s), or any other inquirer should be directed to the Audit/Finance
Committee or legal counsel. No information concerning the status of an
investigation will be given out. The proper response to any inquiry is “I am
not at liberty to discuss this matter.” Under no circumstances should any
reference be made to “the allegation”, “the crime”, “the fraud”, “the forgery”,
“the misappropriation”, or any other specific reference.
The reporting individual
should be informed of the following:
1. Do not contact the suspected individual
in an effort to determine facts or demand restitution.
2. Do not discuss the case, facts,
suspicions, or allegations with anyone unless specifically asked to do so by
the TATVA
legal counsel or the Audit/Finance Committee.
SECURITY
Accounting Department
A lock will be maintained on all
file cabinets or storage cabins of TATVA’s Accounting Department. The
keys to the cabinets will be under the control of accounting personnel and will
be provided to CFO / CEO on an as needed basis. When individuals of accounting
department under whose control the key are available leave the employment of TATVA
keys will be collected by the Human Resources Manager or the employees’
supervisor.
The TATVA corporate seals and
blank check stock shall be stored in a fireproof file cabinet in the Accounting
Department. This cabinet will be locked with a key that is kept in the
Accounting Department. Access to this file cabinet shall be by keys in the
possession of the Controller and Accounts Payable Specialist.
Petty cash funds are stored
in locked drawers at the location assigned. The designated person responsible
for cash disbursements and Senior Manager – Facilities & Administration will
be the only employees with keys to the petty cash drawers.
Access to Electronically Stored Accounting Data
It is the policy of TATVA
to utilize passwords to restrict access to accounting software and data. Only
duly authorized accounting personnel with data input responsibilities will be
assigned passwords that allow access to the system.
Accounting personnel are
expected to keep their passwords secret and to change their passwords on a
regular basis, no less frequently than quarterly. Administration of passwords
shall be performed by a responsible individual independent of programming
functions, the Controller or the CFO in the Controller’s absence.
Each password enables a user
to gain access to only those software and data files necessary for each
employee's required duties. Sharing of
passwords by employees is prohibited in all situations.
The Human Resources Manager
will be responsible for requesting the IT department to ensure that the
passwords of individuals leaving the employment of TATVA will be duly
invalidated upon termination of their employment.
Passwords will also be used
for access to the accounting software.
The CFO, will be in charge of issuing access to the system and limiting
access if necessary. Each individual
user will be responsible for his/her password, and passwords should be changed
on a quarterly basis.
Storage of Back-Up Files
It is the policy of TATVA
to maintain back-up copies of electronic data files off-site in a secure,
fire-protected environment by IS department. Access to back-up files shall be
limited to individuals authorized by management.
General Office Security
During normal business hours,
all visitors are required to check in with the receptionist. An access control
card key is required for access to the offices of TATVA. Access control
cards are issued only to TATVA employees.
GENERAL LEDGER AND
CHART OF ACCOUNTS
The general ledger is defined
as a group of accounts that supports the information shown in the financial
statements. The general ledger is used
to accumulate all financial transactions of TATVA, and is supported
by 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.
Chart of Accounts Overview
The chart of accounts is the
framework for the general ledger system, and therefore the basis for TATVA'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, equity, revenue, expense and gain and
loss account.
TATVA’s chart of accounts is
comprised of five types of accounts:
1.
Assets
2.
Liabilities
3.
Equity
4.
Revenues
5.
Expenses
There are two types of
accounts: real accounts and nominal
accounts. Real accounts are asset,
liability, and equity accounts and they appear on the balance sheet. Nominal or temporary accounts are revenue and
expense accounts, and they appear on the Profit and Loss statement. TATVA's nominal accounts are
annually closed or zeroed out, but real accounts are permanent.
The structure of accounts is:
Asset, liability, equity, income and expense accounts:
XXXXX
(five digits) Represents the
natural account number
XX
(Two digits) Represents the
Location
XXX
(three didgits) Represents the
Department.
Distribution of Chart of Accounts
All TATVA employees involved
with account coding responsibilities (assignment or review of coding) or
budgetary responsibilities will be issued a current chart of accounts. As the
chart of accounts is revised, an updated copy of the chart of accounts shall be
distributed to these individuals promptly.
Control of Chart of Accounts
TATVA's chart of accounts is
monitored and controlled by the Controller.
Responsibilities include the handling of all account maintenance, such
as additions and deletions. Any
additions or deletions of accounts should be approved by the CFO, who ensures
that the chart of accounts is consistent with structure of TATVA and meets the needs
of each division and department.
Fiscal Year of Company
TATVA shall operate on a fiscal
year that begins on January 1 and ends on December 31 within the
guidelines as prescribed under the Companies Act 1956. Any changes to the
fiscal year of the Company must be ratified by majority vote of TATVA’s
board of directors.
Journal Entries
All general ledger entries
that do not originate from a subsidiary ledger shall be supported by journal
vouchers, which shall include a reasonable explanation of each such entry.
Examples of such journal entries include:
1. Corrections of
posting errors
2. Non-recurring
accruals of income and expenses
3. All transactions
those are not related to any Vendor / Customer
Certain journal entries,
called recurring journal entries, occur in every accounting period. These
entries may include, but are not limited to:
1. Depreciation of
fixed assets
2. Amortization of
prepaid expenses
3. Accruals of
recurring expenses
4. Recognition/Amortization
of deferred revenue
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 TATVA
that all journal entries not originating from subsidiary ledgers shall be
authorized by the Deputy Manager – Finance & Accounts.
POLICIES ASSOCIATED WITH REVENUES AND CASH RECEIPTS
REVENUE
Revenue Recognition Policy
1. The Company
derives its revenue primarily from software development services rendering to
its holding company TATVA Technologies Inc. These revenues are based on time
and material based pricing. Revenue from time and material based contracts is
recognized upon performance of services.
2. Dividend
Income (Income from investments made in mutual funds / debt based schemes is
recognized when the right to receive payment is established.
3. The expense that are in the nature of reimbursable such as Travel
Expense, visa charges, Travel Insurance etc., and expense that are incurred by
US employee during their visit to India are billed at actual and is been
credited to respective expense accounts.
Responsibilities for Billing and Collection
TATVA’s Accounting Department is
responsible for the invoicing of services as well as the collection of outstanding
receivables.
Accounts Receivable Entry Policies
Posting of sales invoices to
the accounts receivable subsidiary ledger shall be performed by individuals
independent of the cash receipts function of TATVA.
Posting of credit memos and
other adjustments to customers accounts receivable shall also be performed by
an individual independent of the cash receipts function of TATVA and approved by the
Deputy Manager – Finance & Accounts.
CASH RECEIPTS
Overview
Cash (including checks
payable to the Company) is the most liquid asset a company has. Therefore, it is the objective of TATVA
to establish and follow the strongest possible internal controls in this area.
For funds that are received directly
at TATVA,
cash receipts are centralized to ensure that cash received is appropriately
directed, recorded and deposited on a timely basis.
Endorsement of Checks
It is the policy of TATVA
that all checks received that are payable to the Company shall immediately be
restrictively endorsed by the individual opening the mail.
Timeliness of Bank Deposits
It is the policy of TATVA
that bank deposits will be made on a daily basis, unless the total amount
received for deposit is less than Rs.1000. In no event shall deposits
be made less frequently than weekly.
INTER-COMPANY
ACCOUNTS MANAGEMENT
Monitoring and Reconciliations
On a monthly basis, a
detailed Inter-company accounts report is generated and reconciled to the accounts
report of holding company. All differences are immediately investigated and resolved
and necessary entries in either book are to be made and balances should match
as at last day of the month. On a quarterly basis a balance confirmation
certificate from holding company need to be obtained.
Collections
Collections are performed as
per contract terms and conditions.
Credits and Other Adjustments to Inter-company
billing
All credit / debit
adjustments arising from billing errors shall be processed by an employee who
is independent of the cash receipts function duly authorized by Deputy Manager
– Finance / CFO.
POLICIES ASSOCIATED
WITH EXPENDITURES AND DISBURSEMENTS
PURCHASING POLICIES AND PROCEDURES
Overview
It is the policy of TATVA
to follow a practice of ethical, responsible and reasonable procedures related
to purchasing, agreements and contracts, and related forms of commitment. The policies in this section describe the
principles and procedures that all staff shall adhere to in the completion of
their designated responsibilities.
Use of Purchase Orders
It is the policy of TATVA
to utilize a purchase order system. A properly completed purchase order shall
be required for all purchases of goods and services in excess of Rs.5000,
with the exception of travel advances and expense reimbursements, which require
the preparation of a separate form described elsewhere in this manual.
Purchase orders shall be issued
and maintained by Facilities department. Employee who is independent of issue
and maintenance of Purchase orders should preserve the documents both in
electronic form and paper form and made available to finance department as and
when required.
Responsibility for Purchasing
All division heads shall have
the authority to initiate purchases on behalf of their division, within the
guidelines described in this policies manual. In addition, division heads may
delegate purchasing authority to responsible individuals within their
department. Division heads shall inform the accounting department of all
individuals that may initiate purchases. The accounting department shall
maintain a current list of all authorized purchasers of TATVA.
All purchase orders are need
to be signed by any of the two authorized signatories mentioned below.
- CFO
- Deputy Manager – Finance & Accounts
- Deputy Manager – Business Finance
- Senior Manager – Facilities & Administration
In the case of purchases,
agreements and contracts, and related forms of commitments that are related to
Human Resource department are need to be signed by VP-Global HR or Senior
Manager – HR along-with Deputy Manager – Finance & Accounts / CFO.
Approving Limits
Capital Expenditure
Specified in Budget
Non-IT items Up to Rs.500K Deputy Manager-Finance jointly
with Sr. Manager-Admin
Beyond Rs. 500K CFO with recommendations of
DMF & SMA
IT Items Up to Rs. 500K DMF jointly with Director IT
Beyond Rs. 500K CFO with recommendations of
DMF & DIT
Software Up to Rs. 500K DMF jointly with Director IT
Beyond Rs. 500K CFO with recommendations of
DMF & DIT
Technical Know how
Entering into Technical Know
How agreements has to be approved by CFO & CTO jointly.
Sales of Assets
Non-IT Items Up to Rs.100K DMF jointly with SMA
Beyond Rs.100K CFO jointly with DMF with recommendations of SMA
IT Items Up to Rs.100K DMF jointly with DIT
Beyond Rs.100K CFO jointly with DMF with recommendations of DIT
Entering into Lease or Hire Purchase agreements
All lease or hire purchase agreements
have to be approved by CFO with the functional concurrence of SMA in the case of
Non-IT related and DIT in case of IT related. Preliminary vetting has to be
done by DMF.
Other Assets
All Earnest Money Deposits,
Deposits with Customs, Telephone deposits and Security Deposits must and should
be approved by CFO & DMF with recommendations of SMA.
Code of Conduct
No employee, officer or agent
of TATVA
shall participate in the selection, award or administration of a contract if a
real or apparent conflict of interest would be involved. Such a conflict would
arise when the employee, officer or agent, or any member of his or her
immediate family, his or her partner, or a company which employs or is about to
employ any of the parties indicated herein, has a financial or other interest in
the firm selected for an award.
The officers, employees, and
agents of TATVA shall neither solicit nor accept gratuities, favors or
anything of monetary value from contractors or parties to sub-agreements unless
the gift is an unsolicited item of nominal value.
Ethical Conduct in Purchasing
Ethical conduct in managing the Company's
purchasing activities is an absolute essential.
Staff must always be mindful that they represent the Board of Directors
and share a professional trust with other staff and the general membership.
Staff shall discourage the
offer of, and decline, individual gifts or gratuities of value in any way that
might influence the purchase of supplies, equipment, and/or services. Gifts to the Company, viewed as normal
business incentives to obtain future Company-approved business such as for
meeting sites, are acceptable donations.
ACCOUNTS
PAYABLE MANAGEMENT
Overview
TATVA strives to maintain
efficient business practices and good cost control. A well managed accounts
payable function can assist in accomplishing this goal from the purchasing
decision through payment and check reconciliation.
It is the policy of TATVA
that the recording of assets or expenses and the related liability is performed
by an employee independent of accounting all such transactions. The amounts
recorded are based on the vendor invoice for the related goods or services. The
vendor invoice should be supported by an approved purchase order or Time sheet where
necessary, and should be reviewed and approved by approving authority prior to
being processed for payment. Invoices and related general ledger account
distribution codes are reviewed by the Deputy Manager-Finance prior to posting
to the subsidiary system.
The primary objective for
accounts payable and cash disbursements is to ensure that:
1. Disbursements are properly authorized
2. Invoices are processed in a timely manner
3. Vendor credit
terms and operating cash are managed for maximum benefits
Recording of Accounts Payable
All valid accounts payable
transactions, properly supported with the required documentation, shall be
recorded as accounts payable in a timely manner.
Accounts payable are
processed on a daily basis. Information is entered into the system from
approved invoices or disbursement vouchers with appropriate documentation
attached.
It is the policy of TATVA
that only original invoices will be
processed for payment unless duplicated copies have been verified as unpaid by
researching the vendor records and after obtaining a letter from Vendor
confirming non-receipt of payment and if found received repayment will be
refunded. No vendor statements shall be
processed for payment, except credit card statements which have receipts for
purchases and necessary documents.
Accounts Payable Cut-Off
For purposes of the
preparation of the Company’s monthly financial statements, all vendor invoices
that are received, approved and supported with proper documentation by the 1st
of following month shall be recorded as accounts payable as of the end of the
immediately preceding month if the invoice pertains to goods or services
delivered by month-end. Expenses for
invoices not yet received are accrued.
Establishment of Control Devices
Control of invoices is
established by the Accounts Payable Executive as soon as invoices are received.
Vendors will be instructed to mail all invoices directly to the departments
from which they have received the orders.
Invoices received shall be
handled in the following manner:
- Invoices related to purchases using a purchase order
will be “date received” stamped. An
approval from respective department heads confirming the receipt of
material / service is necessary to process any vendor Invoice. Approval on
purchase order shall be deemed as approval for the procurement of material
/ services. A voucher package (see
the section below) shall be prepared.
- Invoices related to purchases not using a purchase
order will be “date received” stamped. An approval from respective
department heads confirming the receipt of material / service is necessary
to process any vendor Invoice. A voucher package (see the section below)
shall be prepared.
Documents to required to submit
Prior to submit any Vendor
invoice to Accounts Payable Executive the following documents need to be
attached where appropriate.
1.
Vendor
invoice (or employee expense report)
2.
Agreements
and Contracts
3.
TATVA
Whizible Time sheet for consulting services
4.
Packing
slip (where appropriate)
5.
Bill
of Entry, Airway Bill for all import purchases
6.
Receiving
report (or other indication of receipt of merchandise and authorization of
acceptance)
5. Purchase order (for purchases in excess of Rs.5000)
6. Transmittal
7. Any other supporting documentation deemed
appropriate
Processing of Voucher Packages
The following procedures
shall be applied to each voucher package by the accounts payable executive:
- Check the mathematical accuracy of the vendor invoice.
- Compare the hours in Time sheet and period on time
sheet with Vendor Invoice
- Compare the nature, quantity and prices of all items
ordered per the vendor invoice to the purchase order, packing slip and
receiving report
- Obtain the approval of the department head (or their
designee) associated with the goods or services purchased
- Verify the general ledger distribution, using the Company’s
current chart of accounts
Approvals by department heads
indicate their acknowledgement of satisfactory receipt of the goods or services
invoiced, agreement with all terms appearing on the vendor invoice, and
agreement to pay vendor in full.
Payment Discounts
To the extent practical, it
is the policy of TATVA to 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.
Employee Expense Reports
Reimbursements for travel
expenses, business meals, or other approved costs will be made only upon the
receipt of a properly approved and completed expense reimbursement form (see
further policies under “Travel and Business Entertainment”). All receipts must be attached, and a brief
description of the business purpose of trip or meeting must be noted on the
form. Expense reports will be processed for payment in the next vendor payment
cycle if received within two business days of the deadline. Expenses older than sixty days will not be reimbursed.
Reconciliation of A/P Subsidiary Ledger to General
Ledger and Open Invoice File
At the end of each monthly
accounting period, the total amount due to vendors per the accounts payable
subsidiary ledger shall be reconciled to the total per the accounts payable
general ledger account (control account) and the unpaid invoices in the open
invoice file. 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 Deputy Manager Finance.
TRAVEL
AND BUSINESS ENTERTAINMENT
Travel Advances
Employees traveling abroad
(to customer places/parent company) for business purpose are entitled for a
travel advance of $ 1000. All travel
advances shall be approved by the respective manager / department heads. Travel
expenses are to be made in accordance with the Company’s travel policies.
Employees receiving travel
advances are required to submit an expense report within 7 days of returning
from travel. Any outstanding advances
more than 30 days old will be deducted from an employee's next paycheck without
any prior intimation.
Employee and Director Business Travel
At the conclusion of a
business trip, an employee or member of the board of directors that has
incurred business-related expenses should complete an Expense Report in
accordance with the following policies:
1. Identify
each separately incurred business expense (i.e. do not group all expenses
associated with one trip together)
2.
Separate out billable and non billable.
3. With the exception of tips and reimbursed
mileage, all business expenses must be supported with invoices/receipts.
4. For all lodging and any expenditure other
than per diem, vendor receipts/invoices must be submitted. Credit card charge
slips do not represent adequate supporting documentation.
5. All Travel ticketing need to be routed though
TATVA Travel Desk only. In case where employee incurred any expense for booking
travel tickets or tickets cost has to be approved jointly by the reporting
manager of the employee and Travel Desk. For airfare, airline-issued receipts
should be obtained. If a traveler fails to obtain a receipt, other evidence
must be submitted indicating that a trip was taken and the amount paid (for
example, a combination of an itinerary, and boarding passes).
6. TATVA provides cab facilities to their
employees who are on travel to abroad (customer places) where ever it is
possible. All employees are requested to use of the same. In any case, if there
is no cab facility is arranged by company, employee is requested to use most
economical transport to commute between the hotel and work place. All such
expense need to have prior approval from respective managers. Employees who
travel with in India on recruitment drive or any other business purpose are
requested to use most economical transport.
7. The business purpose of each trip must be
adequately explained on each report.
8. Project/function codes must be identified for
all expenditures.
9. For all meals and other business
entertainment, the following must be clearly identified:
a. Names, titles, companies, and business
relationships of all persons entertained
b. The business purpose of the entertainment
(topics discussed, etc.)
10. All expense reports must be signed and dated by
the employee.
11. All expense reports must be approved by the
employee's reporting manger (in case the expense incurred abroad, the manager
at that place need to approve and for all domestic expense, local manager has
to approve).
12. One expense report for each week should be
prepared, and all weekly expense reports along with necessary supporting
documents need to be submitted together to Accounts Payable executive.
An employee will not be
reimbursed for expense reports not meeting the preceding criteria. If the
Expense Report results in a balance due to TATVA (as a result of receiving a
travel advance greater than actual business expenditures), the employee must
attach a check or surrender equivalent foreign currency or sign a statement
indicating authorization to settle the balance due through a payroll deduction.
No further travel advances
will be issued to any employee who has an outstanding balance due to TATVA
from previous business trips.
Reasonableness of Travel Costs
TATVA shall reimburse travelers
only for those business-related costs that are reasonably incurred.
Accordingly, the following guidelines shall apply:
1. Suites and other upgraded rooms at hotels
shall not be allowed; Travelers should stay in standard rooms
2. When utilizing rental cars, travelers should
rent midsize or smaller vehicles; Share rental cars whenever possible
3. Business-related long-distance telephone
calls while away on business travel are permitted, but should be kept to a
minimum; Expense reports should explain long-distance charges
4. Whenever possible, travelers should utilize
long-distance calling cards when placing calls while away on travel. Avoid using the hotel’s long-distance service
if possible
5. Reasonable tips for baggage handling shall be
reimbursed; No receipts are required
Please refer Travel Policy
document for more details.
Spouse/Partner Travel
It is the policy of TATVA
not to reimburse any employee or board member for separate travel costs (air
fare, etc.) associated with his/her spouse or partner. The cost of a shared
hotel room need not be allocated between employee/director and spouse/partner
for purposes of this policy.
CASH
DISBURSEMENTS (CHECK-WRITING) POLICIES
Check Preparation
It is the policy of TATVA
to write vendor checks and expense reimbursement checks twice a week. Checks
shall be prepared by accounts payable executive and authorized check signers
will verify and authorize the payment by signing on the check.
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 shall be paid
within the agreed upon terms after submitting a proper invoice upon 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 accounting department)
7. Checks shall never be made payable to “bearer” or “cash”
8. Checks shall never be signed prior to being prepared
9. Upon the preparation of a check, vendor
invoices and other supporting documentation shall immediately be marked with
paid seal in order to prevent subsequent reuse.
Check Signing
All checks require two
signatures. No checks shall be signed prior to the check being completed in its
entirety (no signing of blank checks).
It is the policy of TATVA
that each check shall be signed by individuals other than the one who approved
the transaction for payment.
Check signers should examine
all original supporting documentation to ensure that each item has been
properly checked prior to signing a check. Checks should not be signed if
supporting documentation appears to be missing or there are any questions about
a disbursement.
Mailing of Checks
After signature, checks are
returned to the individual who prepared them, who then mails checks immediately
to concerned departments / individuals (in the case of employee reimbursements).
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 reconciliations.
Stop payment orders may be
made for checks lost in the mail or other valid reasons. Stop payments are
processed by written authorization duly signed by the authorized check signers to
the bank by accounting personnel with this authority. A journal entry is made
to record the stop payment and any related bank fees.
Record-Keeping Associated with Contractors,
Consultants, Professionals and Land Lords
TATVA shall obtain Permanent
Account Number (PAN) from all vendors to whom payments are made by recovering
Tax Deducted at Source (TDS). A record shall be maintained of all vendors to
whom a Form 16 is required to be issued at year-end.
PAYROLL
AND RELATED POLICIES
Classification of Workers as Independent
Contractors or Employees
It is the policy of TATVA
to classify the people working for the organization into 3 categories i.e.,
employees, contractors and project trainees. The income of people who fall
under the category of employees will be considered as Salary Income and necessary
taxes will be recovered as per applicable rules & regulations set by Income
Tax department of India. The amounts paid to contractors and project trainees
will be considered Consultant fees and necessary taxes will be recovered as per
applicable rules & regulations set by Income Tax department of India.
If an individual falls under
the category of contractor / project trainee, the individual need to furnish
his / her PAN details to TATVA.
If an individual qualifies as
an employee, a personnel file will be created for that individual and all
documentation required by the TATVA personnel policies shall be
obtained. The policies described in the remainder of this section shall apply
to all workers classified as employees.
Payroll Administration
TATVA operates on a Monthly
payroll. For all TATVA employees, a
personnel file is established and maintained with current documentation, as
described throughout this section and more fully described in TATVA's
Employee Handbook.
Changes in Payroll Data
It is the policy of TATVA
that all of the following changes in payroll data are to be authorized electronically
using the “Resource sheet / transaction sheet”:
1.
New
hires
2.
Rehires
3.
Transfers
4.
Changes
in salaries and pay rates
5.
Leave
6.
Resignations
/ Terminations
7. Voluntary
payroll deductions
8. Relocation
/ Sign on / Joining Bonus payable to individuals
9. Tax deducted at source (TDS)
1 through 6 and 8 above shall
be authorized by the Human Resources Manager electronically.
Voluntary payroll deductions
shall be authorized in writing by the individual employee.
Individual employee has to
declare their Income Tax exemptions at the beginning of the year (Tax Financial
year) using the Tax declaration module available in Payroll website.
Documentation of all changes
in payroll data shall be maintained in each employee’s personnel file.
Vacation Request
HR should keep the Leave
availed data and on a monthly basis along-with other payroll inputs, they need
to send the balance leave available of each individual employee as on payroll
input date and the same will be uploaded in payroll website.
Payroll Taxes
The Accounting Department is
responsible for ensuring all required tax forms are properly completed and
submitted, and that all required taxes are withheld and paid to statutory
bodies. The Accounting Department may utilize the services of an outside
payroll service center for the processing of payroll, as determined by the CFO.
Review of Payroll
Upon return of payroll
reports from the payroll service center, the same will be reviewed by an
employee independent of accounting all payroll related transactions prior to
its been communicated to Banks for crediting the net pay amount to individual
employee bank accounts.
Distribution of Payroll
Payroll payments (or check
stubs for electronic deposits) shall be distributed by Deputy Manager Finance
& Accounts and CFO jointly.
POLICIES PERTAINING TO
SPECIFIC ASSET AND LIABILITY ACCOUNTS
CASH
AND CASH MANAGEMENT
Cash Accounts
It is the policy of TATVA to keep the number
of its cash accounts to a minimum in an effort to effectively manage its cash
funds. TATVA maintains two general
checking accounts and Foreign currency accounts. TATVA maintains multiple Investment accounts
(where surplus money parked). Any additional
cash accounts shall only be opened and maintained if they are required after
taking written approval from CFO.
As per the Indian Banking regulations, a
Board resolution need to be issued informing the bank about the individuals who
can operate the bank accounts along-with their specimen signatures attested by
CFO/Director.
General Checking Account (operating account):
The primary operating account
provides for routine business check disbursements. All cash and credit card deposits are made to
this account. Cash transfers are done on
an as needed basis to cover disbursements.
Other special accounts are maintained in compliance with funding source
requirements.
Investments in mutual funds Account:
Surplus funds in the general
checking account are transferred into this account to take advantage of dividend
income. The Company can invest available surplus funds in mutual funds / debt
based schemes as decided by the Board of Directors.
Bank Reconciliations
Designated employees from
Accounts department are provided with passwords to access Bank account
statements online from respective bank’s websites. The accounts payable
executive will reconcile the balances between bank and general ledger on a
weekly basis.
All bank reconciliations,
including any adjusting journal entries resulting from preparing bank
reconciliations, are reviewed by Deputy Manager-Finance & Accounts.
Bank reconciliations and
copies of bank statements printed from bank website are filed in the current
year's accounting files.
Cash Flow Management
The Deputy Manager Finance monitors
cash flow needs on a weekly 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.
Stale Checks
It is the policy of TATVA
to cancel check entries that are more than 6 months old that have not cleared from
the Company's bank account. For un-cashed checks that are more than 6 months
old contact will be made with the payee to resolve the issue.
All stale checks that are cancelled
within the same fiscal year as they were written shall be credited to the same
expense, asset or liability account that was debited when the check was
written, or the expenditure incurred. For stale checks cancelled in fiscal
years subsequent to the year in which the check was written, the credit shall
be to stale checks (liability) account. As per Indian Income Tax / Companies
act regulations, the company can’t reverse the liability within 3 years from
the time the liability is created in books of accounts.
Petty Cash
It is the policy of TATVA
to provide for imprest funds (used for payment of minor office expenditures)
only for valid transactions and to periodically replenish these funds up to its
authorized balance of up to Rs.75,000. It is the responsibility of the Petty
Cash Custodian to ensure that the petty cash fund is locked at all times.
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.
The petty cash custodian
shall prepare a reconciliation of the petty cash account on a periodic basis,
but no less than month and physical cash should match with cash account balance
maintained in books of accounts. The
physical cash need to be verified by the designated person from accounts
department and a statement showing the cash balance with denominations need to
be prepared by the accounts person. The statement of cash balance has to be
reviewed by Deputy Manager – Finance and on a monthly basis and file statement.
Wire Transfers
The employees of TATVA authorized to
transact bank accounts through a Board Resolution only can authorize a wire
transfer.
Foreign Exchange Transactions
Foreign currency transactions will be
recorded at the rates of exchange prevailing on the date of the respective
transactions. Exchange differences arising on foreign exchange transactions
settled during the year will be recognized in the profit and loss account of
the year, except for exchange differences arising on restatement of foreign
currency loans or liability for acquiring fixed assets from a country outside India,
which will be adjusted in the carrying amount of such fixed assets.
Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date will be
translated at the closing exchange rates on that date; the resultant exchange
difference will be recognized in the profit and loss account except those
related to the acquisitions of fixed assets from a country outside India, which
will be adjusted in the carrying amount of such fixed assets.
The Company enters into foreign currency
options to hedge its foreign currency receivables / payables. The Company does
not account for market to market gain / loss on these outstanding option
contracts as at the balance sheet date. The gain / loss on such transaction
will be recorded upon settlement of such contracts.
PREPAID
EXPENSES
Accounting Treatment
It is the policy of TATVA
to treat payments of expenses that have a time-sensitive future benefit as
prepaid expenses and to amortize these items over the corresponding time
period. For purposes of this policy, payments of less than Rs.5000.00 shall 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
shall be classified as current assets.
Procedures
As part of the account coding
process performed during the processing of accounts payable, all incoming
vendor invoices shall be reviewed for the existence of time-sensitive future
benefits. If future benefits are identified, the payment shall be coded to a
prepaid expense account code.
The accounting department
shall maintain a schedule of all prepaid expenses. The schedule shall indicate
the amount and date paid, the period covered by the prepayment, the purpose of
the prepayment, and the monthly amortization. This schedule shall be reconciled
to the general ledger balance as part of the monthly closeout process.
EMPLOYEE
SALARY ADVANCE
Introduction
It is the policy of TATVA to help its
employees to meet their immediate unforeseen financial contingencies.
Coverage
Applicable to all employees, who are on the
payroll of the company, except contractual employees and those, whose services
have been outsourced. However, employees are advised to use discretion in
availing the same, as this facility is specifically meant to be of assistance
to the employees, if they encounter an unforeseen financial contingency.
Eligibility
Employees are eligible for availing this
facility only upon completion of 3 months of service from their date of joining
the company.
Employees who are meeting the above
condition can avail this facility subject to a maximum of 1.5 times of the
monthly CTC of the employee.
The amount availed by the employee as
Salary advance will be deducted from their monthly salaries in equated monthly
installments subject to a maximum of 3 months.
Irrespective of the amount availed, an
employee will be eligible to avail this facility only once in a Calendar year.
All deviations to the above are need to be
approved by Head HR and CFO.
For detailed procedure to avail this
facility refer to Salary Advance Policy.
INVESTMENT
POLICIES
Introduction
It is the policy of TATVA
to treat all assets of the Company, including those funds that are legally
unrestricted, as though they are held by TATVA in a fiduciary capacity for
the purpose of accomplishing the Company’s mission. As such, the policies
described in this section are to be interpreted in light of that overall sense
of stewardship, and the investment standards of TATVA shall be those of a
prudent investor.
Delegation of Authority
The Board of Directors of TATVA
has delegated supervisory authority over its investing activities to the Audit/Finance
Committee of the board. The Audit/Finance Committee is responsible for
regularly reporting on the Company’s investments to the full Board of
Directors.
Investment Objectives
TATVA’s investment objectives are
the preservation and protection of the Company’s assets, as well as the
maintenance of liquid reserves to meet obligations arising from unanticipated
activities, by earning an appropriate return on investments.
Allowable Investments
Investments of TATVA shall be made in mutual funds
/ debt based schemes.
Diversification
Out of the total investments
in mutual funds / debt based schemes, not more than 30% should be in Fixed
Maturity Plans (FMP) and no FMP can be for more than 91 days period. AUM of any
AMC should be at least Rs.5000crores and no AMC can have more than 20% of
company’s total investment portfolio. For any deviations to this
diversification prior approval from CFO need to be obtained.
Accounting Treatment
All purchased investments
shall initially be recorded at cost.
Dividend Income (Income from investments
made in mutual funds / debt based schemes) is recognized when the right to
receive payment is established.
Procedures and Reporting
The following procedures will
be followed to ensure that investments are properly managed and that these
investment policies are consistent with the mission of TATVA and accurately
reflect the current financial condition of the Company:
1. The Chief Financial Officer and Investment
Counselor shall prepare a schedule of investments for presentation on an annual
basis to the Board of Directors.
2. The annual investment report shall be
presented to the Board of Directors at the time the TATVA audit is presented,
outlining in detail the investment portfolio’s composition and performance for
the fiscal year, along with a comparison to appropriate market indices. The
report will show results for the most recently-completed fiscal year and for
last three years.
3. Investment policies shall be reviewed
annually by the Chief Financial Officer, working with the Audit/Finance
Committee, to determine any appropriate modifications.
Recommendations for any
revisions or modifications to the investment policy will be made by the Audit/Finance
Committee to the Board of Directors for their approval.
FIXED
ASSET MANAGEMENT
Capitalization Policy
Physical assets acquired with
unit costs in excess of Rs.5000.00 are capitalized as fixed
assets on the financial statements.
Items with unit costs below this threshold shall be capitalized and
fully depreciated in the year of purchase.
Cost includes freight, duties, taxes and incidental expenses related to
acquisition and installation of fixed assets. The cost of fixed assets also
includes the exchange differences (favorable as well as unfavorable) arising in
respect of foreign currency liabilities incurred for the purpose of their
acquisition or construction.
Capitalized fixed assets are
accounted for at their historical cost and all such assets, except land are
subject to depreciation over their estimated useful lives, as described later.
Establishment and Maintenance of a Fixed Asset
Listing
All capitalized fixed assets (imported)
shall be recorded in Bond Register and necessary approvals need to be obtained
from concerned government authorities before the asset is put in use. The
details of capitalized fixed assets shall be recorded in Asset register and
should consist of the following information.
1. Date of acquisition
2. Cost
3. Description (including if necessary, color,
model, and serial number)
4. Location of asset
5. Tag Number of the asset
A physical inventory of all
assets capitalized under the preceding policies will be taken once every year
by TATVA.
This physical inventory shall be reconciled to the Asset register log and
adjustments made as necessary. All adjustments resulting from this
reconciliation will be approved by the CFO.
Maintenance and Insurance
Adequate maintenance procedures shall be
implemented to keep the property in good condition. TATVA shall provide for sufficient
insurance coverage of all the property.
Receipt of Newly-Purchased Equipment and Furniture
At the time of arrival, all
newly-purchased equipment and furniture shall be inspected for obvious physical
damage. If an asset appears damaged or is not in working order, it shall be
returned to the vendor immediately.
In addition, descriptions and
quantities of assets per the packing slip or bill of lading shall be compared
to the assets delivered. Discrepancies should be resolved with the vendor
immediately.
Depreciation and Useful Lives
All capitalized assets are
maintained in the special fixed assets account group and are not to be included
as an operating expense.
Depreciation is provided on the
straight-line method. The rates of depreciation prescribed in Schedule XIV to
the Companies Act, 1956 are considered as the minimum rates. The Company
calculates the depreciation based on the management’s estimate of the useful
life / remaining useful life of the asset. Pursuant to this, depreciation on
assets is to be provided at the following rates.
Category of assets Useful
life (in years)
Computers 3
Networking equipment 3
Office equipment 3
Furniture and fixtures 3
Software 2
For accounting and interim
financial reporting purposes, depreciation expense will be recorded on a
monthly basis.
Repairs of Fixed Assets
Expenditures to repair
capitalized assets shall be expensed as incurred if the repairs do not
materially add to the value of the property or materially prolong the estimated
useful life of the property.
Expenditures to repair
capitalized assets shall be capitalized if the repairs increase the value of
property, prolong its estimated useful life, or adapt it to a new or different
use. Such capitalized repair costs shall be depreciated over the remaining
estimated useful life of the property. If the repairs significantly extend the
estimated useful life of the property, the original cost of the property shall
also be depreciated over its new, extended useful life.
Dispositions of Fixed Assets
In the event a non-expendable
asset is sold, scrapped, donated or stolen, adjustments need to be made to the
fixed asset listing and property log. If
money is received for the asset, then the difference between the money received
and the "book value" (purchase price less depreciation) of the asset
will be recorded as a loss if the money received is less than the book value
and a gain if the money received is more than the book value.
In the case of property owned
by a funding agency, and when it is determined that the property is no longer
needed for the purposes initially acquired, the Controller will follow the
disposition instruction of the specific grant document or other applicable
regulations mentioned in the grant agreement to ensure proper and authorized
disposition of the property.
Write-Offs of Fixed Assets
The CFO approves the disposal
of all capitalized fixed assets that may be worn‑out or obsolete. Property that
is discovered to be missing or stolen will be reported immediately to the
Controller. If not located, this
property will be written off the books with the proper notation specifying the
reason.
LEASES
Classification of Leases
It is the policy of TATVA
to classify all leases in which the Company is a lessee as either capital or
operating leases. TATVA shall utilize the criteria described in Indian Accounting
Standard No. 19 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 TATVA
at the end of the lease term;
2. The lessee has the option to purchase the
asset at a price which is expected to be sufficiently lower than the fair value
at the date the option becomes exercisable such that, at the inception of the
lease, it is reasonably certain that the option will be exercised;
3. The lease term is for the major part of the
economic life of the asset even if title is not transferred; or
4. At the inception of the lease the present
value of the minimum lease payments amounts to at least substantially all of
the fair value of the leased asset; and
5.
The leased asset is of a specialized nature such that only the lessee can use
it without major modifications being
made
Indicators of situations
which individually or in combination could also lead to a lease being
classified as a finance lease are:
- if the lessee can cancel
the lease, the lessor’s losses associated with the cancellation are borne
by the lessee;
- gains or losses from the
fluctuation in the fair value of the residual fall to the lessee (for
example in the form of a rent rebate equaling most of the sales proceeds
at the end of the lease); and
- the lessee can continue
the lease for a secondary period at a rent which is substantially lower
than market rent.
All leases that do not
possess any of the preceding characteristics shall be treated as operating
leases.
Accounting for Leases
All leases that are
classified as operating 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 TATVA 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 TATVA.
All leases that are
classified as capital leases shall be treated as fixed asset additions of TATVA.
As such, upon the inception of a capital lease, TATVA shall record a
fixed 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 fixed asset recorded under a capital lease shall be depreciated
over the term of the lease, in accordance with depreciation policy described in
this manual.
ACCRUED
LIABILITIES
Identification of Liabilities
The company
recognizes the necessity of a provision when there is a present obligation as a
result of a past (or obligation) even that probably required an outflow of
resources and a reliable estimate can be made of the amount of the obligation.
Where there is a possible obligation or a present obligation that the
likelihood of outflow of resources is remote, no provision will be made.
The accounting department
shall establish a list of commonly incurred expenses that may have to be
accrued at the end of an accounting period. Some of the expenses that shall be
accrued by TATVA at the end of an accounting period are:
Unpaid Salaries and wages
Leave encashment (see policy
below)
Gratuity
Bonus Accrual
Consulting Services Contractor
Fees
Data Communication
Telephone
Utilities
Professional Fees
Accrued Leave
Personnel policies of TATVA
permit employees to carry forward up to a maximum of 45 days of unused leave
from year to year. Such unused leave is payable to an employee upon termination
of employment.
Gratuity and leave
encashment, which are a defined benefit scheme, will be accrued based on actuarial
valuations at the balance sheet date, carried out by an independent actuary.
POLICIES ASSOCIATED
WITH FINANCIAL AND TAX REPORTING
FINANCIAL
STATEMENTS
Standard Financial Statements of the Company
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 Company. Financial statements may reflect year-to-year
historical comparisons or current year budget to actual comparisons.
The basic financial
statements of TATVA shall include:
1. Balance
Sheet - reflects assets, liabilities, equity of the Company, reserves &
surplus and classifies assets and liabilities as Fixed assets, current assets /
loans and advances, current liabilities and provisions.
2. Profit and Loss statement - presents
revenues (including of other incomes such as dividend income, interest income),
personnel costs, operating expenses, provision for income taxes and net income
for the period.
3. Statement of Cash Flows - reports the
cash inflows and outflows of the Company in three categories: operating
activities, investing activities, and financing activities
Frequency of Preparation
The objective of the
accounting department is to prepare accurate financial statements in accordance
with generally accepted accounting principles and distribute them in a timely
and cost-effective manner. In meeting this responsibility, the following
policies shall apply:
A standard set of financial
statements described in the preceding section shall be produced on a monthly
basis, by the 10th of each month. The monthly set of
financial statements shall be prepared on the accrual method of accounting,
including all receivables, accounts payable received by the 3rd
business day of the month, and actual depreciation expense.
Review and Distribution
All financial statements and
supporting schedules shall be reviewed and approved by the CFO prior to being
issued by the Accounting Department.
After approval by the CFO, a
complete set of monthly financial statements, including the supplemental
schedules described above, shall be distributed to the following individuals:
1. Chief Executive Officer
2. Division Heads
and any other employee with budget-monitoring responsibilities
Financial statements may
include an additional supplemental schedule prepared or compiled by the Accounting
Department. The purpose of this schedule is to provide known explanations for
material budget variances in accordance with TATVA’s budget monitoring
policies described later in this manual (under the “Financial Management
Policies” section).
Special Monthly Distribution
On a monthly basis, a
complete set of TATVA financial statements and supplemental schedules shall be
distributed to the CEO and CC members.
Monthly financial statements
distributed to the CC shall include an additional supplemental schedule
prepared or compiled by the CFO. The purpose of this schedule is to provide
known explanations for material budget variances in accordance with TATVA’s
budget monitoring policies described later in this manual (under the “Financial
Management Policies” section). The Audit/Finance
Committee will determine which financial statements will be distributed to the
board.
Annual Financial Statements
A formal presentation of the Company's
annual financial statements shall be provided by the Independent Auditor to the
full Board of Directors at the Company’s Annual Meeting. This presentation will
be preceded by a meeting with TATVA's Audit/Finance Committee, at
which the Audit/Finance Committee will vote to accept or reject the annual
financial statements. See separate policies regarding the annual audit under
“Financial Management Policies.”
GOVERNMENT RETURNS
Overview
To legitimately conduct
business, TATVA must be aware of its tax and information return filing
obligations and comply with all such requirements of Central, state and local
jurisdictions. Filing requirements of TATVA
include, but are not limited to, filing annual information returns with Income
Tax, Sales Tax, STPI, ROC, Customs, FBT, Payroll Tax, withholding tax returns
and Foreign Tax returns.
Filing of Returns
It is the policy of TATVA
to become familiar with the obligations in each jurisdiction and to comply with
all known filing requirements. The Chief Financial Officer shall be responsible
for identifying all filing requirements and assuring that TATVA is in compliance
with all such requirements.
It is also the policy of TATVA
to file complete and accurate returns with all authorities. TATVA
shall make all efforts to avoid filing misleading, inaccurate or incomplete
returns.
Filings made by TATVA
include, but are not limited to, the following returns:
1. Form 1 – Return of Income as per
India Income Tax Act 1961, along-with Financial Statements duly audited and
certified by a authorized Chartered Accountant, 3CB, 3CD, 3CEB, 29B, 56F. All
these need to be filed with Indian Income Tax department on or before 31st
October following year-end.
2. Form 24Q – Quarterly Payroll Tax
returns need to be filed with Income Tax Department before 15th of
following month or as per the due dates given by IT department. All payroll
taxes need to be remitted to Government with in 7 days from last day of the
month.
3. Form
26 Q – Quarterly withholding tax returns need to be filed with Income Tax
Department before 15th of following month or as per the due dates
given by IT department.
All withholding taxes need to be remitted to Government with in 7
days from last day of the month. All withholding taxes that are made in the
month of March (between 1st March and 30th March) need to
be remitted on 31st March and all withholding taxes that are made on
31st March need to be remitted before 7th of following
month. Withholding taxes that are made on accruals made on 31st
March need to be remitted before 31st May.
4. STPI
– Monthly returns in the prescribed format (STPI will release the formats) need
to be filed before 20th of following month. Quarterly returns in the
prescribed format need to be filed before 20th of following month
ending the quarter. Softex forms along-with the invoices of export revenues
need to be filed on a quarterly basis. Annual returns need to be filed within
30 days from the year end date.
5. Form
100 – Monthly Sales Tax returns (VAT returns) need to be filed before 20th
of following month. Annual returns need to be filed with in 60 days from the
year end date.
6.
Form 3 – Monthly Special Entry tax returns need to be filed before
20th of following month. Annual returns need to be filed with in 60
days from the year end date.
7.
Form 5A – Monthly Professional Tax returns need to be filed before
20th of following month. Annual returns (Form 5) need to be filed
with in 90 days from the year end date.
8.
ROC – Annual return as per The Companies Act, 1956, Schedule V-Part
II (Section 159) need to be filed with in 60 days from the date of Annual
General Body meeting.
9.
Provident Fund – Monthly PF returns (Form 5, 10 & 12A) need to
be filed before 18th of following month. Annual returns (Form 3A
& 6A) need to be filed with in 60 days from the year end date (for PF
returns the year end date is 28th Feb).
TATVA's fiscal year-end is December
31 and Tax year-end is March 31. All annual tax and information returns of TATVA
mentioned above other than ROC and Provident Fund are filed considering the
financials for the period April to March. ROC returns are filed based fiscal
year-end financials. Provident fund returns are filed for the period March to
February.
It is the policy of TATVA
to comply with all payroll tax requirements and withholding tax requirements by
withholding and remitting the same to Income Tax Department of India and issue
Form 16 (for payroll taxes) to individual employee and Form 16A (withholding
taxes) to each vendor.
TATVA is registered as a 100%
export oriented unit (‘EOU’) with the Software Technology Park of India and is
eligible for a tax holiday up to 31 March 2009.
Income Tax expense comprises
current tax (i.e. amount of tax for the year determined in accordance with the
income-tax laws of India) and deferred tax charge or credit (reflecting the tax
effects of timing differences between accounting income for the year). The
deferred tax charge or credit and the corresponding deferred tax liabilities or
assets recognized using the tax rates that have been enacted or substantively
enacted by the balance sheet date. Deferred tax asset / liability as at the
balance sheet date resulting from timing differences between book profit and
tax profit not to be consider to the extent that such asset / liability is
expected to get reversed in the future years within the tax holiday period.
Deferred tax assets will be recognized only to the extent that there is
reasonable certainty that the assets can be realized in future; however, where
there is an unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax assts will be recognized only if there is a virtual
certainty of realization of such assets. Deferred tax assets are to be reviewed
as at each balance sheet date and written down or written up to reflect the
amount that is reasonably / virtually certain (as the case may be) to be realized.
FINANCIAL MANAGEMENT
POLICIES
BUDGETING
Overview
Budgeting is an integral part
of managing any Company in that it is concerned with the translation of Company
goals and objectives into financial and human resource terms. A budget should be designed and prepared to
direct the most efficient and prudent use of the Company's financial and human
resources. A budget is a management
commitment of a plan for present and future Company activities that will ensure
survival. It provides an opportunity to
examine the composition and viability of the Company's activities in light of
the available resources.
The division heads, assistant
heads and project managers in each of TATVA’s divisions shall be
responsible for developing an annual budget for projects, programs and
departments within their division. A
consolidated budget for the Company shall be developed by the CFO. The consolidated budget shall also include an
annual budget for the central administrative office. The policies in this section describe the
principles and procedures that all staff shall adhere to in the completion of
their designated responsibilities as they relate to budgeting.
Timing
It is the policy of TATVA
to adopt a final budget at least 30 days before the beginning of the Company’s
fiscal year. Since TATVA operates on a
fiscal year that begins on January 1 and ends on December 31, a final budget
shall be adopted by December 1 each 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.
Divisions and
departments shall prepare their annual budgets for the next fiscal year by the
beginning of the fourth quarter of the current fiscal year. Divisional budgets shall be submitted to the
CFO by October 1 of the current fiscal year.
The CFO shall prepare a consolidated budget for the Company by November
1 and present it to TATVA’s board of directors for their approval by December 1.
Preparation and Adoption
To prepare the Company
budget, the CFO shall gather proposed budget information from all the division heads
and others with budgetary responsibilities and prepare the first draft of the
budget. Budgets proposed and submitted by each division or department should be
accompanied by a narrative explanation of the sources and uses of funds
explaining all material fluctuations in budgeted amounts from prior years. To the greatest extent feasible, divisions
shall prepare their budget forecasts based on the actual expenditures incurred
in the current operating year or on historical data.
Staff responsible for the fiscal management of
specific programs or projects within a division shall prepare an annual
operating budget for their program or project.
Any anticipated increases to staff salaries should be accurately
projected. Operating expenses should be
estimated to include a reasonable annual growth rate based on a standard
inflation index. Contracted services
expenses shall be based on contractor’s estimates of costs as stated in the
contract agreement. Projected expenses
shall be reconciled against projected revenues from professional services,
maintenance and hosting, and license fees to prepare a balanced budget.
Project managers shall submit
an annual budget by program to the division head. The division head should review the budget
and recommend revisions as necessary. Project
managers shall make the necessary changes and present a revised budget to the
division head. The division head should
then prepare a consolidated annual divisional budget incorporating information
from the individual program/project budgets and submit it to the CFO by October
1.
The CFO shall review the
individual divisional budgets and recommend any changes or revisions, if
necessary. Division heads shall make the
necessary revisions and the CFO shall incorporate the annual divisional budgets
into the consolidated annual budget for TATVA.
A draft of the Company-wide
budget, as well as individual divisional budgets shall be presented to the Chief
Executive Officer for discussion, revision, and initial approval.
The revised draft shall then
be submitted to the Executive Committee of the Board of Directors, and finally
to the entire Board of Directors for adoption.
The CFO shall notify the division heads of the status of board approval
of their budgets. Division heads shall
make any necessary changes or revisions as recommended by the board and
resubmit to the CFO for final adoption.
Monitoring Performance
It is the policy of TATVA
to monitor its financial performance by comparing and analyzing actual results
with budgeted results. Division heads
shall be responsible for overseeing the adoption of the divisional budget by
their staff. Directors, Assistant
Directors and Program Managers shall be responsible for continually monitoring
program/project performance to ensure that there are no significant overruns in
any spending category. 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 accounting department and
distributed to each division/department head with budgetary responsibilities.
These individuals shall be responsible for maintaining monthly expense reports
by program/project or department and should respond with a written explanation
of all budget variances in excess of five percent to the CFO on a monthly
basis.
On a quarterly basis, the
division head should reconcile divisional expenses and revenues and take
corrective action as necessary to curb budget overruns within specific programs
or division wide, as may be the case.
Quarterly reports on divisional fiscal performance should be submitted to
the CFO no later than 10 days after the beginning of each quarter.
Budget Modifications
After a budget has been
approved by the Board of Directors and adopted by the Company,
reclassifications of budgeted expense amounts of less than Rs.100,000 within a single department may be made by the
Division Head, with approval from the CFO. Reclassifications of budgeted
expense amounts across departments of less than Rs.500,000 may be made by
the CFO only with approval of the Chief Executive Officer.
Reclassifications in excess
of the preceding thresholds and any budget modification resulting in an
increase in budgeted expenses or decrease in budgeted revenues shall be made
only with approval of the Audit/Finance Committee [or full board of directors].
Approved budget modifications
to the divisional budgets and/or the budget for central administration shall be
submitted to the CFO at the end of each quarter. The CFO shall incorporate approved
modifications into the consolidated TATVA budget on a quarterly basis
and provide updated copies to the division heads, the Chief Executive Officer
and the board. Only division heads shall
have the authority to request budget modifications based on the recommendations
of the assistant heads or the program managers.
Any staffing changes, increase in staff salaries, changes in contract
agreements with contracted service providers or changes to any other budgetary
line items shall require evaluation by the division head. Changes to insurance premiums or property
taxes should be brought to the division head’s attention immediately so he/she
can request the required modifications to the budget.
ANNUAL
AUDIT
Role of the Independent Auditor
It is the policy of TATVA
to arrange for an annual audit of the Company's financial statements to be
conducted by an independent audit firm. The independent audit firm selected by TATVA
will be required to communicate directly with the Company's Audit/Finance
Committee upon the completion of their audit. In addition, members of the Audit/Finance
Committee and Executive Committee are authorized to initiate communication
directly with the independent audit firm.
Audited financial statements
must be available to submit to board of directors and investors by the 60th
day after the end of the fiscal year.
Audited financial statements,
including the auditor's opinion thereon, will be submitted and presented to the
Board of Directors by the independent accounting firm at the Company’s Annual
Meeting, after the financial statements have been reviewed and approved by the Audit/Finance
Committee.
How Often to Review the Selection of the Auditor
TATVA shall 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 3 years to ensure competitive
pricing and a high quality of service (this is not a requirement to change
auditors every 3 years; simply to re-evaluate the selection)
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 shall
be considered by TATVA in selecting an accounting firm:
1. The firm’s reputation in the industry
2. The depth of the firm’s knowledge and
experience with companies in the software industry
3. The firm’s
demonstrated ability to provide the services requested in a timely manner
4. The ability of firm personnel to communicate
with Company personnel in a professional and congenial manner
If TATVA decides to prepare
and issue a written Engagement Letter to be sent to prospective audit firms in
accordance with its procurement policies, the following information shall be
included:
1. Period of
services required
2. Type of contract to be awarded (fixed fee,
cost basis, etc.)
3. Complete description of the services
requested (statutory audit, tax audit, transfer pricing study, internal audit,
filing of tax returns, etc.)
4. Identification of auditing standards to be
followed (generally accepted auditing standards)
5. Identification of meetings requiring their
attendance, such as staff or Board of Director meetings
6. Company chart of TATVA
7. Chart of account information
8. Financial information about the Company
9. Copy of prior year reports (financial
statements, management letters, etc.)
10. Other information considered appropriate
11. Description of proposal and format requirements
12. Due date of proposals
13. Overview of selection process (i.e. whether
finalists will be interviewed, when a decision shall be made, etc.)
14. Identification of criteria for selection
Minimum Proposal Requirements
from prospective Audit firms shall be:
1. Firm background
2. Biographical information (resumes) of key
firm member who will serve TATVA
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
7. Other resources available with the firm
8. Expected timing and completion of the audit
9. Expected delivery of reports
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 Chief Financial Officer shall meet with
the prospective engagement teams from each proposing firm to discuss their
proposal. Copies of all proposals shall be forwarded to each member of the Audit/Finance
Committee. After the Chief Financial Officer narrows down the field of
prospective auditors to three firms, final interviews of each firm are
conducted by the Audit/Finance Committee, who makes the final recommendation to
the board of directors for approval.
Preparation for the Annual Audit
TATVA shall be actively involved
in planning for and assisting with the Company’s independent audit firm in
order to ensure a smooth and timely audit of its financial statements. In that
regard, the accounting department shall provide assistance to the independent
auditors in the following areas:
Planning - The Deputy Manager Finance
is responsible for delegating the assignments and responsibilities to
accounting staff in preparation for the audit. Assignments shall be based on
the list of requested schedules and information provided by the independent audit
firm.
Involvement - Company 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 Company’s year-end. By performing significant
portions of audit work as of an interim date, the work required subsequent to
year-end is reduced. Company’s staff will as much as possible provide requested
schedules and documents and otherwise assist the auditors during any interim
audit fieldwork that is performed.
Throughout the audit process,
it shall be the policy of TATVA to make every effort to
provide schedules, documents and information requested by the auditors in a
timely manner.
Audit/Finance Committee Responsibilities
In accordance with the TATVA
by-laws, there shall be an Audit/Finance Committee consisting of three members.
The term of office shall be for three years. The Audit/Finance Committee's
responsibilities include, but shall not be limited to, the following:
1. Appointment of, and communication with, the Company’s
independent auditors
2. Review and approval of the annual, audited
financial statements
3. Discussion of internal control matters with
the independent auditor
4. Responding to any reported instances of fraud
involving TATVA or its employees
5. Conducting a quarterly analysis of the Company's
financial statements
6. Making policy and other recommendations to
the TATVA
board of directors regarding matters arising out of the audit
In fulfilling these duties
and responsibilities, the Audit/Finance Committee is entitled to examine any
and all documents within the control of TATVA and its employees. In
addition, the Audit/Finance Committee shall have the authority to contract with
independent contractors in the fulfillment of the committee’s responsibilities.
Audit Distribution
Upon completion, the audit
shall be submitted to all shareholders and board members.
INSURANCE
Overview
It is the policy of TATVA
to minimize the financial impact of loss or damage sustained to property, or
lawsuits caused by negligence, errors and omissions.
Coverage Guidelines
TATVA maintains the following
types of insurance coverage:
1. Property
2. Employee Health Insurance
3. Directors and Officers Liability
4. Group Term Life Insurance
Frequency of Review of Coverage Limits
The CFO shall review the
coverage limits on TATVA’s insurance policies on an annual basis.
RECORD RETENTION
Policy
It is the policy of TATVA
to maintain computer records, electronic data (if available) and hard copies of
records for effective and efficient operating, tax and legal purposes for 15
years.
Purpose
This policy ensures to
maintain records in an effective way and properly retrieve information as
needed and eliminate unnecessary documents to save costly record handling and
storage space. Our general policy is not to retain records unless legally
required to do so or unless they have a current business purpose.
Exceptions to the above
policy are as follows:
1. If any litigation, claim, or audit is
started before the expiration of the 15-year period, the records shall be retained
until all litigation, claims or audit findings involving the records have been
resolved and final action taken.
Responsibility
The CFO approves an
annual record management program consistent with operational needs and tax and
legal requirements.
The Program Managers,
Department heads and Division heads prepare list of all type of documents their
departments create and maintain. Assign departmental responsibility for
retention and disposition of records. If
files are disposed of, TATVA employees
shall follow appropriate disposition procedures in accordance with privacy and
patient protection laws.
Address questions
regarding to this policy to the Chief Financial Officer.