Book Closure Process for financial statements

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

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


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION



The following 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.


In-House Cash Receipts Processing


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.

  1. CFO
  2. Deputy Manager – Finance & Accounts
  3. Deputy Manager – Business Finance
  4. 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:

  1. Check the mathematical accuracy of the vendor invoice.
  2. Compare the hours in Time sheet and period on time sheet with Vendor Invoice
  3. Compare the nature, quantity and prices of all items ordered per the vendor invoice to the purchase order, packing slip and receiving report
  4. Obtain the approval of the department head (or their designee) associated with the goods or services purchased
  5. 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:

  1. if the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee;
  2. 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
  3. 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.