Professional Documents
Culture Documents
FOR
NON-PROFIT ORGANISATIONS & DONOUR FUNDED PROGRAMS
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
The Promise
This training is an introduction to financial control and accountability for non-financial organisational or project leadership.
Many of us in leadership positions in civil society organisations and projects find ourselves dealing with large sums of money when we have little or no knowledge or experience about how to manage money.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Some other organisations are unable to attract funding because they have failed to play by the rules.
This training is intended to give us a basic understanding of some of the issues and how tos. It will not turn us into bookkeepers or accountants. But it will provide us with a reference tool to help us understand some of the concepts and approaches.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Training Outline
Session 1: Session 2: Introduction Setting up a bookkeeping system for our organisations Producing financial reports
Session 3:
Introduction
This Session:
Introduction contd.
This session:
Explains roles and responsibilities for financial management. Outlines the building blocks and tools of financial management. It looks at the basics of a good bookkeeping system, at the importance of having financial policies and how to develop them.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Many leaders and managers in civil society organisations are overwhelmed by the jargon of financial management.
Sometimes they avoid their responsibilities in this regard because the jargon makes them feel incompetent.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
help managers to make effective and efficient use of resources to achieve objectives and fulfill commitments to stakeholders help NPOs to be more accountable to donors and other stakeholders
help NPOs gain the respect and confidence of funding agencies, partners and beneficiaries give the NGO the advantage in competition for increasingly scarce resources help NGOs prepare themselves for long-term financial sustainability.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Financial management entails planning, organising, controlling and monitoring the financial resources of an organisation to achieve objectives. Financial management is about taking action to look after the financial health of an organisation, and not leaving things to chance.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Financial control occurs when systems and procedures are established to make sure that the financial resources of an organisation are being properly handled.
Accounting Records Every organisation must keep an accurate record of financial transactions that take place to show how funds have been used. Accounting records also provide valuable information about how the organisation is being managed and whether it is achieving its objectives. Financial Planning Linked to the organisations strategic and operational plans, the budget is the cornerstone of any financial management system and plays an important role in monitoring the use of funds.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Financial Monitoring Financial reports allow the managers to assess the progress of the organisation.
Internal Controls Checks and balances collectively referred to as internal controls are put in place to safeguard an organisations assets and manage internal risk.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Effective management of NGOs demands: Planning Tools: Strategic plan, business plan, activity plan, budgets, work plans, cashflow forecast, feasibility studyetc.
Organising Tools: Constitution, organisation charts, flow diagrams, job descriptions, Chart of Accounts, Finance Manual, budgetsetc.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Controlling Tools: Budgets, delegated authority, procurement procedure, reconciliation, internal and external audit, fixed assets register, vehicle policy, insurance...etc.
Monitoring Tools: Evaluation reports, budget monitoring reports, cashflow reports, financial statements, project reports, donor reports, audit reports, evaluation reportsetc..
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Session 2
Setting up a bookkeeping system for our organisations
What
Structure line management; number of staff, their functions and where they are based; operational structure (e.g. department, branch, function). Organograms are useful here.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Activities of the organisation number and type of projects. Volume and type of financial transactions do you pay for your goods and services with cash or with suppliers accounts or both?
Resources of the organisation what financial, equipment and human resources are available to help manage the finances? Reporting requirements how often and in what format do financial reports have to be produced for the different stakeholders in your organisation?
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
All of these considerations will help one to decide the most appropriate:
method for keeping accounting records; coding structure for transactions; financial policies; and financial reporting routines.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
2. 3.
4.
Develop an organisation chart and job descriptions of staff. Produce a budget based on activity plans. Develop a financial accounts structure including a Chart of Accounts and Project Cost Centres. Develop a Finance Manual or a file of established policies and procedures.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
The way that an NGO is structured and registered has an impact on its legal status, accountability and transparency.
Every NGO should have a founding document such as a Constitution or Memorandum and Articles of Association.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
The constitution describes, amongst other things: the name and registered address of the NGO; the objects of the organisation and target group; the system of accountability i.e. who is the governing body, its powers and responsibilities; and how it raises its funds.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
2.
Developing a budget
Developing a financial accounts structure based on: Chart of Accounts Cost Centres Chart of Accounts The Chart of Accounts is probably the most important organising tool for the accounting and reporting processes.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
The chart of accounts is a list of codes representing different categories or groups of transactions carried on by an NGO.
NGOs buy a wide variety of goods and services to help achieve their objectives They also receive different kinds of income grants, donations and membership fees
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
To make sense of all of this financial activity, it helps to sort the different types of income and expense into a series of predetermined categories. Then, when a transaction takes place, it is recorded in the books of account and categorised according to the guidance held in the Chart of Accounts (see fig 1)
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Cost Centres
Restricted funds must be accounted for seperately to demonstrate to the donor how the funds have been utilised. This is known as fund accounting and requires that such fund will have a separate code. Thus every cost item concerning the funds activities is listed under that code.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
An overall Financial Policy will contain policies that relate to a number of areas such as:
Donor or income policies (e.g. receipts, deposits) Budgeting policies Expenditure policies (e.g. amounts, payments, requisitions, non-budgeted expenditure)
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Travel policies (e.g. car hire, class of airfare or hotel, per diems) Auditing policies Assets policies (e.g. purchasing, utilisation, maintenance and disposal vehicle policies go here). Petty cash policy Salary policy Staff loans Opening and operating a bank account.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Make sure you have enough information to develop the policy. Clarify why the policy is needed. Write a short paragraph or sentence to explain the need. (e.g. We need a per diem policy because staff are doing regular work out of town, and they need to know in advance what money will be available for them).
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Define any terms that need defining. (e.g. Per diem means daily allowance.) Clarify the purpose of the policy. What do you want the situation to be as a result of having the policy? (e.g. This policy is intended to ensure consistency.
Clarify organisational principles that underpin the policy (e.g. transparency, consistency). Note these in writing.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Clarify who the policy will apply to. Write this down. (e.g. All staff traveling out of town overnight on project business). Clarify the existing situation. Write a short paragraph/sentence that does this. (e.g. This was always decided on an ad hoc basis before.) Put it all together and then circulate the draft policy for feedback.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
See Appendices for samples of a financial policy and schedule of delegated authority.
5.
The transaction (money is spent or received) takes place. The transaction is recorded in writing as proof that it has taken place. This could be in the form of a receipt issued by you for money received, or a receipt issued to you by the supplier when you pay for something. If the payment is electronic, then you will receive confirmation in a print-out. If you pay by cheque, or are paid by cheque, you may not receive a receipt or issue one. Instead, the transaction will be recorded in your bank statement.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
The transaction is then recorded in an accounting book. For all money received and spent, this record will be in the cash book (either manually or on computer). A summary is made of all transactions and written in a monthly statement. A summary of all transactions for the year is written in an annual statement.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Receipting incoming money. Maintaining a petty cash system with petty cash vouchers. Banking (depositing the money that has come in). Writing cheques based on approved cheque requisition forms.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Standard forms to use for daily record keeping: Receipt Voucher (for receiving every incoming money) Payment Voucher (for ALL expenses made) Travel and Subsistence Expenses claim Bank Reconciliation Journal Voucher
Standard forms to use for Monthly record keeping: Cashbook Bank statements Bank reconciliation forms.
Accounting Procedures:
1. 2. 3. 4.
5.
Issue receipt vouchers for money received Issue payment vouchers for money paid out Enter details of the above transactions in a journal At the end of the month, enter details in the journal into the cashbook Use the analysed cashbook to produce an income and expenditure statement.
organisation does not take on financial obligations it cannot meet. The organisation has taken all necessary precautions to prevent misuse of funds, and to keep funds and records relating to them safe.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Control over finances should be divided up so that one person does not have too much control or power over the money. It should be clear who is responsible for each task or area of activity. You must be able to trace mismanagement or abuse to a particular person or people. There should be no grey areas in terms of who is responsible for what, and no overlaps that make it possible for one person to blame another and avoid responsibility.
PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com
Decisions about finances should be made at the right level. So, for example, a bookkeeper should not make decisions about non-budgeted expenses. Who makes what decisions should be included as written financial policy, approved by your highest governing body. People should have the necessary skills to carry out their roles and responsibilities. Everyone from at least the level of middle management up, and including members of the governing structures, should understand financial statements and be able to monitor them. Anyone working directly on a project or programme should understand its financial statements. Train people if necessary. Financial statements should be discussed at governing body and staff meetings. PRESENTATION BY JOSEPH WACHIRAjose10105@yahoo.com