NGO Financial Management Pocket Guide - Secure …

1 TMBristol-Myers Squibb FoundationCommunity Outreach And Education FundNGO FinancialManagementPocket GuideYour Road to Financial Management SystemsCompiled by:Robert Mbugua Amos NjarambaDamon Young Phangisile MtshaliPublic Sector Services (Pty) LimitedMore information can be obtained from:Bristol-Myers Squibb Foundation Inc47 Van Buuren Road, Bedfordview, 2007PO Box 1408, Bedfordview, 2008 South AfricaTel: (+2711) 456-6400 Fax: (+2711) Bristol-Myers Squibb Foundation launched Secure theFuture Community Outreach and Education Fund in 1999,it committed itself not just to giving Financial support toestablished institutions. It committed itself to giving supportto all those organisations and institutions that were pushingthe frontiers and thinking out of the box to find new, effectiveapproaches to tackling the HIV/AIDS doing this, the Foundation and Secure the Future had toacknowledge that some of the innovative ideas were notalways to be found in solid, mature organisations that hadtried and tested ways of doing business.

2 They can also befound in the heart of communities, in villages that cannot evenbe easily located on the map, among young people who arestill excited by the challenges of being young and in thosecommunity formations that have always given themselvesselflessly to uplifting their at Secure the Future did not want to exclude thesemeaningful contributions because of their seeming lack offormal structure and capacity. However, we also needed tobalance this with responsible this necessary balance lay in one of the objectivesof Secure the Future : To build capacity of individuals andcommunities to find solutions that are relevant to their own resource-limited settings but can be replicable in other similar settings. Secure the Future NGO Financial Management Pocket Guide1 ForewordSecure the Future NGO Financial Management Pocket GuideChapterspage1.

3 Policy & Procedures Manual32. Accounting Policies53. Summary of Procedures84. General Ledger115. Cash Management and Disbursements146. Budgeting and Budgetary Control187. Fixed Assets228. Travel269. Procurement of Goods and Services2810. Reporting Requirements3311. Payroll3812. Branch Accounting4413. Corporate Governance4914. Computer Information Systems (CIS)52 AppendicesAppendix 1 List of Examples of Forms55 Appendix 2 Glossary of Terms65 Table of ContentsChapter 1 Policy & Procedures ManualSecure the Future NGO Financial Management Pocket GuideSecure the Future NGO Financial Management Pocket Guide2We interpret this as going beyond the technical skills ofproviding HIV/AIDS services but also to building stronginstitutions that can sustain their on the Bristol-Myers Squibb Foundation teamed withPricewaterhouseCoopers to help us in strengthening themanagement and Financial systems of the organisations withwhich we were partnering.

4 Our collective lessons, learned inSouthern and Eastern Africa, led us to compile this PocketGuide. It also reflects what we have learnt from our is not a bible, or the ultimate answer, but we hope it providesa Guide that can literally be kept in one s Pocket for quickreference to proper Financial hope you find it MtshaliDirector: Bristol-Myers Squibb FoundationCommunity Outreach and Education Fund, Secure the Future Please note that all the terms that arein bold are explained in the Glossaryof Terms on 2 Accounting PoliciesSecure the Future NGO Financial Management Pocket GuideSecure the Future NGO Financial Management Pocket Guide4 Accounting policies and procedures Accounting policy and procedure manualOne of the initial steps of a non-profit organisation(NPOs) should be to establish an accounting policy andprocedure manual.

5 An accounting policy and proceduremanual documents the policies and procedures anorganisation should use to record and monitor financialtransactions. Documentation of accounting policies andprocedures is important because it provides clarityregarding internal processes. In addition, it can be helpfulto newcomers of a NPO while improving their financialmanagement skills. Its purpose is to help NPOs: Record all Financial transactions Monitor and control expenditures Satisfy statutory reporting requirements Ensure timely and accurate Financial and managementreporting to donors and grant-makersIn general, this manual should outline the areas coveredin the following section ( ). An effort has been made tosimplify these procedures to make it easier for you todevelop your own accounting policies and proceduresmaunual.

6 As your organisation grows in terms of level ofactivity and number of donors, it will be necessary toupdate your procedure manual Overview of procedures availableThis Pocket Guide contains the following policies andprocedures which should be part of your organisation sprocedures manual: Pocket of Management and and Budgetary of Goods and Information Systems (CIS)the currency of the grant or as agreed by the example, Bristol-Myers Squibb Foundation makes grantpayments in the currency of the donor s recorded contract(ie, the currency of the country where the grant will becarried out). Main office/local officesWhere the grant recipient has multiple projects or fieldoffices as part of one grant, local bank accounts shouldbe introduced. The main office should bear overallresponsibility for distribution of funds to local offices orprojects.

7 The transfer of funds to the local office shouldbe made according to the programme budget, projectmilestones and should be sufficient to meet the projectrequirements. This is necessary to avoid large amountsof currency in local office bank accounts. The mainoffice should monitor and ensure proper expenditureaccountability by the local office. In addition, the mainoffice should also consolidate expenses incurred at thelocal office level for reporting the Future NGO Financial Management Pocket Guide7 Secure the Future NGO Financial Management Pocket Accounting conventionThe accounts of the grant recipient should be preparedunder the historical cost convention. The day-to-daytransactions should be recorded at the monetary valueof the goods or services or fair market value of thedonated IncomeIncome represents grants from donor, members subscriptions and interest received from bank depositsand on investments.

8 Grants, cash donations and interestreceived from bank deposits and investments are recognisedas income in the period in which they are ExpenditureExpenditure represents expenses incurred directly forprogramme are recognised when paymentsare made (ie, when cheque or cash is disbursed or paid). TaxationNo provision is made for taxation payable as it is expectedthat the grant recipient will be properly registered, andtherefore, be exempted from any Currency of accountThe accounts of the grant recipient should be created toreflect the budget line items of the approved programmebudget. In addition, the accounts should be recorded inPurpose and objectives of the accounting systemThe objectives of the grant recipient s accounting system are: To record and classify all transactions accurately and completely To maintain a complete record of all.

9 Revenuereceived Expenditureincurred Assetsowned Liabilitiesdue to third parties To report to donors on all required Financial informationProcess descriptionsGeneral ledgerPost monthly transactions of revenue, grantsreceived, expenditure on project activityand other transactions relating to assets of booksRecord transactions on the grant recipientbank accounts and record receipts ofpettycash from the bank and petty and Record budget and actual expenditure byexpenditurebudget code on a monthly and assetsMaintain manual records of all transactions relating to transactions relating to procurementof goods and transactions relating to compen-sation of employees (eg, salaries, gratuitiesand incentives).ReportingPrepare monthly, quarterly and/or the Future NGO Financial Management Pocket Guide9 Chapter 3 Summary of ProceduresSecure the Future NGO Financial Management Pocket GuideChapter 4 General LedgerSecure the Future NGO Financial Management Pocket GuideSecure the Future NGO Financial Management Pocket Guide10 Interface descriptionPROGRAMME FUNDINGGOODS AND SERVICESREQUISITIONCASH DISBURSEMENTSUPDATING THECASH BOOKP rogramme budget approvedby donorDonor funds deposited intodesignated bank accountGrant recipient updatescash bookGrant recipient sendsacknowledgement ofreceipt to donorApproved programme budgetposted to grant recipient sgeneral ledgerService provider or vendorselected using appropriatebidding procedureService provider submitsoriginal invoice for paymentCash book posted to thegeneral ledgerPurchase order generated.

10 Properly authorised andforwarded to service providerVerification of correct quantityand quality of goods andservices are receivedMonthly reconciliation of cashbook to general ledgerGood and servicesreceived and comparedto purchase orderPayment requisitionprepared and authorisedMonthly generation of reportsfrom general ledger to monitorprogramme activitiesService provider submitsoriginal invoice for paymentCheque signed by authorisedsignatories (original invoicestamped paid and filed)Cheque sent to vendorand cash book updatedto reflect paymentGeneral ledger proceduresThis consists of the following activities:Monthly Record expenditure by project activities Record other payments not relating to projects Record grants and other income received during the month. Extract monthly trial balance Identify and record (pass) journal entriesfor accruedcharges and prepayments (if required) Prepare end of year trial balance Reverse year-end accruals after close of Financial year.