Download - Financial Management Training 10.20.2010
Tips & Tools for NGO Tips & Tools for NGO Financial Financial Management Management Denise PhelpsDenise Phelps
TreasurerTreasurer
MD School for the Deaf & Civitan MD School for the Deaf & Civitan ClubClub
NGO Financial NGO Financial ManagementManagement
Do More with LessDo More with Less Sources of Income InconsistentSources of Income Inconsistent Mission-driven, not Financially-Driven Mission-driven, not Financially-Driven
StaffStaff Small Purchaser of Goods & ServicesSmall Purchaser of Goods & Services Comply with Donor RequirementsComply with Donor Requirements
NGO Financial ToolsNGO Financial Tools
Policies & Procedures ManualPolicies & Procedures Manual Record Financial TransactionsRecord Financial Transactions Monitor & Control ExpensesMonitor & Control Expenses Satisfy Reporting RequirementsSatisfy Reporting Requirements Ensure Timely & Accurate Reporting to Ensure Timely & Accurate Reporting to
Donors and Grant-makersDonors and Grant-makers
NGO Financial ToolsNGO Financial Tools
RecordRecord Revenues – all typesRevenues – all types Expenses – all typesExpenses – all types Assets – All things owned by NGOAssets – All things owned by NGO Liabilities – Money owed to othersLiabilities – Money owed to others
Donors can see their money is being Donors can see their money is being spent and decide whether to give morespent and decide whether to give more
ProcessesProcesses
Programme FundingProgramme Funding Goods & Services RequisitionGoods & Services Requisition Cash DisbursementsCash Disbursements Updating the Cash BookUpdating the Cash Book
Director/Finance OfficerDirector/Finance Officer
ResponsibilitiesResponsibilities Make all general ledger entriesMake all general ledger entries Verify informationVerify information Produce and distribute financial reportsProduce and distribute financial reports
MonthlyMonthly
Record expenses by projectRecord expenses by project Record non-project expensesRecord non-project expenses Record grants/income receivedRecord grants/income received Run trial balanceRun trial balance Record accrued expensesRecord accrued expenses
Cash ManagementCash Management
Cash is accounted for in General LedgerCash is accounted for in General Ledger Cash is deposited correctlyCash is deposited correctly Separate cash handling from recordingSeparate cash handling from recording Payments are verified and approved prior Payments are verified and approved prior
to disbursementto disbursement Vouchers and invoices are marked paidVouchers and invoices are marked paid Bank reconciliations are done timelyBank reconciliations are done timely
Bank ReconciliationBank Reconciliation
1.1. Record bank charges into cash bookRecord bank charges into cash book2.2. Record any other debits or credits that are Record any other debits or credits that are
not in the cash booknot in the cash book*Ensure they are all legitimate*Ensure they are all legitimate
3.3. Prepare Reconciliation Prepare Reconciliation Balance on bank statementBalance on bank statement
- - Unpresented cheques/chargesUnpresented cheques/charges+ Outstanding deposits/credits+ Outstanding deposits/credits= Cash Book Balance= Cash Book Balance
Donor requirementsDonor requirements
Expenses have to be:Expenses have to be: ReasonableReasonable AllocableAllocable AllowableAllowable
Budgeting – Why?Budgeting – Why?
Most important part of Financial Most important part of Financial ManagementManagement Where do you want to go and how do you Where do you want to go and how do you
want to get there?want to get there? Gives a tool for checkpoints along the wayGives a tool for checkpoints along the way Allows you to spot trouble areas and devise Allows you to spot trouble areas and devise
plans to address themplans to address them Provides a benchmark for donors to grade Provides a benchmark for donors to grade
your performance against projectionsyour performance against projections
Budgeting – How?Budgeting – How?
Gain input from everyone when creating Gain input from everyone when creating budgets – expenses and income sourcesbudgets – expenses and income sources
Look at last year and decide what will Look at last year and decide what will stay the same and what will changestay the same and what will change
Break out monthly to prevent cash flows Break out monthly to prevent cash flows issuesissues Income with date to be receivedIncome with date to be received Expenses with date to be paidExpenses with date to be paid
Budgeting TipsBudgeting Tips
Once budget is created:Once budget is created: Increase expenses and decrease income by 10% to Increase expenses and decrease income by 10% to
see if there would be any trouble areas createdsee if there would be any trouble areas created Look for opportunities to Look for opportunities to
Buy in bulk for lower costBuy in bulk for lower cost Prepay for cost savingsPrepay for cost savings Set-up payment plans to spread out cash paymentsSet-up payment plans to spread out cash payments
Share with staff/board/donors to see if they spot Share with staff/board/donors to see if they spot trouble areastrouble areas
Gain necessary approval and recordGain necessary approval and record
Budget change approvalsBudget change approvals
Change in scope of projectChange in scope of project Change in key personnel to carry out projectChange in key personnel to carry out project Need for additional funds, due to Need for additional funds, due to
unforeseeable eventsunforeseeable events Transfer of funds from one line item to anotherTransfer of funds from one line item to another Costs prohibited by the grant agreement are Costs prohibited by the grant agreement are
incurredincurred
Fixed AssetsFixed Assets
Ensure they are recorded on balance sheetEnsure they are recorded on balance sheet Reflect any changes in them as soon as they Reflect any changes in them as soon as they
happenhappen Asset examplesAsset examples
VehiclesVehicles Office EquipmentOffice Equipment Office FurnitureOffice Furniture Computer EquipmentComputer Equipment Property/Real EstateProperty/Real Estate
Fixed AssetsFixed Assets
Tag & Inventory all fixed assets Tag & Inventory all fixed assets (Donor/Type/#)(Donor/Type/#)
Record in Asset Register/General LedgerRecord in Asset Register/General LedgerOpening Balance (cost-purchase/market-Opening Balance (cost-purchase/market-
donate)donate)+ Additions to asset category + Additions to asset category
(purchase/donated)(purchase/donated)- Subtractions (depreciation/dispose/sell)Subtractions (depreciation/dispose/sell)= Closing balance= Closing balance
Fixed Assets TipsFixed Assets Tips
Verify and inventory all fixed assets at the end Verify and inventory all fixed assets at the end of the periodof the period
Make sure you are personally seeing the Make sure you are personally seeing the inventory at least once per year (vehicles, inventory at least once per year (vehicles, laptops, etc.)laptops, etc.)
Keep receipts of all fixed assets with any Keep receipts of all fixed assets with any applicable warranty informationapplicable warranty information
Decide whether to sell any assets that you are Decide whether to sell any assets that you are not using or will need to use in the futurenot using or will need to use in the future
TravelTravel
Travel is planned for in advance for budget and Travel is planned for in advance for budget and discount purposesdiscount purposes
Travel expenses are approved before incurredTravel expenses are approved before incurred Travel expenses are accounted for with Travel expenses are accounted for with
receipts before paidreceipts before paid Travel adheres to donor requirementsTravel adheres to donor requirements Travel should be at lowest cost - economy Travel should be at lowest cost - economy
class, travel on non-holiday weekdays, etc.class, travel on non-holiday weekdays, etc.
Goods & ServicesGoods & Services
Procurement principlesProcurement principles Competitive BiddingCompetitive Bidding TransparencyTransparency Supremacy of the tender committee/procurement Supremacy of the tender committee/procurement
officerofficer
Excluded partiesExcluded parties Employee, officer or agent of NGOEmployee, officer or agent of NGO Specification development contractorSpecification development contractor Excluded by donor agreementExcluded by donor agreement
Goods & ServicesGoods & Services
Request for BidRequest for Bid Responsibilities/specifications/type of Responsibilities/specifications/type of
serviceservice Minimum qualificationsMinimum qualifications Terms of ServiceTerms of Service Deadline for submissionDeadline for submission Deadline for completionDeadline for completion
Compare at least 3 SuppliersCompare at least 3 Suppliers
Goods & Services TipsGoods & Services Tips
Annual goods and services needsAnnual goods and services needs Collective buying opportunitiesCollective buying opportunities Bulk or early payment terms discountsBulk or early payment terms discounts Monthly commitment discountMonthly commitment discount Consolidate suppliersConsolidate suppliers Referral discountsReferral discounts Lock-in prices/contractsLock-in prices/contracts
Reporting RequirementsReporting Requirements
Determine each donor’s requirementsDetermine each donor’s requirements Keep each donor/grant accounting Keep each donor/grant accounting
separate – through bank accountsseparate – through bank accounts QuarterlyQuarterly
DisbursementsDisbursements Cash Flow/DisbursementCash Flow/Disbursement Director/Accounting Officer StatementDirector/Accounting Officer Statement
Annual ReportsAnnual Reports
Government requirementsGovernment requirements Donor requirementsDonor requirements Independent auditorIndependent auditor Submitted 30 days after audit to DonorsSubmitted 30 days after audit to Donors Financial reports 90 days after end of fiscal Financial reports 90 days after end of fiscal
yearyear Include impact reports, explanations, etc. Include impact reports, explanations, etc.
with financial statementswith financial statements
Additional InformationAdditional Information
PayrollPayroll Corporate GovernanceCorporate Governance Computer Information SystemsComputer Information Systems AppendixAppendix
Bank reconciliationBank reconciliation Budget BookBudget Book Fixed Asset RegisterFixed Asset Register Comparative Quotation ChartComparative Quotation Chart
QUESTIONS???QUESTIONS???
Thank you for participating today!Thank you for participating today!
Contact information – Contact information –
Denise PhelpsDenise Phelps
[email protected]@globalgiving.org