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

dphelps@globalgiving.orgdphelps@globalgiving.org