Why is Financial Management important for NGOs?
1. Legal Requirement
2. Transparency
3. Accountability
4. Credibility
What is Financial Management?

· Financial management is not just keeping accounting records, it is important part of programme management
· Financial management Process & Tools:


· Planning


· Organizing


· Controlling


· Monitoring

Execution Cycle


[IMG]file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image012.gif[/IMG]Financial Control?


Heart of financial management Financial control

Who is Responsible for Financial Management?

It is important to understand and NGO’s structure and legal status to appreciate who is responsible for what in Financial Management.

· What is an NGO?

o Working to improve the world in which we live.
o Not-for-profit’ (but note that they are still allowed to make surpluses).
o Stakeholders – an NGO is an alliance of many different interests.
o Governed by a committee of volunteers – the ‘GC/BOM/EC.
o Independent of the State.

· Legal Status

There are a number of different ways of registering as an NGO and this will determine the organization’s legal status.
Al-Khidmat Foundation Pakistan is registered under society’s act 1860.


· Constitution of NGO(Memorandum & Articles of Association)
· General Council
· Board of Management/Central Executive Committee
o Regional General Council
o Regional Executive Committee
§ Sub-Office(District) General Council
§ Sub-Office(District) Executive Committee
A Team Effort

[IMG]file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image015.jpg[/IMG] Who is Accountable?

Building Blocks of Financial Management


· Accounting Records

Accounting records provide valuable information about how the organisation is being managed and whether it is achieving its objectives.

· Financial Planning

Linked to the organization’s 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.

· Financial Monitoring

Providing the organization has set a budget and has kept and reconciled its accounting records in a clear and timely manner, it is then a very simple matter to produce financial reports which allow the managers to assess the progress of the organization.

· Getting Organized
Getting the basics right for your NGO

· Systems Design

Systems design is one of the organizing aspects of financial management. NGOs are quite different from commercial organizations.
Main Features:

· Organization chart
· Job descriptions of staff
· Chart of Accounts
· Project Cost Centers
· Finance Manual’ (policies and procedures)
· Financial year planner

Chart of Accounts

Al-Khidmat Foundation Pakistan has designed its chart of accounts as per their needs (Service Areas) and ICAP Accounting Standers.


§ Disaster Management
· Rescue
· Relief
· Rehabilitation
§ Health
· Hospitals & health Centers
· Diagnostic Centers
· Ambulance Service
· Wheel Chairs
§ Education
· Talent Scholarships
· Schools
· Hostels
· School Supplies
§ Clean Water
· Water Filtration Plants
· Water Schemes
§ Orphan Care
· Aghosh Homes
· Al-Khidmat Orphan Care Program
§ Prisoner’s Welfare
· Provision of facilities
· Legal Aid
§ Community Services
· Self Employment(Micro Finance)
· Qurbani
· Ramdhan
· Winter Package
· Masajid

Cost Centres(Project wise/Programme Wise)

Accounting for Shared Costs
There is no hard and fast rule for allocating overheads to projects; rather logic should be applied and the criteria chosen should be justifiable.


Main Points for Calculation of Project Cost

What is a Finance Manual?

· Financial Manual

The Finance Manual is set of policies and procedures for Financial Operations of Organization.

What goes in a Finance Manual?

o Financial accounting routines
o The Chart of Accounts and cost centre codes
o Delegated authority rules (ie who can do what)
o The budget planning and management process
o Ordering and purchasing procedures
o Bank and cash handling procedures
o Management and control of fixed assets
o Staff benefits and allowances
o Annual audit arrangements
o How to deal with fraud and other irregularities
o Code of Conduct for staff and board members

· Standard Forms

Standard forms are purpose-designed documents used to simplify or facilitate financial administration routines:

· Purchase Order
· Travel Expenses claim Form
· Assets Register
· Bank Reconciliation
· Staff loan application


What is a Budget?

„A budget describes an amount of money that an organisation plans to raise and spend for a set purpose over a given period of time.

· Planning

· Fundraising

· Project implementation

· Monitoring and evaluation
· Who needs Budgets?
“A budget tells your money where to go; otherwise you wonder where it went.”
Budgets are used by different people for different purposes.

Ø Board of Management/Trustees /General Council, Executive Council
Ø Executive Director/CEO/Senior Programmer Manager
Ø Project managers
Ø Fundraisers
Ø Finance staff
Ø Donors
Ø Community partners

· Types of Budget

Ø The Income and Expenditure Budget
Ø The Capital Budget
Ø The Cash flow Forecast

· The Income and Expenditure Budget

The income and expenditure budget sets out the anticipated running costs of the organization and shows where the funds will come from to cover the costs.

· The Capital Budget

A capital budget lists the expenditure you plan to make for the coming years on capital projects.

· Vehicles
· Office furniture and equipment
· Computer equipment
· Building construction
· Major renovation works

The Cash flow Forecast

For good cash and financial management, cash reserves are essential as there will always be times when grants are delayed or unexpected expenses occur.

Ø Why Cash flow Need?

o Requesting donor grants early
o Delaying some activities
o Negotiating a temporary loan facilities
o Cash Reserves/Idle Funds be Invested to Maximize Income

How to prepare a cash flow forecast
Tips on Preparing a Cash flow Forecast

1. Break down specific activities into 12 Months (Working Excel Sheet)
2. Regular Expenses enter in specific month (Salaries/Utilities etc)
3. Foresee Monthly/Quarterly/Annually Expenses/Deductions
4. Foresee Grant/Funds Inflow from donors (Schedule Income Periods)
5. Unpredictable expenses–e.g. Office/equipment repairs –best to put a monthly
6. Exclude non-cash transactions-Donations in kind/Depreciation

Ø Budgeting Techniques

Ø Incremental
Ø Zero-base

Ø Incremental budgeting

This approach bases any year’s budget on the previous year’s actual, or sometimes budgeted, figures with an allowance for inflation and known changes in activity levels.
It has the advantage of being fairly
· Simple and quick to implement.
· Useful for organizations where activity and resource levels change little

· Zero-based budgeting

  • Zero-base budgeting-Not Required previous data
  • Required next year’s targets and activities

· The Budgeting Process

  • What are the objectives of the project?
  • What activities will be involved in achieving these objectives?
  • What resources will be needed to perform these activities?
  • What will these resources cost?
  • Where will the funds come from?
  • Is the result realistic?


Why Keep Accounts?

Good financial records are the basis for sound financial management of your organization:
· Information
· Credibility
· Legal requirement
· Future planning

Accounting Methods

There are two main methods for keeping accounts:

· Cash accounting
· Accruals accounting

Summary of Accounting Methods

Accounting system Single Entry Double Entry
Transaction types Cash only Cash and Credit
Terminology Receipts and Payments Income and Expenditure
Main Book of Account Bank (or Cash) Book Nominal (or General) Ledger
Skill level Basic bookkeeping Advanced bookkeeping
Non-cash transactions No Yes
Assets & Liabilities No Yes
Reports produced Receipts & Payments Report Income & Expenditure Report with Balance Sheet

· Which Accounting Records to Keep

Accounting records fall into two main categories:

§ Supporting Documents
§ Books of Account

o Supporting documents

§ Receipt Books & Receipts Voucher(Cash/Bank) for money received
§ Receipt or voucher for money paid out

The Balance Sheet

The balance sheet is a list of all the assets and liabilities on one particular date and provides a „snapshot of the financial position of an organization.

Components of a Balance Sheet
FIXED ASSETS: The less liquid assets – those having a significant value lasting more than one year.
CURRENT ASSETS: The more liquid assets – can usually be converted into cash within one year.
Funds held in the bank and as cash.
Money owed to the organization such as loans and unpaid sales invoices.
Value of items paid for in advance such as Advance to Sub-Offices/Other NGOs,Advance Rent etc.
-Grants Due
Grants owed to the organization for projects already started in the reporting period.
The value of Goods in Kind received and issued from donors/suppliers.
CURRENT LIABILITIES: Those paid within one year of the year-end.
- Creditors & Accruals
Money owed by the organization at the year-end such as Accounts Payables, unpaid bills.
- Grants in Advance
Grants received for a particular purpose but not yet spent in full, so carried forward to the next financial year.
OTHER LIABILITIES: Longer term commitments and General Funds.
- Reserves
Money set aside for specific purposes, eg replacing equipment. Although designated funds, they form part of the organisation’s General Funds.
- Accumulated Funds
Accumulated surplus of income over expenditure achieved since the organization starts.

Financial Reports

Who Needs Financial Reports?
Financial reports must be timely, accurate and relevant

Stakeholder Why do they need it?
Project staff To know how much money and resources are available for their projects and what has been spent so far.
Managers To keep an eye on how project funds are being used, especially compared to the original plans. To help plan for the future.
Finance staff To make sure that there is enough money in the bank to buy the things the NGO needs to run its programmes.
Board of Management/EC To keep an eye on how resources are being used to achieve the NGO’s objectives.
Donors To make sure that their grants are being used as agreed and that the project’s objectives are being fulfilled. To consider whether to support an organisation in the future.
Government departments To make sure that the NGO pays any taxes due and that it does not abuse it status as a ‘not for profit’ organization.
Project beneficiaries To know what it costs to provide the services they are benefiting from and to decide if this is good value for their community.
The general public To know what the NGO raises and spends during the year and what the money is used for.

§ Financial analysis: (To Check Health of NGO)

  • Trend analysis (Comparison with Last Years)
  • Ratio Analysis (Current Year Financial & Interpretation of results)

  • Trend Analysis

Trend analysis is comparing the figures to detect trends and use this information to forecast future trends or set targets.

  • Financial Ratio Analysis

Financial Ratio analysis in the not-for-profit sector is less common, but is nonetheless very useful if adapted for the development sector.

Donor agencies often use this technique when assessing performance, especially to compare relative costs – such as central administration – between similar organisations or projects.

Ratio analysis helps Board /General Council/Executive Council Memebers and managers answer three important questions:

  • Financial sustainability – will our organization have the money it needs to continue serving people tomorrow as well as today?
  • Efficiency – does our organization serve as many people as possible with its resources for the lowest possible cost?
  • Effectiveness – is our organization doing a responsible job of managing its money?

Ratios Analysis Formulas

1. Donor Dependency:
Expressed as %
2. Income Utilisation:
Expressed as %
3. ‘Survival Ratio’:
Expressed in weeks or days
* These are un-restricted funds for general purposes under Accumulated Funds. Alternatively use Net Current Assets.
4. Acid Test or Liquidity Ratio:
Expressed as a ratio n:n*
*Answer should be in the range of 0.8 to 1.2:1. A result of 1 to 1 means there are sufficient funds to cover immediate debts.
5. Current Ratio:
Expressed as a ratio n:n*
*A result of 2:1 is considered satisfactory – enough to pay off the debts within 12 months.

Types of Reports
o Management Reports
§ Cash Flow Report
§ Budget Monitoring Report
§ Forecast Report
o Donor Reports
o Beneficiaries Report
· Management Reports
o The Cash flow Report

The cash flow forecast updated with actual receipts and payments each month, plus any new information about future spending or fund-raising plans.
Main Features:
o Exercise good credit control – chase debtors for prompt payment
o Review grant schedules– encourage payment in advance rather than in arrears
o Bank all monies received daily
o Request special payment terms from major suppliers (and stick to them)
o Pay certain overheads by installment – eg Lease Payments
o Prioritize major payments
o Defer action that will lead to additional expenditure – eg recruitment, taking on leases, purchasing equipment

§ The Budget Monitoring Report

This report is a comparison between Actual and Budgeted figures of over all budget/Project to review the results and take necessary actions for better performance.

The budget variance percentage can be calculated following ways.

1. Budget variance/ X 100
Budget for period
Under-spends will result in a positive % and over- spends will produce a negative %
2. Actual for period / x 100
Budget for period
Under-spends will result in a figure less than 100% and over-spends will be more than 100%

3. % Budget Utilised (or ‘Burn Rate’):

Actual spend/ X 100
Total Budget
A resulting figure of over 100% means the total
project budget is overspent.

· Donors Reports

It is worth remembering that donor agencies are themselves accountable to stakeholders (trustees, government, tax-payers, etc.) and they rely on you to provide them with the information they need.


Financial accountability requires that you demonstrate to the donor that their funds have been used for the purpose for which they were intended.
It is important to comply with the conditions and meet reporting deadlines to establish credibility and encourage confidence, and to make sure your grant arrives on time.

Terms and Conditions of Grant Aid

It is important always to check what you have agreed to do as part of the agreement for funding from each of your donors. Conditions imposed by donors vary enormously but can include:

· Progress reports – frequency, format and style of reports, usually quarterly to coincide with release of grant installments.
· Scope and designation of funds – what funds may, or may not, be used for; whether funds can be carried forward from one financial year to the next.
· Administrative overheads – the specific items that are allowable or excluded, or a percentage limit based on the total grant.
· Budget line items – specific budget headings/account classifications which correspond with the original grant application.
· Virement policy – ie permission (or otherwise) to transfer surpluses in the budget from one budget heading to another, and within what limits.
· Accounting method – Accruals or Cash accounting.
· Bank Accounts and interest – separate bank accounts are required by some donors and/or they do not allow you to keep any interest earned on sums invested.
· Depreciation policy – how to treat fixed assets purchased with a grant.
· External Audit – some donors require a separate external audit.

The Donor Report

Donors require that an NGO is able to demonstrate financial soundness before granting the release of funds. This is why the donor report is so important. When

Check List before putting report to donors do:

· Meet reporting deadlines (or request an extension)
· Produce accurate and verifiable figures
· Not conceal under-spends or over-spends
· Explain any significant variations
· Keep the donor informed of any potential problems

Finally, bear in mind that donors have a lot of experience of working with groups like your own; they will almost always respond positively to requests for advice.

· Reporting to Beneficiaries

To participate fully in an NGO’s work, beneficiaries need access to information about the NGO’s plans, resources and activities. Increasing transparency and accountability to beneficiaries


Here are 20 questions to ask when reviewing financial information:

· Auditors Report on the Annual Financial Statements
1. How long ago was the last audit conducted?
2. What does the Auditor’s Opinion say – is it qualified or unqualified?

· Balance Sheet

3. Does the organization have enough ready cash (see ‘Cash at Bank’ listed under Current Assets) to pay off its immediate debts (see Creditors)?
4. How long could the organization survive if all of its funding dried up? (Calculate the ‘survival ratio’) How does this compare to last year?

· Income & Expenditure (or Profit and Loss) Account

5. Is income and expenditure broadly in balance? (Look for net income/expenditure)
6. Is there a significant increase or decrease in activity levels from the previous year?
7. What is the balance of direct project costs vs. admin costs? Is it reasonable for the size and nature of the organization?
8. How ‘donor dependent’ is the organization? (Calculate the ‘donor dependency ratio’)
· Budget Monitoring Report
9. Is expenditure broadly in line with the budget?
10. Is income broadly in line with the budget?
11. Are there any significant variances? If so, have they been satisfactorily explained?
12. What action is being taken to correct significant variances – eg under-spending as a result of delayed activity plans?
13. Are there any large bills outstanding which could substantially affect the figures shown?
14. Are we owed any large sums of money? What is being done to retrieve them?
15. Are there any un-budgeted expenses which may occur in the rest of the year?
16. What is the projected end-year outcome? Is this outcome satisfactory? If not, what steps can be taken to change the result?
· Cash flow forecast
17. Is there enough cash in the bank to fulfil the activity plan in the next six months?
18. What grants are due and are they still expected to come through on time?
19. Are spare cash balances invested to produce the best return?

· General
20. What non-financial figures are being produced to show how the programme of activities is progressing?

Safeguarding Your Assets

· Managing Internal Risk

Controls are very important in protecting all those who handle the financial affairs of the organization as they remove any suspicion of, or temptation to, dishonesty.

There are several different categories of internal controls:

· Delegated authority
· Separation of duties
· Reconciliation
· Cash control
· Physical control

· Delegated Authority

The Management delegate authorities to members of the staff team to relieve the load and to ensure smooth operation during absences of key staff.

· Delegated Authority Document

It is good practice to record what has been decided in a Delegated Authority document; its purpose is to clarify who has the authority to make decisions, commit expenditure and sign legal undertakings on behalf of the organisation so that there is no confusion about responsibility.
The Delegated Authority Document should include instructions for such duties as:
o Placing and authorizing orders for goods and services
o Signing cheques
o Authorizing staff expenses
o Handling incoming cash and cheques
o Access to the safe and petty cash
o Checking and authorizing accounting records
o Signing legal undertakings

The Delegated Authority document must be approved by the Management, and should be reviewed every year to ensure it is still appropriate to current needs. It should also outline deputizing arrangements to cover for absence of key personnel.

· Separation of Duties

In order to protect those operating the procedures and to prevent any temptation to mis-use funds, there must be a separation of the various duties within the finance procedures.

Signing cheques
Each organization should have a panel of cheque signatories from which to select the required number of authorizing signatures; there should be sufficient people nominated to ensure efficient administration of payments.

The Procurement Process

1. Specify goods or services to be purchased, check budget

The standard, quantity and price of goods or services required, as described in the activity plans, is clarified so that it is clear what needs to be purchased.

2. Prepare Purchase Requisition

An internal request is prepared – usually on a standard form for that purpose – to formally request the purchase of the goods or services specified.

3. Authorize Purchase Requisition

The purchase requisition will usually be checked and authorized by Approval authority to verify that there is a genuine reason for the purchase.
4. Obtain Quotations

Quotations from reputable independent suppliers are requested (in accordance with internal procedures and donor rules) to make sure the organization gets best value for money and to minimize the risk of collusion.

5. Select Supplier

Quotations are reviewed and a supplier is selected based on price, quality, and delivery times and ‘after sales’ terms to ensure value for money. For larger purchases, it is usual to have a Purchasing Committee – a small group of managers who take responsibility for selecting the supplier.

6. Issue Purchase Order (PO)

A Purchase Order is sent to the selected supplier with a copy kept on file with the supplier’s quotation. This is a legally binding contract.
7. Receive Goods from Supplier

When supplies are delivered and received, a Goods Received Note (GRN) is usually signed to confirm receipt and a copy filed for later reference.

8. Receive and Check Supplier Invoice

The invoice should be checked and matched up with the GRN, PO and quotation, usually by the finance team.

9. Prepare and Authorise Payment Authority

The Payment Authority is attached to the invoice and all the supporting documents.
10. Pay Supplier Invoice

Payment should be made to the supplier within the specified payment terms.

11. Enter Payment into Accounting Books

The final stage is to record the payment in the organization’s books of account.

· The Reconciliation Process

Reconciliation involves verifying accounting records to make sure that there are no errors or omissions that have so far gone undetected. Records that should be reconciled at regular intervals are:

· Bank Book
· Petty Cash Book
· Stock control records

· Cash Control
It is important to observe the Seven Golden Rules for Handling Cash as follows:

1. Keep money coming in separate from money going out

§ Never put cash received into the petty cash locker/box
§ All money coming into the organization must be paid/deposited into the bank promptly and entered into the records.

2. Always give receipts for money received

§ Receipts must be written/issued in ink, not pencil

3. Always obtain receipts for money paid out

§ Must get payment receipt, no receipt means there is no proof that the purchase was made.

4. Pay surplus cash into the bank

§ Every attempt should be made to pay cash into the bank on a daily basis or, at the very least, within 3 days of receipt.
5. Have properly laid down procedures for receiving cash

§ To protect those handling money, there should always be two people present when opening cash collection boxes, etc. Both should count the cash and sign the receipt.

6. Restrict access to petty cash and the safe

· Keys to the petty cash box and the safe should be given only to authorized individuals.

7. Keep cash transactions to an absolute minimum

Petty cash should only be used to make payments when all other methods are inappropriate. Wherever possible, suppliers’ accounts should be set up and invoices paid by cheque.

· Physical Controls
Physical controls are additional common sense precautions taken to safeguard the assets of an organization.

· Having a safe

Having a safe – or a safe place – to keep cash, cheques books, legal documents, etc. is an important consideration. A proper safe is worth considering especially if your organization has to keep large sums of money on the premises overnight.

· Safeguarding Fixed Assets

Fixed assets may represent considerable wealth held in the form of land, buildings, vehicles, machinery and office equipment.

· The Assets Register

An Assets Register should be established with an entry or record sheet for each item. Each asset should be tagged with a unique reference number for identification purposes. The register will record important information about each asset, such as:

· Where and when the item was purchased and how much it cost
· Where it is held or located
· How much it is insured for
· Repair history
· Serial numbers
· Details of guarantees or warranties.
· Depreciation rate and method, where relevant.

· Building and Equipment Maintenance policy
§ To preserve the value of buildings and equipment, an organization must have a pro-active policy of maintenance.
§ Office equipment such as photocopiers and electrical equipment should also receive regular services by qualified technicians to ensure they are safe and operating properly.
Vehicle policy
Every organization that owns vehicles should have a vehicle policy. This will set down the policy on a range of issues such as:

§ Purchasing, replacement and disposal
§ Maintenance and repair
§ Private use of vehicles by staff
§ What to do when accidents happen
§ Driver qualifications and training

Top Tips on the Warning Signs of Fraud
Remember: “Prevention is better than cure!”

The following ideas may be an early indication of fraud or abuse. Use with care!

Ø From the accounting records:
Lots of corrections to the manual cashbook – this may include extensive use of white-out or blocked out figures
Pristine records – ie a manual cashbook that look as if they have all been written on the same day in the same hand. Could be an indication of rewritten/duplicate books
Delayed banking of cash received – shown up by bank reconciliation. Could be ‘teeming and lading’?
Records not being kept up to date – ie deliberately delayed so managers cannot detect false accounting going on.
Missing supporting documents – eg certain bank statements destroyed to cover someone’s tracks, or a project officer who regularly claims to have ‘lost’ receipts.
Debtors rising unexpectedly – eg if debtors have paid but the cash is being pocketed. This may occur if there are poor controls in issuing receipt books as someone could take an unused book and issue valid receipts without them ever being entered into the accounting records.
Hand written supporting documents with errors and corrections on them. Indicates possible changes made after the goods or services were purchased.
Cash counts not reconciling to the accounts but reconciling at the next cash count – possible borrowing of funds by the safe key holder.

Ø Budget monitoring reports showing inconsistent behaviour between line items - eg project-related expenditure is under-spent due to delays – except for fuel which his over-spent. This could indicate abuse of the vehicle.
Ø Vehicle log books not maintained in an appropriate level of detail. This could indicate abuse of the vehicle.
Ø Budget monitoring reports delayed – to cover up something?

Non-financial areas:

Working very long hours – first in last out of the office? Could mean that they have to do extra work to cover tracks?
Never taking holidays – can’t afford for someone else to see what they are doing!

Change of lifestyle – spending patterns don’t match their income (eg designer clothes, social habits, expensive car...)
Creating ‘smoke screens’ – where someone is making a false accusation about another team member to give them time to cover their tracks or make a getaway!

Fraud Prevention Tips:

Ø Make sure you have robust internal control systems in place.
Ø Visit projects, and see if the activities carried out roughly match the expenditure.
Ø Share financial reports with beneficiaries, and ask if they think they have had value

Ø Dealing with Fraud and Irregularities

Here are some tips on how to deal with fraud and other irregularities
To keep RISKS LOW:
Ø Report the incident to a superior or Board member
Ø Investigate incidences, gather the facts
Ø Secure the assets and records
Ø Keep calm!
Ø Swiftly act
Ø Look the other way
Ø Overlook the ‘fall out’ of a fraud
Ø Withhold information to protect others
Above all, remember that prevention is better than cure!
Minimum Standards
Financial Management in NGOs

A. Minimum Requirements
Standard Why
1. A valid supporting document for every transaction (securely filed and stored for the minimum period required.) Protection for staff, evidence and details of transaction.
2. A cash book for every bank account, reconciled every month. To organise and summarise transaction information; check for errors and omissions.
3. A Chart of Accounts – used consistently in the accounting records and budgets Principle of consistency; to facilitate production of financial reports.
4. A budget detailing costs and anticipated income for all operations. Planning, fundraising, control and reporting.
5. Clear delegation of authority – from Executive Council through the line management structure. To know who is responsible for what and within what limits.
6. Separation of duties – sharing finance duties between at least two people. To prevent temptation to steal and reduce opportunity to commit fraud; to share the load.
7. Annual financial statements – preferably audited by an independent person. Accountability to stakeholders; transparency.
B. Good Practice
8. Additional accounting records when staff is employed (Salary & Benefits record) or assets owned (assets register). To meet statutory and audit requirements; for control purposes.
9. Budgets based on real activity plans, which include the full cost of running a project. Realistic, more likely to meet targets.
10. Budgets with clear calculations and notes. Easy to read and make adjustments. Easy to justify calculations.
11. Separate core costs budget of every project/programme. Encourages active management and financing strategy for core costs.
12. Monthly cash flow forecast. Helps to identify and take action to avoid short-term cash flow problems.
13. Use of Cost Centres when working with multiple donors and/or projects. To separate restricted funds and related transactions; to facilitate reporting to managers and donors.
14. Funding grids, if more than one donor is funding an organisation or project. To avoid double-funding situations and identify areas of shortfall.
15. Budget monitoring reports at least monthly to managers (and also regularly to beneficiaries). To monitor progress; control purposes.
16. Written policies and procedures, including a code of conduct for staff & Executive council members. To prevent confusion about organisation rules and expected practice.
17. Diversified funding base – mix of restricted and unrestricted funds. Less vulnerable to financial shocks; helps to build up reserves.
18. A reasonable level of reserves. Less vulnerable to financial shocks; helps overcome cash flow problems