Financial Management Training 10.20.2010

Tips & Tools for NGO Financial Management Denise Phelps Treasurer MD School for the Deaf & Civitan Club

NGO Financial Management Do More with Less Sources of Income Inconsistent Mission-driven, not Financially-Driven Staff Small Purchaser of Goods & Services Comply with Donor Requirements

NGO Financial Tools Policies & Procedures Manual Record Financial Transactions Monitor & Control Expenses Satisfy Reporting Requirements Ensure Timely & Accurate Reporting to Donors and Grant-makers

NGO Financial Tools Record Revenues – all types Expenses – all types Assets – All things owned by NGO Liabilities – Money owed to others Donors can see their money is being spent and decide whether to give more

Processes Programme Funding Goods & Services Requisition Cash Disbursements Updating the Cash Book

Director/Finance Officer Responsibilities Make all general ledger entries Verify information Produce and distribute financial reports

Monthly Record expenses by project Record non-project expenses Record grants/income received Run trial balance Record accrued expenses

Cash Management Cash is accounted for in General Ledger Cash is deposited correctly Separate cash handling from recording Payments are verified and approved prior to disbursement Vouchers and invoices are marked paid Bank reconciliations are done timely

Bank Reconciliation Record bank charges into cash book Record any other debits or credits that are not in the cash book *Ensure they are all legitimate Prepare Reconciliation Balance on bank statement - Unpresented cheques/charges + Outstanding deposits/credits = Cash Book Balance

Donor requirements Expenses have to be: Reasonable Allocable Allowable

Budgeting – Why? Most important part of Financial Management Where do you want to go and how do you want to get there? Gives a tool for checkpoints along the way Allows you to spot trouble areas and devise plans to address them Provides a benchmark for donors to grade your performance against projections

Budgeting – How? Gain input from everyone when creating budgets – expenses and income sources Look at last year and decide what will stay the same and what will change Break out monthly to prevent cash flows issues Income with date to be received Expenses with date to be paid

Budgeting Tips Once budget is created: Increase expenses and decrease income by 10% to see if there would be any trouble areas created Look for opportunities to Buy in bulk for lower cost Prepay for cost savings Set-up payment plans to spread out cash payments Share with staff/board/donors to see if they spot trouble areas Gain necessary approval and record

Budget change approvals Change in scope of project Change in key personnel to carry out project Need for additional funds, due to unforeseeable events Transfer of funds from one line item to another Costs prohibited by the grant agreement are incurred

Fixed Assets Ensure they are recorded on balance sheet Reflect any changes in them as soon as they happen Asset examples Vehicles Office Equipment Office Furniture Computer Equipment Property/Real Estate

Fixed Assets Tag & Inventory all fixed assets (Donor/Type/#) Record in Asset Register/General Ledger Opening Balance (cost-purchase/market-donate) + Additions to asset category (purchase/donated) Subtractions (depreciation/dispose/sell) = Closing balance

Fixed Assets Tips Verify and inventory all fixed assets at the end of the period Make sure you are personally seeing the inventory at least once per year (vehicles, laptops, etc.) Keep receipts of all fixed assets with any applicable warranty information Decide whether to sell any assets that you are not using or will need to use in the future

Travel Travel is planned for in advance for budget and discount purposes Travel expenses are approved before incurred Travel expenses are accounted for with receipts before paid Travel adheres to donor requirements Travel should be at lowest cost - economy class, travel on non-holiday weekdays, etc.

Goods & Services Procurement principles Competitive Bidding Transparency Supremacy of the tender committee/procurement officer Excluded parties Employee, officer or agent of NGO Specification development contractor Excluded by donor agreement

Goods & Services Request for Bid Responsibilities/specifications/type of service Minimum qualifications Terms of Service Deadline for submission Deadline for completion Compare at least 3 Suppliers

Goods & Services Tips Annual goods and services needs Collective buying opportunities Bulk or early payment terms discounts Monthly commitment discount Consolidate suppliers Referral discounts Lock-in prices/contracts

Reporting Requirements Determine each donor’s requirements Keep each donor/grant accounting separate – through bank accounts Quarterly Disbursements Cash Flow/Disbursement Director/Accounting Officer Statement

Annual Reports Government requirements Donor requirements Independent auditor Submitted 30 days after audit to Donors Financial reports 90 days after end of fiscal year Include impact reports, explanations, etc. with financial statements

Additional Information Payroll Corporate Governance Computer Information Systems Appendix Bank reconciliation Budget Book Fixed Asset Register Comparative Quotation Chart

QUESTIONS??? Thank you for participating today! Contact information – Denise Phelps [email_address]

Financial Management Training 10.20.2010

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