10 Top Tips for Grant Management

8/6/2019 10 Top Tips for Grant Management

1/36

10 top tips for grant management

1. BUILDING TRUST

In all aspects of grant management, problems can be avoided with clear and regular

communications with grants officers. Put everything in writing!

2. Observe project start and end dates for spending

Dont make payments or enter into commitments before the agreed contract start date. Allinvoices must be dated between the official start and end dates. It is OK to spend right up tothe of the end of contract date as long as the invoice is dated before the end of the project asthe expenses can be accrued. This is one useful method to avoid large under-spends.

3. Meet project targets within budget

Make sure the activities covered in the project proposal match the activities carried out andthe amount of money spent. It is no good putting ten workshops in the proposal, then onlycarrying out five and the cost is the same as ten.

Tell beneficiaries and project officers about who the donor is and what their conditions andrestrictions are. Hold regular meetings with other staff (e.g. project and administrative staff)to discuss the donor's conditions, and to review progress compared to the project plans agreedwith the donor.

4. Avoid under-spendingThis is as much, if not more, of a problem for a donor as over-spending is. Donors havetargets to meet too and they really don't want the hassle of funds being returned to them. Ifyou do not use up all of their allocation, the donors may then lose this money from their nextyears allocation.

5. Monitor donor-by-donor expenditure

In multiple-donor funded projects, keep an eye on the individual expenditure allocated to each

donor to make sure you do not under- or over-spend for each donor. The total expendituremight show you are on target overall but conceal the donor by donor position.

6. Spend Capital equipment budgets early

Equipment should be spent in the first part of the programme. Donors do not generally allowthis to take place in the closing months or to be the subject of a no-cost extension.

7. Make time to prepare donor reports

Putting a financial report together always takes longer than you think! This is especially trueif you need to ask questions from busy programme and project managers. Delayed reporting


2/36

from the field and poor follow up at head office to chase reporting often leads to under- orover-spending going unnoticed for far too long. It is then too late to rectify.

8. Reports must be complete and accurate

Make sure all expenditure is reported in the correct period. For instance:

Do not allow working advances to remain unreconciled for longer than necessary. Do not change previously reported budget or actual figures.

If a previously reported figure is wrong, do not change the figures. It is better to make anadjustment to the current figures and use notes to explain what you have done.

9. Keep clear contract files and budget notes

Put dates and notes on all papers relating to the grant. It will then always be clear to whoevermanages the project implementation (often two years after the initial proposal) which is thelatest version of the contract and the final budget, and what changes have been requested andagreed by the donor.

10. Donors dont like surprises

If you cannot meet reporting deadlines or fulfil other conditions, warn the donor as soon aspossible; dont ignore it. You may be able to negotiate on unrealistic terms and conditions.

For example, reporting deadlines may not be realistic because a lot of spending takes place inremote areas of the field, where there is no internet access so reports have to be physicallydelivered when field staff return to base. It is better to explain this to donors in advance andthey will often respond favourably.

Similarly, if certain budget items are going to cost more than budgeted due to unforeseenchanges, give the donor advance notice.

Remember:Prevention is better than cure!

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

From the accounting records

Lots ofcorrections to the manual cashbook this may include extensive use ofwhite-out or blocked out figures

Pristine records .ie. a manual cashbook that look as if they have all been written onthe same day in the same hand. Could be an indication of rewritten/duplicate books

Delayed banking of cash received shown up by bank reconciliation.

Records not kept up to date i.e. deliberately delayed so managers cannot detectfalse accounting going on.


3/36

Missing supporting documents e.g. certain bank statements destroyed to coversomeones tracks, or a project officer who regularly claims to have lost receipts.

Debtors rising unexpectedly e.g. if debtors have paid but the cash is beingpocketed. If there are poor controls in issuing receipt books, someone could take anunused book and issue valid receipts without them 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.

From the reports

Budget monitoring reports showing inconsistent behaviour between line items - egproject-related expenditure is under-spent due to delays except for fuel which his

over-spent. This could indicate abuse of the vehicle. Vehicle log books not maintained in an appropriate level of detail. This could indicate

abuse of the vehicle. Budget monitoring reports delayed to cover up something?

From non-financial areas

Working very long hours first in last out of the office? Could mean that they arehaving to do extra work to cover their tracks?

Never taking holidays cant afford for someone else to see what they are doing! Change of lifestyle spending patterns dont match their income (e.g. personal

building projects, 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!

And some Ideas on fraud prevention

Make sure you have robust internal control systems in place Visit projects, and see if the activities carried out roughly match the expenditure.

Share financial reports with beneficiaries, and ask if they think they have had valuefor money (find out how: www.whocounts.org). Hold regular meetings with other staff at all levels (e.g. project and administrative

staff, board members, etc) to discuss financial reports, making budgets and reportsopenly available.

Help non-finance staff and managers improve their financial skills, for instance byreading Mango's Guide to Financial Management for NGOs.

If you are concerned about fraud, then ourRecruitment Team can provide sensitive,expert staff to investigate what has happened.

Failing to plan is planning to fail!
http://www.whocounts.org/http://www.mango.org.uk/Recruitment/FindStaffhttp://www.mango.org.uk/Recruitment/FindStaffhttp://www.whocounts.org/http://www.mango.org.uk/Recruitment/FindStaff


4/36

1. Be organised

The process of preparing a meaningful and useful budget is best undertaken as an organisedgroup exercise with beneficiaries, programme and finance staff working together. It cant be

just left to the accountant! The budget process involves asking a number of questions:

1. What are the objectives of the project?2. What activities will be involved in achieving these objectives?3. What resources will be needed to perform these activities?4. What will these resources cost?5. Where will the funds come from?6. Is the result realistic?

Have all of the information that you need to answer these questions ready. If you want toencourage participation and a sense of local ownership, then it can really help if

representatives of your beneficiary groups are actively involved in setting the budget. This isgood practice for NGOs.

2. Set up a timetable

There are several stages involved in constructing a budget. For instance, you may have togather information together, discuss activities with different members of staff and

beneficiaries, estimate costs, negotiate with funders, see how different team budgets fittogether across the organisation and finally have the budget approved by senior staff ordonors.

It makes sense to prepare a budgeting timetable and start the process early. This could be fourto six months before the start of the financial year, depending on the size of your organisationand the approach you plan to take.

3. Write down all your notes and assumptions

Many different people will need to use the budget for different purposes. So they should all beable to pick it up and understand it without any additional explanation. It is crucial to presentyour information clearly, particularly if staff change during the life of a project. You mustkeep notes on all budgeting assumptions and how calculations have been made, and attach

them to the budget.

4. Use consistent budget headings

When you are setting up or reviewing a budget, it is important to pay attention to the budgetheadings. This is because the budget items also appear in your NGOs financial accounts andreports. If the budget items and accounting records use the same descriptions and budgetheadings, then it will be much easier to produce regular budget monitoring reports

One way of achieving consistency is to prepare a budget outline. For instance, this could list

all of the main types of income and expenditure that a project or department might have in atypical year. It can help jog peoples memories and remember all the relevant costs.


5/36

5. Estimating costs

It is important to be able to justify your calculations when you are estimating costs. Lastyears budget can be very helpful as a starting point; but it might also be misleading andcontain inaccuracies.

One approach is to make a list of all the things you will need for each specific activity, andthen work out the number and unit cost of each item. From this detailed working sheet it issimple to produce a summarised budget for each budget heading. It is also very easy to updateif quantities or unit costs change.

To demonstrate this approach, here is an extract from a sample budget worksheet for atraining workshop:

6. Take care with contingencies

Try to avoid adding a bottom line percentage for so-called contingencies on the overallbudget. Generally, donors do not like to see this and it is not an accurate way of calculating abudget. It is better to calculate and include a contingency amount for separate items in thebudget e.g. a salaries contingency or fuel contingency, if needed.Remember that every item in your budget must be justifiable adding a percentage on the

bottom is difficult to justify and also difficult to monitor.

7. Forgotten costs

Dont forget the forgotten costs! There is a tendency in NGOs to under-estimate the true costs

of running a project for fear of not getting a project funded. Here are some of the most oftenoverlooked costs:

Staff related costs (e.g. recruitment costs, training, benefits and statutory payments) Start-up costs (e.g. publicity) Overhead or core costs (e.g. rent, insurance, utilities) Transport costs (e.g. moving goods around the country) Vehicle running costs Equipment maintenance (e.g. for photocopiers and computers) Governance costs (e.g. board meetings, AGM) Audit fees

If you dont include them in the budget, then you may not have enough funds to pay for them!


6/36

8. Ask for help!

Find yourself a budget buddy to check your draft budget with a critical eye. This could be awork colleague or someone doing a similar role in another NGO.

If you are new to budgeting, come along to one of Mangos training events take a look atthe course outline for the Mango's Training Course Budgeting for Funding Proposals(BE2). This provides an excellent introduction to budget skills.

Financial sustainability means

'Financial continuity and security.'(A. Fowler)

'The organisation and its core work will not collapse if external funding is withdrawn.' (M.Norton)

In practice, organisations which fulfil these definitions are characterised by :

A diversified funding base Availability of unrestricted funds Availability of financial reserves Strong stakeholder relationships

A diversified funding base

It is important to have a financing strategy which produces several different sources ofincome. It does not make good sense to put all your eggs in one basket. To rely on just oneor two donors for your income makes you vulnerable to external threats.

Diversification means securing funds from as wide a base as possible the local businesscommunity, national and local government and the general public and not just fromexternal, institutional donors such as USAID or DfID.

Availability of unrestricted funds

Funds that are received from donors for a specific purpose are known as restricted funds: youare legally obliged to use them for the reason that the donor gave them to you.

In contrast, unrestricted funds can be used for anything at all that helps you to achieve yourmission. The more unrestricted funds you have, the more freedom of action you have. Youcan choose and change the projects that you want to run and you can cover costs that donorsare reluctant to fund, like core costs.

We have to look beyond institutional donors for sources of unrestricted funds, for example:

membership fees, advertising income, fee income, general appeals and bank interest.
http://www.mango.org.uk/Training/BE2http://www.mango.org.uk/Training/BE2http://www.mango.org.uk/Training/BE2


7/36

Having a regular source of unrestricted income is essential for the next feature of a financialsustainable NGO

Availability of financial reserves

Reserves are financial resources that an organisation builds up during its lifetime (fromsurpluses of unrestricted income) and puts aside to meet unexpected events in the future.These funds are sometimes kept in a special reserves bank account and are shown separatelyon the annual financial statements.

Building up reserves has a number of obvious advantages for NGOs. It reduces theirdependence on donors, helps during cashflow shortages and helps to withstand financialshocks and unplanned expenditure.

Strong stakeholder relationships

The more that you can build up and manage a positive relationship with donors, the strongerposition you will be in. True partnerships occur when back-up and financial support isprovided in the good times and the bad times.

The key to financial sustainability is to develop your relationships with an eye to the future aswell as meeting todays needs. This means building the confidence of donors over time. Forinstance, it may not be appropriate to press them for funds today, if you believe that youmight win more funds from them in the future.

It is a mistake to take funds for projects that you cannot deliver, just because the money isavailable. This will harm your relationship with the donor and reduce the chance of winningfunds that you really need next year or the year afterwards.

A 'budget monitoring report' is a financial report that shows actual income and expenditure,for a certain period, compared to the budget, for the same period.

These reports are one of the most important tools for managers, allowing them to check thatprojects are still on track, in financial terms. Any areas that are not on track can be identified,and action can be taken to put things right before any situation gets critical.

Finance staff should prepare budget monitoring reports regularly throughout each project,normally once per month. Programme staff and managers should review the reports straightaway, once they are prepared. It is good practice to organise a regular review meeting,including both programme and finance staff, to discuss the financial position and decide onany actions that need to be taken.

1. Look for the date of the report

How recent is it? Reports are only really useful if they cover a period that is prettyrecent - not more than a few weeks ago.

2. Look at the bottom line


8/36

What is the total expenditure to date compared to the total amount in the budget? Is itabout what you would expect for this period?

What is the overall difference (or variance) from the budget? Plus or minus 10% isgenerally acceptable.

Is total income what you expected? Have you received all the income you were

expecting from your donors?

3. Look at the budget variance column

Identify significant variances i.e. where actual expenditure is more than 10%different from the budgeted amount, or where the actual expenditure is a significantamount.

What, if any, reasons are given for these variances? Are they reasonable? Are the variances temporary (i.e. a timing issue that will work through eventually) or

are they permanent (i.e. where you have really spent more or less than the budget)?

How can the funds be found to pay for any permanent negative variances (i.e. whereexpenditure is more than the budget)?

4. Look at the % of the budget (or grant) that has been

used

Generally, is expenditure for each line about the level you would expect for thisperiod?

What message does expenditure to date on project-related costs tell you? For example,if it is half way through the year and only 25% of the budget is used so far, perhaps the

project is at risk of not being completed on time. But if you have spent 75% of thebudget, perhaps you are at risk of running out of funds.

Are there any items showing zero expenditure which might cause concern? E.g.vehicle insurance.

5. Look for linked budget items

Are different budget items behaving consistently? E.g. if training activities aredelayed, then all training-related budgets should be underspent to a similar level,

perhaps including venue hire or travel as well as trainers costs.

6. Look for unusual or unexpected expenditure or income

Could this be an indication of either miscoding or abuse of funds / fraud?

7. Look at the narrative reports

Does the narrative report tell the same story as the budget report? For instance, if thenarrative report says that some activities are delayed, then expenditure should bereduced too.

8. Look for solutions


9/36

Can any permanent underspends be used to fund permanent overspends? Be verycareful about conditions that donors may have placed on restricted funds you maynot be able to change how you are planning to spend money.

Can any areas of overspend be controlled or reduced in future months? Note that somecosts are fixed and so cannot be controlled.

Can you find additional sources of income, if you need them? Do you need to think about the exact timing of when you receive funds and when you

schedule expenditure? Maybe some big expenses could be delayed, if needs be. Does the budget still describe the activities you are actually carrying out? If the budget

is out of date, then it may be worth re-doing it. This normally needs negotiation withyour donors, your staff and the people / organisations you are aiming to help. It is notsomething to do too often not more than every three or six months. But it can help tomake sure that your work is really relevant to your beneficiaries.

All these solutions will need to be discussed with programme managers. Decisionsabout changes to the budget or expenditure cannot be made by finance staff on theirown.

Managers use a cashflow forecast (or cash budget) to monitor how much cash they have inthe coming months.

Whereas the other budgets show whether the organisation can cover its costs over the wholeyear, the cashflow forecast shows whether it has enough cash in the bank to meet all of its

payments as they arise every week or month.

The cashflow forecast predicts the flow of cash coming in and going out of the organisationby breaking the annual budget down into smaller time periods, usually months. This helps toidentify if there is ever a time when cash might run short. It allows managers to take action,such as:

requesting donor grants early; delaying payment of certain invoices; delaying some activities; or negotiating a temporary overdraft from their bank.

The cashflow forecast is also useful where the organisation maintains substantial cashreserves that need to be invested to maximise investment income.

Seven top tips when preparing a cashflow forecast:

1. Know the timing of your activities

Cashflow forecasts are not simply the budget broken down into 12 equal instalments - youneed to know when specific activities will take place. E.g. for a training project, when will thecourses take place, when will costs have to be paid and will the course fees be paid in

advance?


10/36

2. Record the expected timing of your payments.

Expenses must be entered on the cashflow forecast when the cash is expected to leave thebank. So an invoice for Januarys electricity will probably be received in February and paid inMarch.

3. Salary payments

Salaries are usually paid monthly. But dont forget that deductions, such as income tax, areoften paid to the authorities the month after salaries are paid, or in some cases paid annually.

4. Payment terms and grant schedules

E.g. sometimes auditors require a 50% deposit of the audit fee before the audit and the rest

follows after the report is filed; so although this is an annual activity the actual cashmovement is affected by payment terms. Similarly, grant schedules dictate the inflow of cashfrom donors.

5. Unpredictable expenses

E.g. equipment repairs it is best to put a monthly or quarterly sum.

6. Exclude non-cash transactions

Obvious but easily forgotten! Exclude non-cash transactions from the cashflow forecast (e.g.donations in kind or depreciation). So if these are on the budget, they have to be left off thecashflow.

7. Regular updates

Update your cashflow forecast monthly, starting with the actual cash and bank balancesavailable now, always looking say 6 months into the future.

Top tip for using a cashflow forecast

8. Take action now

When all the expected receipts and payments are recorded, look at the month end balance forthe next 6 months if there are any months with projected cash flow difficulties, take actionnow (e.g. by postponing activities, getting a loan, renegotiating remittance schedules etc) toavoid the problem.


11/36

Top tip for avoiding cashflow problems

9. Build reserves

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

'Accountants speak in tongues'

Pre-expose learners to jargon and concepts with advance reading or preparationactivities

Avoid using jargon until you have explained it

Provide plain language explanations / glossaries Use pictures and everyday stories to explain difficult financial concepts such as

accruals and depreciation Adopt forfeits for thoughtless use of jargon or acronyms

'Finance is difficult and boring'

Bring out and build on existing knowledge Demonstrate that most financial management is common sense Avoid giving learners figure-work too soon Start with simple processes before moving to more complicated ones Create a relaxing learning environment Use games and quizzes to surprise people Keep it active, inject some fun prove that finance doesnt have to be boring!

What's in it for me?

Show how financial management has something for everyone Keep it practical provide tools and techniques learners can use in their work Be selective in the content what do learners really need? Provide well presented, selective back-up resources and checklists

NGO finance staff can encourage good practice, reduce the risk of fraud and increase long-term impact by providing regular financial reports to beneficiaries.

1. Why should NGOs report to beneficiaries?


12/36

Financial reporting to beneficiaries can improve participation, and make NGOs moreaccountable to the people they aim to help. This is the foundation stone of good

practice and effective NGO work. Whats most important is whether an NGOs work meets beneficiaries real priorities,

and whether it helps beneficiaries gain more confidence. So, how NGOs work with

beneficiaries is just as important as what concrete activities they carry out if notmore important.

Beneficiaries should be closely involved in making key decisions, like how budgetsare spent and what activities are carried out. They can only do this if they know howmuch money is available ie if NGOs are transparent about their budgets.

Beneficiaries can also monitor actual expenditure compared to the budget. This helpsthem build their confidence; it can identify efficiencies or savings; and it can help

prevent or spot fraud. It also demonstrates that NGOs are treating them with respect. Finally, financial transparency by NGOs shows government agencies what is possible.

It helps build up NGOs legitimacy when they are trying to hold governments toaccount, and push for good governance. NGOs should be leading the way in this area!

Tearfund published its budget in a school building project in Afghanistan. It improvedcommunity relations, so that rebuilding could continue after it had been halted, reducedoverspending and identified a case of fraud.

2. What should NGOs report to beneficiaries?

As a general principle, NGOs should aim to be as open as possible about financialmatters. (After all, the money is given to help the beneficiaries, not the NGO.) Thismeans publishing how much money they have in each community (budgets), and how

much they have spent. But it all depends on the local context, and the sort of relationship that the NGO has

(or wants to have) with beneficiaries. If the relationship is long term, trusting andempowering, then NGOs should be very open. If it is short term, or trust is in shortsupply, or the environment is dangerous, then NGOs may be less open.

It may be easier to start being transparent about direct project costs (like the amount ofmoney spent building a new school), rather than indirect costs (like overheads andstaff salaries). The important thing is to make a start, with whatever you arecomfortable with.

The Ugandan government fought corruption, and increased the funds arriving at rural primary

schools from 24% to 82% by publishing financial information about them in newspapers.

3. How should NGOs report to beneficiaries?

NGOs should present information in ways that are easy for beneficiaries to access andunderstand.

This means presenting information in local languages and local currencies, using themedia that local people find easy to access. This might include posters outside theoffice, or signboards, or presentations at public meetings, or even radio & newspapers.

It may be easier to present financial information in graphical form, using simple

charts.


13/36

Expenditure can be summarised by activity, or geographical area, or local partner. Itshould be presented for activities that are relevant to beneficiaries.

Reports should have be no more than 15 lines long, and be updated regularly (perhapsevery month, while projects are active).

The National Development Foundation in Sri Lanka went a step further, and set upcommunity bank accounts for local Farmers Organisations, empowering them to take chargeof their own development spending.

Here are ten practical ideas to help integrate financial management and programmemanagement:

1. Participatory budgeting

Involve everyone in the organisation in the annual budgeting round, using the activity-based

budgeting process (see Top Tips 3 on Budgeting). Project staff are in the best place to produceaccurate budgets for their own projects. This process builds ownership and a more responsibleuse of project resources during implementation.

2. Finance staff visit the field with programme staff

This will help finance staff understand more about the practical difficulties of working in thefield. It also helps build a stronger relationship between field and programme staff. And it can

be very motivating for finance staff, and helping them identify more with the NGOs missionand objectives.

3. Reporting to beneficiaries

Set up regular ways of reporting the financial position to your beneficiaries. This helps tomake the link between funds received in their name and project outputs. It also helpseveryone involved in the project concentrate on using the funds available as effectively as

possible. (See also Top Tips 8 on Reporting to Beneficiaries).

4. Finance and project staff prepare donor reports

together

Together, finance and project staff can make the links between the financial reports andnarrative reports, pick up lessons learned and help to identify future actions. It will help the

project officer understand how useful a budget monitoring report is for programmemanagement.

5. Regular and accessible finance reports

Make sure that the finance team is providing project staff with regular, useful and easy-to-usefinance reports. E.g., this often includes a monthly budget monitoring report. Keep the reports

simple and easy to read. Finance staff have to keep up their side of the bargain, and make surethey produce useful information for project staff!


14/36

6. Financial management training

Sponsor key staff and board members from your partner NGO to attend a Mango trainingevent. Let them be inspired and excited by financial management too!

7. Job descriptions

Include a section in all non-finance staff job descriptions on their responsibilities for financialmanagement e.g. budgeting and budget management, procurement, internal control. Theseareas simply cannot just be left to the accountant they are under project staffs control.

8. Strategic planning

Make sure that the NGOs strategic planning process includes discussions on financing, for

the whole organisation. Topics for discussion could include: different sources of funding;ethical funding policy; and the reserves policy, all of which have an impact on programmesand financial sustainability. Also, do not exclude finance staff from discussion on mission andobjectives they need to have a strong sense of mission too.

9. Lead from the top

Encourage the board and senior managers to show that they take financial managementseriously. If they regularly review financial reports, then they set the agenda for everyoneelse. But if they do not, then other staff may not have an incentive to spend time working onthe finances. One of the best thing financial managers can do is to persuade the Director tolook at financial performance and controls before a crisis hits!

10. Be friendly

Finance staff can encourage project staff to work more closely with them if they are friendlyand helpful. Its all about attitude! Do you help project staff tackle their problems, or do youcreate more difficulties for them? For instance, a good starting point might be to recognisethat, for project staff, finances are important but not the number one priority!

All NGOs strive to make the most of their money keeping costs down, so they can help

more people and partners. The current economic conditions and rising prices make it all themore important.

'Look after the pennies and the pounds will look after themselves'

1. Set realistic budgets

If you think carefully about costs, then you are much less likely to spend more than youshould. Involve staff in setting their own budgets they are much more likely to takeownership and manage budgets responsibly and seriously. Involve beneficiaries too, to build

up their ownership and empowerment.


15/36

2. Check the budget

Before you buy anything, check the budget you have available. Make sure all staff arechecking the budget. If they know the budget, they can make sure they stick to it.

3. Review expenditure against the budget every month

Monitoring expenditure will highlight any issues when they arise, giving you the chance totake actions to control your costs. Make sure that managers and decision-makers have accessto accurate and useful information and then look at it carefully!

4. Plan expenditure in advance

Last minute purchases cost more and limit choices. For example, this works well for flights

and accommodation.

5. Build relationships with suppliers

Pay your bills on time and negotiate discounts for bulk or regular purchases. For example,bulk printing of stationery or publications. When times are hard, suppliers value regularcustomers who pay on time.

6. Join with other NGOs to set up purchasing groups

This will allow you to access bulk discounts on products you would not usually buy largequantities of for yourself.

7. Avoid budget games

For example, unnecessary spending towards the end of the financial year to use up unusedbudget lines. Managers and trustees should always review budgets carefully.

8. Get quotes

For large items of expenditure always get at least 3 quotations from different suppliers. It maybe useful to set up a Procurement Committee to ensure best value for money. You couldinclude representatives from your partner organisations or beneficiaries on the Committee.Shop around for smaller items too dont just take the first price you are offered.

9. Approved supplier list

For regular purchases, like stationery supplies, carry out a regular tendering exercise to findout who offers the best value for the products you need. The supplier can invoice on amonthly basis which will help to avoid high processing costs for your NGO.

10. Avoid waste and losses


16/36

Clarify and implement your organisations policy on staff members (private) use of vehicles,telephones, photocopiers...etc. Re-use single-side printed paper for draft copies. Photocopylarge reports as double-sided to save paper and postage costs. Lock up your stationery andstore cupboards and make one person responsible for stock control.

Sometimes, fraud can happen despite the best internal control system. Sadly, many NGOshave been the victims of fraud, on either a large or small scale. You are not alone if it happensto you.

Fraud is defined as: a deliberate, improper action which leads to financial loss to theorganisation. This includes theft of goods or property; falsifying expenses claims; andfalsification (or destruction) of records to conceal an improper action.

It is very important for NGOs to prepare in advance how to deal with any occurrences offraud, by having a written policy or procedure.

Examples of fraud

Alongside theft, some common types of fraud include:

bribes paid to NGO staff by suppliers, partners or beneficiaries, supplies sold for personal gain, unauthorised personal use of assets (e.g. telephones, vehicles), staff being paid inflated expenses (supported by false receipts), the same project being funded by two different donors, and resources given to ghost staff or beneficiaries, who do not really exist.

Dealing with fraud

An NGOs fraud policy should cover:

how you will respond to allegations of fraud, how you expect to deter fraud, how you will respond to different types of fraud, how allegations can be reported (including "whistle-blowing"), and how allegations will be investigated.

Finally, staff need to know about the policy.

All allegations of fraud must be treated seriously and investigated as soon as possible. Internalinvestigations have to be fair and take time to assemble real evidence before coming toconclusions. The police may be able to help you.

You should record the details of each fraud and the actions you take in response in a fraudregister. This is an important document for monitoring fraud and learning how to strengthencontrols in the future.


17/36

Keeping Risks Low

Here are some tips on how to deal with fraud and keep RISKS LOW!

DO:

R Report the fraud to a senior member of staff or Board memberI Investigate all incidences to gather facts and evidenceS Secure the assets and recordsK Keep calm!S Swiftly act

DONT:

L Look the other way (this could suggest you are involved)O Overlook the impact of fraud on staff morale and credibilityW Withhold information to protect others

Above all, remember that prevention is better than cure!

Cash can be easily misplaced or misused leading to losses for an organisation. Cash controlsare very important in protecting everyone who handles cash. They provide guidance on cashhandling. They also remove the suspicion of fraud and the temptation.

Follow the 10 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 tin. It will cause errors and confusion in theaccounting records. All money coming into the organisation must be paid into the bank

promptly and entered into the records before it is paid out again. Otherwise it can beconfusing when reconciling the cash balance.

2. Always give receipts for money received

This is one of the highest risk areas, so be warned! Proper issuing of receipts helps to protectthe organisation from cash being pocketed rather than banked. Use pre-numbered duplicatereceipt books written in pen.

Keep track of your receipt books using a register, recording each book as you receive it fromthe printers, the date it started being used and the date it was returned finished. Use receipt

books in order. Make sure unused receipt books are locked up.

3. Always obtain receipts for money paid out

Sometimes this may not be possible, for example, when purchasing items from a market. Inthis case the cost of each transaction should be noted down straight away so that the amounts


18/36

are not forgotten. Then they can be transferred to a petty cash slip and authorised by a linemanager. Remember no receipt means there is no proof that the purchase was made.

4. Pay surplus cash into the bank

Having cash lying around in the office is a temptation to a thief and the money would also bemanaged better if it were earning interest in a bank account. A casual approach to cash on the

premises might lead to people wanting to borrow from it. Often fraud has started in thisway. Every attempt should be made to pay cash into the bank on a daily basis or, at the veryleast, within 3 days of receipt.

5. Have properly laid down procedures for receiving cash

To protect people handling money, there should always be two people present when openingcash collection boxes, envelopes and other sources of money. Both people should count the

cash and sign the receipt.

6. Restrict access to petty cash and the safe

The keys to the petty cash box and the safe should only be given to authorised individuals.This should be recorded in the organisations Delegated Authority document.

7. Reconcile the petty cash book

The petty cash should be counted and reconciled at least once every week. Any discrepanciesmust be reported straight away to a manager, and investigated.

8. Keep cash transactions to an absolute minimum

Petty cash should only be used to make payments when all other methods are impossible.Wherever possible, suppliers accounts should be set up and invoices paid by cheque. Theadvantage of paying for most transactions by cheque is that this has the effect of producing anextra set of records in the form of the bank statement. Also, it ensures that only authorised

people make payments and it reduces the likelihood of theft or fraud.

9. Manage and monitor staff advances

Any cash advance given to staff (eg to go to the field) should be accounted for and clearedbefore another advance is given. All payments made must be justified by receipts. Anybalances owed to or owed by the member of staff must be paid to clear the advance.

10. Be clear about who is responsible for what

Everyone in the organisation should be completely clear about who is responsible for

handling cash, and what their specific responsibilities are. If possible, set out theresponsibilities on job descriptions. Everyone should also know who is not allowed to handlecash!


19/36

Everyone involved in an NGO, not just accountants, shares the responsibility for making surethat their funds are used effectively. But who should do what in practice?

1. The Board of Trustees

The Board is the governing body of the organisation. One of its main responsibilities is tooversee financial control and accountability in order to make sure that money is usedappropriately to benefit all those it is intended to help. This includes to:

Discuss and approve the annual budget Approve the organisations financial policies, including delegated authority Review quarterly and annual financial reports, including budget monitoring, cashflow

and the balance sheet Monitor progress in generating funds to ensure that the organisation has adequate

resources to carry out its objectives

Review and approve the audited financial statements Ensure accountability and transparency Periodically assess the financial risks facing the organisation.

2. The Chief Executive Officer (CEO)

The CEO is the most senior member of the staff team and is responsible for:

Appointing financial staff Managing the budgeting process Ensuring income is generated as set out in the financing strategy and budget Reviewing donor agreements to be aware of conditions attached to grants Making decisions about large expenditures (within the limits set by the Board) Ensuring that proper financial records and accurate books of account are kept Ensuring that financial reports are produced on time, in the correct format and

delivered to the right people Monitoring that programme activities are in line with the budget Checking financial reports and drawing the attention of staff/Board to problems Ensuring control of cash, stocks and equipment.

Note: The CEO may delegate some of the activities required to fulfil these obligations to

senior managers, such as the Finance Manager or Programme Managers, but the responsibilityremains with him/her.

3. Senior Managers

Typical financial management responsibilities of senior managers include to:

Coordinate the budget for their departments or projects Monitor their project budgets against actual income and expenditure Manage their budgets within the limits set Explain the monthly financial reports for their departments or projects to their staff Review the overall organisational financial reports and give input to the CEO on them


20/36

Assist the CEO with income generation, with specific reference to their projects ordepartments

Further delegate some financial responsibilities to members of their team egresponsibility for setting and controlling project budgets.

4. Programme Staff

Senior managers often delegate financial responsibilities to programme staff, including to:

Set the project budgets ensuring all costs are included Control the project budget to make sure money is spent as agreed Work with the finance staff to make sure everything is coded correctly Work with logistics/admin to make sure that resources purchased are the best value for

money Support partner organisations in planning budgets and monitoring expenditure.

5. Finance Staff

The finance team provide important technical support to the other members of theorganisation. Their responsibilities include to:

Handle the organisations cash including issuing receipts and banking money Administer the payment process to ensure bills are paid on time Complete the books of account and reconcile them every month File all financial documents and make them available for the auditors Produce financial reports for the Board, managers and other stakeholders Maintain records for cash, equipment and stock control Ensure vehicle log books and maintenance records are kept Keep the asset register for computers, vehicles and office equipment.

[Adapted from: Financial Control and Accountability Toolkit by Janet Shapiro, CIVICUS]

The current economic environment in which NGOs operate has become unpredictable. Therecession has impacted on NGOs income and reserves. No one can predict the depth orlength of any reduction in income, but it will not blow over quickly.

There will be opportunities as well as threats arising from the recession so planning shouldstart immediately. Here are ten practical ideas to help you manage in these tougher times:

1. Review your NGOs situation

Consider how the recession is affecting, or could affect your NGO. Understand the truepicture, not what youd like to believe. Carry out analysis to understand what your NGO doesbest and why. This will help you focus on your organisations strengths.

2. Act decisively


21/36

With increased uncertainty and volatility, it is important to take tough decisions early. Focuson key strengths and risks across your NGO. Do not underestimate the time taken to agree

potentially unpopular decisions. Dont sit back and wait; be ready to take advantage of therecovery when it arrives.

3. Remember Cash is King

Ensure your finances and cashflow are in good order. Cash management is vital. Monitor cashreceipts and payments closely to ensure you have funds available when needed. Look closelyat your financing and funding arrangements and any foreign exchange risks.

4. Focus on what really matters

Evaluate which activities, projects and programmes really add value and meet beneficiariespriorities. Revisit your existing programmes what initiatives could you stop or defer?

5. Manage your cost base

Focus on areas where performance could be improved. Go for targeted rather than across-the-board cuts so essential activities arent cut. Focus on using resources more efficiently andeffectively. Look at whether your way of operating needs to change.

6. Reliable management information is key

Now, more than ever, you need the right management information. Monitor your performanceagainst clearly defined financial and non-financial key performance indicators (KPIs). Keydecisions need to be based upon up-to-date and accurate facts.

7. Plan for different scenarios.

Be prepared to react quickly and flexibly and plan what if scenarios. Create a range offinancial, operational and staffing scenarios that reflect the possible impact of the recession onyour NGO, and then plan strategies to manage the impact.

8. Recognise the value of your peopleRegular and clear communication with employees, board members and volunteers is essential.Retaining and motivating key staff is critical to your future - develop appropriate incentivesfor them.

9. Understand your stakeholders positions

Evaluate the likely impact of the recession on your beneficiaries, funders and otherstakeholders. Make sure you understand their issues and priorities and maintain regular and

open dialogue.


22/36

10. Take advantage of the opportunities

Dont stop innovating or investing in those areas of growth you will need for the future. Dontforget who you are or what you do. Have an eye for the future.

Acknowledgement: These tips are based on 10 Fundamental Priorities for Managing in aDownturn by Ian Oakley Smith, Director, PricewaterhouseCoopers Charities Team.

In these financially uncertain times, it is more important than ever to ensure that you recruitthe best finance staff for your organisation. To help you find the right finance staff for yourorganisation, Mango have put together seven top tips.

1. Make sure the job description accurately reflects the

role

This is an area which is often overlooked within the recruitment process. However investingtime in putting together a robust job description will save you time and money in the longterm. Having an accurate job description allows you to attract candidates who are interested inthe content of the role on offer and will ensure that everyones expectations are managedthroughout the process.

2. Be clear on the skills and experience required for the

role

Take time to define the specific skills, experience and competencies required for the job andensure that there is some way of measuring these throughout the recruitment process. Thiswill ensure that only candidates that meet your criteria will reach the final stages of the

process.

3. Make the job description and particulars as attractive as

possible

Candidates are more likely to be attracted to positions which offer some degree of flexibilityor where there are opportunities for career development. If you are able to offer this, ensure

that this is made clear in the job advertisement and in the job description.

4. Use a structured interview and assessment process

Research has shown that past behaviour is an effective predictor of future performance so it isa good idea to ask candidates for examples of when they have demonstrated the skills andexperiences required for the specific role.

5. Conduct an appropriate skills based test at interview

Studies have also shown that combining an interview with a skills based test is the mosteffective way of identifying the best person for the job. A test will allow you to eliminate


23/36

candidates that are not able to perform the tasks required for the role and will also give you alevel of understanding of the training or support that the successful candidate may require.

6. Involve employees in the recruitment process

They may be able to recommend appropriate candidates, assist you with the selection processand even advise you on whether the job description and terms and conditions will be attractiveto potential candidates. They may also be able to assist you in assessing organisational fit atinterview stage.

7. Use Mangos Recruitment Service

We have a wide range of experienced finance professionals, ranging from consultants to thosewho are willing to go on assignment for expenses only.

We are a charity ourselves so we understand the constraints and environment within whichyou are working.

It is important to have a clear procurement policy to avoid confusion and to make sure we getvalue for money when buying goods or services. The policy also removes the suspicion offraud and the temptation!

Often we need to make sure we comply with donor rules and regulations so having ourinternal stages clearly defined helps us compare and adjust to donor regulations as required.Where a donors rules are stricter than our own internal policies we must make sure wecomply with the donor rules for that particular grant agreement.

The typical stages in a procurement process are illustrated below. Of course, your ownorganisations process may vary, with more or fewer steps, and use different terminology andforms.

1. Check the budget and the specification of goods or

services to be purchased

The exact quantity, standard and guide price of the goods or services required, as described in

the project budget, must be checked to ensure funds are available and the correct items arepurchased.

2. Prepare a purchase requisition

An internal request on a standard form is prepared to formally request the purchase of thegoods/services specified.

3. Authorise purchase requisition


24/36

This will usually be checked and authorised by the budget holder or another nominated personto verify that there is a genuine reason for the purchase. The available budget is re-checked atthis stage.

4. Obtain quotations

Quotations from reputable independent suppliers are obtained, as specified by the internalrules and/or donor rules.

5. Select the supplier

Quotations are reviewed and a supplier is selected based on price, quality, delivery and aftersales terms to ensure value for money. For larger purchases, it is usual to have a PurchasingPanel or Procurement Committee to select the supplier.

6. Issue purchase order (PO)

After the supplier is selected a PO is sent to the selected supplier with a copy kept on file. Thequotation will be attached to the PO. This then forms a legally binding agreement between thesupplier and the NGO.

7. Receive goods from supplier

When supplies are delivered/received, they must be checked against the purchase order toensure they are the correct items. A Goods Received Note (GRN) is usually signed and a copyfiled.

8. Receive and check supplier invoice

Once received, the invoice should be checked and matched up with the GRN, PO andquotation to make sure the goods have been received and the prices charged are as agreed.

9. Prepare and authorise the payment

The Payment Authority form is attached to the invoice and all the supporting documents. Itincludes budget and accounting codes and must be checked and authorised by the budgetholder or another nominated person

10. Pay the supplier invoice

Payment should be made to the supplier within the specified payment terms, usually 30 days.

11. Enter payment into the accounts

The final stage is to record the payment in the organisations books of account and add to theasset register.


25/36

As a grant-making organisation, you need to have confidence in the implementing partnersyou work with. You want to know if their financial management is strong enough to use andaccount for the funds properly.

But how do you go about assessing the financial management of a potential partner or even a

longstanding one? Here are some top tips to help you:

1. Develop a partnership relationship from the start

An assessment should be the first stage in developing an effective and long lastingrelationship between partners. Keep in mind the power dynamics that external funding cancreate and make sure assessments are sensitive to the local organisations priorities andconstructive from their point of view.

2. Be clear about the purpose of the assessment

Do you see the assessment as a test to be passed as a condition for funding? If so, thegrantee may not volunteer information about problems in case they fail.

Or do you see the assessment as a tool to identify opportunities for improvement? If so, beprepared to give your partner the chance to resolve any issues or even offer your assistance tohelp build your partners capacity.

If your assessment is aiming to do both of the above at once, have a list of minimum standardswhich must be met but also look at a wider range of financial management issues to identifyareas for improvement. (see points 4 and 5 below).

3. Talk to a range of people in the organisation

It is tempting to think that you only need to talk to the finance staff when doing a financialassessment but financial management is for everyone. If possible, talk to the ExecutiveDirector, all Senior Managers, field staff and beneficiaries as well as the Accountant.

4. Assess the quality of relationships with their partners

and beneficiaries

If your grantee is itself making grants, look at how it works with its own partners. Do theycarry out assessments? Are there formal grant agreements? Are there reasonable reportingrequirements to ensure accountability?

How closely do grantees work with the people they aim to help to ensure activities meet theirpriorities? Do they provide financial reports to communities?

5. Use Mangos health check

Mangos Health checkis a tool for organisations to assess themselves against best practiceand identify areas for improvement. It covers best practice in the Four Building Blocks of
http://www.mango.org.uk/Guide/HealthCheckhttp://www.mango.org.uk/Guide/HealthCheck


26/36

good financial management: budgeting, basic accounting systems, financial reporting, andinternal controls, as well as staffing.

6. Visit Mangos minimum requirements checklist

MangosMinimum requirements checklist separates the must haves from the should haveswhich could assist you in deciding on your assessment priorities.

7. Assess governance issues

Good governance has a fundamental impact on the effectiveness of financial management.Find out: whether the Board meet regularly? Do they review budgets and financial reports? Isthere anyone on the Board with financial knowledge or experience? Are there any conflicts ofinterest?

8. Review the audited financial statements and other

financial reports

The audited financial statements give an independently verified picture of the organisationsfinancial activities and balances. See our checklist for20 Questions to ask when reviewingfinancial reports.

9. Dont look at figures or financial systems in isolation

Avoid relying solely on checklists, tools or numbers to make an assessment decision. They allhelp you to gain an understanding, but it is important to consider each organisation in its owncontext.

10. Have a standard approach to ensure consistency and

fairness

If your organisation has several individuals assessing many applications, it is important todevelop a standard approach and tools or criteria, but leave plenty of room for flexibility and

personal judgement by the assessors.

Foreign exchange issues have come to the fore this year. We all got so used to the US$ andGPB being stable that the global financial crisis and subsequent fall in value of major donorcurrencies took many of us, and our grant contracts by surprise. It also exposed inadequatesystems for managing currency fluctuation risk.

And still for many, it all seems so complicated and risky that wed just rather not think aboutit. Well here are some simple tips to help you, your donors and your grantees make sense of itall. Here are 10 top tips to help you get to grips with it all.

1. Understand your forex risk
http://www.mango.org.uk/Guide/MinStandardshttp://www.mango.org.uk/Guide/MinStandardshttp://www.mango.org.uk/Guide/20Questionshttp://www.mango.org.uk/Guide/MinStandardshttp://www.mango.org.uk/Guide/20Questions


27/36

Any organisation whose income and expenditures are denominated in different currencies isexposed to foreign currency risk. Assuming that foreign exchange rates will remainunchanged is a form of speculation. It is helpful to map income and expenditure in the variouscurrencies to monitor currency flows and assess the organisations currency needs and risk.

2. Limit the number of forex transactions

If your organisation receives money in dollars, consider putting it into a dollar bank accountto make transfers to country offices and partners that work in dollars. Likewise with euros and

other donor currencies. This will reduce the number and the cost of currency transactions. Acurrency map will help you determine this.

3. Forward cover

Forward cover achieves certainty at a cost. The decision to agree a rate now to buy a currencyat a certain point in the future depends on your contract/donor and your NGO's circumstances.The commission/rates offered vary so it is worth shopping around to find the best deal.

Larger NGOs may decide to accept the risk of currency fluctuation as they may have greateropportunities to offset the gains and losses, or at least sufficient reserves to absorb losses.Smaller NGOs may be able to accept the risk of losses over time: a loss suffered now mayreduce reserves, but a gain in the future might rebuild them. But beware, as some donors mayrequire gains to be used in the project.

4. Money transfers

Ensure that you regularly review the currencies in which you make transfers to overseasprogrammes, to ensure that they are still the most appropriate (in view of thestrength/volatility with local currencies). Often transfers are made to field offices in dollarsfor historical reasons which are rarely reviewed.


28/36

5. Is there a problem?

Local prices might rise due to inflation, but (in a perfect forex market) the exchange rate willadjust so the hard currency needed is the same. Thus the donor funded project spends thesame in hard currency even if the local currency is adrift.

6. Strict internal controls

Due to the high fluctuation of exchange rates there may be an increased risk of fraud.Expenditure could be recorded at one rate while in reality another rate has been used. Thedifference is then pocketed. Strong internal controls need to be in place, and properlyenforced.

7. Re-submit budget before signing

There can be a significant time lag between the initial submission of a proposal and a projectstarting. Before the contract is signed, make sure the exchange rate assumptions made in the

budget proposal are still valid. Always note the date of the exchange rate on the budget.

8. Negotiate with your donor

Ask your donor to absorb the forex losses (or gains) or the cost of a forward cover contract.They should accept one of them. The forward cover contract cost should be included in the

budget for the project. If the contract is silent on forex then be confident to suggest to thedonor a clause regarding forex gains and losses. In light of experience in the last year, donorsare more likely to accept NGO requests.

9. Negotiate with your suppliers

Suppliers of large items are often happy to accept payment in any hard currency. So ask if youcan buy in the currency of your donor contract.

10. Use common sense when reporting

When trying to solve some of the forex difficulties in reporting, if no rate is specified usecommon sense to determine what rate to use. Be consistent in your approach and disclose itfully.

Say Financial Statements and most people think of accountants and auditors: something thatthey have to get excited (and stressed) about once a year, but which does not affect the rest ofthe organisation.

However, financial statements are not just a legal requirement. They provide information toall stakeholders including beneficiaries, the Board, donors and the general public. Sharingyour annual report and financial statements at meetings or online is easy to do badly.


29/36

These top tips give advice on how to share your annual report and financial statements so thatpeople can engage and understand them more easily. There are four sections:

1. General advice2. Presenting to Board members

3. Sharing with beneficiaries; and4. Publishing accounts on a website.

1 General advice

Focus on the big picture

Help people to get a sense of the key features of your accounts, such as total assets, liabilitiesand funds, total income, expenditure and surplus/deficit. People need to have a sense of the

big picture before getting bogged down in the detail.

Use charts and graphics rather than lots of numbers

Many people are immediately put off by numbers. Using graphical representations will helpget the message across.

Show trends

Analyse trends over 5 years or so and share interesting findings. For example, trends inlocally generated income, salary expenses, total programme costs, a particular expenditureline, ratios, level of reserves etc.

2 Presenting to Board members

Board members need to approve the annual financial statements and use them to

check that the finances of the organisation are being properly managed.


30/36

Consider a quiz

For a change, hand out a quiz (6-10 questions) that brings out the key features of the financialstatements. Each question should refer to the page number where the answer can be found.Ask people to work together in pairs or threes to complete the quiz. Review the answerstogether and have a prize for the best team.

Comment on comparison to targets

The Board may have set targets such as donor dependency ratio; admin costs in relation todirect programme costs; payroll equity (% gap between highest and lowest paid); level ofreserves etc. Share the targets and what has been achieved, highlighting efforts made,challenges met and future plans at the same time.

Point out any issues that require discussion or decision

Rather than going through the accounts line by line, give a big picture overview then steermembers straight to any significant issues that require their input, such as low levels ofreserves, overspent grants, ageing assets, difficult debts, worrying liabilities, or surprises thatwerent expected from ongoing review of the management accounts.

3 Sharing with beneficiaries

The quality of participation by beneficiaries is a key factor in NGO effectiveness.Most NGOs recognise the importance of being accountable to the communities we work with,

but few have set up systems to deliver it.

Discuss the method of presentation

Discuss which method would best suit local people to make it most accessible. Maybe ameeting under a tree with a flip chart, or displaying graphs on a notice board.

Make it accessible

The information should be made accessible to help all beneficiaries understand the finances,

not just a handful of representatives. Consider excluded groups, e.g. women.Focus on figures that correspond to the activities they are involved with.


31/36

Keep it simple

Use local language and local currency. As a rule of thumb, include no more than 15 lines offigures on a report.

Make it participatory

Allow time for questions and comments.

Get finance staff involved

Consider letting the organisations finance staff present the finances to the community(ideally in collaboration with programme staff). This provides useful segregation of duties andalso encourages finance staff to engage with the field work.

Get resources

When presenting budget monitoring information to non-literate people, an excellent resourcefor tools is an organisation called Little Fish.www.littlefish.com.au/web/money_storyDeeper.html Also, see the Who Counts? section ofour website for more information and ideas. www.mango.org.uk/whocounts/

4 Publishing your accounts on a website

Excellent for transparency, credibility and accessibility.

Convert your accounts into formats that work on web pages (e.g. html or pdf format) Make it possible to get to your accounts within three clicks on your website Break the annual report down into sections so that people can dip into a particular part

they are interested in Links to yourvision and mission are critical Make it accessible for people with disabilities (see Web Accessibility Initiative

www.w3.org/WAI/WCAG20/quickref) Take a look at Mangos websitewww.mango.org.uk/About/AnnualReports

This Top Tip covers the financial governance role of the members of your NGOs governingbody (often referred to as the Board). It is also available in French.
http://www.littlefish.com.au/web/money_storyDeeper.htmlhttp://www.mango.org.uk/whocounts/http://www.w3.org/WAI/WCAG20/quickrefhttp://www.mango.org.uk/About/AnnualReportshttp://www.mango.org.uk/About/AnnualReportshttp://www.mango.org.uk/Pool/G-TT20-gouvernance-financi%C3%A8re.dochttp://www.littlefish.com.au/web/money_storyDeeper.htmlhttp://www.mango.org.uk/whocounts/http://www.w3.org/WAI/WCAG20/quickrefhttp://www.mango.org.uk/About/AnnualReportshttp://www.mango.org.uk/Pool/G-TT20-gouvernance-financi%C3%A8re.doc


32/36

The board has ultimate legal, moral, and financial responsibility for the organisation. Boardmembers therefore represent and protect the interests of the beneficiary communities that their

NGO works with, which is why they are often called Trustees.

Governance is the legal authority of a board to establish policies that will affect the life and

work of the organisation while holding the board accountable for the outcome of suchdecisions. [from: www.boardsource.org]

Financial governance refers to policies and decisions that affect the financial life and health oforganisations. There are five key roles for board members to fulfil this duty:

1. Making sure funds are used to help beneficiaries

effectively

Making sure the organisation has practical strategies for analysing and responding to

social problems Monitoring that the organisation is actually doing a good job, putting its strategy into

practice and achieving value-for-money Making sure the organisation has appropriate internal procedures (such as internal

controls and accounting systems) to empower front-line staff to make goodjudgements

Regularly checking that internal procedures are followed in practice (eg carrying outinternal audits)

Taking an active role in internal controls as necessary (eg authorising large payments) Regularly monitoring financial reports, including the income and expenditure

statement and the balance sheet Monitoring whether the organisation is being accountable to its beneficiaries (eg

presenting financial reports to them).

2. Making sure the organisation has enough funding

Approving a realistic annual budget and fundraising plans Monitoring the amount of income received Actively working out how to ensure the organisation will be sustainable, including

approving a financing strategy Monitoring relationships with donors (eg if reports are submitted on time) Monitoring fund balances including general reserves (if any fund balances are

negative, this could have serious implications for your credibility.)

3. Making sure the organisation has effective senior

management

Recruiting a Chief Executive with financial management skills for their role (orsupporting the Chief Executive to develop these skills)

Supporting the Chief Executive to develop a culture of good financial management (egleading by example and encouraging finance and programme staff to work together)

Making sure that the most senior finance manager is a member of the most seniormanagement team
http://www.boardsource.org/http://www.boardsource.org/


33/36

Encouraging an open culture that recognises problems and aims to learn from them;and holding senior managers to account for the results of the decisions that they takeand the initiatives they launch.

4. Making sure that the organisation operates within the

law

Understanding the organisation's legal requirements, including Labour laws, Tax lawsand Health & Safety legislation

Making sure that the management team meets legal requirements (eg paying taxes,filing annual reports)

Appointing external auditors, overseeing the audit and approving the audited accountsand annual reports

Filing reports with government departments.

5. Making sure the board can handle its responsibilities

effectively

Appointing a Honorary Treasurer, with specific responsibilities for financialmanagement and the skills to carry them out

Making sure that all board members understand their financial managementresponsibilities and supporting them to develop appropriate skills

Making sure there are no conflicts of interest between the organisations operationsand board members work or business interests

Making time at board meetings to discuss the financial management aspect of allmajor decisions.

his Top Tips sheet outlines advice from our colleagues at Transparency International UK (TI-UK) on what you could do to fight back against the curse of corruption.

Research by TI-UK suggests that among NGOs anti-bribery procedures are either poor ornon-existent. This is often explained by the difficult circumstances in which NGOs areoperating on the ground,. Paying a bribe is seen as the only way to get things done.

However, we must not forget there is strong evidence to link corruption and poverty. This is

a powerful reason for fighting bribery and corruption.

Where to start?

Most NGOs are nave or in denial about bribery but they should be the ones who care most!Start the fight back by asking these questions in your NGO to get a discussion going:

Is there a bribes policy and are employees aware of it? Have bribes been demanded or paid?

How much and how often? Have they been successfully avoided?


34/36

What do your employees/partners do when they suspect corruption? Are projects designed to prevent bribery?

Avoidance strategies: or how to reduce the risk of paying a

bribe1. Conduct a risk assessment: where is your organisation exposed to a high risk of

bribery and how effective are your anti-corruption policy and management systems?2. Introduce a zero-tolerance policy: put in place a headline policy that recognises the

damage that corruption does to your goals and mission; the importance of stronginternal anti-bribery systems; and makes it clear that the organisation does not tolerate

bribery in any form. Establishing a reputation for not paying bribes is an importantstart.

3. Put in place strong anti-bribery systems: Key areas to consider include procurementsystems, audit and whistle-blowing. Transparency International (TI) produces a

checklist to assess anti-corruption procedures - although aimed at companies, it is alsorelevant to NGOs.

4. Design out bribery from future projects or operations: embed anti-corruptionmeasures in project design. For instance, set achievable timescales, train staff and takecare in selection of partners and suppliers.

5. Gather local knowledge and information: it is important to know whether bribes arebeing paid by your employees, agents or partners and if so where, how much, andhow frequently. Find out which government departments or officials are less corrupt,which ports are corruption-free.This sort of information is crucial if your NGO truly wants to implement a zero-tolerance policy and to design out bribery. Ask at your local TransparencyInternational (TI) chapter, embassies, local businesses and other NGOs.

6. Provide training and support: implementing effective anti-bribery systems can be adifficult process, and employees and partners may feel vulnerable and ill-equipped,especially in a transition phase from one way of doing things to another. Propertraining and support is a vital part of this process.

Resistance strategies: or what to do when asked for a bribe

1. To pay or not to pay? Never refuse when your personal security is threatened.Depending on the situation, you could refuse to pay or play ignorant and find

yourself being waived through or receiving the service anyway.2. Seek creative solutions are there alternative options, eg can you buy equipment in-

country rather than having to import and pay special customs fees?3. Consider collective action if enough organisations and companies resist paying

bribes and share information, some endemic corrupt practices will be forced out.Publicising known regular corrupt practices in the local media such as the infamousroad block on airport roads could also have a positive impact.

4. Seek advice - contact the local TI chapter or embassies for advice on local resistancestrategies, and to report corrupt practices.

Remember: You do have a choice!Many organisations refuse to pay bribes. It may make some operations more difficult to runBUT saying no to bribes helps create a better society


35/36

The safe handling of cash is important for the management of project resources and securityof project staff, especially in an emergency response. Every NGO should have its own

policies and procedure on cash management - here are some general points and practicalsuggestions to consider.

Be aware of the risk to cash and yourself at all times!

General advice

Keep cash balances to a minimum. Aim for no more than two weeks supply of cashon office premises where an adequate banking system exists.

Keep cash in a locked metal cash box and stored in a secure, discretely located safe. Only move cash when absolutely necessary. When doing so, avoid sending people

alone and maintain confidentiality about movements. Avoid fixed routines for cash withdrawals from the bank.

Consider obtaining insurance for cash held on the premises and cash in transit. Theneed for this has to be balanced with the cost of insurance. Use cheque payments for bills whenever possible and as soon as possible. For major purchases, is there another way? eg direct payments from head office

into supplier bank accounts or ask suppliers to collect cash from your offices. For staffpayroll, consider direct transfers into bank accounts.

Carry out cash counts as a spot check, varying the time and day in the week. Count and sign for cash each time it is handed from one person to another. Reconcile cash balances at least once a week.

Before you arrive in the field

Split money between the team travelling out to the emergency. Check restrictions on bringing money into the country. The usual restrictions may

change in an emergency situation. Arrange a letter of authority from Head Office toconfirm your role and the amount of cash you are carrying.

Have a mix of denominations to make small (or large) payments immediately. Use money belts 24 hours a day! Consider where cash will be held on arrival will you need to take a safe? Check the insurance for cash in transit. What are the limits? Collect the cash at the latest possible minute.

Once you arrive in the field

Declare money to customs authorities, if required. Dont advertise how much money you are carrying. Keep this information within

the team. Put the cash in a safe place or a bank as soon as possible. Where there are no banks,

look for creative, acceptable safe alternatives, eg a pharmacy safe. Assign one person to oversee and access safe to minimise risk. Disguise the safe as much as possible in the tent/office. Take care in a tent office: close the door or have someone at the door to stop

people wandering in when you access the safe.


36/36

Carry out your cash reconciliation in private or during a quiet period, to avoidbeing distracted or diverted.

Keep notes neatly and clearly bundled in the safe to avoid confusion. Keep your working advance separate from your personal money. Establish acceptable means of transport for the cash carrier. For example, charter

or commercial flight? Public or private road? NGO car or private car?

When leaving the field

Do a formal handover of remaining cash. Do a cash count together and ask theperson taking over to sign a handover document confirming they have taken receipt ofthe cash.

Avoid carrying significant cash home. Spend it on regular project expenses, egsalaries, or an arrangement with another NGO who will reimburse Head Office.

Observe the same cash security measures when you travel home with cash as you

did when you travelled to the field.

10 Top Tips for Grant Management

Documents

Transcript of 10 Top Tips for Grant Management