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Transcript of G Mango Accounting Pack User Guide v3 Apr10
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Mango’s Financial System
User Guide
Version 3, April 2010
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Mango’s Financial System 1
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
The use of all of Mango’s tools and materials is subject to our Policy on the Use of Mango’s Tools and Materials. Copies of the policy are available on request, and from our website .
For further information, please contact:
Mango, Chester House, George Street, Oxford, OX1 2AU, UK
Website: www.mango.org.uk
Phone: +44 (0)1865 433885
E-mail: [email protected]
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Mango’s Financial System 2
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
Contents
1. Introduction ........................................................................................................... 3
2. Who can use Mango’s Financial System? .............................................................. 3
3. Overview of Mango’s Financial System ................................................................. 3
4. Setting up Mango’s Financial System .................................................................... 4
5. Using the spreadsheets .......................................................................................... 6
6. Preparing the accounts codes ................................................................................ 77. Entering your budget on to the Management Report......................................... 10
8. Entering transactions in the Cash book(s) ........................................................... 10
9. The Analysis Sheet ............................................................................................... 12
10. Dealing with different currencies .................................................................... 13
11. The Consolidation Form ................................................................................... 15
12. Preparing the Management Report ................................................................. 17
13. Recording Non Cash information in the “Registers” ....................................... 1914. Internal Controls – using Mango’s Financial System “Forms” ......................... 24
15. Financial Controls ............................................................................................. 28
16. Excel Tips .......................................................................................................... 31
17. Mango’s Accounting Principles ........................................................................ 34
18. Mango’s Financial System Spreadsheets ......................................................... 36
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Mango’s Financial System 3
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
1. Introduction
Mango’s Financial System is a simple set of tools for accounting and financial management
in small to medium sized NGOs. The System includes spreadsheets and forms to record
financial transactions; it can produce financial reports for monitoring, and it provides the
financial forms you need for key internal controls. The system can be easily adapted to meet
the needs of any particular NGO.
An NGO can obtain the following benefits from using Mango’s Financial System:
- crucial records can be kept in good order,
- financial information can be prepared on time and be easily understood,
- trust and respect can be built up within the staff team,
- mistakes and fraud may be prevented,
- staff will be able to do their job well.
These issues are discussed in more detail in Mango’s Guide to Financial Management for
NGOs, freely available from Mango’s website, www.mango.org.uk.
We welcome any feedback on your experience of using the system, and any suggestions for
improvements. Please let us know how we can make it better for you!
2. Who can use Mango’s Financial System?
The system is already used by many small and medium sized NGOs. They include local
community organisations and field offices of national and international NGOs.
Mango’s Financial System may not be appropriate for NGOs that handle a large volume of
transactions, or those that have special accounting or reporting requirements.
Users do not need to have much experience working in finance: the system includes full
explanations of all the different procedures. But they need to be comfortable working with
numbers, and using Excel and computers. (The system is based on Excel spreadsheets.)
If you do not have easy access to computers, then the spreadsheets and forms can be
photocopied and the system run on paper.
3. Overview of Mango’s Financial System
3.1 System features
The main features of Mango’s Financial System are:
- Based on Excel spreadsheets and forms
- Follows widely accepted NGO accounting principles
- Is simple, flexible and transparent
- Can handle the use of different currencies
- Produces daily cash balances and monthly reports
- Can be adapted to meet the reporting requirements of each NGO
- Can be downloaded free of charge from Mango’s website.
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Mango’s Financial System 4
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
3.2 Structure of Mango’s Financial System
The general shape of Mango’s Financial System is as follows:
Preparations
- A list of ‘accounts codes’ is prepared and entered into the system
Daily transactions
- Daily cash (or bank) transactions are recorded in Cash Books.
- The transactions are analysed on Analysis Sheets by account code.
- At the end of the month the transactions are converted into one standard currency
(referred to as the ‘reporting currency’) and summarised on a Consolidation Form.
- The Consolidation Form feeds into a Management Report.
Other transactions
Transactions which do not involve an immediate cash transfer are recorded in a series of
Registers. These include the committed expenditure register, the assets register, the floats
register, the loans register and the funding grid.
Monthly reports
At the end of each month users should prepare the Management Report and the Funding
Grid (and floats/loans registers as appropriate). The Management Report compares actual
expenditure to the budget. The reports provides a complete financial picture, enabling
managers to understand and control their financial position.
Standard controls and procedures
The system includes standard controls and procedures (supported by forms). These controls
ensure that resources are used in an appropriate manner and that the accounting system
meets basic audit requirements.
4. Setting up Mango’s Financial System
Mango’s Financial System
Consolidation Form
ManagementReport
Committedexpenditure
Fundinggrid
Assets
Floats
Loans
“Registers”
Cash Book
Cash Book
Cash Book
Analysis Sheet
Analysis Sheet
Analysis Sheet
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Mango’s Financial System 5
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
There are ten steps for setting up and running the system. You may wish to enter
transactions immediately (Step 4!), setting up accounts codes as you go along. However, we
strongly recommend that you work through each step in turn, as this will help you set up the
system properly, linking transactions in with your existing reports – and will help you
understand the system and ultimately save you time.
Setting up:
STEP 1 Download Mango’s Financial System spreadsheets (section 5) and plan
procedures for saving and backing up files.
STEP 2 Prepare a list of ‘accounts codes’. Enter your list of accounts codes onto the
consolidation spreadsheet and copy onto the cash book Analysis sheets.
TIP: A MODEL LIST OF ACCOUNTS CODES IS PROVIDED!
STEP 3 Enter your budget on to the Management Report (section 7).
Daily use:
STEP 4 Enter transactions in the cash book(s) (section 8).
STEP 5 Support transactions with the appropriate Forms (section 13).
STEP 6 Record non-cash information and transactions into the appropriate Registers as
and when these transactions take place (section 14).
At the end of each month:
STEP 7 Carry out month-end internal control procedures (eg cash and bank
reconciliations), (section b)).
STEP 8 Review the analysis on the Analysis Sheets (section 9) and enter currency
exchange rates, if you are using more than one currency used (section 10).
STEP 9 Complete the entries on the Consolidation Form (section 11). Excel does most of
the work but some final adjustments may be needed before information flows
into the Management Report.
STEP10 Prepare the Management Reports (section 12) and carry out monthly back up
procedures (section 0).
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Mango’s Financial System 6
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
5. Using the spreadsheets
5.1 Using the spreadsheets for the first timea) The system is based on three Excel files, called: Mango System, Mango Forms and
Mango Registers. There is also a model list of accounts codes: Mango Accounts
Codes, and an example of how the system works in practice: Mango Model . See
section 18 for full details of the contents of these files. We recommend that you set
up a separate folder for these Excel files, which you only use for accounts.
b) If you are not yet an expert on spreadsheets, we recommend that you read through
section 16, Excel Tips, where some useful techniques and formulas are explained.
c) You will find that each file contains a number of ‘worksheets’. You can move
between these by pressing the Tab at the bottom left hand corner of the page.
d) The main file you will use is ‘Mango System’, which holds all the main accounting
records. You should save a new copy of the file with a different name at the start of
every month. For example, if your financial year runs from July 2010 to June 2011
you might call the first file ‘Accounts 2011-01 Jul.xls’ (2011 indicating the financial
year end, 01 indicating the first month in the financial year). The August file would
be called ‘Accounts 2011-02 Aug.xls’, and so on. This way the files will be listed in
the folder in date order.
e)
Once you have saved your file you can select the Tab at the bottom of the workbookentitled ‘Accounts List’. Section 6 explains how you prepare your list of accounts.
You carry on from there.
f) Do remember to back up your work every day!
5.2 Procedures at the month-end
At the end of each month, save the file and print out all the worksheets. Then you have to
prepare the file for the next month. Save it a second time (‘save as’) with the new month
name, as explained in (d) above. Next, you have to remove the transactions from the last
month. This has to be done with great care and in strict order as follows:a) Go to the Management Report worksheet. Make the column for the new month wider,
if you need to. Go to the ‘Working Assets’ section at the bottom of the spreadsheet.
Enter the closing cash and bank balances from last month, and floats and loans, as
opening balances in the column for the new month. If the amounts from the previous
month’s Consolidated report have been entered manually there is nothing else to be
done.
b) Move on to the Cash books. Change the month in the header and then enter the closing
balance in the blue box into the opening Balance Box (Do this manually – or you risk
copying formulas and creating problems!). Once this has been done you can delete allthe transactions entered in the previous month.
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Mango’s Financial System 7
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
c) Then move on to the Analysis Sheets. If you only use one reporting currency there is
nothing to be done on this sheet. If you are using more than one currency then there
are two important tasks on the Analysis Sheets: first enter the past month’s exchange
rate into the ‘Last Month’s exchange rate’ box. Then enter this new month’s exchange
rate into the ‘This Month’s exchange rate’ box. (If your organisation only uses onecurrency leave the rates in both boxes as ‘1’.) Secondly, if during the previous month
you modified any of the exchange rates next to any of the accounts restore the
exchange calculation formula in Column ‘F’ (the ‘This Month’s Exchange Rate’ column).
d) Finally move on to the Consolidation Sheet. Enter the new month at the top of the
Sheet. If you manually entered the previous month’s totals into this sheet you can now
delete all the transactions. BE CAREFUL NOT to delete the BLUE BOXES (totals). If the
amounts in the monthly columns are linked with formulas across to the Analysis Sheets
then you will only need to delete the transactions recorded in the ‘Journal’ and
‘Expenditure from Other offices’ columns (the other amounts would have been zeroed
when you deleted the transactions in the Cash books).
e) Save the file again, plus a further backup copy.
6. Preparing the accounts codes
6.1 Setting up a list of accounts codes
You need to enter some basic information before Mango’s Financial System spreadsheets
will work. This should be fairly simple. The first step is to make a list of each type of receipt
and payment that your NGO may receive or spend. These are called ‘accounts codes’. For
example, receipts might include: donations, grants and sales. Payments might include:
salaries, travel expenses, and office costs.
You should enter this list onto the ‘Accounts List’ worksheet.
Remember the golden rules:
Store weekly backup copies of these files in
another folder.
Print out paper versions of these files at the end of
each month. File these safely.
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Mango’s Financial System 8
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
6.1 Setting up a list of accounts codes (contd)
Planning a coding structure
The codes should be planned so that similar types of income or expenditure are grouped
together. For example, different types of expenditure might be grouped together as‘administration costs’ or ‘personnel costs’ or ‘project costs’. Each individual type of income
or expenditure is then given a code. For instance ‘telephone costs’ might be 200,
‘photocopying’ might be 210 and ‘stationery’ might be 220.
Using letters
If you want to, you can also use letters in the codes. This can be useful for ‘sub accounts’.
For example, if you are running various projects, the photocopying for first project might be
210W (for a Water project); photocopying for the second 210H (for a Health project) and so
on. You can use whatever codes you want – whatever will be most useful for you and your
NGO, as well as for your donors and for any legal requirements.
Being consistent
Please be very careful when you are designing and entering account codes: they have to be
written in a consistent format, matching the format that you use next to each transaction in
the cash book.
If they are not written in exactly the same format, then the computer will not be able to
analyse your cash book automatically. For instance, the computer will not recognise
‘ABC123’ as the same code as ‘ABC-123’ or as ‘abc 123’ or as ‘ABC 123’. It does not matter
which format you choose. But you must pick one, and follow it. Design accounts codes so
that they are logical and easy to remember, with space to create new accounts later on.
Sample list
A sample list of accounts codes is provided. You can copy some of the accounts and account
codes from the sample to your own list if this is helpful. In some countries there is an official
chart of accounts (often in French speaking countries). It probably will not fit your needs as it
is designed for commercial organisations, but you may wish to adapt and follow it as closely
as possible.
You will see that accounts for cash and bank transfers, float and loan payments and
reimbursements, have been entered already on your list of accounts codes. These accounts
are critical for the operation of the system. If you introduce additional cash or bank
accounts then they will also have to be added to the list of accounts codes.
When you have finished preparing your own list of accounts codes save your file again!
TIP: It is a good idea to print out a copy of your ‘List of Accounts Codes’ in a large
font so that everyone who is involved with handling budgets or finances knows
the name and code for each account.
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Mango’s Financial System 9
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
6.2 Copying the accounts codes into other worksheets
The next step is to copy your list of accounts codes into the Consolidation Form ; then onto
the Analysis Sheets and finally into the Management Report. These sheets are explained in
more detail later. Make sure that every analysis sheet form that you use has exactly the
same list of codes on it (whether you use all of the codes in each account or not). This is very
important because it makes it much easier to consolidate the accounts.
It may be easiest to copy your list of accounts codes using the Excel functions ‘Copy’ and
‘Paste’ (see section 0). You may also need to ‘Insert’ new rows if there is not room on the
various worksheets for your accounts. Do check that there are enough rows before you
copy rows of accounts over from your list of accounts codes to another sheet, or you may
copy them over existing data. That could give you some problems! If you do make a
mistake, remember that you can click on the Excel ‘Undo’ button to get back to where you
were.
If you insert new rows for accounts you will need to copy down the formulas that are
entered on the previous rows. This is very easy and the technique is explained in Excel Tips
and Hints section 0.
6.3 Creating more cash books for cash and bank accounts
If your NGO runs several cash or bank accounts, either in your office or elsewhere, this is a
good moment to create new worksheets for each separate cash and/or bank accounts. The
format of the worksheets is the same for both cash and bank. In accounting terms, there is
no difference between a cash account and a bank account – the transactions for both are
recorded in a ‘cash book’.
You will see that each cash book has its own analysis sheet, and that there are formulas thatlink these two spreadsheets together. The easiest way to create a new cash book, together
with its analysis sheet, is to copy one of the ‘pairs’ of worksheets (‘Cash’ or ‘Bank’) that has
already been provided.
This is done by highlighting the Tab for the ‘CSBOOK1’ worksheet; then, by holding down
the Control key on your keyboard, highlighting the ‘CB1ANALYSIS’ worksheet. Then select
‘Edit’ from the main window; – then ‘Move or Copy Sheet’. Then tick the ‘Create a copy’
box and indicate where you wish to position the two new sheets in your workbook. Then
press ‘OK’.
CONGRATULATIONS! You can now start making entries in the cash books.
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Mango’s Financial System 10
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
7. Entering your budget on to the Management Report
Mango’s Guide to Financial Management of NGOs ( www.mango.org.uk/guide
) includes
notes on how to prepare a budget for an NGO. This section describes how to enter your
NGO’s budget information onto the Management Report.
You must use the same list of accounts codes in your budget as you use in your financial
system – otherwise you will not be able to compare the financial reports to the budget,
which is a crucial control. When you have prepared your budget, select the Management
Report worksheet (the Tab is labelled ‘Report’). Enter the period that the Budget covers at
the top of the page.
You will see a column near the right-hand side, headed ‘Budget’. Enter your budget figures
into the rows in this column, taking care not to accidentally delete the formulas in the
adjacent columns.
When the Management Reports are prepared, Mango’s Financial System will automatically
make some comparisons between your budget figures and the actual results. The columns
to the right of the budget will show you the amount of the budget that has not yet been
spent, or has been overspent, and also will show you what percentage of the budget has
been received or spent.
Do not be concerned about the cells marked “#DIV/0!” These are cells where there is a
formula which needs figures in the actual, or budget, columns before it can work.
8. Entering transactions in the Cash book(s)
8.1 Introducing the cash book
All cash or bank transactions must be recorded in a cash book. (A cash book is simply a list
of these transactions.) It is very important that it is always accurate and complete, and it
should be updated every day.
A separate cash book must be kept for each account that an office uses. So, there must be
separate cash books for each currency used, and for cash as opposed to bank accounts. For
example, an office in Rwanda might have four accounts, and four cash books: Rwandan
Franc Cash Account, Rwandan Franc Bank Account, US Dollar Cash Account and US Dollar
Bank Account. The procedure for creating new cash books is explained in Section 0.
You should enter the name of the office, the account name, the month and year at the top
of the cash book. In Mango’s Financial System a new file is opened each month, starting
with the previous month’s balance.
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Mango’s Financial System 11
© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
8.2 Entering transactions
A separate row of the cash book must be filled in for each transaction. Each entry must
include:
• The date that the receipt was received or the payment made;• A reference number, which should be the Payment Voucher number, if possible. If
for some reason no Payment Voucher is available, then a receipt or invoice number
can be used instead;
• The name of the supplier (or person from whom cash has been received) together
with a brief description of the receipt or goods/services bought (always made as
precise as possible);
• The relevant accounts code (keep your list of account codes next to your desk);
• The amount received in the receipts column or spent in the payments column.
8.3 The opening cash or bank balance
Enter the opening balance at the beginning of the month in the top row of the summary box.
If it is a negative balance enter the balance as a negative figure. Do not make entries in any
of the ‘Blue’ Cells as these contain formulas and are calculated by the spreadsheet,
automatically giving you the closing balance up to the date where you have entered
transactions.
The spreadsheet has been formatted so that the top few lines (including the titles) always
remain on the screen. (This was done using the Freeze Panes tool.) It will also do the same
thing when printing: it will repeat the titles at the top of each page printed (see section 0.)
8.4 Transfers between cash and bank accounts
You have to be very careful entering these transfers as entries have to be made in two cashbooks. For example, if $5000 is transferred from Bank to Cash an entry has to be made in the
bank Cash book paying out the $5000, with the account code reference of the cash book
(CB). A further entry has to be made in the Cash book showing the receipt of $5000,
referenced to the bank cash book (BK). If this involves currency exchange please refer to
section 10.3.
8.5 Entering account codes
You also have to be very careful entering the accounts codes as already mention in section 0.
If you enter an account code that does not ‘match’ one that is listed on the Cash book
Analysis Sheet, or forget to enter one, a warning ‘CHECK CODE’ will appear in red in the
summary at the top of the page! This will disappear once a correct code has been entered.(This is created by an Excel ‘IF’ formula – see 0).
8.6 Adding new accounts and account codes
If you have a receipt or payment for which there is no account you will need to set up a new
account and account code. Be sure that this is really necessary, and obtain management
authorisation before proceeding.
If you decide to go ahead, first, save your file! The next step is to go to your list of accounts
codes. You may need to insert a new row so that you can enter the new account in the right
place on the list. When you have done this you will need to change the list on the
Consolidation Form, the Management Report and on each Cash book Analysis Sheet.Remember that you will need to copy down the formulas from the previous rows for totals
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© Mango 2010 Registered charity, no. 1081406, Limited company registered in England & Wales, no. 3986178
and for calculations. (If you have ‘linked’ amounts between worksheets you will also need to
enter new links for the new account).
8.7 Deleting accounts and account codes
Care is needed before deleting account codes that are no longer used. It is best not todelete accounts during the financial year, but to wait until after the year is completed. In
this way you can avoid deleting an account that has been used in the financial period. Save
your file before you make any addition or deletion. Any changes in the accounts and
accounts codes should be authorised by management.
8.8 Physical Records
Each cash book should be backed up with folders of documents supporting each transaction.
Receipts should be supported by: duplicate receipts, donor correspondence, etc. Payments
should be supported by a payment voucher, and attached to this would be payment
requisition forms, quotes, suppliers’ receipts, invoices, and any other relevant
documentation. Payments and receipts should be filed separately in separate folders foreach cash book. File these documents in date order, the most recent on top. This filing
system should make it easy to find the records for any transaction listed in the cash book.
9. The Analysis Sheet
9.1 Introduction
Each cash book is linked to an Analysis Sheet. The analysis sheet lists all the accounts that an
office uses. For each account all the cash book transactions must be added together and the
total spent or received entered next to the account on the analysis sheet. This is the bit of work that your computer will do for you. It can save a great deal of time.
The analysis sheet is also the place where transactions in foreign currency are converted to
your NGO’s reporting currency at the rates of exchange set by your organisation each
month. Section 10 gives full details on how Mango’s Financial System handles foreign
currency transactions.
Two cash books with analysis sheets are provided in Mango’s Financial System spreadsheet.
If more are required you can copy one of these – but copy both the cash book and its
analysis at the same time! This is important in order to keep the formulas on the two pages
that are linked to each other. The way to copy these two together is explained in section 0.
9.2 Setting up the Analysis Sheet
The analysis sheet must be set up with your basic information before it will work. This should
be fairly simple.
You have probably already copied your list of accounts codes from the Consolidation Form
onto the Analysis Sheets. See section 0 for details as to how this is done. Take care when
entering the Account Codes – you must use EXACTLY the same list every other time!
The analysis sheet is set up with columns for Account Code, Account Name, Receipts,
Payments, This Month Exchange Rate and Total Reporting Currency. These last two columns
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are explained in section 10. The amounts in the final column are eventually transferred
(manually or by linking) to the Consolidation Form (see section 0).
The Spreadsheet uses a ‘SUMIF’ formula for the analysis work (see section 0 for more
details). This means that it looks down the list of transactions on the cash book, and picksout all of the transactions that have the same code, and then sums them together.
The formulas are already on the analysis sheets. If you enter any new rows in the analysis
cash book the following step should be taken: select the cells containing the formulas in the
existing row above the new one, and then copy them down (but not across) to any new rows
where you have entered your codes and descriptions.
10. Dealing with different currencies
10.1 Currency conversion and exchange ratesIf you run accounts in different currencies, then you will have to convert all transactions into
one, standard, reporting currency. This allows you to monitor the overall office expenditure,
and compare it to the budget. Branch offices may also be required to submit monthly
financial returns to a head office in a reporting currency (for instance, in GB Pounds for UK
based NGOs).
The currency conversion takes place on the analysis sheet. If transactions in a particular
cash book have to be converted into a reporting currency for consolidation, then monthly
exchange rates for last month and this month should be entered in the boxes indicated at
the top of the analysis spreadsheet.
102. Choosing and entering exchange rates
You will need to be careful about the exchange rate that you choose. It is generally
acceptable to pick an average of the exchange rates used over the month. Some
organisations (and donors) prefer you to use the exchange rate of the last working day of the
month instead. You may also find that for some projects, a different exchange rate
altogether should be used. This will only be the case when it is explicitly set out in an
agency’s financial procedures.
The exchange rate difference is calculated on the analysis sheet. It is done in the box
underneath the page heading. It is a simple calculation, working out the difference between
the opening balance at last month’s exchange rate and the closing balance at this month’s
exchange rate.
The opening and closing balances in reporting currency will be automatically calculated, and
also the exchange rate difference. The balances and the exchange differences are entered
on the consolidation form at the end of the month.
10.3 Currency exchange
a) Editing rates of exchange
Some special entries may be needed when one currency is exchanged for another. For
example, if you exchange €1000 Euros (the reporting currency) for local currency LC at
the rate of 20 LC=€1. This gives your NGO 20,000 LC. The bank cash book and analysis
sheet will show €1,00 as paid out. The cash book receiving the money will record
20,000 LC that is then converted back into Euro using the monthly rate of exchange. If
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this is set at 25 LC=€1 it will be converted back to €800 Euro. This would create a
problem, because the two sides of the transaction do not balance.
In these circumstances you can change the rate of exchange used in respect of this
particular account, as it is important that ‘both ends’ of the transfer are the same
amount (€1,000) on the Consolidation Form. The Consolidation Form will not balance if they are not! This is done on the analysis sheet, next to the cash book account. If there
is more than one transaction during the month you will have to work out the
appropriate ‘average’ rate of exchange so that the two sides agree.
If you do change any currency exchange rates, then you are replacing the formula for
‘This month exchange rate’ next to the cash book account. When you set up the cash
book for the following month, copy this formula back into the cells that you changed.
b) Exchange Rate Differences
Changes in the exchange rate can lead to a change in the value of assets. For instance,an office might hold RWF100,000 in cash in January and February. In January, the
exchange rate may be 450RWF = £1, so the RWF100,000 would be equivalent to £222.
In February, it could fall to 500RWF = £1, so the same RWF100,000 would now be
equivalent to £200.
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11. The Consolidation Form
11.1 What the Consolidation Form doesThe consolidation form brings together information from all the different cash books for all
the different accounts, and consolidates this information in one reporting currency. It allows
you to monitor the total cash amount spent or received on each accounts code over the
whole month. It is likely that this is the most appropriate statement to submit to a head
office as part of the monthly accounting returns.
The Consolidation Form does not produce figures ready to compare to the budget, because
it does not include future committed expenditure. These transactions appear in the
Monthly Report (see section 12 for further details.)
The consolidation form is made up of columns of data from each analysis sheet. These showthe amount received/spent on each code, in each account. There are two additional columns
at the right hand side of the form: ‘Journal vouchers’ and ‘Expenditure made in other
offices’.
The ‘journal vouchers’ column is used to record any adjustments made to the accounts (for
instance, rectifying mistakes that creep into the accounting, like a mis-coding). See section 0.
The ‘expenditure made in other offices’ column is used to record expenditure that has been
made on your behalf by another office. See section 0.
The final output of the consolidation form is the last column of figures on the right. Thisshows the total cash movements on all of your NGO’s accounts lines over the month. They
make up the main element of the management report, which is described in section 12
below.
11.2 Setting up the Consolidation Form
Enter the name of your organisation and month and year at the top of the form.
You have probably already copied your list of accounts codes to the Consolidation Form. See
section 0 for details as to how this is done. Take care when entering the Account Codes!
Enter the name of each Cash book account in the titles of the ‘Details of Accounts’ columns.
You may have to insert more columns, if you have more than six accounts. Make sure that
you copy over the formulas in the blue total and control cells at the bottom of the page.
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11.3 Completing the Consolidation Form at the end of the month
The first step in using this form is to make sure that the previous forms have done their job
properly. You should check that all transactions have been entered onto the right cash
books, and that the cash books have been properly analysed. You should print out and file allthe cash books and their respective analysis sheets.
The figures on the cash book analysis sheets have to be entered on their respective columns
in the Consolidation Form. The consolidation form must only contain figures in the
‘reporting’ currency. So you will use the figures from the ‘reporting currency’ columns of the
analysis sheets to complete it.
The figures may either be entered manually, or, if you are confident with Excel, you may
copy the information across from the cash book analysis sheets using “Paste-Special-Values”,
or by linking.
Do make sure that the totals of the columns on the Consolidation Form equal the closingbalances on the individual cash book analysis sheets. There is a control at the bottom of the
page where you can either enter in these balances manually, or link them in, in order to
check that these equal the totals on the Consolidation Form.
Check that transfers between cash and other cash or bank accounts “zero out”. There is a
control that indicates this at the bottom of the Consolidation Form.
Very small rounding differences can arise on cash books kept in a currency other than the
reporting currency. Enter these differences in the “Roundings “row at the bottom of the
page. The control will then confirm that the column is mathematically correct.
11.4 Journals
The ‘journal vouchers’ column is used to record any adjustments made to the accounts (for
instance, rectifying mistakes that creep into the accounting, like a mis-coding. Another
example is the recording of expenditure accounted for against floats. Explanations should
be given on supporting journal vouchers. These must be authorised at a high level within the
organisation, as they allow major changes to the accounts.
A journal entry always affects two accounts (see section Error! Reference source not found.
for more information about double entry bookkeeping). Journals that increase income
accounts, or decrease expenditure accounts, should be entered as “positive” figures.
Journals that decrease income accounts, or increase expenditure accounts, should be
entered as “negative” figures.For example, if an employee has accounted for $82.50 expenditure from a float, and it was
all used for local travel, the journal entry would be –82.50 in the row recording local travel
and +82.50 in the row recording floats (paid)/reimbursed.
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11.5 Expenditure made in other offices
The ‘expenditure made in other offices’ column is used to record expenditure that has been
made on your behalf by another office. For instance, a vehicle might be bought on your
behalf by your head office in the UK. This money will never come through any of your cashor bank accounts. However, it will be recorded as expenditure against your budget. So, it
must be recorded on the consolidation form as well.
This gives rise to two critical issues. The first is where the documentation for such
expenditure will be held. If you have external donors, this may well be affected by their
requirements. The second concerns information flow. You have to make sure that all
expenditure made in other offices is monitored in a timely, accurate way. There are likely to
be specific procedures for each international NGO that govern this information flow. You will
have to work with the finance staff of other offices to make sure that they know what
information you need, and when you need it.
If another office carries out many transactions for your NGO each month you may find it
easiest to record and analyse this through a separate cash book and cash book analysis
sheet.
12. Preparing the Management Report
12.1 Introduction
The Management Report is a summary of cash income and cash and non-cash expenditure
compared with budget figures. It should be submitted to management at the end of each
month. The funding grid (see section 14.6) should also be prepared and submitted tomanagers at the end of each month. This completes the financial picture for them, allowing
them to see what funds they can reasonably expect in the future.
The goal of the management report and the funding grid is to provide managers with a
complete understanding of:
• how much money has been spent so far, on what?
• how much money is there in the bank?
• how much money can be expected to arrive in the future?
• will my future income cover my current and future liabilities?
These are all crucial aspects of financial management. Along with an up to date budget, they
allow a manager to ensure that he/she has the financial resources necessary to complete a
project’s objectives. Further detailed information will be found in Mango’s Guide to Financial
Management for NGO s.
12.2 The structure of the Management Report
This report is split into three sections: income, and expenditure and working assets. At the
bottom of the report are important ‘arithmetical controls’ that make sure everything
balances.
a) Income
The income section describes the income that the office has actually received. This may
include transfers from head office, income received directly from external funders and local
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income. Exchange rate differences are disclosed at the bottom of this section. Provided this
is a small amount it is not important for managers, but a large difference surplus or (deficit)
may indicate that the system for determining the monthly exchange rates need to be
reviewed.
b) Expenditure
The expenditure section describes the expenditure made on the normal budget codes and
includes “committed expenditure “ (see section 0).
c) Working assets
The main working assets are the cash and bank balances that are available to fund on-going
expenditure. This section also summarises floats or loans that are outstanding and carried
forward to the next month.
d) Arithmetical controls
At the bottom of each monthly column there is an arithmetic control. This adds up the
individual figures you have entered on the Management Report, plus the Opening balance
for Float and Loans, and compares this total with the Total Working Assets. If it agrees then
this gives you comfort that nothing has been missed out – however it does not of course
check that figures have been entered in the right account. So you should always double
check your work.
12.3 Setting up the Management Report in Excel
The name of your organisation and month and year should already appear at the top of the
form as these cells are linked with the Consolidation Form.
You have probably already copied your list of accounts codes to the Management Report.
See section 0 for details as to how this is done. Take care when entering the Account Codes!
The report is designed with 12 columns for the year. You may have to change the dates or
alter the width of these columns as necessary. If you insert new rows remember to copy
across the formulas in the total cells (shaded blue), and control cells (white or red).
It does not matter if the spreadsheet shows a series of “#VALUE!” and “#DIV/0” messages
when you first set it up. These happen because the computer is trying to make calculations
without having any data. When the data is entered (ie the exchange rate, and transactions in
the cash book) then they should disappear.
12.4 Preparing and reviewing the Management Report
a) Transferring figures from the Consolidation Sheet
First, copy the figures for the month from the consolidation form onto the management
report.
Most of the accounts on the Consolidation Form are in the same order on the management
report. Note that any exchange rate difference, and any rounding, is entered in the Income
section. Provided this is a small amount it is not important for managers, but a large
difference surplus or (deficit) may indicate that the system for determining the monthly
exchange rates need to be reviewed. Rounding arising from exchange conversion is also
entered here.
The opening and closing balances for cash and bank balances at the end of the month should
be entered in the Working Assets section. (Cash counts and bank reconciliations should have
been carried out).
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b) Movements on floats and loans
The monthly payments or repayments of floats and loans must be entered in the Working
Assets section of the Management Report. Payments out (entered as negative figures on the
Consolidation Sheet) must be entered as positive figures and repayments received by the
NGO as negative figures.
You also need to enter the opening balance of float and loans outstanding in the Working
Assets section. This is simple – it is the closing balance as recorded in this section for the
previous month.
After completing the monthly column complete the ‘committed expenditure’ column. This
should be completed from the committed expenditure register (see section 0 for details). It
may need to be analysed before it can be entered on to this form. You can use a copy of the
analysis sheet form to do this. Be careful about exchange rates, as the committed
expenditure register is likely to contain transactions in different currencies.
Adding the monthly figures together for the year to date and the committed expenditure
gives an up to date, complete total expenditure figure. This can be usefully compared
against budget to monitor the overall situation.
12.5 Checking the accuracy of the spreadsheet entries
All of these spreadsheets must be checked to make sure that they really are doing what you
want them to do. It is very easy for a formula to slip by a line when you copy from one cell or
one sheet to another one. You should regularly check the formulas, and all of the total
figures.
There are visual checks at the bottom of the Management Report to ensure that all the
account balances on the consolidation form have been entered on the management report.If all amounts have been correctly entered (including any roundings) the checks will say
“YES”. If there is a mistake it will indicate “NO- CHECK”. In this case check that all the
balances on the Consolidation Form have been accurately transferred to the Management
Report. (Did you also check that cash/bank transfers zeroed out on the Consolidation Form?
See section 0).
The checks at the bottom of each monthly column are not printed out but there is one box
above the signatures of those who are to sign off the report. This looks at a cell that in turn
checks that all the months are correct.
12.6 Other month end procedures
The procedures for saving the spreadsheet file after you have completed the report, and
how to prepare a new file for the next month, are explained in section 0. (If you link the
Consolidation Form to the Management Report be very careful that, at the end of the
month, the figures are copied and pasted in as values on the Management Report, to replace
the formulas).
13. Recording Non Cash information in the ‘Registers’
13.1 Registers
The procedures described above for the cash book, analysis sheet and consolidation form
explain how to account for all cash transactions. They are basically a single entry system.
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However, it is important to capture information about non-cash transactions. This is done
using a series of registers.
The registers record:
a) committed expenditureb) floats
c) loans
d) salary advances
e) assets and
f) committed & received funding
All of this information is necessary for the accounts to give a true picture of the field office’s
financial position. The information in these registers is needed when the Management
Report is being prepared (normally at the end of the month).
It is critically important that these areas are all recognised as being the accountant’sresponsibility. The accountant must make sure that this information is collected and entered
on to the accounts, even if he/she has to get the information from outside the finance office.
The chief difficulty with running the registers always lies in ensuring that the information on
them is complete and up to date.
13.2 Committed Expenditure Register
All expenditure that has been incurred but not yet paid must be recorded on the committed
expenditure register. Examples of ‘committed expenditure’ include:
• a vehicle that has been ordered but has not yet arrived,
• emergency relief equipment that has arrived, but has not yet been paid for,
• the freight costs of transporting emergency equipment around the world, to be paid30 days in arrears,
• a quarterly phone bill paid in arrears.
These are all non-cash transactions that have a significant impact on your accounts.
The information required on the committed expenditure register is not complicated. It
includes the following items:
• the date that the expenditure was incurred (e.g. when the vehicle was ordered);
• a brief description of what the expenditure is;
•
the relevant accounts code for the expenditure;• a reference number for the expenditure. There will not be a payment voucher at this
stage (as they are only completed when payment is made). Often the most useful
reference number to use if the Purchase Order number;
• the place from where the goods/services will be supplied;
• the account from which the goods/service will be paid. This is particularly important
for monitoring expenditure that will be made on your behalf by other offices,
including head office;
• the amount of expenditure incurred;
• the currency;
• finally, whether the item has registered in the accounts. This box should be ticked
when the goods/services have been paid for, and the payment has come through onthe accounts. At this point, the item should no longer be included as committed
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expenditure: it will be accounted for as cash expenditure through the cash books or
as expenditure made on your behalf by another office.
All expenditure incurred but not yet paid for must be included on the committed
expenditure register. Every entry on the register should be re-examined every month. Youmust check that it is still ‘committed expenditure’, and has not yet been paid for. You must
also check that all committed expenditure for every possible accounts code has been
entered on to the register.
TIP: Use the blank column on the right to list and total in pencil the amounts
outstanding at the end of the month.
The accountant must work closely with the project manager and the logistician to make sure
that the committed expenditure register is up to date. You might arrange for a copy of every
Purchase Order used by logistics to be sent to you. You might also review the entireexpenditure of the month, and the committed expenditure register with the project
manager BEFORE you produce the final monthly management report.
Information from the committed expenditure register is transferred on to the management
report (see section 12.4). You may have to analyse it, using an ‘analysis sheet’ if you have a
large number of items on the register. If you do, then be careful to use the right exchange
rate for each individual item.
13.3 Float Register
A ‘float’ is a temporary advance of cash to staff members who require a balance of cash in
hand in order to make authorised purchases. The staff member must account for the use of
the cash float within the time limits agreed with management.
Many development organisations experience difficulty in managing their floats. For instance,
there may be a large demand for flexible expenditure procedures at the beginning of an
emergency relief project. These can be arranged using floats. As a result a large amount of
cash may be given out to project staff. Staff should be given clear guidelines as to how they
must account for these floats. Suggested procedures are explained in section 14.4 below.
The accountant can monitor all outstanding floats by using the float register. Proper use of
the float register significantly reduces risk.
When a staff member takes out a float, complete the left hand side of the register (from
‘date’ up to ‘signature’). In the ‘balance b/f’ column include the amount of outstanding
floats that the member of staff has not yet accounted for. Make sure that the staff member
signs the register: this can be important if the amount taken is disputed.
Fill in the right hand side of the register when the staff member accounts for the float. This
includes columns for any cash and any receipts returned. Try to avoid leaving any
outstanding ‘balance c/f’ here: if the staff member cannot account satisfactorily for some
expenditure, then discuss it with them and their manager, and resolve the issue as soon as
possible.
Remember to make a journal entry in the Consolidation Form in respect of all expenditure
accounted for! This will reduce the floats carried forward and increase the expenditure on
the accounts for which receipts have been paid. An example is given in section 0.
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The float register should be reviewed by a senior manager every month, and action taken in
respect of any outstanding floats. If old balances and problems are not dealt with quickly
they will just get worse.
13.4 Salary Advance Register
Some NGOs arrange for staff to receive mid month advances on their salaries, and in certain
cases may agree to make other advances that are deducted from the salary payment at the
end of the month. The accountant should discuss standard policies on allowing staff to take
salary advances or loans with managers. For instance, a maximum amount of salary advance,
or number of advances per year could be set. All salary advances must be authorised by
managers.
The simplest way of recording these is to charge the advances directly to the appropriate
salary code. In this case, the register acts to remind the accountant to deduct the amount of
the advance from the monthly salary payment. It is not a register of assets or liabilities.
13.5 Loan Register (Monthly Control Sheet)
In the majority of cases NGOs do not allow staff to take loans from the organisation. From
the accountant’s point of view such a practice increases risk and ties up NGO funds without
increasing the NGOs’ ability to carry out its work. So, it is not something to be encouraged:
NGOs are not banks. However, there may be exceptions in certain circumstances, and these
should be clearly explained in your NGO’s procedural manuals and each case authorised by
senior management. Always consider the long-term risks when thinking about these
policies.
Loans are first recorded on the “Loan Request Form/ Loan Record”. This gives details of the
name of the person receiving the loan, the amount and terms of repayment. Repayment
instalments are recorded on this record as they are made and a running balance is kept f theamount outstanding.
Loans issued and loans repayments are also recorded at the time they are made or received
in the Loan Register. This is a monthly “control” account. The total monthly payments, less
repayments, should be the same as the net amount paid out/received on the Consolidation
Form. The balance on the Register should equal the balance on the Management Report. It
is essential to add up the outstanding balances on the individual Loan Records each month
and to check that the total agrees with the balance on the Monthly Control.
Loans and repayments should be charged to an "outstanding loan" code. Any balance on this
code is an asset, like the ‘outstanding floats’ code. It will be recorded separately on the
management report (see below). You will also have to think about any interest that youcharge on the loan, and whether you will account for it within the ‘outstanding loan’ code,
or an a separate ‘interest’ code.
13.6 Asset Register
An asset is defined as ‘an item owned by your organisation which keeps its monetary value
for over a year’. This includes motor vehicles, equipment, buildings etc. Their value must be
‘significant’ – in other words, worth more than a small, or trivial, amount. Your organisation
should decide what is regarded as ‘a trivial amount’!
Due to the nature of their work, NGOs account for assets in two different ways: as
expenditure, or as long-term assets where the reducing value of the asset is carried forward
from one year to the next.
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This is quite a technical subject and is further discussed in Mango’s ‘Guide to Financial
Management for NGOs’ and in section Error! Reference source not found.
Mango’s Financial System is designed to treat assets as expenditure (referred to as ‘capital
expenditure’). In the examples you will see that capital expenditure is given its own codes
and listed separately on the Management Report. It is common practice to prepare aseparate budget to cover this expenditure.
All assets, no matter how they were bought, should be recorded on the asset register. This is
important as it allows you to monitor where the assets are and how they are being used.
Every asset should be assigned a unique asset number, which should be written on it
indelibly: it may be engraved, or written using an indelible pen.
13.7 Funding Grid
The funding grid is a register of the funding arrangements for an office. This includes cash
and non-cash income transactions, such as income from external donors and income
committed by donors.
Monitoring the funding position in this way is critically important for development
organisations. It will allow projects to be continued with the confidence that you have the
funds to meet the necessary expenditure, or it will allow gaps in the funding to be identified.
You can then start to fill any gaps as soon as possible. If this is not properly managed, then
an NGO can find itself with huge liabilities, and no way to pay for them: a bad position.
The funding grid can be used at two levels. It can be used at the office level, to record the
funding arrangements for all projects being implemented. In this case each line would
contain the summary details for a project. Or, it can be used at the project level, to recordthe funding arrangements for each budget line. In this case each line of the grid would
contain the details for each budget line. This may be appropriate for large projects that have
more than one external donor. Use the grid in the most appropriate way for the
office/programme/project that you are supporting.
The grid is quite straightforward to fill in, if you have up to date information. For each
funder, record the amount that they have agreed to fund. Alongside the amount, record the
status of the funding, according to the following three categories:
Received funding Funds that you have already received.
Committed fundingThe donor has signed a contract to provide these
funds, but has not yet paid them over.
Uncertain fundingEverything else,including funds currently being
negotiated for.
It is crucial to the quality of the accounts, and of financial management, that you only use
these categories, and that you always follow them carefully. You may also have to do some
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work fitting the budgets submitted to donors in to the same layout as your project budget.
However, this is necessary for proper monitoring.
The final ‘balance’ column of the grid shows the amount that no external donor has agreed
to cover. It is assumed that the NGO will pay for this out of its own resources. So, it is
important to monitor the total of this column against the total unrestricted budget availablefor your office or project.
Information flow is the biggest problem for keeping the funding grid up to date. You are
likely to have to liaise very closely with the project manager, and with any fund-raising staff
(in country, or in the head office) to find the information that you need. This is likely to
require discussion and definition of information flows at the beginning of a project: you will
have to work out where you can get the information that you will need.
The funding grid is not summarised on the management report. It should be submitted to
managers as part of the Management Reporting. For large or complicated programmes it
may be necessary to develop the funding grid further.
14. Internal Controls – using Mango’s Financial System ‘Forms’
Please refer to Mango’s ‘Guide to Financial Management for NGOs’
www.mango.org.uk/guide for detailed guidelines on internal controls.
14.1 Making Payments
All payments should be authorised. (See financial controls section below.) A payment
request form is included in Mango’s Financial System’s standard forms. Authorisation should
not be so complicated that it holds up the programme. But, it should not be so lax that it
exposes the organisation to unnecessary risk.
14.2 Vouchers
Every transaction should be supported by appropriate vouchers.
Mango’s Financial System’s standard forms include: payment vouchers, receipt vouchers,
petty cash vouchers and journal vouchers.
Wherever possible, you should have duplicate books of pre-numbered vouchers printed in
advance. One copy of the voucher then goes into the accounting files, and one copy remains
in the voucher book, as a back up record. With receipts, you will need triplicate books, toallow a third copy to be given to the person paying income into the organisation. The name
of your organisation should be printed on the top of the voucher.
14.3 Petty Cash
Most offices keep a small petty cash float. This should be used for small daily purchases,
which can be authorised by the cashier or secretary. A number of petty cash controls should
be set, including:
• Maximum amount of petty cash at any time (also known as the ‘total float amount’)
– for example US$250;
• Maximum payment allowed from the petty cash – for example US$50;
• The minimum amount of petty cash, that triggers a top-up of cash – for exampleUS$20;
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• One person should have responsibility for managing the petty cash, including
holding the key to the cashbox, writing out petty cash vouchers and completing the
petty cash form to request more cash;
• There should be a receipt for every petty cash transaction (wherever possible: if for
some reason it is not possible to get a receipt, then the responsible member of staff can sign for a specific payment instead);
• A petty cash voucher should be filled in for every petty cash transaction.
When the total float amount is withdrawn from the main cash/bank account, it should be
coded to an ‘outstanding petty cash’ code. Any balance on this code in the main books
should always equal the amount of cash in the petty cash box plus the value of receipts in
the cashbox. This should always be the same as the ‘total float amount’.
All petty cash transactions are accounted for using petty cash vouchers and the petty cash
form. The petty cash vouchers work in the same way as payment vouchers work. They assign
a unique number to each petty cash transaction, and allow you to track a transactionthrough the books. They also provide a way of authorising expenditure.
A cash top-up should be requested when the amount of cash held falls below the minimum
‘top-up’ point. The petty cash form should be completed. Then, the difference between the
total float amount and the current cash balance should be added to the petty cash. In this
way, the petty cash float will always be topped-up back to its maximum level, which it
should never exceed.
The petty cash form should be completed whenever a cash top-up is requested. It is a simple
analysis sheet. There are columns on the left for the petty cash voucher number, description
of expenditure and the amount spent for each transaction.
On the right hand side, there is a large grid made up of a series of blank ‘accounts codes’
columns. Enter the accounts codes for the transactions that have taken place at the top of
the columns. Then enter the amount spent for each transaction into the appropriate
column. (This will be the second time that you enter the amount spent for each transaction.
This allows you to check that the ‘totals’ for each column add up to the total amount of
petty cash spent.)
In this way, you can add up the amount in each column, and you will have analysed the petty
cash expenditure by accounts code. You can then transfer the analysed totals across to the
main cash book. Enter the expenditure made for each code. Then, enter the total of the
expenditure made as income against the ‘outstanding petty cash’ code. This will moveexpenditure over from the ‘outstanding petty cash’ code to the appropriate expenditure
codes. (This is all much easier to do in practice than to follow on the procedures page like
this.)
The alternative procedure is to open a further cash book in Mango’s Financial System and
copy the information into this from the petty cash form.
The balance on the petty cash form must be in agreement with the balance as recorded in
the petty cash book once the transactions have been entered into Mango’s Financial System.
The bottom part of the petty cash form includes a section for counting the cash in the
cashbox, and reconciling it to the total float amount and the amount spent. This is animportant control to make sure that the petty cash accounts are complete.
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14.4 Floats
These procedures should be implemented alongside use of the Floats Register, described
above. They set out how to account for floats, and standard controls that should beimplemented to reduce the risk of floats becoming contentious.
An outgoing float should be recorded in the cash book, using a specific ‘outstanding floats’
code, NOT an expenditure code. Any balance on the ‘outstanding floats’ code is an asset. It
will be recorded on the management report as such.
When the float is accounted for, you should transfer the expenditure out of the ‘outstanding
floats’ code and into the appropriate expenditure code. (You do this by recording the
amount spent as income against the float code, and expenditure against the expenditure
code.) When you have made all of these adjustments, you can then tick the ‘adjustment to
accounts?’ box on the float register.
The following controls can reduce the risk of confusion when using floats: (You may have to
adapt them to the specific circumstances of each project)
• All floats taken must be accounted for within two weeks;
• Staff must provide receipts for all expenditure made from their float;
• Any member of staff can only have one outstanding float at any time;
• Any float taken that cannot be accounted for will be automatically deducted from
the staff member’s salary.
You should not let the amount of unaccounted for floats to build up. Either charge the
expenditure to a valid expenditure code, or deduct it from the staff member’s salary.
(Discuss these problems with the project manager.) But, do not just leave it as ‘unknown’.
This is where problems often creep in to running floats: staff should know the rules, and
accountants have to implement them rigorously.
14.5 Salaries
A basic salaries sheet is included in Mango’s Financial System’s standard forms. You will have
to do some careful research into local tax rates and any organisational adjustments, such as
pension arrangements, before you pay salaries. Tax tables should be available. Make sure
that all salary advances are deducted, using the salary advance register, and that all staff
members sign for their salaries.
14.6 Cashflow Forecasting
It is important to monitor overall cash requirements for the coming months. This can be
done by producing a cashflow forecast from the project budget. This involves working out
what actual cash movements will have to take place when, on a monthly basis.
These calculations should be the basis of requesting more cash from head office, or from
external donors. Without careful cashflow forecasting, a project can be seriously held up due
to an unnecessary shortage of funds.
14.7 Restricted Funding
External funding may have to be spent according to different restrictions. These can include:
• funds that have to be spent on one particular project;
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• funds that have to be spent on a particular programme;
• funds that have to be spent within a particular time period;
• funds that have to be spent within a particular geographic region;
• funds that have no restriction at all.
It is very important to keep track of all the different types of funding that have been
received. For larger programmes, this is likely to involve some sort of additional coding
system. You will need to monitor these different types of funding very carefully, to make
sure that (a) money is spent as it should be, and (b) as much as possible is achieved with the
available funds, and that the best use possible is made of unrestricted funding.
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15. Financial Controls
Financial controls are a critical part of any financial system. These controls apply to all
systems, as well as Mango’s Financial System. They are split into three sections:
Management Controls, Budget Monitoring and Specific Controls. The first two are even more
important than the third: if the management controls are right, then the specific controls
will follow. (Further details are given in Mango’s Guide to Financial Management for NGOs).
15.1 Management Controls
a) Appropriately experienced and skilled (trained) staff
Everybody who has any involvement in the financial systems must have appropriate financial
skills. This includes all project management and implementation staff, as well as finance
staff. Finance staff must be suitably qualified and experienced. It is likely that they will have
to provide training to other team members.
b) Clear job descriptions
Staff should have clear Job Descriptions, especially as regards financial responsibilities and
duties. This applies to project management and project staff, as well as finance staff.
Everybody must know what their responsibilities are, and how they fit into the overall
system.
A single individual should be identified with executive responsibility for following the
budget: a ‘budget holder’. The budget holder must have authority that corresponds with this
responsibility. This means, the authority to implement suitable financial controls (including
authorisation procedures). Even staff more senior than this person must follow the budget
holder’s procedures. The budget holder is likely to be the project manager for any specific
project.
Wherever possible financial procedures should be split between more than one person. This
is known as ‘segregation of duties’. For instance, if one person writes cheques, a different
person should sign then. If one person completes the cash book, a different person should
check the analysis. This ensures that any mistakes that creep into the system are caught
quickly. It also makes fraud more difficult to perpetrate.
c) Establishing practical, robust financial procedures
It is the responsibility of the organisation’s governing body to make sure that appropriate
financial procedures are put in place. This does not mean that they have to develop theprocedures but they must ensure that the financial staff does this.
These procedures include specific controls, for instance on the way in which payments are
made, and how floats are managed. They should also cover the monthly accounts, including
cash books and the format of the management report.
d) Rigorous following of financial procedures
Everybody must know what the financial procedures are. Everybody must follow them. This
means that finance staff must implement them rigorously, and not bend the rules for
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colleagues. Senior managers must also follow them. This is likely to require the support (and
example) of the budget holder.
15.2 Budget Monitoring
a) Regular production of management reports
The management report above compares actual expenditure against the budget. So it can be
used to monitor the budget. This is a fundamental financial control for managers.
You will have to make sure that the budget is accurate and relevant, for budget monitoring
to be meaningful. So, if project activities change, you may have to review or flex the original
budget.
b) Authorising and signing off management reports
The Financial reports must be signed off and dated by the person preparing the report and
by the person who authorises its issue to your senior staff or the governing body. This is
particularly important if the document is to be shared with outside funding partners. In thiscase it will usually require the signature of the Project Holder as well. The Project Holder
should not sign the report until it has been discussed and approved by your NGO’s Executive
Committee.
c) Appropriate use of management reports
Project management should carefully examine reports. Significant variances between budget
and actual expenditure should be identified and explored. Appropriate actions should be
taken in response to variances, to prevent them getting worse, and possibly handicapping
the project. See the Management Overview Pack for further explanation of how to review
the monthly finances.
d) Forward planning
This month’s management report is generally the basis for next month’s planning. However,
a separate cashflow report is likely to be valuable, as discussed above.
15.3 Specific Controls
a) Bank accounts and cash handling
Use bank accounts and cheque payments (rather than cash) wherever possible. Accounts
must be held in the name of the organisation, not an individual. Each cheque should have
two signatures on it (perhaps from a pool of three signatories). Never pre-sign cheques.
Cheque books should be securely stored.
Hold as little cash as possible in the office. Any cash held in the office should be kept in a
safe. Only one person should be responsible for the safe (and open it) at any time. Only the
organisation’s cash should be held in the safe.
b) Regular bank & cash reconciliations
A bank reconciliation should be prepared every month for each bank account. (Mango’s
standard forms include a bank reconciliation form.)
A cash count should be performed every two weeks for each cash account. Variances
between the cash balance in the safe and the cash balance on the accounts must be
explored and explained.
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c) Authorisation procedures & expenditure limits
All payments should be authorised. Clear procedures should be set up defining who can
authorise what. These often rely on expenditure limits. The key aspect of this is having
named staff who are allowed to authorise expenditure up to a specific limit, or against a
specific budget line. For instance, the office manager might be able to authorise payments of up to $1,000 on specific lines, the programme manager might be able to sign up to $2,500
on all budget lines, and all other payments must be authorised by the chief executive or
country director.
Finance staff must enforce these authorisation procedures: there should be no payment
without proper authorisation. To this end, it is useful to have standard forms for
authorisation (for instance, the Payment request form available in Mango’s standard forms).
However, authorisation should not be so complicated that it holds up project activities.
Rubber stamps, with a series of check boxes, can be a useful way of ensuring that payments
are authorised.
d) Payment procedures
Every office must have unambiguous, practical procedures for making payments. Payments
should be made against original invoices only, whenever possible. All payments must be
recorded in the appropriate cash book.
Purchase orders can be used as part of these procedures, to make sure that the goods being
bought are necessary for the project, and as a basis for verifying that goods/services have
been received before payment. Pro forma invoices can be useful for getting an accurate
price for specific goods/services before finalising the purchase decision. Whenever possible
set up accounts with suppliers: these allow short-term credit, a better chance of gaining
price reductions and a safe means of making payment.
e) Procedures for specific transactions
Specific transactions should be governed by specific procedures. Some of these are
described above. Areas that require particular attention are: floats, salary advances, loans,
petty cash, restricted funds, assets, and vehicle usage.
f) Completeness of records
Accounts records must be well ordered, complete and up to date. The original receipts and
invoices are the basic reference documents for investigating any query about the accounts.
It is crucial that they are well kept to allow the whole accounts system to function smoothly.
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16. Excel Tips
16.1 Copying and pasting textThis is a basic and powerful Excel tool. You can copy the contents (text or formulas) of a cell
to another cell by selecting with the cursor the cell containing the contents that you want to
copy. You then choose ‘Edit’ and then ‘Copy’ from the main window menus. (A short cut is
to right click the mouse and select ‘Copy’). The next step is to move the cursor to the cell to
which you are copying the information. Choose ‘Edit’ again and then ‘Paste’ from the main
window menus. (A short cut is to right click the mouse and select ‘Copy’ or ‘Paste’, or click
on the short cut icons). You can copy a block of cells in several columns or rows – but do
make sure that there are sufficient empty cells where you paste this information. See also
section 0 below.
16.2 Copying rows of formulasIf you copy a formula from one cell to another the formula does not change but the cell
references do, so the copied formula will apply to different cells. This can be useful - it
means you can copy the formulas in the rows in the various worksheets down to the new
rows that you have inserted. The formulas are automatically changed so that they apply to
the newly inserted row. Note that this is ‘copying’ a cell. If you ‘Move’ a cell the formula
references do not change!
An alternative method to copy down cells is to highlight the cells to be copied, and then
move the cursor to the bottom right corner of the cell on the right hand side. You will see
that the cursor changes shape – into a thin or a thick cross. When it is in the shape of a thin,
pencil line cross hold down the left click of the mouse and ‘drag’ the cells down to the nextrow. Check the formulas are correct before moving on to another task!
16.3 Copying worksheets
Worksheets are copied by moving the cursor onto the worksheet tab; right click, then select
‘Move or Copy Sheet’. If you need to create a new cash book together with its analysis
sheet, you will need to copy an existing ‘pair’ of worksheets together. Select the tab of the
first worksheet, then hold down the control key and select the tab of the second worksheet.
Then right click as before. In this way you can copy the two worksheets at the same time
with all the linked formulas.
16.4 Cell referencesExcel allows you to tell one cell to look at another, and to use the contents of the other cell
in a calculation. For instance, the formula ‘=A1+A2’ can be entered into any other cell. The
value shown in the other cell will be the sum of the value in cell A1 and the value in cell A2.
‘A1’ and ‘A2’ are called ‘cell references’.
Cell references can always be written in one of two ways. They can be absolute, or relative.
The big difference between them is that a relative cell reference will change when you copy
it from one cell to another. But an absolute cell reference will not.
This can be very important when you are copying formulas around in accounts spreadsheets.
Watch out for it with the SUMIF formula on the analysis sheet.
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Normally, all cell references are relative. But, either the column letter or the row number
part of the cell reference can be made absolute by putting a ‘$’ sign in front of it. For
instance, the reference ‘$A$4’ will not change no matter where it is copied to. The reference
‘A$4’ will allow the column to change as the formula is copied across the page. But it will not
let the row change if the formula is copied down the change. The reverse happens with thereference ‘$A4’.
16.5 Freeze Panes
Freeze Panes lets you keep a part of the spreadsheet on the screen at all times, even if you
scroll a long way down it. This is useful for making sure that the titles of tables are always
visible.
You can freeze the part of the screen ABOVE and to the LEFT of any selected cell by choosing
‘Freeze Panes’ from the ‘Window’ menu. So, you have to select a cell in the right place
before ‘freezing the panes’. You can turn freeze panes off by choosing the ‘Freeze Panes’
options a second time from the ‘Window’ menu.
16.6 ‘IF’ formula
A cell containing the Excel ‘IF’ formula examines the contents of another cell. It compares it
with the value that you have indicated in the formula. If it is the same, the cell will display
one value. If it is different, the cell will display another value. For example, the ‘warning’
cell that checks if analysis codes have been entered reads as follows: =IF(F8=G8,"","CHECK
CODE"). (In other words: If cell F8 is equal to cell G8 then return the text “ ”, otherwise,
return the text “CHECK CODE”). The cell checks if the balance on the Analysis Sheet agrees
with the balance on the Cash Book. If it does not then an analysis code has either not been
entered, or has been entered incorrectly.
16.7 Insert Rows (and columns)
You can insert a new row by moving the cursor onto the left hand margin on the rows above
which you wish to insert the new row. You then choose ‘Insert’ and then ‘Row’ from the
main window menus. (A short cut is to right click the mouse and select ‘Insert’).
The new row will be formatted in the same way as the previous row.
Avoid inserting new rows at the top or at the bottom of the Cash Book or Reports. If you do
this the formulas calculating the totals will not include any amounts that you enter into the
new row. You will have to amend the formula. Mango’s Financial System spreadsheets have
been designed with an extra narrow row at the top and at the bottom of each worksheet so
that this danger can be avoided.These remarks also apply to the insertion of new columns.
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16.8 Page Setup
Page Setup lets you do the same thing when you are printing an Excel document. You can set
a whole range of features that define how the page will be printed. One of them lets you
repeat the titles of a table at the top of every page. (All the Accounts Spreadsheets are setup in this way.)
Choose the ‘Page Setup’ option from the ‘File’ menu. This gives you a window that has four
tabs on it: Page, Margins, Header/Footer, and Sheet.
The Page tab lets you set the paper size, and whether your spreadsheet will be printed as a
landscape document (sideways) or as a portrait document (upright).
The Margins tab lets you set the margins between your spreadsheet and the edge of the
paper. It also lets you centre the spreadsheet on the page, which often looks good.
The Header/Footer tab enables you to put headers (at the top) and footers (at the bottom)of your spreadsheet.
The Sheet tab lets you set a number of other options, including Print Titles. Enter the rows
that you want to be repeated at the top of each page (e.g. writing 1:6 for rows 1 – 6) in this
box.
16.9 Paste Special
Paste Special is very useful for moving large amounts of data around. It lets you copy and
paste data in a special way. Choose ‘Paste Special’ from the ‘Edit’ menu, and you will get a
range of options. (Note this only works when you have already ‘copied’ something –
otherwise, the computer has nothing to paste.)
‘Values’ is a useful option: you can select a cell that has a formula in it, which returns (for
instance) the value of 4. If you use paste to copy the cell, then you will get a copy of the
formula. But if you use ‘Values’ from the ‘Paste Special’ feature, then you will get the
number ‘4’.
This can save a lot of time when copying data from the analysis sheet across to the
consolidation form, for instance. It is also useful for moving around columns of monthly data
inside the consolidation form.
‘Formats’ is another handy ‘Paste Special’ option. You can copy across just the formats of a
cell, without any of its contents. This can help when putting borders around tables, or when
changing the fonts used in a spreadsheet.
16.10 SUMIF(A,B,C)
The SUMIF statement transforms spreadsheet-based accounts. It does all of the hard work
for you, by summarising large volumes of data, by code. It uses three variables A, B & C:
A Range 1 (where it will search for the criteria)
B Criteria
C Range 2 (where it will find the data to sum)
On these accounts spreadsheets, the criteria (B) that it will search for is the accounts code.
Range 1 (A) is the column containing the accounts codes on the cash book. Range 2 (C) is thecolumn containing the amounts spent or received on the cash book.
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The formula automatically picks out all transactions that have the same code, and adds
together the total amounts spent/received for each one. That means that it does all of the
analysis for your accounts.
16.11 Autofilter
The second tool which makes Excel an accountant’s dream is the Autofilter. This can
transform any list in a spreadsheet into a database, and lets you pick out specific items that
share certain characteristics. So, for instance, you can immediately pick out all transactions
from the cash book that have the same code.
To use the Autofilter tool, simply select a cell that is in the list, and choose ‘Autofilter’ from
the ‘Filter’ option on the ‘Data’ menu. This will place drop down menus at the top of each
column of your list. You can then use these drop down menus to select the items on the list
that you want to be displayed. To turn the Autofilter off, choose ‘Autofilter’ a second time
from the ‘Filter’ option.
Autofilters are extremely easy to use and can save many hours of laborious work. Try usingthem with the Autosum button on the tool bar. Excel will automatically give you a sum
function that only adds up the totals of what you can see on the screen (i.e. what you have
selected using the filter) rather than everything on the list.
But, you have to be careful that you do not leave a blank line between the titles at the top of
your lists of data and the data itself. Autofilter only goes up to the top of an unbroken list,
and automatically assumes that the top cell contains a title. This means that the column on
the left would work properly, but the column on the right would not:
Code Code
A12
A15 A12
A16 A15
A16
17. Mango’s Accounting Principles
17.1 Introduction
Mango’s Standard Financial System for NGOs is an adaptation of single entry bookkeeping
that includes the most important non-cash accounts (which would normally only be found ina double-entry system). It is based on the fundamental principles of single and double entry
bookkeeping. But it is not a complete double entry system.
17.2 Principles underlying Mango’s Financial System’s standard system
The basic elements of this system are described in the table on the next page. This table
shows how the system accounts for expenditure & income, and assets & liabilities, including
all non-cash transactions. It is based on a series of accounting procedures (and spreadsheets)
including, for example a funding grid and a committed expenditure register.
Only one type of non-cash transaction is not accounted for using its own specific procedure:
prepayments. They are treated as if they were cash expenditure, which is both simple and
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prudent. Exchange rate differences are the only non-cash transactions not included on this
table. They are accounted for on the analysis sheets.
We have not extended the system to cover stock. In our experience, stocks of relief and
development equipment are either very small, and easy to handle, or very large andcomplicated to handle. The former case should not present significant problems: stock can
be accounted for by extending the asset register. The latter case requires detailed logistical
procedures, which are outside the scope of our standard system.
17.3 Mango’s Financial System - Accounting Policies for the treatment of
expenditure, income, assets and liabilities
Transaction Explanation ExampleType of
transaction
Where on
Mango’s
system?
Expenditure Cash/bank payment
for goods/services,
made when
goods/services are
received
• Salary payment
• Fuel purchase
Cash Cash book
Income Income received for
goods/services
delivered by you, at
the same time that
you provide the
goods/services
• Fees from training
courses
• Transfers from
head office
Cash Cash book
Assets
• Fixed assets Physical assets,
worth money
• Vehicles
• Computers
Cash Cash book and
asset register
• Outstanding
floats and
loans
Floats and loans
paid out to
members of staff
and not yetreturned in full.
• Float for a field
trip
• Housing loan
Cash Cash book and
float register
or loan
register
• Pre-
payments
Payment made for
goods/services that
you have not yet
received.
• Goods/ services
paid for in
advance
• Eg advance
payment to sub-
contractors,
insurance
Cash Cash book
• Deferred
paymentIncome not yetreceived for
• Donors have
agreed to fund aNon-cash Funding Grid
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goods/services
delivered by you
(debtors).
project, but have
not yet provided
funds although the
project is partly
completed.
Liabilities
• Accruals Payment you owe
for goods/services
that you have
received but not yet
paid for (creditors)
• Goods bought on
credit
• Goods ordered but
not yet paid for
• Services paid for in
arrears
• Eg electricity
Non-cash Committed
Expenditure
Register
• Payment in
advance
Income received for
goods/services that
you have not yet
delivered.
• Donors provide
funds before a
project has
started.
Cash Cashbook and
funding grid
18. Mango’s Financial System Spreadsheets
This is the full list of the contents of the Excel Spreadsheets in Mango’s Financial System.
They are compatible with Excel 95 (and more recent versions of Excel).
18.1 Accounting System (file name: “Mango System.xls”)
• Welcome
• Accounts List
• 2 Cash books (CSBOOK1 and CSBOOK2)
• 2 Analysis sheet (CB1ANALYSIS and CB2ANALYSIS)
• Consolidation Form (CONSOLIDATE)
• Management Report (REPORT)
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18.2 Registers (file name: “Mango Registers.xls”)
• Committed Expenditure Register (COMMITTED EXPENDITURE)
• Float Register (FLOATS)
• Salary Advance Register (SALARY ADVANCES)• Loan Register (LOANS)
• Asset Register (ASSET REGISTER)
• Funding Grid (FUNDING GRID)
1.3 Forms (file name: “Mango Forms.xls”)
• Payment Request Form (PAYREQ)
• Payment Voucher (PAY VOUCH)
• Float Request Form (FLOAT REQ)
• Salary Sheet (SAL SHEET)
• Loan Request Form (LOAN REQ)• Petty Cash Form (PETTY CASH)
• Petty Cash Voucher (P-C VOUCH)
• Cash Count Form (CASH COUNT)
• Bank Reconciliation (BANK REQ)
• Receipt Voucher (REC VOUCH)
• Journal Voucher (JOURNAL)
1.4 Model List of Accounts Codes (file name: “Mango Accounts Codes.xls”)
1.5 Mango’s Financial System – Model Accounts (file name: “Mango Model.xls”)