mango financial management

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Learning Objectives

Clarify the role of financial management in humanitarian programme management

Identify good practice in the field

Identify key issues affecting financial management in emergency humanitarian responses

What is Financial Management?A working definition:

‘Planning, organising, controlling and reporting on the organisation’s financial resources to achieve its goals.’

It’s a management functionLooking after the financial health of an organisationManaging the financial aspects of an NGO’s work to make best use of resources

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Financial Management in Practice Managing risk

Internal risk• E.g. theft, fire

External risk• E.g. economic instability, change in donor

policy

Managing strategicallyKeeping an eye on the wider picture

Managing by objectivesThe ‘plan, do, review’ project cycle

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Financial Management in Practice

Implement plans – spend &

receive funds

Set budgets

MonitorBudgets

Build in learning and take action

Plan

DoReview

What is Financial Control?

Financial control occurs when

systems and procedures are set

up to make sure that financial

resources

are being used ‘properly’

(ie to maximum effect).

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Structure & Governance

Governing Body

Chief Executive Officer

Finance Manager Operations Manager

Project Officers Finance Team

Dele

gate

d A

uth

ority

Accou

nta

bilit

y

Who is Accountable?

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Governing body

Managers

All staff In practice, anyone who works to achieve

project aims

Day-to-day authority delegated to managers to

implement policy

Ultimately accountable in

law

?

Two Golden Rules

NGOs have to maintain a respectful dialogue with the people they aim to help.

NGOs depend on their front line staff and have to help them to make good judgements (and check whether they do).

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Achieving Good Practice

Robust financial systemsProper records, policies and proceduresDesigned to suit the NGO and its working environment

Open and accountable systemsIncluding reports to all stakeholders, beneficiaries included

Skilled staffFinancial management is fully integrated in programme management

Guiding Principles

Consistency Accountability Transparency Viability Integrity Stewardship Accounting standards

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The Building Blocks

With all the foundations in place, financial control will be achieved and programmes implemented more effectively.

Financial Control

Financial monitoring

Accounting records

Internal control

Financial planning

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Accounting Records

Fall into two main types:Supporting documents• E.g. Receipts, vouchers, invoices, orders…

Books of account• E.g. Cashbook, general ledger, registers…

Accounting codes structureA list of codes/descriptions for:• Each type of income & expenditure (the

Chart of Accounts)• Each project or activity (Cost Centres)

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The Planning Pyramid

Tim

ef

ra

me

Financing Strategy

OperationalBudgets

Vision

Mission

Objectives

Strategies

Activity Plans

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Budget Monitoring Reports

ActivityPlans

ActivityPlans

Project Budgets

Project Budgets

Master

Budget

Master

Budget

BUDGET MONITORING REPORT 1 Jan to 31 Dec 1998

Months: Jan Feb Mar Apr May JunReceiptsDFIID 0 0 12,000 0 0 12,000SEED 0 15,000 0 0 10,000 0Donations 1,250 1,250 1,250 1,250 1,250 1,250Fundraising 0 0 0 5,000 0 0Subscriptions100 100 500 100 100 100Consultancy 0 0 1,125 0 0 1,125Bank Interest 80 80 80 80 85 85

A. Total Receipts1,430 16,430 14,955 6,430 11,435 14,560

PaymentsPersonnel expenses3,725 3,725 3,725 3,725 3,725 3,725Office costs1,800 1,500 1,500 1,500 1,500 1,500Management costs75 16 16 75 16 820Project costs2,675 2,675 2,675 2,675 2,675 2,675Travel costs1,475 1,475 1,475 1,475 1,475 1,475

CASHFLOW FORECAST - Tusaidiane1 Jan to 31 Dec 1998


A. Total Receipts1,430 16,430 14,955 6,430 11,435 14,560


CASHFLOW REPORT 1 Jan to 31 Dec 1998


A. Total Receipts1,430 16,430 14,955 6,430 11,435 14,560


Accounting Records

Cashflow Forecast

Budget Monitoring

reportCashflow Report

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Budget Monitoring Report

Milestone Project - Budget Compared to Actual ReportPeriod covered: Month 1, 2001All figures in Pounds Sterling

A B C D EBudget for ‘Actuals’ for Difference Notesthis period this period (Adv)/fav.

A1. Salaries 4,000 3,389 611 Vacancy

A2. Recruitment 200 333 (133) Accountants post re-advertised

A3. Staff training 230 280 (50) Computer training brought forward

etc.

Budget item

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Internal Control

It’s how we manage internal risk

Commonsense, practical procedures designed to safeguard assets & protect staff• E.g. Authorisation rules, vehicle policy

Common control problems:Presentation of false receiptsCollusion with suppliersUse of vehicles for private useLoss of cash or stocks kept on premisesUn-budgeted expenditure

What is Fraud?

“Fraud happens when somebody uses deception to obtain goods, services or money.” [UK Home Office]

...bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation and collusion...It is a deliberate actOften involves falsification of records

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What is Corruption?

“Corruption is the misuse of entrusted power for private gain.” [Transparency International ]

... Bribery, fraud, extortion, embezzlement, nepotism, cronyism...Complex Money is not always involved

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Summary: Minimum Requirements

A valid supporting document for every transaction

A Cashbook for every account held

A practical accounts coding structure

Budgets covering all operations Clear delegation of authority rules

who can authorise what and within what limits?

Annual financial statements (audited)

To meet statutory requirements

Regular budget monitoring

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Issues for Humanitarian Projects

Accountability vs. ‘saving lives’People do come first

But someone, somewhere, has to account for the use of public funds

If we fail to account properly, funds could be withdrawn, credibility is lost…

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Keeping accounting recordsField accountants not always provided

Difficult to get receipts and quotations

Payments made in different places by different people, so difficult to capture all transactions in a timely way

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Issues for Humanitarian ProjectsCash management

High dependence on cash for purchasingProgrammes involve huge sums of money, spent very quicklyCashflow issues – is the money there when it is needed? Banking infrastructure may be limitedDifferent currencies in useCash security – in transit and on site

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Procurement Purchasing procedures difficult to follow in a devastated market• e.g. quotations, approved suppliers

Logistical problem of acquiring huge quantities of project materialsAuthority to spend often unclearOpportunities for fraud

Control of stocksStorage , transportation and security issues

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Budgetary controlPressure to spend funds on timeBudgets often change during a programme• Prices shoot up when aid workers are in

town!

Restricted vs. unrestricted fundsHO vs. field office expenditures• Difficult to monitor ‘committed’ expenditure

made away from project office

Managers need weekly reports to monitor budgets, but not always available

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Issues for Humanitarian ProjectsOne project, several donors

Complicated funding picture, often unclearEach donor has its own set of rules to follow

Donors’ rules include:What they will/will not fundMoving funds between budget itemsWhen they will make paymentsThe records they require you to keepThe financial reports they require

mango financial management

Economy & Finance

financial

financial

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