Mukono District NGO Forum believes in the institution of a financial system which is based on a sound financial controls, transparency and full accountability of the team members concerned. The said financial system should be flexible enough to cope up with the changing needs of the programme and the environment in which it operates, without disrupting the necessary routine finance work. This system should also be sufficiently streamlined so as not to burden the operating environment of Mukono District NGO Forum. The aim of this manual is to bring together a package of model policies, procedures and controls in order to create such system.
This manual however is considered to be a dynamic document and may change from time to time based on the changes in the circumstances, Environment and Policies of Mukono District NGO Forum. This accounting manual is to assist in defining and explaining the required treatment of all the financial matters of the organization.
SCOPE OF THESE REGULATIONS
- These are binding to all staff and those with vested interests in Mukono District NGO Forum including the executive committee, suppliers and other service providers.
- Where these enter into conflict with the constitution of the organization, the constitution shall prevail.
- Any breach of these regulations may lead to disciplinary action or legal proceedings or both.
2.0 ACCOUNTING BASES:
These are methods developed for the application of the accounting concepts to the financial transactions for the purposes of the financial accounting. In the course of accounting practice there have been developed a number of accounting bases e.g. Bases for Expenditure, capitalization, calculation of depreciation and financial year.
2.1 Capital items:
All assets that value a useful life beyond one financial period and valued above Ugx 100,000/=, are referred to as capital items. They are fixed assets that will be carried over from one financial period to the other. For Renovations, repairs, maintenance and alterations to the constructed or rented building, the capitalization limit will be any amount of Ugx. 100,000/= and above.
This is a reduction in the value of fixed assets in the relation of their usage and it reflects the wear and tear of the same assets. Obsolescence may also reduce the value of fixed assets totally and as a result the value of which assets will need to be reduced in the books to match their usefulness and usage. Depreciation will be charged using straight- line method at the following rates:
Capital items Rate
- Land: Nil
- Buildings: Nil
- Furniture and office Equipment: 12.5%
- Computers: 30%
- Motor vehicles: 20%
2.3 Financial Year
Mukono Financial Year runs from ……………………… to……………….of the Year
3.0 ACCOUNTING POLICIES
These are specific accounting policies, selected and consistently followed by an organization in the judgment of its senior management team, appropriate to its circumstances and best suited to present fairly its result and financial position.
Senior management team composes of:
- The Chairperson
- Executive Committee members /Secretary finance/Treasurer
- The Programme Coordinator
4.0. PLANNING AND BUDGET
Mukono District NGO Forum operates on a three year strategic plan that identifies the projects that should be carries out by the programme over that period. These projects cannot be carried out at the same time; neither can all of them run for the five years. They are therefore divided and attached to separate financial years as in strategic plan year by year. As such, there is a need to recognize the resources, financial and otherwise that will facilitate the performance of these projects. As these resources are scarce we need to allocate them to fit and balance with the projects. This will be done annually by preparing annual budgets.
4.1. Annual budgeting Process
Mukono District NGO Forum will prepare estimates of the expected operations to be carried out during the following financial year in the last quarter of the current financial year. These estimates will be arrived at after a review of the strategic plan with the view to ensure that it fits well and the objectives are attainable under the prevailing circumstances. Those estimates of the Revenue and Expenditure will be called an annual budget.
- The Budget shall constitute a recurrent budget detailing the normal day-to-day expenditure of recurring nature.
- The Budget shall also constitute a capital budget for items of a capital nature indicating their source of financing.
- The approved documents shall constitute the authority by the executive committee of management to spend.
4.2. Cash Flow Projections.
In addition to annual budgets, Mukono District NGO Forum may prepare cash flow projections on annual basis or as the need may arise. Circumstances may require that these cash projections be prepared for periods either longer or shorter than one financial period and even continuously overlapping from one financial year to the other depending on the requirements of either a particular project or the funding needs at and specific time. (See Appendix 2)
5.0 PROCUREMENT PROCEDURE
All expenses as should be incurred by the organization must be properly authorized, within the budget and they must be justifiably for either goods received by the organization or services rendered to the organization. All procurement transactions will be conducted in a manner to provide a maximum benefit to the organization. Before procurement above Ugx 500,000/= is made, a fair and free competition will be invited through tendering process. At least three bids will be received before any action is taken. After the tenders have been received, they will be compared and selected according to the one that will give the maximum benefit to the organization in terms of quality, price and lead-time.
The following will therefore be the suppliers’ procedures:
- The programme Coordinator makes the request after verifying the availability of funds.
- The request form will then be forwarded to the chairperson for approval.
5.1 Payment of Suppliers
When making any payments for suppliers, the following documents must be attached to the payment vouchers.
- The copy of the local purchase order,
- The copy of the delivery note as was received by the Finance Coordinator,
- Invoice or payment request by the vender/ supplier being paid.
5.2 Payment process
1. The finance Coordinator or a responsible person prepares the payment vouchers on which the following documents will be attached:
- Cash/ cheque requisition (approved)
- Local purchase order
- Delivery note
- Invoice or payment request
2.The programme Coordinator, after checking for accuracy, approval and completeness of the intended payments, append his/her signature.
3. Finance coordinator then draws the cheques and registers them in the cheque payment register.
4. The drawn cheques together with the cheques payment vouchers will then be sent for signatories.
5. For payment to be valid, the principal signatory and any two signatories drawn from the list of the authorized signatures must sign all cheques. The programme coordinator will be principal signatory to all Mukono Bank Accounts.
6. After they will have been signed, the cheques will be sent back to the financial Coordinator for checking to confirm that they have actually al been signed and eventually disbursed to the payee/supplier.
7. All cheques collected from the finance coordinator, the collectors of the cheques will be properly identified before the cheque is ISSUED. After payments have been prepared, it’s a requirement that entries are raised to facilitate the recording of the payments in the accounting books, this process is called posting and this will be done by raising a journal voucher. (See appendix 4)
6.0 INTERNAL CONTROL
The basic principle here is segregation of duties such as recording, issuing, authorization/ approval and custody of all the assets and liabilities within the organization.
- Adherence to management policies in order to achieve the goals and objectives of the programme.
- Effectiveness and efficiency of the operations of the programme.
- Economical use of resources and safety of the assets of the programme.
- Reliability and integrity of the financial information of the programme.
- Compliance with the statutory requirements.
Specific controls discussed in the subsequent sections include;
- Budgetary control
- Physical controls
- Accounting and management controls
6.1 Budgetary Control
There are six main purposes to drawing up and agreeing a budget;
- Priorities activities for the coming year
- Ensure that the short-term (annual) plans are in line with the long-term mission, vision and objectives.
- Inform and educate stake holders about the plans and resources available to achieve the plan
- Aid in the assessment of performance for the secretariat.
- Establish the authority of staff to carry out activities and incur expenditure.
- Enable Executive Committee control through analysis of budget variance reports
It is important to note that it is not possible to have control without a budget. It forms the benchmark against which performance is measured. If budget integrity is compromise, control decisions and actions can only be flawed and are likely to lead to errors. It is therefore vital that budgets prepared can be relied upon to be realistic, accurate and acceptable to the respective players.
As mentioned earlier, the control function relating to budget involves an analysis of variances on a periodic basis for management and executive committee. These reports are key to ensuring that we control our expenditures within the limits set at the beginning of the year and where there is need to change, that a clear justification is given.
As a rule, any variance on a budget item of greater the 10 % must be adequately explained. Executive Committee shall follow up any such variances and the related explanations to ensure that these are justified and, if not proper justification is forthcoming, to withhold further funds releases. Failure to adhere to the budget without good cause can lead to adverse consequences. (See appendix 5)
Timing and deadlines
- The budget preparation process must start not later than 14 weeks to the end of the current financial year so as to get a more practical analysis of the actual expenditure,
- Management must present a draft proposal to the Executive Committee not later than 10 weeks to the beginning of the financial year.
- The executive committee must approve it not later than 6 weeks to the beginning of the budget year.
- This timing is important so as to communicate to the General Assembly as might be necessary (with the end of the year reports)
6.2 Physical controls
a) Cheque payments
Mukono District NGO Forum encourages all transactions to be carried out through the bank. As much as possible, all payments should be made by cheque. The finance coordinator prepares a cheque Requisition for all amounts to be paid by cheque, including the petty cash. Every item on the cheque requisition form must be supported by adequate documentation, evidence that the funds are actually required and fall within the budget.
The payment voucher should be clearly written out with the actual date, account code, purpose of expenditure and total amount (in figures and in words). The practice of preparing payment vouchers after the release of cheques shall not be tolerated. These documents must all be filled out in a neat and orderly way to facilitate understanding, checking and analysis by third parties. Any wasted/ misused cheque leaves should be indicated as such and recorded in the monthly accounts.
6.2.1 Controls over cash held in the office
Some of the points in this section have already been mentioned in above sections but shall be repeated to emphasize the importance of the practices in ensuring that risk of error and fraud are eliminated. The finance Coordinator shall make specific checks on totals, amounts in words, coding of transactions, authorization and balances. All cash in the office must be counted on a weekly basis, reconciled to the records. Any discrepancies between cash balance on hand and the records must be reported immediately and in any case not later than the end of the week in which they occur. The finance coordinator is responsible for ensuring that all transactions are properly recorded in the receipts and payments vouchers. All cash held in the office must be kept in the office safe at the end of each working day. Access to the safe must be limited to the programme Coordinator. Any other person must have authorized by executive committee to access the safe.
Petty cash imprest re-imbursement shall only be made on filing satisfactory accountability of the previous imprest to the treasurer or programme coordinator. The petty cash float shall not be in excess of Ugx. 500,000/= at any particular time. The executive committee shall review this sealing periodically. Any excess cash holdings in the office shall require a clear justification from the chairperson of the committee. The chairperson is therefore expected to exercise prudence in determining the amounts to be drawn from the Bank with due regard to the requirements and timing of payments to third parties to ensure that this condition is met. As a general rule, funds exceeding Ugx. 500,000/= (five hundred thousand shillings only) shall be considered to be excess funds.
126.96.36.199. Revenue Control
Mukono District NGO Forum earns her revenue from Donor agencies, membership fees, annual subscriptions, well wishers, donations in kind and expertise fees. All receipts will be shown as gross (without any Deductions) in the period in which it is earned.
Borrowing and lending funds
No matter how dire the situation may be, it is absolutely unacceptable to borrow funds from third parties for use in the organization. Likewise, management shall not tolerate any instances of lending funds to third parties for whatever reasons. Any breach of this clause shall result in severe disciplinary consequences for the person responsible.
6.2.3 Custody of records
The documents referred to in this section include receipt vouchers, payment vouchers, cashbook, and the cheque book.
a) Receipts and payments vouchers
Only the chairperson has the right and responsibility to authorize the printing and distribution of new receipts and payments vouchers. Any other such documentation that has not been authorized by chairperson shall be rejected and the officer responsible shall be required to make good the value of the transactions recorded therein. It is the responsibility of the Finance Coordinator to request for the new receipts and payments vouchers from the chairperson.
New receipts and payments vouchers shall be in the custody of the Finance Coordinator. A record shall be kept of the serial numbers of the books as released from the store. The books shall be released to the finance coordinator as and when required and in the order of their serial numbers. The Finance Coordinator is required to sign for these books as and when they are released to him/her. During their active use, these documents shall be in the custody of the PO. He/she should make a note on the cover of the voucher book of the first and last dates on which transactions are recorded.
Once the books have been used up, a record is made of the details (first and last dates of transactions, total to value of transactions), and the book is returned to the programme coordinator who signs it as received. The Finance coordinator should them store these books in a secure place (the law requires a minimum period of six years) before they become obsolete and can be destroyed.
Once a cashbook has been fully used up, the Finance coordinator can request for a similar book from the program coordinator. The important point to note is that the formats must be uniform and the records entered in the book must be extremely accurate and reliable.
c) Cheque book
When the renewal of a check book becomes due, the finance coordinator shall fill out a checkbook request form (normally in the cheque book). New and used cheque books shall be in custody of the programme coordinator. A record shall be kept of the serial numbers of the cheque books as released from the bank.
During their active use, the cheque books shall be in custody of the of the finance coordinator. She/he should make a note on the cover of the cheque book of the first and last dates on which cheques payments are recorded. Once the cheque book has been used up, then keeps it. The finance coordinator should then store the cheque book in a secure place (the law requires a minimum period of six years) before they become obsolete and can be destroyed. Failure to do this could lead to adverse consequences.
6.3 Accounting and management controls
These controls include observation and checking of accounting records for the following items;
- Arithmetic accuracy of records and whether they agree with the amounts written in words
- Account coding reflects the actual substance of the underlying transactions
- Dates are accurate
- Proper authorization was obtained for each transaction
- Transaction is realistic and is in line with income and budget
- Reconciliation between cash book records, physical cash and bank statement.
It is important that the Executive committee is conversant with the most recent chart of Accounts and the annual budget. It is always a good idea to cross check these manually to obtain assurance that the records are accurate and reflects the intentions and aspirations of the organization. Where spreadsheets are in use, it is vital that visual checks are incorporated in the design (e.g. total vertical columns must agree with horizontal rows).
The Finance Coordinator is permitted to enter financial data information into the books of accounting. A clear audit trail must exist right from the source records to the reports generated through the system. It is also the responsibility of the Finance Coordinator to print and file all the key financial reports in an orderly and efficient way.
Cash audits and inspection
- The Executive Committee shall have unlimited access to all records regarding their line of duty at all times.
- An appointed auditor shall have access to perform cash audits at any time as might be deemed appropriate by their line of authority.
- The Executive Committee shall have the prerogative to call for an audit of any nature at any particular time deemed necessary.
These controls mainly involve a periodic assessment of the financial performance of the organization with due regard to the goals and objectives under review. It includes a review of the management accounts by the Executive committee. This should highlight any areas of concern that need further investigation or corrective action to be taken.
- Audited accounts must be presented to the Executive Committee within the 1st months of the proceeding financial year.
- The external auditor shall be appointed by a resolution of the executive committee.
- Writing off fixed assets shall be only be by a resolution of the executive committee
- All the relevant documents used in the preparation of the accounts must be reserved and kept for future reference.
- Accounting records shall only be deemed obsolete by a resolution of the executive committee passed with over 2/3 majority.
- All cash count certificates and the fixed assets register at the end of every year must be counter signed by the programme Coordinator and Treasurer.
- Fixed assets shall apply to those items whose useful life is beyond one financial year and whose initial cost value is over Ugx. 100,000/= or as might be decided by the
- The accounts shall remain the property of MUDINFO and shall not be published without the express authority of the executive committee.
7.0 BOOKS OF ACCOUNTS
These will include:
- Cash Book
- General ledger
7.1 General Cash Book
Mukono District NGO Forum will maintain an analysis cashbook (both in hard and or soft copy), in which all receipts and payments except for petty cash will be entered.(See appendix 3)
While posting into the cash book, all entries will be made and their correctness checked on a daily basis, the cash book will be balanced off, closed and a bank reconciliation statement prepared by MUDINFO at the end of every month before the totals as per the account headings are posted to the General Ledger.
These are resources that belong to the organization and or have control over. They are future divided into two: Fixed assets and current assets.
8.1 Fixed Assets:
These re resources not meant for sale, but to be used to increase the earning/productive capability of the organization. They include but not limited to things like: land, buildings, motor vehicles, furniture and equipment, e.t.c.
8.2 Current Assets:
These are assets, which can be turned into money easily. They include but not limited to; Debtors, bank balances, cash at hand and imprest amounts.
8.3 Account Codes:
The account codes are numerical figures assigned to particular cost centres for easy referencing and data entry.
9.0 INCOME AND EXPENDITURES
As already stated above, this is the main support to the organizations existence. They include but not limited to the following:
- Donor funds are the amounts received from the donor and donor agency organizations for a specific project or the normal operation of the organisation.
- Locally generated revenues such as membership fees and annual subscriptions.
These are costs incurred by the organization to enable it run its activities.
At the end of every month a trial balance will be extracted from the general ledger andout of which the monthly financial statements will be prepared.
10.0 BANK RECONCILIATION STATEMENT
At the end of every month, the cashbook may not be closed and the balalnce carried forward to the following month. The balance of the cashbook may not be the same as that appearing on the bank statement at close of a particular month. These two balances are however meant to be the same but because of the timing differences and errors and other factors, they may differ. The causes may be due to the following:
- Un presented cheques. These are cheques that have been issued/ paid out but have not yet been deducted/ drawn from the account.
- Errors in recording the cheque value. The amount recorded in the cash book or even on the bank statement, may differ from that written on the cheque. This results in their over or under stating the true amount in the cash book or bank statement.
- Deposits in transit. These are deposits that have yet been credited onto the account by the time of printing the bank statement.
- Direct deposits. These are deposits that have been banked on MUKONO account without information through the office in time to adjust the cash book accordingly.
An explanation of this difference should therefore be given in a statement form. (See appendix 6)
11.0 FINANCIAL REPORTS
These will include annually, quarterly or and monthly prepared statements for the use by Executive Committee and management respectively.
The key reports required from the Financial Coordinator are:
- Monthly income and expenditure statement
- Monthly cash flow statement
- Monthly budget variance reports with explanatory notes
- Monthly Bank statements and reconciliation
- Cash count certificates
The monthly financial reports should be prepared and presented to the Programme Coordinator by 6th reach them on or before 10th
Year End Procedure
The financial year of the MUDINFO begins on …….. (Mention the dates) At the end of the year, all books of accounts will be closed and annual financial statements prepared. The financial statements will include:
- The income and expenditure account
- Balance sheet
The said financial statements will have comparative figures that will be the audited figure of the previous financial year.
12.0 FIXED ASSETS REGISTER (INVENTORY)
Fixed assets are the resources that have an economic value beyond one financial year. They take the form of Land, Buildings, motor vehicles, equipment, and furniture e.t.c. All assets shall be recorded in a fixed Assets register clearly showing the date of purchase, condition, cost, suppliers, serial number, possible uses/users and any other information considered useful. (See Appendix 1) All the depreciation must be displayed against the Asset in the register. The programme coordinator shall be accountable for all the assets of the organization and shall at all times have on record all property. Permission to move any property shall be given in writing by the executive committee with a 2/3 majority. of the following month and copies sent to the executive Committee to.
Assets shall only be written off if:
- They cease to be of use to MUDINFO over a prolonged period
- They pose a mortal danger to MUDINFO and the community
- They become obsolete through technological advancement.
- Their maintenance and repairs costs become prohibitive.
- These financial regulations are overtaken by provision in the MUDINFO constitution.
- With the prior consent of the executive committee, the programme coordinator may rent or hire out an asset and declare al money received as a result.
- All assets held by MUDINFO should have the coded with an identification code as agreed by the executive committee.
- This inventory list is checked and compared with the physical assets on a quarterly basis by the programme Coordinator.