Financial Management System of
Access Bangladesh Foundation
Access Bangladesh Foundation, a non political, not for profit and non government organization was set up in 2008 with the aim of encouraging poor disable person, ultra poor people and women to become self-reliant and not to be dependent on others. ABF enables them to become contributing productive members of society and helps them to lead their lives with dignity and self respect.
The main objective of this study is to explore the financial management system of Access Bangladesh Foundation. For accomplishing the study, data were collected both from primary and secondary sources. A number of discussions were made in order to understand different financial issues and activities.
Access Bangladesh Foundation gives priority in maintaining excellent financial management system after incorporation. ABF believes good practice in financial management can help financial manager and project coordinator to be effective and efficient stewards of the resources to achieve objectives and fulfill commitments to stakeholders. Officers at every level in Finance department have a role to play in handling the financial activities and risks, answer to donors and beneficiaries and deliver results to the stakeholders.
Financial planning in ABF involves building both longer term funding strategies and shorter term budgets and forecasts. Once plans are set, ABF draws up its budgets and cash flow forecast to help the implementation of plans.
ABF is receiving support by national and international donors, currently as on date, ABF is receiving fund for six projects. ABF receives funds from the donors according to agreement and other sources of fund like social contributors, member’s subscription, donation, service charge, etc. ABF maintains separate bank account for its projects and open the bank account in any scheduled bank in the project area by taking resolution of the Executive committee. Bank reconciliation statement is prepared by a Finance officer in every month to reconcile the bank balances.
All fixed assets are recorded in fixed assets register. The fixed assets are physically verified at the end of each year and results are reconciled with fixed assets register. Different types of internal risks are managed by using a series of controls, checks and balances. Internal controls are also very important in protecting all those who handle the financial affairs of the ABF as they remove any suspicion of and temptation to dishonesty.
This study finds that there are no internal auditors in ABF and the internal audit is not conducted on a regular basis. Study also finds a communication gap between the project employees and personnel of finance department of ABF which induces the conflict in obtaining and using the funds.
So ABF should introduce efficient internal audit mechanism in order to examine the financial operations and should generate more funds for expanding and smooth continuation of their projects.
Background of ABF
Traditionally, society has viewed people with disabilities as recipients of charity and welfare. As a result, many disabled people tend to expect help from society, instead of making attempts towards self-reliance. A change of attitude has to take place in disabled people as well, to encourage them to become self-reliant and not to be dependent on others. In order to prevent the further marginalization of disabled people in the future, it is important to take a pro-active stand to enable them to become contributing productive members of society. By doing this, disabled people will be enabled to lead their lives with dignity and self-respect.
Besides, the financial burden on the families, society and the scared resources of the nation would be reduced and the disabled people will become asset to the economy. In order to facilitate this the Access Bangladesh Foundation, a non-political, not for profit and nongovernment organization was set up on 4thJanuary, 2008 through the generous support of some dedicated persons who have been serving for the disabled people over the years.
Service Offered by ABF
After the incorporation, ABF has provided different services to disable person, poor and ultra-poor people and women. At present ABF is offering following services:
I. Sewing Training Project for Women with Disabilities
The project aims to make the disabled girls and women productive resources and ensure their employment which will support themselves and their families financially and will facilitate their successful reintegration in the community.
II. Disabled Small Entrepreneur Development Project
Access Bangladesh started a project for the sustainable development of disabled people titled “Disabled Small Entrepreneur Development Project”. Through this programme it provides necessary training to the disabled small entrepreneur for building their capacity and to provide financial support in the form of interest free credit.
III. Disabled Hawkers Development Project
The purpose of this project is to encourage the disabled hawkers to raise their existing earning capacity and living standard and to give inspiration to other disabled persons. The project is located in different Rail stations, Bus terminals and footpaths where disabled hawkers run their small businesses. Access Bangladesh is playing a facilitator role in the establishment of Disabled hawkers club, providing skill development training, logistical and financial support.
IV. Support to the Poor Disabled Students
The aim of this project is to encourage poor disabled students to achieve their education and also it will help to change gradually the attitude of the society towards disabled students. Access Bangladesh provides tuition fees and other material support to extremely poor and meritorious disabled students. There will be a continuous monitoring and evaluation of the progress of each Sponsored Student. Access Bangladesh maintains a very close contact with schools to check examination results and discuss the progress of the students with their teachers.
V. Self Help Initiative of Persons with Disabilities
To ensure establishment of rights of persons with disabilities, community based approach is a must. Through this community program Access Bangladesh helps to form Self Help Groups by the disabled people themselves. Access Bangladesh facilitates this group through group meetings, discussion and training so that the group members can build their capacity to solve their own problems and improve the wellbeing of themselves and their families. Access
Bangladesh also provides medical support and financial support to the stakeholders. To ensure community participation, it involves local government officials, media people and community people so that the mass people will be aware about their responsibility.
IV. Faith and Light
This group consists of the children with disabilities and their parents. There is much linking these families together. They get together once a month to share their joys and sorrows and to do different activities. Access Bangladesh motivates this group to build a strong family base towards their children.
Origin of the Study
Internship program helps to gain the practical knowledge by implementing the theoretical aspects and make a student competitive in the corporate world. Even this program is also helpful for the post graduate students who are employed in different organization. This program helps to learn different functions of the department or project.
Objectives of the Study
The broad objective of this study is to explore the financial management system of Access Bangladesh Foundation.
The specific objectives of this study are:
- To explore the financial planning and budgeting of ABF;
- To explore the financial and non-financial asset management procedure of ABF;
- To identify the auditing practice of ABF;
- To explore the procedure of preparing and using various financial documents and reports.
Methodology of the Study
As a finance officer of ABF, researcher is involved with various financial activities. In order to complete this study all the information has been collected from both primary and secondary sources. In this research, qualitative techniques are used to find and analyze the information.
The primary sources of information are:
- Direct observation tool will be used to explore the procedure of preparing and using various financial documents and reports;
- Unstructured interview will be conducted with Mr. Albert Mollah, executive director of ABF to explore the financial planning of ABF;
- Focused Group Discussion will be organized with seniors and colleagues of finance department to explore the financial and non-financial asset management procedure and auditing practices of ABF.
The Secondary sources of Information are:
- Official files and records will be used to explore the use of various financial documents and reports;
- Annual audit report will be used to identify the auditing practices;
- Different publications of ABF will be used to explore the asset management procedure of ABF.
Financial Management System of Access Bangladesh Foundation
Financial Aspects of ABF
Financial management system of an NGO involves the planning, organizing, controlling and monitoring the financial resources efficiently in order to achieve the key goals and objectives of the NGO. Marinating a good financial management system is important because the main source of most of the NGO is donor funds. So the management must ensure that donated funds, which are increasingly the scarce resources, are properly used. Management must be careful at how the whole organization is financed in the medium and long term, not just focusing on projects and programs.
Access Bangladesh Foundation, a non-political, not for profit and non-government organization, gives priority in maintaining excellent financial management system from the very beginning of its foundation. ABF believes good practice in financial management can
- help managers to be effective and efficient stewards of the resources to achieve objectives and fulfill commitments to stakeholders;
- help ABF to be more accountable to donors and other stakeholders;
- help to earn the respect and confidence of funding agencies and partners;offer the advantage to generate more donor funds in this competitive world; and
- help to prepare themselves for long-term sustainability and the gradual increase of self-generated funds.
Custodians of the Accounts
Officers at every level in Finance department have a role to play in handling the financial activities and risks, answer to donors and beneficiaries and deliver results to the stakeholders. The Board is responsible for the financial oversight of ABF and is ultimately accountable by law. However, the Board delegates different responsibilities to the executive director who delegate some functions to senior finance manager. Finance manager delegates the responsibilities to the downward.
General activities of the Board regarding financial management are:
- Oversee financial controls and ensure accountability;
- Review and approve annual budget;
- Approve financial policies, including delegating authority;
- Review and approve financial reports and audited financial statements;
- Monitor and support resource mobilization;
- Assess financial risks facing the ABF.
General activities of the Executive Director regarding financial management are:
- Report to the Board and manage budgeting process;
- Appoint/hire financial staff and delegate tasks;
- Review donor and other agreements/contracts;
- Ensure financial records are accurate and up to date;
- Ensure correct, timely preparation and submission of financial reports;
- Ensure that program activities are in line with budget and deliverables;
- Monitor resource use and manage income generation;
- Monitor financial needs of the organization and business planning;
General activities of the Finance Manager are:
- Manage and monitor the budgets of the finance department and projects;
- Review organization financial reports and provide inputs to executive director;
- Delegates financial responsibilities to his/her team;
- Project future financial needs;
Control budgets to ensure money is spent as agreed and work with finance officers to ensure policies and procedures are followed and expenditures are coded and reported accurately. (Ref: Access Bangladesh HR Manual)
ABF is receiving support by national and international donors, currently as on date, ABF is receiving fund for six projects. ABF maintains their books of accounts on cash basis of accounting. ABF maintains main bank account for operating its foreign funds and this account is kept in the name of the ABF. All the funds and grant received from overseas are deposited into this account.
The finance and accounting personnel make record of all the vouchers of all kind of receipts and payment into the cash book
ABF maintains separate bank account for its projects and open the bank account in any scheduled bank in the project area by taking resolution of the executive committee. Bank account may be opened for each fund or project based on terms and conditions of the donor‟s agreement. All the bank accounts are operated in accordance with the provision of the resolution of the executive committee of the ABF.
The Bank accounts are operated by Mr. Albert Mollah and Mr. Nahid Hossain (Acting). The vouchers, journal, receipt, payment are maintained by ABF. The payment of bills, preparation of vouchers, preparation of cheques etc. are maintained by the finance officer.
With regard to programme advances, the programme and the amount required for its implementation has been prepared by the program coordinator and submitted to finance manager for its payment. The programs advances are used to paid to the program coordinator by account payee cheques and settle accordingly by the finance officer and the program coordinator.
Usually, all the advance settlement vouchers are verified by the finance officer and approved by the executive director of the ABF.
Maintenance of Books of Account
Books of accounts are maintained on cash basis. ABF maintains a cashbook for its day to day transactions and also summarized all transactions for each individual head. The books of accounts of ABF are maintained by Mr. Nahid Hossain and Rakib-ul-Hasan. Both of them are expert and experienced in maintain the books of accounts. The supporting documents and evidences along with the vouchers are kept in the office file. All entries in the payment side of the cash book are posted to the debit column of the respective accounts in the ledger book.
The entries in receipt side of the cash book are posted to the credit side of the respective accounts in the ledger book on regular basis. The second source of the ledger postings will be journal vouchers. The ledger shall be balanced monthly basis.
- The General Ledger Book:
This is a central book to list the transactions which contains basic bookkeeping information from the main working books of account (Bank Book, Petty Cash Book, Sales and Purchase Ledgers). ABF used it to sort basic financial information and use the information of ledger when ABF plans for several projects and different donors requiring different reports. The Ledger has different pages for each category of income, expenditure, assets and liabilities and information is „posted‟ from the other accounting books into particular category. At the end of the month, a head-wise abstract is prepared showing monthly totals of payment under each head. It plays a central role in the double-entry bookkeeping system and is the basis of trial balance.
The adjustment entries for stores, overhead, advances, prepayments, outstanding expenses, accrued income and depreciation are made as and when required through journal vouchers. For such adjustment the subsidiary and general ledger accounts will affect. All rectification, transfers and adjustments and non-cash transactions are processed through journal voucher.
The adjusting journals are prepared by the finance officer and duly approved by the executive director or delegated authority. The journal vouchers are filled in a chronological order.
- Supporting Documents
It is very important to maintain supporting documents in the form of receipts and vouchers for all financial transactions – preferably cross-referenced to the books of account and filed in date or number order. Apart from being required by the external auditor to support the audit, certified receipts also provide protection to ABF in handling the money. In order to support the main working boos of accounts and the ledger, ABF keeps files of the following original documents:
→ Receipt or voucher for money received;
→ Receipt or voucher for money paid out;
→ Invoices – certified and stamped as paid;
→ Paying-in vouchers for money paid into the bank;
→ Bank statements;
→ Journal vouchers – for adjustments and non-cash transactions;
→ Payment Vouchers (PVs);
→ Local Purchase Orders (LPOs). (Ref: Discussion with finance and accounts personnel)
- Bank Account & Its Reconciliation
The Bank book is the main book of account of ABF for recording bank transactions. ABF maintains separate book for each bank account which makes it easier to reconcile each account at the end of the month. Each page of the book is ruled into columns. Each transaction is entered on one line of either the Receipts page or the Payments page in date order. The column headings help to enter key information – e.g. date, cheque number, payee, description, amount, category of transaction, etc. The columns are totalled at the end of each month. Some financial policies regarding the bank account of ABF are:
» Every check/instrument is signed by at least two signatories. An employee that has access to bank account and cash account is not entitled to be an authorized signatory. The bank is authorized to undertake any written instructions, signed by two of the signatories, for transacting any financial business from time to time.
» All receipts are to be acknowledged by issuing an official receipt. The date of receipt, its accounting and the date of deposit of the check/draft to the bank account should be the same. The bank deposit slip must be attached with the receipt voucher.
» No receipt should be issued on the last day of the month if the instrument cannot be deposited with the bank on the same day.
» Payment voucher has to be prepared before preparing any check. Check cannot be prepared if sufficient balance is not available with bank. All vouchers have to be verified and approved before payment is released.
» Payment has to be made only against original bills and claims. Any type of copy of bill or claim should not be considered. All supporting documents should be attached with the payment voucher and filed according to serial number.
» With regard to programme advances, the programme and the amount required for its implementation has been prepared by the program staff and submitted to finance officer for its payment. In ABF, all the advance settlement vouchers are verified by the finance officer and approved by the executive director.
» Checks should be written in proper way and must ensure that the amount in words and figures are the same. All checks have to be crossed by a rubber stamp stating “A/c Payee Only”. All checks are stamped for the name of ABF.
» Check books should always be kept under lock and key. Only authorized persons are allowed to handle them.
» Any bank account not required to be operated must be closed immediately. Before closing the bank account authorized officer must ensure transfer balance in the account to the other bank account and surrender all the check leaves to the bank under a receipt.
Bank reconciliation statement is prepared by a finance officer in every month to reconcile the differences between the cash balance shown in the bank statement and cash balance shown in the ABF‟s bank book. This is achieved by taking the bank statement for a particular date and comparing it to the closing bank book balance for the same date. If there is a difference between these two closing balance figures, the difference must be explained.
Each month the bank reconciliation statement is reviewed carefully to investigate long outstanding cheques deposited or issued or any other item for settlement.
All debits charged by bank for bank charges or commissions and all credits for the interest and other that appears in the monthly bank statement is scrutinized carefully before accepting them as correct and before recording those debit/credits in the cash book. Cheques older than six months from date of issue are generally written back into the cash book noting the reference number and date of payment.
- Petty Cash Book
A petty cash book is maintained in ABF by the accountant to have small amounts of cash available for immediate payments of small amount of expenditures. Accountant is responsible for controlling the petty cash fund and documenting the disbursement made from the fund. Actual cash is spot-checked and verified by the finance manager at least once per month. Accountant will reimburse the fund for any discrepancies.
Petty cash shall be maintained on an imprest basis. At any given time, the cash and receipts in the cash box shall total the imprest level. The level shall be maintained at BDT 5000. All requests for petty cash must be signed by finance manager on a pre-numbered voucher. A check to replenish the fund will be issued when the fund is low and at the end of every month.
- Maintenance of Accounting Registers
The account related register is most important for recording financial transactions which are treated as documentary evidence of financial transaction. The Finance and Accounting Personnel shall maintain the following registers for recording the financial transaction and its related information.
Staff Movement Register
Movement of office staff is recorded in the staff movement register. The information about name, date of departure, designation, out time, in time, purpose etc. are recorded in this register.
Access Bangladesh maintains a register for recording staff salary payment. It contains salary recipients name, designation, basic salary, allowances, salary deduction etc.
Access Bangladesh also maintains salary sheet monthly basis for all staff.
Access Bangladesh maintains an attendance register for the staff members which contain information of office staff attendance.
Access Bangladesh maintains leave register for office staff.
All stores are recorded in the stock register which would contain information about quantity, total receive, total issue, and total balances of materials and signature of recipient.
Advance register/ Advance slip
A register/slip is maintained to record advances give to employees. It contains information about purpose of advances, date of advances with probable date of complete adjustments.
Cheque issue register
Cheque issue register is maintained for each issued cheque a book in the prescribed manner.
Vehicle log book
Access Bangladesh maintains a vehicle log book for recording of the driven hours, departure, arrival etc. It should be prepared for checking the mileage, fuel consumption, which must be needed for controlling fuel bills.
Cheque sign register
A register is maintained for recording information about signing all cheques. (Ref: Access Bangladesh Financial Manual)
Planning & Budgeting
Planning and budgeting is the fundamental tool for ensuring a strong financial management system of the organization. Planning and budgeting helps the ABF to control the project costs & monitor the performance in the implementation of various activities of the Project.
At ABF, financial planning is both a strategic and operational process linked to the achievement of ABF‟s objectives. It involves building both longer term funding strategies and shorter term budgets and forecasts. Once plans are set, ABF draws up its budgets and cash flow forecast to help the implementation of plans. During the year financial reports are produced to compare the budget with actual performance. (Ref: Discussion with executive director)
Budget Structure in ABF
The main objective of an efficient budgeting system is to facilitate budgetary control, i.e. monitoring of performance at regular intervals and the accountability for variance. ABF has recently carrying out six projects and each project has their own budget to conduct their various operations. The project budgets are consolidated into departmental budgets which are then, in turn, consolidated into one master budget. This structure allows budgets to be devolved and monitored at the project manager level, whilst maintaining an overview at department and executive director level.
In the master level, there are mainly three types of budgets are prepared in ABF. They are:
- The Income and Expenditure Budget: The income and expenditure budget is used to anticipate the recurrent costs of ABF and shows where the funds will come from to cover the costs
- The Capital Budget: A capital budget lists the expenditure that ABF intend to make for the coming years on capital projects and equipment as fixed assets.
- The Cash flow Forecast: The cash flow forecast is derived from the income and expenditure and capital budgets and monitors the receipts and payments of cash through the operations of ABF. Whereas the income and expenditure budget shows whether the ABF is covering its costs; the cash flow forecast shows whether it has sufficient cash in the bank to meet all of its payments as they arise. Cash flow budget helps ABF to identify the cash shortages and to know when cash levels are critical. (Ref: Discussion with executive director and finance manager)
Budget for each activity is prepared in ABF by breaking up of sub-activities and related costs. Baseline data is collected in ABF through primary data so that it is relevant to the specific objectives and indicators set for the projects. Data are collected by a staff member, partner or evaluation consultant by conducting a piece of research or evaluation. Common sources of secondary data such as surveys, organizational records which are collected by someone other than the user also use to determine the budget details. Different research methods also use to prepare the budget of the project.
Some necessary arrangements for budgeting in ABF are:
- The whole team needs to be involved in budgeting process;
- Objectives of the program along with activity plans must be completed before starting the budgeting process;
- Changes in strategies for the forthcoming year based on the past experience have to be unanimously decided by the team and the budget should be accordingly formulated;
- List out the resources required to achieve these activities and cost them;
- All line items in the budget must flow from planned activities;
- Budget must be as detailed as possible with justifications and break up of costs matched against each activity;
- When budgeting for subsequent years or phase, cost increases due to inflation or exchange rates etc. would need to be kept in mind;
- All expenses have to be reviewed against the budget on a monthly basis;
- The project management shall verify the quarterly reports against the budget, analyze causes for variance and take appropriate action.
Annual budget of the ABF must be approved by the general body of the ABF. After preparing the budget, it also has to be verified and certified by the executive director and finance manager as well to ensure that the costs are realistic as compared to the activities, and the budget captures all the required costs for such activities only.
Once the budget has been agreed and the activity implemented, the process is completed by comparing the plan (budget) with the eventual outcome.
It is apparent that a system of budgetary control provides the mechanism for controlling costs and revenues. The importance of budget and budgetary control system at all level highly emphasized. ABF will follow the following guidelines for budgetary control system.
In all cases expenditure will remain within approved budget unless the concern authorities revise it. It is important that all expenditures, irrespective of capital or revenue in nature, are to be kept within the budgeted allocation. However, circumstances occasionally may necessitate revision of original estimates to bring them in line with current condition.
Finance and accounts personnel is to take corrective measures whenever variance in individual code wise budget targets is expected to occur and give satisfactory explanation to major deviation of financial budget targets.
Finance and accounts personnel are to analyze the entire budget situation on quarterly basis. The project coordinator will control the expenditure volume within the limit of the budgeted allocation. Written justification will be required for over expenditure up to 5%. Prior written permission will be required from the donor for over expenditure exceeding 15%. Prior written permission will be required from the donor or executive committee for any emergency expenditure outside the head of expenses of the approved budget.
A budget comparison report showing the budgeted allocation and actual expenditure must be prepared by the Finance and accounts personnel within the first week of the month. A budget line can be changed if necessary unless it is restricted by the donor. However, the executive committee has the exclusive right to add or subtract budgeted allocation depending upon the quantum of fund available.
The project coordinator will prepare an expenditure plan on the basis of annual approved budget and annual work plan along with showing a month-wise break-up of the projected expenditure.
ABF receives funds from the donors according to agreement and other sources of fund like social contributors, member‟s subscription, donation, service charge, etc. by issuing money receipts.
All receipts are recorded in the related documents like cash book, ledger book through preparing credit voucher under appropriate head of account. All credit vouchers are supported by money receipts and other related document. All received funds against NGOAB approval shall be deposited in the main bank account. Upon receipt all documents against receipts, the finance and accounts personnel verify the relevant documents to justify it. The credit voucher is duly signed and approved by the executive director.
Officer designated to collect cheque from the Bank must have a letter signed by the authorized official, authorizing him/her to collect the cheque. Before releasing the funds, approval from NGOAB is required provided donation is received from foreign agencies.
Each receipt is acknowledged either through acknowledgement letter or a money receipt. All payment vouchers must be supported by the documentary evidence such as requisition/indent, quotation, comparative statement, where applicable purchase committee resolution, purchase order/work order, bill/invoice, cash memo, job completion certificate etc. and duly approved by the authorized personnel. Upon receipt a bill, the finance and accounts personnel will verify the relevant document to justify the payment and prepare a voucher to process the payment.
Executive director can approve up to expenditure amount of BDT 2, 00,000. Exceeding of this ceiling, need to be approved jointly by the executive director and the chairperson of ABF.
All bills received must be duly checked by finance and accounts personnel with relevant documents. No payment shall be made without the prior approval of the delegated authority/the executive director. The bills and the invoice for payment shall be cancelled by affixing the stamp “PAID” and shall be dated. All payments must have the supporting documents as its attachments. All payments must have the supporting documents as its attaching. All payments shall be recorded in cash books and other relevant documents.
Payments voucher shall be prepared correctly and it must be signed by the person who prepare, checked, and approved. (Ref: Access Bangladesh Financial Manual)
Management of Unused Funds
In ABF, funds transferred to the recipient that have not been spent at the end date of the project implementation are to be repaid in donor‟s issuing currency within six weeks after the approval of the final financial report, along with any earned interest or gains from exchange rate fluctuations on those unspent funds. (Ref: Access Bangladesh Financial Manual)
Cash Management and Disbursement
In order to avoid the misappropriation of cash, ABF has efficient cash management procedures. Accounts personnel must ensure and keep in mind that the maximum closing cash balance in hand cannot exceed BDT 20000 after the day transaction. Excess of said amount for any valid reasons, the amount is kept in the main safe under lock and key.
Each day, all cash receipts and payments are entered into the cash book daily basis. At the end of each day after making all transaction finance and accounts personnel shall count the cash physically and shall confirm the balance with the Cash Book. The executive director shall verify the cash balance and cash book at the end of each month and put his signature. S/he may verify the cash balance and cash book at any time to ensure the books are maintaining appropriately.
Access Bangladesh should use vehicle while carrying cash from the bank and one office staff shall have to be provided.
Any payment exceeding BDT 10000 (Ten thousand) must be made through an Account Pay Cheque. If need to pay in cash more than BDT 10000 (Ten thousand) it can be done only after getting approval from the chief executive. In this situation a special note will be required.
For withdrawal of money from the bank account for working cash or for any operational expenses, money requisition must be approved by the executive director. All cash receipts must be deposited in the bank account as soon as possible immediately after receipt cash. If not possible for any valid reason, that must be deposited into bank account by following working day. Cash should be kept in safety place under lock and key. Key must be kept with cash responsible person. (Ref: Access Bangladesh Financial Manual)
Appointment letter is issued to all permanent employees signed by the executive director and employee by accepting of the terms and conditions set forth thereto. The appointment letter contains the initial salary, responsibilities, duties and the general terms and conditions.
Subsequent changes in salary, responsibilities, duties, terms or conditions of employment are communicated to the employee in writing. A personal file is opened for every employee. Copies of job application letter, appointment letter and any other correspondence between employer and the employee are kept in this file.
Salary schedule of ABF contains the gross pay, advances, deductions and net pay is prepared by the finance officer, checked and verified by the finance manager and approved by the executive director prior to the preparation of payment vouchers and the check.
Payment of salaries amount more or equal to BDT 10,000 is made through Account Payee Cheque. All the staff members working at different offices of Access Bangladesh will be paid their salaries within first 3 days of next month.
Staff advances are given upon request in accordance with regulations stipulated in the personnel policies and procedures manual. An advances ledger account is maintained and reconciled at every end month. However, all advances are approved subject to the availability of funds.
Travel expenses incurred by staff or any other authorized person are reimbursed according to the regulations set out in the Human Resource Policies and Procedures Manual.
Concerned staff through money requisition can initiate advance against any operational cost which is verified by finance manager and approved by the executive director.
Adjustments against advance for conveyance is made within 7(seven) days after completion of tour & submission of trip report. In case of advance to carry out day to day activities, advance should be adjusted within 3 days from the date of advance. Expenses incurred against the advance are adjusted subsequently and approved. No further advance will be\ made unless the previous advance is adjusted.
For risk assessment, ABF reviews at least once in every year the risks and mitigation actions implemented for the projects. Major risks of ABF are:
- i) Financial Risk: Financial risk incurs the loss of money and fund. Main influencing factors are:
- Total grant value
- Funding mechanism
- Funds are used for same objectives in different projects.
- Foreign exchange / inflation
- Level of operational risks / ability to deliver project
- ii) Operational risk: Operational risk involves project delivery, personnel, and assets related risks. It incurs failure to meet project objectives, low safety and security of personnel and beneficiaries and loss of assets. Major influencing factors are:
- Political stability and relationship with government / parties
- Experience of location, theme, type of work, technology and process
- Experience of partner / donor
iii) Long term risks: Long term risk involves the external and reputational risks. It incurs closure of operations in country, legal obligation and loss of reputation. . Main influencing factors are:
- Political stability and relationship with government / parties
- Environmental factors and emergency situations
- Strategic importance of donor / theme / region for future SC projects
- Level of operational risks / ability to deliver project
Mitigation strategies are used in ABF to reduce the medium and high risk. A risk register is used to keep the information about the risk if the project is undertaken. Mitigation strategies that are cost-effective are considered at the review and approval stage. If the proposal/project proceeds:
- They keep the risk register of all identified and assessed risks;
- They also aware of the facts that there are a number of risks they have not considered or anticipated;
- If risks do occur, they use the cost effective mitigation strategies to reduce the risk.
Managing Internal Risk
Different types of internal risks are faced by ABF on a day-to-day basis. These types of risks are managed by using a series of controls, checks and balances, which help to avoid losses and detect errors and omissions in the accounting records. Internal controls are also very important in protecting all those who handle the financial affairs of the ABF as they remove any suspicion of, temptation to dishonesty.
Delegation of the authority
Executive director of ABF delegates authority to respective managers of the department and project managers for the day-to-day operations of the ABF because it is not possible for one person to make all the decisions and authorise all transactions. Respective department and project managers therefore, further delegate authority to members of the team to relieve the load and to ensure smooth operation during absences of key staff.
Delegated Authority Document
Every organisation should decide in advance who should do what in finance procedures. It is a good practice to record what has been decided in a delegated authority document. Its purpose is to clarify who has the authority to make decisions, commit expenditure and sign legal undertakings on behalf of the organisation so that there is no confusion about responsibility.
The delegated authority document of ABF includes:
- Placing and authorising orders for goods and services;
- Signing cheques;
- Authorising staff expenses;
- Handling incoming cash and cheques;
- Access to the safe and petty cash;
- Checking and authorising accounting records;
- Signing legal undertakings.
The delegated authority document is approved by the Board and reviewed every year to ensure it is still appropriate to current needs. Before approving the delegated authority document some basis principals are followed by ABF. They are:
→ The lowest level of authority is defined – it is taken for granted that those higher up the management ladder will also have the same authority.
→ No one should authorise any transaction from which they will personally benefit.
→ Sub-ordinates must not authorise payments to managers – they must be passed to someone who is more senior in the management structure.
Dealing with Fraud & Irregularities
Sometimes internal control systems fail to prevent losses through theft, fraud or other irregularities. Fraud is defined as a deliberate, improper action which leads to financial loss to the organisation. This includes theft of goods or property; falsifying expenses claims and falsification (or destruction) of records to conceal an improper action. Other irregularities include unauthorised activities for private gain.
Inevitably, the impact of fraud has a damaging effect on the ABF. Incidents of fraud and irregularities require sensitive handling to minimise the long-term impact. It is important to be prepared to deal with any occurrences of fraud or financial irregularity by having a written procedure which covers steps that need to be taken.
The procedure to deal with irregularities of ABF states clearly that routine controls, checks and balances are in place to safeguard the assets of the organisation and to protect staff from any suspicion of, or temptation to, fraud or other impropriety. Paid staff and volunteers are therefore obliged to co-operate fully with internal control procedures and failure to do so will be dealt with as appropriate within the organisation‟s disciplinary code.
When an irregularity is reported or detected, record the details in writing; report it immediately to a superior in ABF. When an irregularity comes to light, it must be dealt with quickly and sensitively. If all the evidence points to an irregularity, the individual(s) who is involved will be formally interviewed with a third person present. Protect documents and records by either removing access to them by those involved in the irregularity or by suspending the people involved during the investigation. Investigation could be conducted by the executive director, department or project manager.
Results and Discussions
Access Bangladesh Foundation is one of the promising non-government organizations which are working for disable and poor persons. Over the last eight years, it is continuously improving its activities in different area and adopting new projects. Simultaneously, it is also pursuing standard rules in handling the donor‟s funds. ABF is following recognized practices in keeping the financial accounts although some weaknesses in financial policy of ABF are observed.
An internal audit of a firm helps to check financial accounting systems and procedures and internal control mechanisms. Some firms appoint the internal auditor to examine the internal financial mechanism and financial practices of different projects. There are no internal auditors in ABF. Moreover the internal audit is not conducted in a regular basis. Occasionally, the executive director of ABF appoints someone to conduct the internal audit.
The accounting software and technological support of ABF are not so efficient and updated.
There is communication gap between the project employees and personnel of finance department of ABF which induces the conflict in obtaining and using the funds.
Project coordinators of some projects do not maintain all supporting vouchers which are essential for external audit.
In Bangladesh, it has been a common scenario that the poor people are depriving in every sector even if they work so hard for livelihood. Some non-profit organizations try to improve their lives through preparing several projects but yet the numbers are still low comparing to the population. Financial management system of ABF fulfils the basic financial and accounting requirements to ensure better degree of financial control, transparency and accountability in the day to day operations of ABF.
In order to continue the operational activities and to implement the different projects, ABF needs to ensure a sound financial management system and effective accounting administration. Some recommendations are proposed below which will help to develop an effective financial management system.
- The executive committee should introduce efficient internal audit mechanism in order to examine the financial operations of ABF. They can recruit an employee as internal auditor or can appoint a third party to conduct the internal audit.
- The allocation of common cost needs to be reflected in respective financial planning of the respective project.
- ABF needs to generate more funds for expanding and smooth continuation of their projects. For generating more funds they can negotiate with donors to increase the budget and to improve the relationship with local partners.
- In order to eliminate the communication gap between finance personnel and project coordinator, they can assign a person to share the information between two groups. There should be closer coordination between the program staff and finance officer.
- ABF has the opportunity to increase the transparency of their project activities. ABF needs to ensure that project would not be delayed for the obligation of rules and regulations.
- ABD can use different software to keep their different financial information.
- ABF needs to develop a detail financial manual and to examine the manual time to time.