title (arial bold 30 point)introduction: improving ... · page 5 who is the toolkit for and how...

Introduction: Improving internalcontrols: the EY guide forhumanitarian aid organizations

Humanitarian aid resource and deliveryframework

2015

Our Call To Action …

Stakeholder Expectations

► Funds that were allocated to disasterrelief and rehabilitation efforts wereeffectively and efficiently spent inaccordance with:► What the affected people need

► The objectives set by the donors.

► Funds not be unintentionally diverted toother purposes or activities. Suchdiversion is contrary to effective andefficient use.

Stakeholder Requirements

► Standards of accountability,transparency, and trust for all thoseinvolved in relief work need to be set ashigh as (if not higher than) the privatesector.

► Systems of internal controls willsafeguard assets, improve reliability ofthe accounting data, improve compliancewith applicable laws or contractualobligations and promote operationalefficiencies.

How CouldEY Help?

To provide organizations with what EY knows best - a toolkit that:► Includes processes and procedures, incorporated with internal controls► Can be easily understood and implemented by an NGO.► Can help to provide reasonable assurance that the funds allocated to tsunami

efforts are effectively and efficiently being spent.

Introduction: Improving internal controls: the EY guidefor humanitarian aid organizations

What Is The Humanitarian Aid Internal ControlsToolkit?The Toolkit: Framework

Intended to improve the effectiveness andefficiency of an NGO’s operational activities,the Toolkit includes:1. EY’s Humanitarian Aid Resource and

Delivery Framework.2. The operating processes flows and

procedures embedded within theFramework.

3. Descriptions of activities and thefunction(s) involved.

4. Appropriate internal controls for each ofthose processes.

5. A key control and a what can go wronglist for each.

► PO Management

► Contract

► Tender

► Direct Appointment

► Vendor Assessment

► Vendor Database Maintenance

Purchase

Procurement Manager

Procurement Staff

Coordinator

Yes

No

2Perform VendorAssessment

Approvedvendors?

3Approve VendorAssessment

1Obtain and input

vendor data into thesystem

to 2Update

informationchanges in

vendordatabase inWorkflowModeler:

B.04.1 VendorDatabase

Maintenance

to 1Review

approvedvendor list in

WorkflowModeler:

B.04.3 DirectAppointment

Procurement Manager

Procurement Staff

Coordinator

Yes

No

2Perform VendorAssessment

Approvedvendors?

3Approve VendorAssessment

1Obtain and input

vendor data into thesystem

to 2Update

informationchanges in

vendordatabase inWorkflowModeler:

B.04.1 VendorDatabase

Maintenance

to 1Review

approvedvendor list in

WorkflowModeler:

B.04.3 DirectAppointment


What Is The Humanitarian Aid Internal ControlsToolkit? (contd)The Toolkit: Overview

Intended to improve the effectiveness andefficiency of an NGO’s operational activities,the Toolkit also includes explanations of:► What internal controls are and how do

you optimize them?► How much control an NGO might

require?► Where does control start from?► Who an ‘aid recipient’ actually is?► What is the control environment and risk

assessments?► How to apply these tools to different size

organizations?► Segregation of duties?► How to apply information technology to

support this system?

Who is a recipient?

A recipient can be defined by person, family, cooperative, municipality, business or evenorganization. Essentially, it is a ‘measurable unit’ that knows what it needs as well as canacknowledge and be accountable for the aid it receives.

Recipientneed

Aidprovisioned

Aiddelivered Track

Function Duties or procedures to keepseparate:

CashDisbursementand PettyCash

Authorizing payments, handlingcash and recording transactions


Who Is The Toolkit For and How Does It Fit AnNGO?Who Is The Toolkit For?

► NGOs that are planning to establishthemselves (or have recently beenestablished), and who would like to adopt asystem of internal controls that will help tomake sure that relief reaches the intendedrecipient.

► Existing NGOs that wish to improve thecurrent standard of their procedures andinternal controls, or enhance the overallcapacity of their organization and partners.

► Donor entities intending to grant funds to anNGO partner, and who may require theadoption of the Toolkit by the NGO as acondition for the grant.

► Government bodies seeking a benchmarkfor comparison with processes andprocedures used in government aidprograms.

How Does It Scale To Fit An NGO?

The Toolkit fits NGOs varying from a simple tocomplex type of operational structure because itprovides a scalable system of internal controlsfor an NGO depending on its:► Size► Organizational structure► Objectives and kinds of activities

undertaken► What’s required by the ultimate donorsBased on its own set of operational and controlobjectives, an NGO selects different modulesthat best fit its requirements through the use of a“Pick List”.


What Are Some First Steps To EngageDonors/INGOs

1. How well are our implementing partners processes and systems of internalcontrol working?► Conduct an organizational or functional assessment

2. How can we build or improve our implementing partners processes andinternal control systems?► Build capacity in areas of their organization through training and development► Help them to design new processes and systems of internal control (or improve

existing ones) and implement them

3. How well did our implementing partners implement processes and systemsof internal controls?► Conduct a post-implementation review

4. How well are our implementing partners complying with the processes wehave in place?► Begin a on-going compliance checking and monitoring program


Humanitarian Aid Resource and DeliveryFramework

Inventory Management

Human Resource Mgmt.

Delivery

Accounting Reporting(Financial/Mgmt) Bu

dget

and

Anal

ysis

Recipient Requisition Recipient Receipt

Budget Preparationand Requisition

Approval

Funding and Donation Mechanisms

Rec

eipt

Cyc

le

Cash Receipts

Donor Objectives/Goals

Expe

nditu

reC

ycle

Petty

Cas

hC

ash

Dis

burs

emen

t

Rea

cqui

sitio

nC

ycle

Produce/Build

Purchase

Assets Management


Toolkit – Core Modules

“One size does not fit all.”The Toolkit is modular. One module focuses on one process area. An NGO can pick and adopt the process modules thatare applicable to its organization, organizational structure, charitable activities, operational structure and/or the desiredlevel of internal controls.

Core Toolkit Modules

Budget preparation andrequisition approval► Budget Preparation► Recipient Data Maintenance► Fund Requisitions

Cash receipts► Bank Receipts

Inventory management► Receipt of Goods or Services

Purchase► Vendor Assessment► Direct Appointment► Tender► Contract► PO Management► Vendor Database Maintenance

Human resource management

► Recruitment► Promotions► Terminations► Resignations► Employee Master Data► Payroll

Delivery► Distribution Scheduling► Goods Delivery and Monitoring

Cash disbursement► Account Payable► Bank Payment

Petty cash► Petty Cash Payment and

Replenishment

Reporting

► Closing and Reporting

Accounting► Recipient Receipt of Good or

Service► Reconciliations

Recipient requisition

► Recipient Requisition of Goods orServices

Recipient receipt


Toolkit – Expanded Modules

“One size does not fit all.”The Toolkit is modular. One module focuses on one process area. An NGO can pick and adopt the process modules thatare applicable to its organization, organizational structure, charitable activities, operational structure and/or the desiredlevel of internal controls.

Funding and donationmechanisms► Funding and Donation

Mechanisms

Inventory management► Inventory Planning► Goods Issuance► Physical Count► Inventory Monitoring

Produce & build► Planning & Scheduling► Project Execution and Monitoring► Project Inspection► Project Amendment► Project Acceptance/Delivery

Asset management

Budget and analysis► Budget Analysis

Recipient receipt► Recipient Satisfaction Survey


Expanded Toolkit Modules

What’s included in each module?

For each module, the Toolkit contains:► A process flow that depicts the

process initiation, process activities,roles responsible, processtermination and links to otherprocesses.

► Goal of the process.► Definition and description of each

activity, including, controlapplications, relevant prevent anddetect controls, and the functionsinvolved.


What’s included in each module?

For each module, the Toolkit contains:► A list of prevent and detect controls

transformed into checklist for easyevaluation for the workings of yourinternal control system

► A “what can go wrong” list or “watch”guide for use by a donor, financedepartment, internal/external auditoror any person responsible for closermonitoring and subsequent testing ofinternal control compliance, includingquality of performance.


Budget Preparation and Requisition Approval

B.01.1 Budget Preparation


To 1 Assess Proposed Budget/Additional Fund Requisition inWorkflow Modeler: A.02.1 Funding and Donation

Mechanisms

To 1 Prepares Budget analysis monthly in Workflow Modeler:B.13 Budget Analysis

from 3 Analyze Survey Results in Workflow Modeler:C.01.2 Recipient Satisfaction Survey

1Disaster data gathering

2Conduct meeting on

information/datagathering

3Budget preparation

4Review and approve

Field Community Staff

Community Relation

Executive Directorand Trustee

Donors

Sample


B.01.1 Budget PreparationTo ensure budgets are accurate, complete and reasonable.

Sample

Activity:1. Field/Community Staff gathers preliminary data to assess the recipient's requirements (R1).

2. Field Coordinator discusses with the team regarding the information/data gathering process and determines whethersufficient work has been done as the basis for the budget.

3. Field Coordinator prepares budget for Prospective Donors. Proposed Budget consists of estimated number ofrecipients, description of relief aid, implementation plan and the total project value (R2).

4. Executive Director and Trustee:Review the completeness and reasonableness of the Proposed BudgetEnsure the Proposed Budget is aligned with the NGO's objectivesApprove Proposed Budget for submission to Prospective Donors

Function(s) involved:► Field/Community Staff

► Field Coordinator

► Executive Director

► Trustee

► Donors



B.01.1 Budget PreparationTo ensure budgets are accurate, complete and reasonable.

Sample

What Can Go Wrong?

R1– Data not accurate or incomplete (C1)

R2– Proposed budget is incomplete and inaccurate(C1, C2)

Key Control Point Checklist

Performed By Field CoordinatorC1– Reviews the completeness and accuracy of

needs assessment (R1, R2)

Performed By Executive DirectorC2 – Clearly state/formalize and communicate the

assumptions underlying the Proposed Budget torelated implementing partners (R2)


For more information


Adlai GoldbergMaagplatz 1Zurich 8005 SwitzerlandP: +41 58 286 44 88F: +41 58 286 3004E: [email protected]

Thank you


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About EY

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© 2014 EYGM Limited.All Rights Reserved.

EYG no.ED None

This material has been prepared for general informational purposes only andis not intended to be relied upon as accounting, tax, or other professionaladvice. Please refer to your advisors for specific advice.

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