UnderstandingUnderstandingFinancial ManagementFinancial Management

Fund Flow MechanismFund Flow Mechanism

World Bank

DFID

Other DonorsDonor

NACO/Government of India

SACS

NGO/CBO

Responsibility of NGOsResponsibility of NGOs• Responsible and accountable for implementing the planned

activities as formally approved by the SACS. Any changes in these planned activities or budgets during the project year must first be approved in writing by SACS

• Agree to comply fully with the terms of the MoU between SACS and the partners

• Follow national ethical guidelines with respect to the confidentiality of its clients in all matters and work

• Responsible for providing strong organizational governance, well developed systems of functioning in terms of accountability and transparency

Requirement from NGOsRequirement from NGOs• Prepare and submit a monthly activity report to TSU/SACS on the

status of various components under TI and another detailed quarterly report on the progress with regard to the proposed targets

• Prepare and submit monthly financial statements on the expenses incurred, quarterly and annual financial reports for the activities described above

• Provide yearly organizational audit reports and allow the internal and/or external auditor to be appointed by SACS and authorized representatives of SACS/NACO/Accountant General

• Fulfill all necessary formalities in connection with its status as required under the regulations stipulated by the Government of India and State government

• Comply with the financial and procurement guidelines under the programme

Account Reports - RoutineAccount Reports - Routine• The financial reports and schedules as prescribed below should reach the respective authorities before

the 10th of the following month as per the following schedule.

• These reports will be generated by Accounts for internal and external review of financial performance.

Report Type Description Frequency Source Authority to be submitted to

Cash Account Shows cash receipts & payments during the month

End of each month Finance/Accounts Management

Cash Reconciliation Shows reconciliation of physical cash count & cash book balance

Daily Finance/Accounts Management

Bank Account Shows bank receipts & payments during the month

End of each month Finance/Accounts Management

Bank Reconciliation Shows reconciliation of bank statement & cash book balance

End of each month or any other interval

Finance/Accounts Management

Advances Shows unsettled advances by staff at month end

End of each month Finance/Accounts Management

Income & Expenditure Shows income from different sources & expenditures for activities undertaken

Every six months Finance/Accounts Management/ Funding Agencies

Assets & Liabilities Shows asset value and their financing

Every six months Finance/Accounts Management

Account Reports - AnnualAccount Reports - Annual

Financial Statements: These show the financial transactions during the year and consolidation of financial status

• Income and Expenditure statement

• Balance Sheet

• Receipt and Payment Account

Important IssuesImportant Issues

• No cash payments other than these allotments- Incentives to PEs- Petty cash less than Rs.2000

• Not to accept funds from other sources for the same project

• Bank accounts to be operated in Nationalized Banks only

• At least two persons should sign the cheques

Monthly Expenditure and Variance Report Monthly Expenditure and Variance Report

• A Monthly Expenditures and Variance Report reflects the expenditures incurred during the month for each line item and the total expenditure incurred for the month. This report is due to TSU/SACS by the 10th day of the ensuing month.

• Where there is a budget variance, particularly over-spending on a budget line item, the report should state if the variance is: Permitted under the terms of this grant;

Approved in writing by TSU/SACS, if yes, copy of approval attached;

Unanticipated and requires approval.

Internal Control MeasuresInternal Control MeasuresIn addition to setting up adequate internal control measures Management shall from time to time perform these checks to safeguard assets:

Check Frequency Funding Agency/Auditors appointed by them

Finance Department

Management

Spot ChecksCash CountPhysical verification of Fixed AssetsProper Authorization of payment vouchers

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Monthly ChecksCash ReconciliationBank ReconciliationAdvance SummaryMonthly Cash Forecast

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Quarterly ChecksQuarterly Cash Flow StatementPhysical Verification of Fixed Assets √

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Annual ChecksOne year Income & Expenditure ReportPhysical Verification of Fixed Assets

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Management Information ReportManagement Information Report• The MIR should be submitted by 10th of every month. This

report is under 6 heads

Bank & Cash BalancesThis will reflect the utilization of funds received and also will furnish broad indication of how much has been spent on Grants and on office/admin expenses. The Opening and Closing Balances should be in agreement with the Bank Book

Analysis of Expenses against Budget

This is the variance report on Management of Expenses budget and reflects whether the trend of expenses have to be reviewed in order to avoid any negative variation and take corrective action as necessary. Every positive and negative variance has to be commented upon citing reasons for variance and corrective action proposed

Contd. Contd. Grant Utilization Status

It is necessary to review on a monthly basis the utilization status of grant budget in order to ensure that the actual spending is as per the planned budget and the phasing of utilization

Statutory Compliance (TDS, P.Tax, I.Tax etc)

The implications of non compliance of statutory provisions are very serious and it is therefore necessary that the management is kept informed about the compliance or otherwise of these provisions; this report becomes useful for managers to monitor adherence to the requirements and due dates

Fixed/Consumable AssetsThe Assets Register needs to be maintained as per the format. Verification of the same needs to be done on a regular basis.

Contd. Contd.

Pending AdvancesThis is a statement of funds lying with outsiders and staff at the end of every month end. It is necessary to review it on a monthly basis to identify whether any deposits/advances are lying unadjusted or overdue for settlement

Supervisory MechanismsIt contains details about frequency of monitoring, reports & feedback. Problem solving for the person being supervised and mechanisms for identification of training needs should be built in

Surprise checking of cash

Contracting/Re-contracting ProcessContracting/Re-contracting Process

•Stipulation on NGO/CBO guidelines – Part I to be followed

•All records, like minutes of the meeting ,to be kept

•Ensure details of staff, contract papers are on record

ConclusionConclusion• As we are using public money financial propriety should be

observed

• There should be no wastage in utilization of money and same vigilance should be exercised as in case of own money

• The whole process should be transparent

• All the corresponding regulations should be followed and requirements should be met

• No expenditure to be incurred for getting direct or indirect advantage to persons

• Expense for authorized items only to be incurred