Mango Guide to Financial Governance for NGOs

NGOs exist for the benefit of their beneficiaries. The NGO’s governing body is entrusted with responsibility for overseeing the organisation on behalf of the beneficiaries. For this reason, governing body members are often called ‘trustees’. They act as stewards, representing and protecting the beneficiaries’ interests.

The Board has ultimate legal, moral, and financial responsibility for the organisation.

The Governing Body

The governing body may have different names, such as board of trustees, board of directors, executive council, executive committee, etc. The board is often organised with a series of permanent or temporary sub-committees – eg for Finance and Personnel matters.  Advisory committees are also frequently set up to provide support to a country programme or new project.

The 5 roles of Board Members

Board members should avoid getting too involved in day to day management of the organisation, although they do need to be aware of what is happening. Their 5 roles are:

  • Making sure that funds are used to help beneficiaries effectively
  • Making sure that the organisation has enough funding
  • Making sure that the organisation has effective senior management
  • Making sure that the organisation operates within the law
  • Making sure that the board can handle its responsibilities effectively

Making sure funds are used to help beneficiaries effectively

  • Ensuring the organisation has practical strategies for analysing and responding to social problems
  • Monitoring if the organisation is actually doing a good job, putting its strategy into practice and achieving value for money
  • Approving an annual budget for expenditure, based on the cost of relevant activities
  • Making sure that the organisation has appropriate internal controls and accounting systems to ensure that funds are used properly
  • Regularly checking that internal controls are followed in practice (eg carrying out or engaging internal audits)
  • Taking an active role in internal controls as necessary (eg authorising large payments)
  • Regularly monitoring financial reports, including the income and expenditure statement and the balance sheet
  • Monitoring whether the organisation is being accountable to its beneficiaries (eg presenting financial reports to them)

If there is no evidence of dialogue with beneficiaries, then your work may not be meeting their real needs

 

 

Making sure the organisation has enough funding

  • Approving the income section of the annual budget
  • Monitoring the amount of income received
  • Actively working out how to ensure the organisation will be sustainable, including approving a financing strategy
  • Monitoring relationships with donors (eg if reports are submitted on time)
  • Monitoring fund balances including general reserves

If any fund balances are in negative, this could have serious implications for your credibility

Making sure the organisation has effective senior management

  • Recruiting a Chief Executive with financial management skills for their role (or supporting the Chief Executive to develop these skills)
  • Supporting the Chief Executive to develop a culture of good financial management (eg leading by example and encouraging finance and programme staff to work together)
  • Making sure that the most senior finance manager is a member of the most senior management team
  • Encouraging an open culture that recognises problems and aims to learn from them
  • Holding senior managers to account for the results of the decisions that they take and the initiatives they launch

Everything you want to achieve depends on the people employed to do it. Senior managers have to inspire and support other staff.

Making sure the organisation works within the law

  • Understanding the NGO’s legal requirements, including Labour laws, Tax laws and Health & Safety legislation.
  • Making sure that the management team meets legal requirements (e.g. paying taxes, filing annual reports).
  • Appointing external auditors and overseeing the audit.
  • Approving the audited accounts and annual reports.
  • Filing reports with government departments.

Making sure the board can handle its responsibilities effectively.

  • Appointing a Treasurer, with specific responsibilities for financial management and the skills to carry them out.
  • Making sure that all board members understand their financial management responsibilities and supporting them to develop appropriate skills.
  • Making sure there are no conflicts of interest between the organisation’s operations and board members’ work or business interests
  • Making time at board meetings to discuss the financial management aspect of all major decisions.
  • Mango has a one day training course called FM6: Financial Management for Board members, which can be run as an in-house event for your Board.

To access more guides on financial sustainability for NGOs visit: www.mango.org.uk

 

What steps do you and your organisaton take to ensure have excellent financial governance? Let us know in the comments.

How to Motivate Volunteers in your NGO: A Free Guide

Volunteers are the lifeblood of many organisations, indeed almost every non profit got started by either an individual or group of people volunteering their time. Even the biggest development organisations in the world such as the United Nations use volunteers from all around the world to increase their effectiveness. The question remains, how do you get the most of your volunteers and how can you motivate them to go the extra mile for your organisation?

FundsforNGOs.org free guide will take you through a series of key strategies that will help your organisation to get the most from this critical but often overlooked asset. Whether you are a grassroots organisation just starting out or an organisation working across the world, a motivated volunteer force can make a tremendous difference to your organisations impact on its community.

Make them at Home: Your volunteers want to feel a part of your organisation and that their contribution is valued. There are thousands of different and organisations that they could be spending their free time with but instead they have chosen to work with you. Make them feel at home by providing them with somewhere comfortable to work, introduce them to other staff and volunteers and generally pay an interest in their lives. Volunteers are there primarily because they want to help but they also want to enjoy their time with your organisation. Make them feel included and keep them informed of what is happening including asking their opinion when it is appropriate. Volunteers may see an opportunity or a way to improve that others have missed, give them a chance to make a difference.

Understand your Volunteers: Every volunteer does so for a combination of different reasons. Understanding these motivations is the key to getting the best from them as well as providing them with the best experience that you can. Some volunteers may be working with you to gain experience in certain fields such as management or fundraising whilst others will be there solely because they want to make a difference to your cause. It is rare that you will find a volunteer who is only with your organisation for just one reason. Put yourself in their shoes, they have chosen to give up their free leisure time to work instead, why? Don’t be afraid to ask them, it is the only way that you can provide them with an experience that is truly valuable whilst ensuring that they make the biggest positive impact on your work as they possibly can. If you understand your volunteers you will know how to motivate them and keep them around for the long term.

Give Back: Your volunteers are giving up their time, skills, knowledge and experience to help your cause, you have a responsibility to give back to them and invest in them in return. For most volunteers, not all, they will need to learn how to do whatever job it is that they will be doing for your organisation. Even if it seems basic and obvious to you, it is courteous to walk them through it, answer any questions they have and ensure you are always around to support them in case of any problems, as well making sure that they do not feel abandoned. Treat your volunteer like a staff member, the better they are trained the better and quicker they will be at their tasks, allowing your organisation to do more, which is ultimately why you need and want them there in the first place.

Share everything you can: The more your volunteers know the more they will be able to help you to do your job better. Often volunteers are on the frontline and learn opinions and experience situations that management may be too far away and too busy to notice. They will notice the little things so its important that there is an open exchange between volunteer and manager. If your volunteer knows that you’re considering starting a new service, for example, they may well already have an idea what your beneficiaries think about it or know of potential challenges in service delivery that you haven’t considered. Share with you volunteers what you are working on, what the ultimate goal is and what your hopes are, get them to buy into what you’re doing and they will see how they are contributing to the bigger picture. Volunteers are time consuming to replace so you never want to lose one when you don’t have to, by sharing what is going on in the organisation you can help to integrate them further into your organisations vision and hopefully keep them involved for the long term.

Recognise their work: Volunteers, like any of us, will feel better about their work if they feel appreciated and that they are making a positive contribution. Remind them what a positive impression they are making and share with them what would happen if they weren’t there. Without volunteers paid staff would have far less time to focus on developing new projects, raising funds and managing the organisation.  We recommend trying to stop at least once a day to thank them for their work, especially at the end of the day so that they go home feeling like they have achieved something.

Thank and reward: Many organisations simply couldn’t survive or do anywhere near as much if they suddenly had no volunteers. Make sure that they understand their true value by finding an appropriate way to thank them. From volunteer thank you evenings to a simple thank you letter signed by all of the staff, it doesn’t have to cost money and the personal touch will always leave the best impression. If you’ve followed our other tips you will have done your best to get to know your volunteer and will be in a great position to arrange a little something that you know they will appreciate. Use your imagination and make your volunteer feel like a king at least once a year!

Be flexible: Volunteers give a great deal to organisations in their time, energy and expertise, but sometimes life crops up and they will have to stop for a moment. At these times it is important to be as understanding and supportive as you possibly can, even if it is going to cause you problems. Some situations can’t be helped but you can make a volunteer feel much better about letting you and your organisation down by being positive and helping them in anyway that you can.

A happy volunteer is a motivated volunteer. Make sure that you listen and respond to every volunteer individually and you will go a long way to keeping them motivated. Do you have any tips for motivating volunteers? What has worked for your and your organisation? Get involved in our comments section and let us know!

Policy for Book Keeping and Record Maintenance in NGOs

Page 3

6.2.2 Procedures for Fund Disbursements

• All requests for payments are to be made using the appropriate forms.
• Requests for payments are to be properly substantiated with bills/receipts and essential documents.
• Requests for payments are prepared by accountant and submitted to Executive Director for checking and approval.

6.3 Book Keeping and Recording

6.3.1 Book Keeping

The recording system of NGO’s financial transactions allows to monitor bank balances, status of funds receipts and expenditures, and a comparative statement of budget vs. actual expenditure on a regular basis.

NGO will maintain records of fixed assets, petty cash disbursements, supplies, inventory, the use and maintenance of office equipment.

6.3.2 Accounting

The following sets of financial reports will be prepared by NGO:

A. Quarterly financial reports will be prepared for review by each individual project manager of NGO’s specific projects as well as of its core activities. This quarterly report will be reviewed by the Board of NGO. Financial reports to donors will be submitted as prescribed in the agreement between donors and NGO.

B. Annual Balance Sheet and Statement of Income and Expenditures will prepared for each fiscal year.

6.4 Auditing

Books of Accounts of NGO shall be audited annually by an independent auditor appointed by the General Assembly.

NGO may hire internal auditor in order to streamline its accounting systems and procedures.

Finance Policy: Page 1……. Page 2…….Page 3

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

Payment Procedures

Page 2

6.2 Fund Disbursement

All payments be made either by cheque or cash.

6.2.1 Payment by Cheque

(1) Payment for Purchases

Payment against purchases exceeding ______ shall be made by cheque.

(2) Payment for Services Rendered

a. Payments for Staff Salaries

i . Payment Calendar

Staff salaries are paid within seven days following the completion of the month. Individual cheques are to be issued to the employee concerned.

ii. Staff payroll

Staff payroll (salary sheet) is prepared by the Accountant as the basis of payment. The staff payroll contains information on the employees’ basic salary for the month, allowances if any, deductions and net salary payable. The staff payroll is checked by the Treasurer and/or Secretary General and approved for payment by the Executive Director.

iii. Advance Pay

NGO’s employees may take advance payment of up to 3 months (after completion of 3 months probation), if urgently required. The advance must be returned/reimbursed before the end of that particular fiscal year.

For travel purposes, NGO employees shall be given cash advances for expenses covered on official trips. Request for cash advances is prepared by the personnel concerned, recommended by the Treasurer or General Secretary and is approved by the President. All cash advances for travel are to be liquidated within a week following the completion of the trip.

iv. Tax Deduction at Source

NGO will deduct tax at source where applicable as per Government rules.

b. Payment for Contractual Services

Payment for contractual services is done through cheque disbursements. The schedule of payment depends on the Terms of Reference (TOR) agreed upon by the personnel concerned and NGO. Payments are covered by a Request for Payment Form prepared by the accountant and approved by the Executive Director.

Finance Policy: Page 1……. Page 2…….Page 3

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

NGO Finance Policy

Page 1

6.1 Fund Receipt

6.1.1 Sources of Funds

NGO receives funds from the following sources:

i. Dollar supported project fund.
ii. Membership fees.
iii. Income from short term professional services and consultancy assignments undertaken by NGO.
iv. Grants Donations received from philanthropic organizations and individuals.

6.1.2 NGO Core Fund

The following are identified as NGO’s core programme:

A. NGO’s administrative expenses (house rent, utilities, administrative officer, peon).
B. NGO’s Ashreya Shivir Shelter.
C. NGO’s befriending service “Sumitra”.

Any programme coming to NGO must allocate some funds to support this core programme.

6.1.3 Signatories to Cheque Books

The President of NGO, its Treasurer and one other office bearer will be signatory to NGO’s cheques. Money can be released by the signatures of two signatories. However, any cheque of more than $________ will require the signature of the President.

6.1.4 Types of Accounts

The following three types of accounts will be maintained by NGO:

(1) Central Account

All income accrued to NGO will be deposited in the Central Account. The President, Secretary General and Treasurer are authorized to operate the bank account. Two signatures of either of these officials will be required for fund disbursement.

(2) Savings Account

NGO will keep fixed deposit savings account for its trust fund.

(3) Petty Cash Fund

A petty cash fund of $_______ is kept to cover payments not exceeding $_____. The Accountant/Office Administrator will handle this account and is to be liquidated every two weeks.

The President and/or Treasurer will ensure proper handling of petty cash fund through surprise checks from time to time.

Finance Policy: Page 1……. Page 2…….Page 3

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

5. Fixed Assets Policy for NGOs

5.1 Purpose

To carry out its activities, NGO needs material resources. The quality of these resources is dependent upon how they are used. Material resources are in large part durable goods, which need to be well-managed to be maintained in good condition. These goods include stationary, tables, chairs, shelves, computers and related accessories. The Fixed Assets Policy will aim for:

• precise identification of goods that are part of the asset base;
• sensible use of goods;
• periodic taking of physical inventory;
• effective maintenance of goods;
• replenishment of goods when required.

5.2 Procedures

At NGO, the management of material resources is the responsibility of the __________ staff. The procedures involved in managing these resources are:

• receiving and recording goods;
• using goods properly;
• maintaining goods;
• taking inventory of goods;
• disposing of goods.

Material resources are managed by means of records or files.

5.3 Asset inventory

The purpose of the inventory is the physical monitoring of the items belonging to a project. The inventory makes it possible to detect differences between information about goods in the records and the actual state of goods.

Inventory is usually done once a year and is the responsibility of the finance division.

5.4 Procedures

The inventory procedure is composed of the following steps:

a. Creation of record cards on which is found:

• type of item
• description of item
• identification code
• service user or name of manager
• assigned location
• previous placement of item
• notes on condition of item
• record updates
• minutes of physical inventory

b. Final removal of an item

c. Replacement of an item

d. List of annual needs

5.5 Removal of items

The inventory procedure described above permits the identification of dilapidated or defective goods whose presence in office presents more inconveniences than advantages, for various reasons:

• steep rise in operating or maintenance expenses;
• excessive cost of repair;
• any other objective reason.

The Executive Director should give the authorization to take out of service, transfer or dispose of any items, and that should be noted in the book of assets.

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

4. Procurement Policy for NGOs

4.1 Purpose

The purchase of goods and services is necessary for the smooth operation of the organization. The aim of the internal control system for the supplying of goods and services is to ensure orders are handled by individuals having skills in evaluating what purchases are required from suppliers offering the best deals, to ensure purchases made do not exceed the budget provided and to ensure purchased goods and services conform with the quantity and price specified in the order.

4.2 Methodology

NGO shall follow certain methods in purchasing goods, equipment and services required for the needs of the organization or its projects. Use of competitive bidding shall be a priority practice. The first criterion in choosing a supplier shall be the lowest bid. However, if a supplier does not provide the required level of service or an adequate guarantee, then other criteria shall also be considered. NGO shall specify in the purchase file the reasons the lowest bid was not chosen.

• For purchases under $________, a price survey by telephone of two suppliers will be sufficient for determining the supplier.
• For purchases above $________, a quotation/invoice shall be obtained from three local suppliers.
• Purchases from a sole source shall be explained in the purchase file.

The purchase file shall contain all the documents pertaining to each transaction, i.e. the purchase requisition, quotations, contact information of suppliers purchase contracts or orders, invoices, delivery slips and any other pertinent documents.

4.3 Purchases

Employees making purchases as part of the project activity or organizational work shall follow these mechanisms:

a. Requisition form – the employee requesting a purchase fills this form, has it approved by the Executive Director and sends it to finance division.
b. Order form – the finance division issues the order form, after it is signed by the Executive Director. The concerned employee or the finance division will make the purchase successful on the basis of the order form.
c. Delivery slip – After the purchase has been made, a delivery slip will be issued by the finance division for the supplier, who will sign it and give it back to the finance division.

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

3. Computer Policy for NGO Office Management

3.1 Purpose

NGO seeks to effectively manage the computer system for guiding the use, maintenance and security of the computer equipment. Employees are responsible for ensuring that the procedures and policies suggested here are followed.

3.2 Use

Using computer equipment requires particular care because of its fragility and high cost. Access to the equipment should thus be strictly reserved to NGO employees only. Those employees who are unable to handle commonly-used software will be given an orientation by the senior staff on request. At least one NGO employee will be trained in handling minor maintenance of computers and accessories at the office.

3.3 Security

a. In order to safeguard the computers against viruses, the external drives (CDs/DVDs/floppies/pen drives) that are at NGO office are only to be used. In the same way, no external drive from any source other than from sealed packets shall be used in the computers, unless it is first scanned with a latest anti-virus software.
b. In order to safeguard computers from viruses, antivirus software has been installed in the computers. The virus list for this program should be updated on a regular basis. It is the duty of the employee who has been assigned a computer to update the virus list on her / his computer.
c. There should be at least two backups of all important documents. One copy should be on the hard disk of the computer assigned to the concerned employee and a second copy on a CD/DVD kept in the office.
d. The computers of the NGO should normally be used by its employees. Consultants and volunteers should seek prior permission of NGO employee before using his/her computer in the office

3.4 Saving documents in the Computers

In order to streamline the procedure to save documents in the computers and to make it easier for people to find documents and make back-ups of important documents, each employee should have a c:/my documents directory in his/her computer. This directory should be broken down into sub-directories to facilitate retrieval of important documents. Each employee will include a copy of all their important documents to be backed up on a directory entitled backup.

3.5 Back-ups of Documents

In order to safeguard important documents and other work done by the staff, the back-up directory of the employee shall be backed up on CD/DVD once every week (every Friday) and the CD/DVD stored by the employee.

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

2. Communications Policy for NGO Office Management

2.1. Purpose

The purpose of this policy is to control and reduce the communication cost in an effective way. Telephones are the most convenient and fastest mode of communication but for long distance communication, they are expensive.

There are other modes for fast communication such as courier, fax or e-mail. And out of these, e-mail is fast and more affordable. NGO prefers to use e-mail for out of station correspondence to reduce the communication costs. Telephones can be used for local calls and in emergency for national & international long distance calls.

Internet service at the office can be used to download and send email and to conduct work-related research.

2.2 Guidelines

NGO provides the following guidelines to its staff to control telephone use.

a. Telephone users are requested to keep their conversations short in order to keep the cost down and to keep the lines open for other people in and outside the office that need to use the telephone.
b. In general, employees should avoid using phones for non-official calls and are encouraged to use STD/ISD facilities available outside the office. However, the non-official calls will be billed to employees at prevailing rates. To keep track of such calls, a record sheet is provided to each employee working in the office in order to make it easier to remember to record the long distance calls (STD / ISD). All long distance calls should be recorded on this sheet along with all required information and submit to the finance division each month.
c. In order to minimize communication costs as much as possible, email should be used rather than fax or direct long distance calls.
d. Copies of all in-coming and out-going official communications (fax, letters sent or received) should be filed. The employees sending / receiving important e-mails should be responsible to print and file such e-mails. A copy should go in the central file system.
e. Efforts should also be made to keep fax messages short and to send long documents by fax only in urgent cases.
f. Regarding international phone calls, the need for the official call should be discussed verbally with the Executive Director, unless exceptional circumstances make this impractical.

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy

Policy for Annual Performance Evaluation at NGOs

(3) Annual Performance Evaluation

The annual performance evaluation is the analysis, based on documentation from previous stages of the process, of an employee’s work record. The evaluation addresses two fundamental questions. The first relates to the past and involves verifying what was accomplished qualitatively and quantitatively during the year. The second relates to the future and consists of identifying means to be considered to ensure the employee continues to grow and develop.

The performance evaluation form should include all the sections needed for the evaluation. This includes a section relating to performance evaluation in relation to the objectives established at the outset and in relation to the responsibilities of the position, a section that specifies or targets what is needed for the employee’s development and finally a section allowing the employee and the evaluator to express their comments and affix their respective signatures. The form should also include a performance level classification and a definition of each of these levels.

The annual performance evaluation does not have any financial impact on salaries. It is first and foremost a tool to evaluate the employee’s performance and take remedial action if necessary.

1.12.3 Skill Training and Professional Development

Depending on available funds, NGO should foster the professional development of its employees in order to be as effective as possible in its activities. The training programs chosen should address the actual needs identified and expressed during performance evaluation sessions.

1.13 Bond

As part of the staff and organizational development activities, NGO may at times decide to send a designated staff person for trainings and/or further studies both abroad as well as at local level. NGO will bear the full/partial costs of the trainings/studies for this. However, the designated staff sponsored for the trainings/studies is required to sign a bond with NGO that requires him/her to complete the full tenure of working with the organization.

Pages:

1. Purpose and Categories of Personnel…..2. Volunteers and Personnel Recruitment…..3. Appointment Letter and Staff Orientation at the NGO…..4. Employee Salary Benefits in NGOs…..5. Travel Rules & Regulations at NGO…..6. Holidays and Leave in NGOs…..7. Employee Termination Rules in NGOs…..8. Conflict Management Policy in NGOs…..9. Settling Grievance Policy in NGOs…..10. Peformance Evaluation System Policy for NGOs…..11. Policy for Annual Performance Evaluation at NGOs

More NGO Operational Policies:

1. General Personnel Policy (also Human Resource Policy)
2. Communications Policy
3. Computer Policy
4. Procurement Policy
5. Fixed Assets Policy
6. Finance Policy