It is only through a system of strong organizational governance that beneficiaries can be assured that an organization established on their behalf is indeed serving their best interests.
This document provides a simple guidance on the role of a governing body and its management in the effective administration and management of an NGO.
2. |PRABHAT BHANDARI|
1. Governance Component
• Good governance requires the leadership of a competent and committed
governing body (i.e. the Management Committee).
• It is advisable for NGOs to incorporate in their constitution the key elements of
the governance structure (e.g. methods for election of Board members, terms
of office, meeting arrangements and rules governing declaration of conflict of
interest).
• The Board has the duty to ensure the laid down policies and procedures are
complied with.
• The role of board is not to undertake operational activities but to support and
govern the organization.
1.1. Management Board/Committee
Particulars Description
Management
Board/committee
• Management Committee is responsible for ultimate
responsibility for internal controls, and to ensure the laid
down policies and procedures are complied with.
• Formation of management committee (structure,
number, etc.) and electing methods should be defied in
the constitution. It should be ensured that the election
procedures are fair and transparent enough.
• Tenure of management committee should be defined
in the constitution.
• Respective roles and responsibilities of chairperson, vice-
chairperson, secretary, treasurer and all other key
personnel should be segregated and defined in the
chairperson.
• Incorporate a clause for “notion of no confidence” in the
constitution for the elected board members.
• Specify the minimum required board meetings, quorum
for meetings, decision criteria, etc.
• Executive and management level personnel should be
different than the board members or their close
relatives.
• Executive Committee members should not involve in the
day to day management of the organization and
should not derive any profits or compensation for their
board service.
3. |PRABHAT BHANDARI|
Functional
Committee
• Functional committees may be formed to oversee major
functions specifying the committee members, electing
criteria and terms of reference.
• Terms of reference, duties and responsibilities of the
functional committees should be clearly defined.
• Require the committees to report back to the
management committee.
• Some of the committees may include audit committee,
nomination committee, finance committee, etc.
Election of board
members
Election procedure with adequate checks and balance to
ensure fairness and transparency in the process should be
adopted.
No member should be deprived of voting rights and
candidacy.
Board Meetings Lay down the rules and proceedings at meetings of board
and functional committees including:
a) Frequency of meetings
b) Quorum of meeting
c) Rules and procedures for annual general assembly
d) Sufficient advance notice to members
e) Appropriate agenda of meeting, and
f) Accurately record in minutes the discussion and any
resolutions passed, including any views of individual
members raised at the meeting.
Conflict of Interest • Board members should not be engaged in any type of
managerial activities. Their function is to supervise,
monitor and govern the organization as well as review
the management’s functions.
• If board members are to engage in any managerial
functions like procurement or staff requirement,
declaration of actual or perceived conflict of interest
should be done.
Transparency and
accountability
Make transparent the NGO’s operations and financial
activities through social audits, annual reports, etc.
4. |PRABHAT BHANDARI|
1.2. Formulation and Implementation of Organizational Policies and Guidelines
Organization should lay down in guidelines the policies and procedures for the
organization’s major functions, such as financial management, procurement
and staff administration.
Policies Description
Financial Policy It is important for organization to formulate and implement
sound financial control systems to ensure their funds are
properly managed and accounted for. NGOs require:
• Lay down financial policies and ensure strict
compliance
• Specify the process and define criteria for
reimbursement of board members’ expenses, if any
have to be reimbursed.
• Assign personnel for signing cheques, approving
expenses, etc.
Financial policy includes the following:
a) Budgeting for each year
b) Income collection – from membership fees, donation
and foreign support.
c) Payment procedures – payment by cheques as far
as possible, provision of petty cash, compulsory
cheque payment above fixed amount (say Rs.
5,000), approving expenses before making
payments, keeping all supporting documents, and
proper recording.
d) Management and cash and bank – bank account
opening and operation, cheque signatories,
preparation of bank reconciliation statement,
interest recording, etc.
e) Management of staff advances – limit of advance
amount, advance to be reimbursed within particular
day, etc.
f) Financial reporting – periodic financial reporting to
board
g) Audits – provision of internal and external audits to be
included, should be independent person.
Administration
and procurement
Policy
NGO should formulate standard administrative and
procurement policy and procedures no less strict than the
requirement of fund provider as well as strict compliance of
the policy.
General administrative and procurement controls include:
a) Purchase requisition form
5. |PRABHAT BHANDARI|
b) Petty cash purchases: within the limit of petty cash
expenses
c) Sourcing of suppliers and service providers – make a
list of vendors providing the product or service
d) Purchase by quotations – define amount for
purchase by quotations, define process of obtaining,
evaluating quotations.
e) Purchase by tenders – define the minimum amount
of purchase requiring tender, define procedures for
tender invitation, tender evaluation and selection.
f) Receipt of goods and services – proper goods
receipt notes
• Fixed assets management – proper record of all
acquired fixed assets in fixed assets register, coding of
individual fixed assets, proper handling of fixed assets,
periodic physical verification of fixed assets,
acknowledgement of receipt assets in case of user-
based assets, etc.
Staff
administration
Policy
Human Resources are valuable assets of an organization.
Hence, proper management of human resources is
necessary.
• Staff recruitment – define process for staff hiring, define
qualifications and selection criteria for different
positions, conduct open recruitment exercises
• Define job description for all levels of staffs.
• Define remuneration and benefits of all positions.
Remuneration may be fixed in accordance with project
agreements. Deduct necessary tax and retirement fund
savings.
• Define the working hours, leave system, etc.
• Use a proper staff attendance system and monitoring of
staff attendance.
• Performance Appraisal and disciplinary action
6. |PRABHAT BHANDARI|
1.3. Segregation of Duties and Responsibilities
• The functions of board and management staffs should be clearly segregated.
• Duties of responsibilities of chairperson, vice-chairperson, secretary, treasurer
and other key personnel should be defined in constitution.
• Authority level for approval of expenses incurred by chairperson, other board
members, executive chief and other management staffs should be defined.
• Functions, duties and responsibilities of executive director, program heads and
other staffs should be defined.
• The responsibility for recording a transaction and approving transaction should
be assigned to different persons. Generally, approval of transactions is done
by higher management staff.
• Person recording the transaction and making payment orders should be
different from the person authorizing the payment and cheque signatory.
• A person should not be allowed for making payment to himself.
