Finance manual 'reach vulnerable' Swat

1. Introduction and Overview
of the
‘Reach Vulnerable’
Financial Policies and Procedures
2014

2. 1
CONTENTS
CHAPTER 1
BUDGETING AND BUDGETARY CONTROLS 1
CHAPTER 2
ACCOUNTING SYSTEM 2
CHAPTER 3
FINANCIAL CONTROL PROCEDURES 6
CHAPTER 4
ACCOUNTING POLICIES 9
CHAPTER 5
ADVANCES & CONTROL 10
CHAPTER 6
RECORDING FINANCE / ACCOUNTING TRASACTIONS 11
CHAPTER 7
PAYROLL SYSTEM 14
CHAPTER 10
FILING AND DOCUMENTATIONS 15

3. BUDGETING CONTROLS
In practice major changes are duly approved. Generally a 10% variation is accepted as an
inflationary factor but beyond the 10% limit, the donor may investigate and demand the reasons
for variation.
Operational Budget is prepared by Financial Manager with the collaboration of Chief Executive
and Program Manager in the presence of at least two executive members.
3. BUDGETARY CONTROL AND IMPLEMENTATION
This responsibility is delegated to the concerned finance personal and also to the director and
managers of the project. The budgetary activities are conducted either on monthly or quarterly
basis as required by the donor organization
All the BOD member and the staff of Reach Vulnerable is responsible to constantly monitor the
budget implementation analyze the variance analysis and facilitate corrective measures.

4. ACCOUNTING SYSTEM
Maintaining Cash Book / Bank Book
Cash book and bank book are maintained with full responsibility care and confidentiality
Maintaining Inventory / Fixed Assets Register
Inventory control system is in placed to efficiently maintain a quantitative and qualitative record
of our assets. GRIR Goods Receiving and Inspection Report is maintained for every new asset by
the administration and recorded in a store ledger
RECOGNITION OF INCOME AND EXPENSES
Income, donations and grants are recognized on actual receipt basis. Interest income is recognized on
accrual basis.
Expenses are recognized on accrual basis as an amount becomes payable when all events that determine
the liability have occurred and the amount of the liability can be determined accurately.
RESTRICTED AND UNRESTRICTED GRANTS IN BOOKS OF ACCOUNTS
All grants will be reflected in the balance sheet as deferred grant, which will be recognized as
income over the useful lives of the depreciable assets equivalent to related depreciation charge.
Other grants will be recognized over the periods necessary to match these grants with the related
costs.
COMPLIANCE WITH DONORREQUIREMENTS
The head of finance department, will ensure the compliance of donor requirements regarding
financial monitoring and reporting of the projects.
CLOSING PROCESS
Accounts will be closed on monthly basis. Standard monthly adjustments will include
depreciation, prepayment charge off, accruals and provisions; and interest calculation of income.
Maintenance of BOOKS
The finance department is responsible for accounting and reporting function of the following
books:
Cash Book;
Bank Book;
Expense Ledger;
Fixed Asset Register;
Advances / Receivable Ledger;
Payable Ledger; and Petty Cash Imprest Ledger.
Vehicle Log Book;
Monthly Vehicle Fuel Consumption Report;
Non-Expandable Equipment Maintenance Ledger;
Expandable Store Register;
Attendance Cards;

5. Annual Leave Record;
Besides the following financial information is also maintained, including:
Trial Balance, Expense Ledger, Bank Reconciliation Statement, Budget Variance Analysis; and Schedule
of Advances, Receivables and Payables.
Control documents
Reconciliations are made in the following ways;
Cash/Advance Reconciliation
Reconciliation is carried out in the light of Financial Control System and the manual financial record.
Types of Vouchers
The three types of vouchers are: Bank/Cash Receipt Voucher, Cash / Bank Payment Voucher and
Journal Voucher

6. FINANCIAL CONTROLS AND PROCEDURES
Financial Controls and procedure consists of the following sections:
1 Internal Control.
2 Accounting Policies.
3 Accounting System.
4 Authorization limits.
5 Inter Project Funds Transferred.
6 Advances and its control.
7 Recording Financial Accounting Transaction.
Internal Control.
To bring about Internal Control in our system, a systematic approach is practiced which includes
a diversified range of strategies:
Delegating lines of responsibility
Segregating Duties
Internal Auditing:
Forecasting of Financial Matters
Keeping employees on rotation
Recruiting of Competent personnel
.
1. Accountability and responsibility
BOD shall be the sole authority to make rules and regulations, approve annual plan
statements, confirm the appointment of external auditors, appoint / elect Directors
and provide / approve guidelines to the organization.
2. Annual plans
Section heads prepare annual plans which are approved by the chief executive before the
start of Financial Year.
3.1 PAYMETNS & RECEIPTS
All the payments shall be approved by a competent authority and vouchers must be,
supported by authentic documents. Proper record shall be kept to ensure that all funds are
recorded.
3.1.1 CASH

7. General Internal control over cash
To ensure transparency, Internal control over cash is ensured. The important strategies are as
follows:
1. Separation of the function of handling cash from the maintenance of accounting records.
2. For cash income, this listing may be income in cash register. For checks received through the
mail, a control listing of incoming cheques should be prepared by the employee assigned to
open the mail.
3. Require that all cash receipts be deposited daily in the bank.
4. More attention should be paid to small payments to be made in cash from a petty cash fund.
5. Require that the validity and amount of every expenditure be verified before cash is issued in
payment
6. Reconciliation of cash statement with the accounting records.
Cash Receipts
 Finance Officer should prepare Receipt slip in duplicate and gives one copy thereof to the
payer as token of receipt when cash/cheque is received,
 Finance Officer then prepares cash receipt vouchers.
 Cash receipt Vouchers is then checked and verified by Finance Manager and is approved by
Chief Executive.
Cash Payments
 Payments up to a specific limit (Presently Rs 10,000/-) should be made through cash. Above
such limit, payment should be made through bank. However for the time being, due to nature
of work, cash payments may be made over the stated limit with the specific approval of
Chief Executive, if cross cheque can’t be entertained by certain vendors or parties
 Cash payment must not be made before the payment is approved by person authorized. But if
amount of payment is above authorization limit of the concerned authority, higher authority
shall approve it only after the concerned authority initials it.
 Cash payment voucher is prepared by Finance officer.
 Acknowledgment of the payee must be obtained on the Payment Slip, or in case of a vendor,
acknowledgment should be received on that vendor’s letterhead.
 Finance Facilitator stamps “PAID” all the bills at the time of payment.
 CPV is then checked and verified by finance manager.
Other controls
 Cash should be kept in safe custody by Finance Officer.
 Finance Officer should timely enter cash receipts and payments in books.
 Daily reconciliation’s of closing cash balance with physical cash in hand is the sole
responsibility of Finance Officer.
 Cash should be counted after two weeks at the end of the month in the presence of two
witnesses by Finance Officer.
 Petty Cash Limit will be Rs. 25, 000.

8. Bank account for every project
Separate bank account should be maintained for each project.
Signatory There should be two co-signatories for bank account and both should sign the
check to make payment to vendors or any party.
Bank receipts
 Cheques received should be immediately deposited in bank.
 Bearer cheque should be crossed before depositing into bank.
 Finance Officer will prepare Bank receipt voucher.
 Copy of cheque should be attached with Bank receipt voucher.
 Bank receipt voucher should be verified by Manager Finance.
3.1.2 Bank payments
 Bank payment must not be made before the payment is approved by person authorized.
 Bank payment voucher should be prepared by Finance officer and checked by Manager
Finance.
 Photocopy of each cheque should be attached to Bank payment voucher.
 Finance Officer stamps as “PAID” all the bills at the time of payment.
 BPV is then checked and verified by Manager Finance..
Deposits in and withdrawal from banks
 When cash is deposited in or withdrawn from bank, Finance Facilitator/Officer prepares”,
Bank Payment voucher “BPV” or Cash or Bank Receipt Voucher “CRV” as the case may be.
 These Vouchers are then checked by Finance Manager and approved by executive director or
any other authorized person.
Reconciliation’s
Bank reconciliation’s are made on monthly basis. Finance officer is responsible for
preparing Bank Reconciliation Statements.
Financial statement
Reach Vulnerable shall produce its annual financial statements duly audited by a Firm of
Chartered Accountants to be appointed by the BOD.
Vouchers and books
The financial / accounting transactions of Reach Vulnerable are recorded on numbered
voucher, supporting documents, approved by the competent authority and filed. From the
vouchers, these transactions are then recorded in the respective books of account i.e. Cash
book, Journal and Ledger.

9. AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS
Reach Vulnerable practices the following significant accounting policies:
Accrual Basis of Accounting
Accrual basis of accounting is used for the preparation of Financial statements. In accrual basis of
accounting the effect of transactions and other events are recognized when they occur and they are
recorded in the accounting record and reported in the financial statements of the period.
Assets
Assets are expressed in money or are convertible into money and include certain deferred charges that are
not resources liked deferred moving costs.
Fixed Assets
In ReachVulnerable fixed assets are capitalized. There will be proper record of fixed assets in the books
of account. Investing in capital intensive fixed assets will make a considerable mark on the account code,
which is used, for cost allocation. A separate activity code is used in the budget when fixed assets are
purchased.
Foreign Currency Transaction
Transaction in foreign currencies is converted into rupees at the exchange rate prevailing on the dates of
the transaction. All exchange differences arising as a result of conversion are charged to statement of
income and expenditure.

10. ADVANCES & CONTROL
A set of procedures has been laid down which should be followed where advances are issued
including: Official Advances for official activities and Personal Advances against salaries
Official Advances
I. An advance request form is filled by the advance seeker and a copy for future adjustment is
retained.
II. An Advance summary sheet is maintained by the Finance officer to see if the employee has any
outstanding advances. Outstanding balance against the employee on the Advance form is then
brought under consideration.
III. The form is then taken to the person authorized to approve from concern authority.
IV. Upon approval, the Finance Officer or Finance Facilitator pays advance and acknowledgment of
the payee is obtained on the payment voucher.
V. To the Payment Voucher, Advance form is attached. The transaction is then recorded in books
against the applicant.
VI. After the employee incurs the expenditure, he takes the copy of advance form and mentions the
expenditure incurred, balance remaining unspent, or amount overspent on expenditure summary
sheet.
VII. The Expense summary sheet is then taken to the personnel authorized to approve expenditure. He
signs the expenditure summary sheet to signify his approval of the expenditure. .
VIII. An official advance can under no circumstances be used for personal reasons.
IX. Advances are advised to be cleared within one month after taking the advance.

11. RREECCOORRDDIINNGG FFIINNAANNCCEE // AACCCCOOUUNNTTIINNGG TTRRAASSAACCTTIIOONNSS
INTRODUCTION
To ensure that all the financial transactions are being recorded and further that the transactions are not
omitted or irrelevant transactions are not entered in the financial/accounting record, a comprehensive
accounting system is required to be enforced. The following overall controls are to be followed while
recording transactions in the books of account.
VOUCHERS
There are severaltypes of vouchers i.e. receipt voucher, payment voucher, journal voucher, and invoices
for project income. The voucher provides guideline
to the accountants about the nature of transaction, amount of the transaction and which account shall be
charged for the transaction.
Vouchers are correctly drawn up for location, donor, date, amount, accounting code after which the
transactions can be correctly recorded in the books of account. Detailed guideline will be provided in the
later part of this chapter for preparation and approval of the voucher.
DOCUMENTS IN SUPPORT
Supporting documents like receipt of funds, payment of purchase invoices, payment of salaries and
allowances, agreement entered by Reach Vulnerable with the third parties etc.
CASH BOOK
Practically transactions are recorded in the cash book at the time of receipt and payment of cash. The left-
hand side is used for receipts of the cash and the right hand side is used for payments of the cash . Cash
book shall be recorded by the respective Finance Officer.
Receipts
Pre-numbered cash receipt voucher shall be prepared in duplicate by the cash receiving person by filling
all the relevant columns of the voucher.

12. Amount shall be received from the payer which shall be counted and acknowledged for the receipt.
Entries shall then be made in the cash book. Original copy shall be given to the payer while the duplicate
copy shall be kept in the file.
Payments
The amount shall be paid to the payee for whom his acknowledgement shall be obtained. Entries shall
then be made in the cash book. Cash payment voucher shall be allotted a serial number and then filed.
JOURNAL
In this book all the journal vouchers are recorded. A journal voucher is a voucher which records the
internal transactions.
GENERAL LEDGER
In General ledger entries of CPV & BPV,J.V are recorded. Individual Head of Account is allotted a page
in which the relevant entries on debit or credit side are made. Finance Officer is responsible for the
maintenance of general ledger. A trial balance shall be prepared by totalling all the ledger accounts of the
General Ledger periodically.
VOUCHERS TYPES
Cash Vouchers
Funds received are entered on a RV. It also include the funding source of the money received and the
office/area which it relates to. The vouchers are always signed by the person receiving the money and are
later on checked and approved as a CRV/BRV.
Cash/Bank Payment Voucher
All payment made in cash or through cheque from a bank A/C are recorded through Cash/Bank Payment
Voucher. Columns for amount, date,currency, activity, sub-activity, financial codes, particular and
amounts are provided on the voucher which is completed on the base of the supporting documentation.
Journal Voucher (JV)
In Journal Vouchers,adjustment of advances,inter accounts transfers,correction and clearing of
temporary accounts such as stocks,car expenses,etc are made. These vouchers should be completed on
the bases of supporting documents, all approved by the authorized person.
The voucher should then be checked and approved in the same manner as the other voucher explained
above.
Format of Vouchers

13. Numbering:
All vouchers should be numbered.
Date
The system, which should be used, is date/month/year.
Naming convention
The name of the person paying or receiving the money should always be printed on the voucher.
Additionally, the voucher should be signed by the respective person in order to acknowledge
receipt/payment.
Details
Here the details of the nature of transaction recorded on the voucher should be mentioned.
Amount
The amount in words and figure shall be written on the voucher dully supported by, bills, invoices etc.
Detail
Any remarks in respect of receipt, payment or adjustment shall be recorded in this section.
Receiver acknowledgement
When the money is either received or paid, the receiver acknowledgement shall be obtained on the
respective voucher.
Checked by
This is the person who is responsible to check that all the formalities for receipts and payments of cash
have been completed after which the approval shall be granted by the Competent Authority.
Approved by
This is the person who is authorized to approve the receipt and payment of the money. The approving
authority approves the voucher. The approving authority must ensure that all the formalities for approving
for the vouchers have been completed, especially; the voucher has been checked by the concerned person.
LEDGER UPDATE
Finance officer is responsible for updating the respective ledgers after each transaction.

14. PAYROLL SYSTEM
Payroll is prepared for permanent employees. The employee name, employee ID, Designation, gross
salary, donor charging, deduction, net salary, and place for remarks should be stated on the payroll sheet.
The payroll have the following particulars: Employee Name, Employee’s ID, Allowance, Deductions, Net
Salary. Payroll is prepared on the 28th of each month. For each employee, attendance is record, which
constitute a base for payment of salaries. The Finance section will prepare a Bank Payment Voucher and
charge the salaries to staff according to the budget and credit should be given to the respective banks.
Bank is debited when fund for salary is received and a temporary account of salary payable is credited.
When the salaries are paid, salaries payable is debited and cash/ bank is credited. Salaries are transferred
to employees’ bank accounts.

15. FILING AND DOCUMENTATION
1. Filing System
Files are maintained by file name, numbers and date or month which differentiates one file from another.
Names and numbers along with date and month are assigned to each file, which facilitates filing and
retrieval of files and data. Finance Section is responsible for updating files regularly.
2. Major Type ofFiles
Financial records are kept in secure place and the following files are labeled according to the set
convention:
I. Bank Payment Voucher files
II. Bank Receipt Vouchers/Cash Receipt Vouchers files
III. Journal Voucher Files.
IV. Cash Payment Voucher File.
V. File for bank reconciliation.
VI. File of Employees personal advance.
VII. Budget files.
VIII. Donors Financial Reports files.
IX. Annual Audit reports files.