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Mango Financial Management


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Mango Financial Management

  1. 1. LSTM – DHA 2009Financial Management in Emergencies<br />With:<br />Sareta Thomas<br />Mango<br />
  2. 2. 2<br />Learning Objectives<br />Clarify the role of financial management in humanitarian programme management<br />Identify good practice in the field<br />Identify key issues affecting financial management in emergency humanitarian responses<br />
  3. 3. Financial Management in Emergencies<br />1. Overview of financial management <br />
  4. 4. What is Financial Management?<br />A working definition:<br />‘Planning, organising, controlling and reporting on the organisation’s financial resources to achieve its goals.’<br />It’s a management function<br />Looking after the financial health of an organisation<br />Managing the financial aspects of an NGO’s work to make best use of resources<br />4<br />
  5. 5. Financial Management in Practice <br />Managing risk<br />Internal risk<br />E.g. theft, fire<br />External risk<br />E.g. economic instability, change in donor policy<br />Managing strategically<br />Keeping an eye on the wider picture<br />Managing by objectives<br />The ‘plan, do, review’ project cycle<br />5<br />
  6. 6. Financial Management in Practice<br />6<br />Set budgets<br />Build in learning and take action <br />Implement plans – spend & receive funds<br />Monitor<br />Budgets<br />
  7. 7. What is Financial Control?<br />Financial control occurs when systems and procedures are set up to make sure that financial resourcesare being used ‘properly’ (ie to maximum effect).<br />7<br />
  8. 8. 8<br />Structure & Governance<br />Delegated Authority<br />Accountability<br />
  9. 9. Who is Accountable?<br />9<br />Governing body<br />Day-to-day authority delegated to managers to implement policy<br />?<br />Managers<br />Ultimately accountable in law<br />All staff<br />In practice, anyone who works to achieve project aims<br />
  10. 10. Financial Management in Emergencies<br />2. Achieving good practice<br />
  11. 11. Two Golden Rules<br />NGOs have to maintain a respectful dialogue with the people they aim to help. <br />NGOs depend on their front line staff and have to help them to make good judgements (and check whether they do).<br />11<br />
  12. 12. 12<br />Achieving Good Practice<br />Robust financial systems<br />Proper records, policies and procedures<br />Designed to suit the NGO and its working environment<br />Open and accountable systems<br />Including reports to all stakeholders, beneficiaries included<br />Skilled staff<br />Financial management is fully integrated in programme management<br />
  13. 13. Guiding Principles<br /> Consistency<br /> Accountability<br /> Transparency<br /> Viability<br /> Integrity<br /> Stewardship<br /> Accounting standards<br />13<br />
  14. 14. 14<br />The Building Blocks<br />Accounting records<br />Financial planning<br />FinancialControl<br />Internal control<br />Financial monitoring<br /><ul><li>With all the foundations in place, financial control will be achieved and programmes implemented more effectively.</li></li></ul><li>15<br />Accounting Records<br />Fall into two main types:<br />Supporting documents<br />E.g. Receipts, vouchers, invoices, orders…<br />Books of account<br />E.g. Cashbook, general ledger, registers…<br />Accounting codes structure<br />A list of codes/descriptions for:<br />Each type of income & expenditure (the Chart of Accounts)<br />Each project or activity (Cost Centres)<br />
  15. 15. The Planning Pyramid<br />Vision<br />Mission<br />Financing Strategy<br />Objectives<br />Strategies<br />Operational<br />Budgets<br />Activity Plans<br />16<br />
  16. 16. 17<br />Budget Monitoring Reports<br />Project Budgets<br />Cashflow Forecast<br />ActivityPlans<br />Master Budget<br />Budget Monitoring report<br />Cashflow Report<br />Accounting Records<br />
  17. 17. 18<br />Budget Monitoring Report<br />
  18. 18. 19<br />Internal Control<br />It’s how we manage internal risk<br />Commonsense, practical procedures designed to safeguard assets & protect staff<br />E.g. Authorisation rules, vehicle policy<br />Common control problems:<br />Presentation of false receipts<br />Collusion with suppliers<br />Use of vehicles for private use<br />Loss of cash or stocks kept on premises<br />Un-budgeted expenditure<br />
  19. 19. What is Fraud?<br />“Fraud happens when somebody uses deception to obtain goods, services or money.” [UK Home Office]<br />...bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation and collusion...<br />It is a deliberate act<br />Often involves falsification of records<br />20<br />
  20. 20. What is Corruption?<br />“Corruption is the misuse of entrusted power for private gain.”[Transparency International ]<br />... Bribery, fraud, extortion, embezzlement, nepotism, cronyism...<br />Complex <br />Money is not always involved<br />21<br />
  21. 21. 22<br />Summary: Minimum Requirements<br />A valid supporting document for every transaction<br />A Cashbook for every account held<br />A practical accounts coding structure<br />Budgets covering all operations<br />Clear delegation of authority rules<br />who can authorise what and within what limits?<br />Annual financial statements (audited)<br />To meet statutory requirements<br />Regular budget monitoring<br />
  22. 22. Financial Management in Emergencies<br />3. Challenges in the field<br />
  23. 23. 24<br />Issues for Humanitarian Projects<br />Accountability vs. ‘saving lives’<br />People do come first<br />But someone, somewhere, has to account for the use of public funds<br />If we fail to account properly, funds could be withdrawn, credibility is lost…<br />
  24. 24. 25<br />Issues for Humanitarian Projects<br />Keeping accounting records<br />Field accountants not always provided<br />Difficult to get receipts and quotations<br />Payments made in different places by different people, so difficult to capture all transactions in a timely way<br />
  25. 25. 26<br />Issues for Humanitarian Projects<br />Cash management<br />High dependence on cash for purchasing<br />Programmes involve huge sums of money, spent very quickly<br />Cashflow issues – is the money there when it is needed? <br />Banking infrastructure may be limited<br />Different currencies in use<br />Cash security – in transit and on site<br />
  26. 26. 27<br />Issues for Humanitarian Projects<br />Procurement <br />Purchasing procedures difficult to follow in a devastated market<br />e.g. quotations, approved suppliers<br />Logistical problem of acquiring huge quantities of project materials<br />Authority to spend often unclear<br />Opportunities for fraud<br />Control of stocks<br />Storage , transportation and security issues<br />
  27. 27. 28<br />Issues for Humanitarian Projects<br />Budgetary control<br />Pressure to spend funds on time<br />Budgets often change during a programme<br />Prices shoot up when aid workers are in town!<br />Restricted vs. unrestricted funds<br />HO vs. field office expenditures<br />Difficult to monitor ‘committed’ expenditure made away from project office<br />Managers need weekly reports to monitor budgets, but not always available<br />
  28. 28. 29<br />Issues for Humanitarian Projects<br />One project, several donors<br />Complicated funding picture, often unclear<br />Each donor has its own set of rules to follow<br />Donors’ rules include:<br />What they will/will not fund<br />Moving funds between budget items<br />When they will make payments<br />The records they require you to keep<br />The financial reports they require<br />