AUHC-financial management for cm &amp

Training on
Financial Management & Reporting,
Governance, Leadership and Management
for
Clinic Manager & Admin Assistant
By: NHSDP Grants, Internal Control & Capacity Building Team

Learning objectives
 Understand principles of financial management
 Learn best practices and ways to avoid common errors related to:
• Financial reporting
• Segregation of duties
• Internal controls
 Develop strategies to manage cost recovery
 Understand cash management principles and best practices
 Identify ways to analyze and use financial data
 Learn to avoid common voucher errors
 Learn about Governance, Leadership and Management

Training Contents
1. Financial Management (FM)
a) Definition
b) Exercise #1: Understanding FM principles
c) Building Blocks - Financial Management
2. Financial Reporting (FR)
a) Some Important terms
b) Exercise #2: Financial Reporting : You’re the Reviewer
c) Financial Report: Review of common issues
3. Segregation of Duties
a) Definition
b) Objectives
c) Specific examples

4. Internal Control on:
a) Revenue Collection & Deposit
b) Exercise #3: Addressing Common issues relating to Revenue Collection
c) PI and RDF revenue reconciliation
d) Different registers’ maintenance
5. Cost Recovery Management
a) Formula – what includes & what excludes
b) Exercise #4: Calculating cost recovery
c) Case Study: Increasing A Clinic’s Cost Recovery Rate
d) Ways to increase clinic income - Some suggestions
e) Ways to control costs - Some suggestions
Training Contents

6. Governance, Leadership and Management
a) Importance of Governance at Clinic Level
b) Importance of Management at Clinic Level
c) Leadership – Definition
d) Exercise #5: What are the qualities of effective leaders?
e) Leadership – main traits / characteristics
f) Common leadership styles
7. Cash Management
a) Seven Principles of Cash Management
b) Fund flow process
c) Cashbook features
d) Layout of Double column cashbook
e) Exercise #6: Cash book and petty cash management
Training Contents

8. Financial Data Analysis
a) Importance of Financial Data Analysis
b) Some important financial analysis
c) Using financial analysis
9. Voucher & supporting documents
a) Preservation of Voucher
b) Voucher supporting documents
c) Exercise #7: Common issues related to vouchers
Training Contents

Financial Management (FM)
Definition: The part of management which is concerned
primarily with financial affairs of the organization. It’s about
taking action to look after the financial health of an
organization, and not leaving things to chance.
FM involves planning, organizing, controlling and
monitoring the financial resources of an organization to
achieve its objectives.

Financial Management (FM)
• SH NGOs & Clinics need to comply with disciplined, standardized
and consistent accounting practices, as well as, ensure transparency,
accountability and good governance in FM, and thus strengthen
their Financial Systems (FS).
• The basic requirement for ensuring meaningful FM is to establish a
comprehensive system so that SH NGOs & Clinics apply Generally
Accepted Accounting Principles (GAAP) or International Accounting
Standards (IAS) to maintain accounting records correctly and
generate financial reports accurately.

Exercise #1: Understanding FM principles
• Break up into 6 groups
• Each group will be assigned one FM principle to
discuss
• Spend 5 minutes talking about the principle,
and how you think the principle impacts your
job as a Clinic Manager or Admin Asst.
• Each group will have 2 minutes to share their
example with the rest of the group

FM – Building Blocks:
• Financial Planning – budget being linked to the organization’s strategic and
operational plans.
• Accounting Records – keep an accurate reliable record of financial transactions
taking place. This provides valuable information about how the organization is
being managed and whether it is achieving its objectives.
• Financial Monitoring – comparing actual results with budget and plan to check
things are going right.
• Internal Controls – is a process for assuring achievement of an organization’s /
project’s objectives in operational effectiveness and efficiencies, reliable
financial reporting, compliance with laws, regulations and policies. It involves
everything that controls risks to an organization.

Financial Reporting (FR):
Important terms
•Recording Keeping – Double Entry accounting
should be followed – recording transactions
analyzing the two-fold aspect of each transaction.
•Accounting period – Twelve calendar months from
October 01 to September 30 (for PBG)

Financial Reporting (FR):
Important terms
• Cost Principles – Allowable, Allocable AND Reasonable
• Books of entry –
• Journal entries,
• Cash & Bank books,
• Petty Cash book,
• Ledger books,

Financial Reporting : You’re the Reviewer
• Break up into six groups
• Each group will be assigned a section of the
financial report to review
• Group members will have 15 minutes to review
the report, identify errors, and correct them
• Each group will have 3 minutes to present the
errors and corrections

Financial Report: Review of common issues
• Reporting channel & timely reporting
• Previous period’s Closing Balance brining forward as
Current period’s Opening
• Bank Reconciliation – cheuqes more than 6 months old
• Mismatch of cheque details between Bank Statement
and Reconciliation
• Revenue Reconciliation to match revenue as reported in
SFR with Bank Statement
• Un-deposited PI & RDF revenue not reporting in
SFR/Bank reconciliation

Financial Report: Review of common issues (cont.)
• Expenses – charging in wrong categories
• Incurring costs over budget
• Inclusion of ALL bank accounts including FDR, SSFP
period Accounts (if still open)
• Closing Petty Cash Book several times on same date,
or doing once in a month
• Copy of bank statements, cashbooks, petty cashbooks
– visible dates, name of cost-center, account number,
amounts, etc.

Segregation of Duties: Definition
Segregation of duties is an internal control designed to prevent error
and fraud by ensuring that at least two individuals are responsible
for the separate parts of any task. That is one person should not
perform more than two of the following tasks:
 Initiate transaction
 Approve transaction
 Record transaction
 Reconcile balances
 Handle assets or petty cash
 Review and approve reports

•Ensure effective control over assets and records
•Reduces the risk of both erroneous and inappropriate
actions
•Prevent fraudulent activities
•Ensure stewardship of donor funds
Segregation of Duties: Objectives

Think about whether or not each example shows good
segregation of duties:
• The person who requisitions the purchase of goods or
services can also approve that purchase.
• The person who approves the purchase of goods or
services should not be the person who reconciles the
monthly financial reports.
• The person who approves the purchase of goods or
services should not be able to obtain custody of
cheques.
Segregation of Duties: Specific examples

Think about whether or not each example shows good
segregation of duties:
• The person who maintains and reconciles the
accounting records should be able to obtain custody of
cheques.
• The person who prepares a listing of money receipt
received can also make the deposit.
Segregation of Duties: Specific examples

• In general, the approval function, the accounting /
reconciling function, and the asset custody function
should be separated among employees.
• When these functions cannot be separated, a detailed
supervisory review of related activities is required as a
compensating control activity.
• Segregation of duties is a deterrent to fraud because it
requires collusion with another person to perpetrate a
fraudulent act.
Segregation of Duties

Internal Control on
Revenue Collection & Deposit

Exercise #3: Addressing common issues related
to IC for revenue collection
• Break up into four groups
• Each group will be assigned two common
issues related to IC for revenue collection
• Group members will have five minutes to
discuss those issues and suggest potential ways
to correct them
• Each group will have 3-4 minutes to present
their solutions

PI and RDF Revenue Reconciliation
Revenue Reconciliation: Amount (Tk.)
Total Deposit for the month as per Bank Statement 100
Add: Un-deposited revenue amount of current month 30
Less: Un-deposited revenue amount of previous month (20)
Total Revenue for the month (a) 110
Total Revenue reported in SFR/MIS Form (b) 110
Difference (a – b) -
The CM/AA should perform the below reconciliation at the end of each month:
The difference should be nil. If there is any difference, then there is some mismatch.

Internal Control on
Different registers’ maintenance

Internal Controls: Register Maintenance
• What types of registers do you use in your
clinics?
• How do you manage these registers in
your clinics?
• Share best practices
• Share challenges and resolve as a group

The definition of Cost Recovery Rate is as follows:
INTERNALLY GENERATED INCOME
Cost Recovery Rate = ----------------------------------------------------- X 100
ACTUAL OPERATING EXPENSES
Cost Recovery Rate: Calculation

Internally Generated Income includes
(but not limited to):
• Income from Clinic Fees (including reimbursements)
• Income from sale of supplies, equipment and drugs;
• Income from sale of commodities/ items purchased/
manufactured under an award
• Bank interest from nonfederal funds (PI & RDF);
• Income from the use or rental of real or personal property
acquired under federally funded projects
• Income from sale of supplies and drugs (i.e. RDF sales revenue)
• Income from other sources (i.e. net income from new Business
Initiatives e.g. Pharmacy Network, Interest Income from non-
federal funds)

Actual Operating Expenses
Include the followings:
Salaries & wages, Travel expenses, Education & training expenses
Fringe benefits Drug purchase from RDF Depreciation / amortization
Fees, honoraria & allowances, Supplies & Equipment
expenditure
Other direct or indirect costs
General admin expenses, Purchased services
Exclude the followings:
Performance payments under PBG Capital expenditure (Capital expenditure, fixed
assets, renovation etc.)
Training/workshops mandated by NHSDP One-time expenditure for income generating
activities (e.g. Pharmacy Network or any other
such activities)
Advance for Lease (rental)

Exercise: Calculating cost recovery
• Everyone will receive a copy of a cost recovery
calculation worksheet
• Working in pairs, review the incomes and expenses
listed on the sheet, and determine which ones should
be included in calculating cost recovery
• Use those incomes and expenses to determine the
cost recovery rate for the sample clinic

Exercise Solution: Calculating cost recovery
INTERNALLY GENERATE INCOME FOR COST RECOVERY:
GRANTS FUND RECEIVED FROM HEADQUARTER 800,000
CLINIC FEES
40,000
CLINIC FEES REIMBURSED FROM GRAMEENPHONE 5,000
DONATED COMMODITIES 2,500
INCOME FROM SALE OF COMMODITIES 2,500
INCOME FROM SALE OF DRUGS
30,000
BANK INTEREST FROM GRANTS FUND 4,000
BANK INTEREST FROM PROGRAM INCOME 6,000
BANK INTEREST FROM RDF 9,000
FUND RECEIVED FROM CHEVRON –CSR 200,000
TOTAL INCOME TO BE CONSIDERED 92,500
ACTUAL OPERATING EXPENDITURE
SALARIES & WAGES 120,000
FRINGE BENEFITS 72,000
ADVANCE FOR LEASE 30,000
GENERAL ADMIN EXPENSES 10,000
TRAVEL EXPENSES 20,000
SUPPLIES EXPENDITURE 40,000
TRAINING EXPENSES 15,000
PHARMACY CONSTRUCTION AND RENOVATION 250,000
ULTRA SONOGRAM PURCHASE 400,000
PERFORMANCE PAYMENTS UNDER PBG 80,000
TRAINING/WORKSHOPS MANDATED BY NHSDP 100,000
+ ADD DEPRECIATION of USG ( 25% OF 400,000 / 12) 8,333
TOTAL OPERATING EXP. TO BE CONSIDERED 285,333
COST RECOVERY RATE OF CLINIC=92,500/285,333
32.42%

Case Study
Increasing A Clinic’s Cost Recovery Rate

‘Upashahar Clinic’ situated in Sylhet Upa-Shahar is an Urban – Vital
type clinic which is managed by SSKS – an NHSDP network NGO. This
Surjer Hashi clinic is little known in that area. The catchment area has
approximately 20,000 people living around in a 3 KM radius who are
either poor or in the middle class segment. The area has few
established hospital or clinics around even though the by road
communication is very good. There are some small pharmacies in the
area. The literacy of peoples living around is high due to many schools
and colleges around. The clinic currently achieves a cost recovery of
23% with 12 full-time staffs and staff turnover is high.
How the cost recovery can be improved?
Case study: Increasing a clinic’s cost recovery rate

 Ways to increase clinic income:
• Consider transforming from Vital to B-EMOC
• Expanding client base through campaigns in schools and colleges,
Health Camps, Local Fair Participation, School Based Health Service
etc.
• Expand services in different ways like offering Lab Services, Extended
Lab, Home Based Delivery etc.
• Improve quality of care;
• Increase community involvement and awareness in order to increase
Surjer Hashi clinic popularity
• Make the RDF more resourceful

 Ways to control costs:
• Identify and eliminate issues that are causing high staff turnover
• Preparing challenging budgets maintaining quality services
• Conduct variance analysis and budgetary controls each month
• Dynamic assessments for identification and elimination of
unnecessary expenditures
• Communicate with other SH Clinics for best price / costing
information (knowledge and best practice sharing)

Governance, Leadership and Management

Importance of Governance at Clinic Level
As per the Bangladesh Govt. Rules and Regulations for NGOs, Board Members
should avoid getting too much involved in day to day management of the
organization, although they do need to be aware of what is happening in the
organization.
Clinic Managers (CM) and Admin Assistants (AA) are the key role player regarding
governance and administration at Clinic level. They are responsible to ensure the
followings to the NGO’s Board/ Executive Committee through Project Director and
Finance & Admin Manager (FAM). Their roles to the Board / EC are to ensure that:
 Funds are used to help Clients/beneficiaries effectively & efficiently
 Clinic has sufficient fund to operate effectively and efficiently
 There is an effective management team
 Clinic operates within the law of the country and policy of the donor
 Clinic can handle its responsibilities effectively

Importance of Management at Clinic Level
 Ensure organizational and project’s goal and objective by following
organizational mission and vision,
 Ensure efficient and effective operations and administration,
 Building capacity of other staff to implement program activities efficiently and
effectively.
 Ensure responsive Management practices to the community and its changing
needs.
 Ensure accountability at all levels through proper and timely decision making
 Ensure administrative and operational procedures and policies at clinic level.
 Ensure clinic Staff follows administrative procedures and policies.
 Ensure effective operating systems and procedures in place for smooth and
efficient use of organizational resources (e.g. hours worked, inventory control,
etc.)

Leadership is the ability to develop a vision (¯^cœ) that
motivates (‡cÖiYv †hvMvq) others to move with a passion (Av‡eM)
toward a common goal (GKB jÿ¨)
Leadership is a function of knowing yourself (wb‡Ri `vwqZ¡ I
KZ©e¨ m¤ú‡K© m‡PZb _vKv), having a vision that is well
communicated (¯^cœUv‡K mK‡ji gv‡S †eva‡hvM¨ K‡i Qwo‡q †`Iqv) ,
building trust among colleagues (mK‡ji gv‡S wek¦vm m„wó) and
taking effective action to realize your own leadership potential
(Kvh©Ki c`‡ÿc MÖn‡bi gva¨‡g wbR¯^ †bZ…Z¡`v‡biÿgZvi cÖKvkNUv‡bv).
But it is universal truth that either Leader BORN or Leader
BREAD
What is Leadership?

What are the qualities of effective leaders?
• Turn to the person sitting next to you. Spend 10 minutes
discussing what you think are the top FIVE qualities of effective
leaders.
• Each pair will present their characteristics to the group—the
facilitator will keep track of the group’s recommendations.
• Final discussion—what are the ways that you as Clinic Managers
can demonstrate these qualities?

• Adaptable to situations (cwiw¯’wZi mv‡_ Lvc LvIqv‡bv)
• Alert to social environment (mvgvwRKcwi‡ek m¤ú‡K© mZK©_vKv)
• Ambitious and achievement orientated (D”PvKv•Lx I K…wZZ¡g~jK)
• Assertive (`„o†PZvI wR` m¤úbœ)
• Cooperative (mn‡hvMxfvevcbœ)
• Decisive (wm×všÍ Mªnb ÿgZvm¤úbœ)
• Dependable (wbf©ikxj)
• Dominant (Kg©ev¸b ØvivAb¨‡K cÖfvweZKivi ÿgZv)
• Energetic (kw³ m¤úbœ evAbjm)
• Persistent (Aa¨emvqxI cÖ‡qvR‡b Abgbxq)
• Self-confident (AvZœwek¦vmm¤úbœ)
• Tolerant of stress (msKUmn¨ ev†gvKv‡ejvKivi ÿgZv)
• Willing to assume responsibility (†¯^”Qvq`vwqZ¡‡evam¤ú‡K© †evSv)
Leadership - Main Traits/Characteristics

 Autocratic (Authoritarian) (‰¯^ivPvix)
 Bureaucratic (AvgjvZvwš¿K)
 Democratic (MYZvwš¿K)
 Coercive (`gbg~jK)
 Transactional (Av`vb-cÖ`vb g~jK)
 Transformational (iæcvšÍi g~jK)
 Laissez-Faire(Aeva bxwZ ev bgbxq g~jK)
Leadership Style

Seven Principles of Cash Management
Keep money coming-in separate from money going-out
Always give receipts for money received
Always obtain receipts for money paid out
Deposit the surplus cash into the bank
Have properly laid down procedures for receiving cash
Restrict access to petty cash box to general
Keep cash transactions to an absolute minimum

Fund flow Process
Three bank accounts are maintained for Grants, PI & RDF
at each cost center
NGO receives funds from NHSDP on quarterly basis as
per NGO’s request and quarterly expenditure
NGO Project HQ (PHQ) reviews Clinic’s monthly fund
requisitions and disburses funds on monthly basis
through Bank Transfer/TT/DD based on approved
monthly fund requisition

Cash Book: Features
Cash book is the one of the most important books of accounts
It is a book of original record because all cash and bank
transactions are recorded in it as when they take place
A double column cash book should be used to keep a
chronological record of all cash and bank receipt and payments
Cash book figures should be individually posted to the respective
heads of accounts in the ledger
All bank accounts should be reconciled at least monthly.
The reconciliation statement should be prepared by the Admin
Assistant and reviewed and signed by the authorized signatory
Explanations should be given for any unusual reconciling item(s).

Layout of double-column cash book
It has two side:
Debit (for all types of receipts)
Credit (for all types of payments)
It contains the following columns on each side:
o 1st column – Date (dd/mm/yyyy)
o 2nd column – Voucher # (receipt/payment)
o 3rd column – Particulars
o 4th column – Page/ folio #
o 5th column – Cash amount
o 6th column – Bank amount

Exercise: Cash book and petty cash management
• Break up into six groups
• Each group will be assigned a topic related to cash
book management or petty cash
• Group members will have five minutes to discuss
those topics
• Each group will have 3-4 minutes to present their
discussion

Importance of Financial Data Analysis
Financial analysis is an aspect of the overall organization finance
function that involves examining historical data to gain information
about the current and future financial health of the organization.
Financial analysis can be applied in a wide variety of situations to
give managers the information they need to make critical decisions.
Budget is the financial plan of the programmatic goals and
objectives. Therefore, the financial data are good evidence based
indicators of programmatic goals and objectives.

Some important financial analysis
Revenue Projection vs. Actual
Budget vs. Actual expenditure
Cost Recovery
Trend analysis (Revenue & Expenditure)
Cost per customer served
Cost per service
Revenue per staff vs. average staff expenditure

Using financial analysis
What are some examples of financial
analysis you conduct in your clinic?
How do you use the results of the analysis?

Voucher & Supporting documents

Voucher are valuable documents that support
the transaction that were made. Voucher should
be filed systematically and preserved
accordingly. They are the main piece of
evidence in any book keeping / accounting
system.
- Kept on file
- Maintain chronologically
- Preserve minimum 5 years after completion
of the project (As per GoB regulation)
Preservation of Voucher

Voucher supporting documents
Type Particular Remarks
Salary and
benefit related
voucher
- Approved salary sheet/Payroll,
- Bank transfer advice
- Copy of cheque (for exception cases)
- Attendance Record/time sheet
- Copy of treasury challan of tax payment
- Calculation of salary tax deduction
- Please
consider any
deduction,
Joining
documents for
new recruitment
Travel related
voucher
- Approved travel bill
- Travel approval form
- Trip report (Where applicable)
- Checked with work plan
- Check movement register
- Copy of cheque (for cheque payment)
- Mail from NHSDP (If any)
- Any communication copy(If any)
- Copy of motorcyle log with mileage

Training/meeting
related voucher
- Approved activity budget
- All original supporting bill
- Attendance copy
- Schedule of training
- Communication copy of training
- Agenda of meeting

Procurement
related voucher
- Original bill
- Challan copy(If any)
- GRN copy
- Approved Purchase Requisition
- RFQ with acknowledgement
- Collected quotations
- Comparative Statement with selection
memo
- NHSDP approval (For applicable area)
- Copy of purchase order(For applicable
area)
- Cheque acknowledgement copy/Money
Receipt
- SAM check copy
- Any other documents related to
procurement

Fund received from
HQ related voucher
- Approved Fund request copy
- DD/Cheque copy/Bank Advice/Bank
statement copy
Internal Loan
received/refund
related voucher
- Approved Internal Loan Requisition
Form
- Cheque copy/DD copy Bank
advice/Bank statement copy
CSP Honorarium
Payment related
voucher
- Approved payment sheet with CSP
acknowledgement signature

Fees Honorarium
Payment related
voucher
- Payment sheet with details calculation
ie Type of service, Unit price, Total
amount, tax deduction calculation
amount, Net payment amount
- Acknowledgement copy from the
- Register copy for caesarian/Normal
delivery/USG done
- Tax payment challan copy
- Agreement copy(Should preserve on
file)

Exercise: Common issues related to vouchers
• Break up into five groups
• Each group will be assigned a focus area on voucher
review
• Group members will have 10 minutes to identify
common errors related to vouchers and brainstorm
strategies to avoid the errors
• Each group will have 3-4 minutes to present one error
and strategy

 Understand principles of financial management
 Learn best practices and ways to avoid common errors related to:
• Financial reporting
• Segregation of duties
• Internal controls
 Develop strategies to manage cost recovery
 Understand cash management principles and best practices
 Identify ways to analyze and use financial data
 Learn to avoid common voucher errors
 Learn about Governance, Leadership and Management
Review of the Learning Objectives

AUHC-financial management for cm &amp

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