This document discusses internal controls, budgets, and accounting for donor funded projects. It begins by stating why internal controls, budgets, and proper accounting are important when organizations receive donor funds. It then provides objectives and discusses fraud prevention, including examples of fraud that could occur if proper controls are not in place. The document also includes a case study on preventing fraud, templates for budgets and funding requests, and discusses donor requirements and challenges organizations may face in financial reporting for projects.

1. INTERNAL CONTROLS, BUDGETS
& Accounting for Donor Funded
Project
January 26, 2014
Colombo , Srilanka
By: Huzaifa Shabbir Hussain

2. WHY ARE WE CONDUCTING THIS
SESSION??

3. CIPE Pakistan Experiences
• Lack of Interest of Board in managing grant
funds .
• Weak Financial Reporting System.
• Feeble internal control.
• Integrating program activity in to a proper
budget.

4. OBJECTIVES
• UNDERSTANDING internal controls
• Budgeting techniques to prepare effective
budget
• Accounting for donor funded project

5. Do Frauds Happen?
Can it happen at your organization?
• If yes, how?
• If no, why not?

6. Case study
Mr. Raza has recently joined the Business chamber of commerce as chief accountant.
The President and Secretary of Chamber have full faith and trust on Mr. Raza and as
a result, Mr. Raza is all in all in finance.
The President and Secretary of Chamber have authorized Mr. Raza to:
• Finalize rates of transactions with vendors
• Receive invoices
• Verify invoices
• Prepare cheques
• Deliver cheques to vendors
• Record transactions in the books of account

7. Case study
• There is no further check on Mr. Raza except for trust of the President and
Secretary. The only oversight by the President and Secretary of the Business
chamber is the signature on cheques.
ASSIGNMENT / GROUP DISCUSSION & PRESENTATION
• Please consider the above scenario and after discussion in your group, answer the
following:
• How can Mr. Raza conduct fraud or what are two frauds Mr. Raza can conduct?
• What are three suggested internal controls which will help mitigate chances of
fraud at the Business Chamber of Commerce?
• Are there any internal controls at your chamber? Please explain three of them
• What one internal control do you consider you will implement once you are back
from this session?

8. Who is this man?
• New York money
manager Bernard
Madoff's tricked
investor in a $65
billion Ponzi scheme,
the largest fraud
ever by an individual,
was exposed in
December 2008
when Madoff, now
doing 150 years in
prison, confessed to
his sons.

9. Guess who?
• WorldCom's internal
auditing department
uncovered $3.8 billion of
fraud. Inflated assets by as
much as $11 billion,
leading to 30,000 lost jobs
and $180 billion in losses
for investors. Former CEO
WorldCom Mr. Bernard
Ebbers was convicted of
fraud and is doing 25 years
in federal prison.

10. Why Internal Control?
Internal control system ensures:
• Orderly and efficient conduct of the business
• Safeguarding of assets of the business
• Prevention of detection of fraud and error
• Accuracy and completeness of the accounting
record
• Timely preparation of financial statement

11. For Effective Internal Control
System
Have a Financial Accounting Manual!!
Key components of an accounting manual includes:
•Guidelines for various accounting policies and
procedures
•Written procedures for accounting staff

12. Budget Preparation:
Best Practice & Strategy

13. WHAT IS A BUDGET
• A budget is a detailed plan of income and
expenses.

14. Why Budget and Forecast?
Budgets and Forecasts
Measure actual and forecasts against the
budget throughout the planning process
Analyze anticipated versus actual results
Predict future performance and anticipate
changes

15. FINANCIAL BUDGET PREPARATION
PROFIT AND LOSS BUDGET
Income
Rs 100
Expenses
Rs 80
Great! I will
make profit of
Rs 20

16. FINANCIAL BUDGET PREPARATION
PROFIT AND LOSS BUDGET
Income
Rs 80, Expenses Rs 100,
What will I do??

17. FINANCIAL BUDGET PREPARATION
• IN CASE OF LOSS
–Increase income
–Reduce expenses

18. BUDGET TEMPLATE

19. Accounting for
Donor Funded Project

20.  ACCOUNTANTS ARE NOT EXPERT IN MANAGING
GRANTS
 SUB COMMITTEES DON’T TAKE INTEREST IN
FINANCIAL REPORTING
 REGULAR FOLLOW UPS
 REPORTING REQUIREMENTS
• OPENING A SEPERATE BANK ACCOUNT.
• BUGGING FOR DEADLINES OF FINANCIAL REPORTS
• EXPLAINING THE SKELETON/FORMATS FOR
REPORTS and ADVANCE REQUEST
CHALLENGES FACED!!

21. • ASSISTING THE GRANTEE:
–Preparation of Project Budgets
–Working out the Direct Cost & Indirect
Cost with the Project Manager
INITIAL STEPS TAKEN!!

22. • NARRATIVE REPORTS
• PROJECT OBJECTIVES ARE FULFILED
• FINANCIAL REPORTS ARE SUBMITTED AS PER
THE DATES MENTIONED IN THE GRANT
AGREEMENT
• EVALUATION REPORTS
• FAILURE OF SUBMISSION OF FINANCIALS ON
TIME.. RESULTS IN WITHOLDING GRANT
PAYMENTS
DONOR KEEPS A CLOSE EYE ON!!

25. Monthly Advance Request
Template!!

26. • COMMON FINDINGS ARE!!
REGULAR SITE VISITS
INADEQUATE
INTERNAL CONTROLS
UN ALLOWABLE COSTS

27. CONTRIBUTION OF
GIFT WAS RECORDED
IN MONTHLY FINANCIAL
REPORT TO THE BOARD MEMEBERS
“THE AMOUNT OF $1000 –
on continuous follow-up reversed from the
grantee project and in the end they
managed it from their own resources”!
STANDARD GRANT
PROVISIONS

28. QUESTIONS ASKED?
BOARD MEMBER OF A CHAMBER AFTER
APPROVAL OF A GRANT ASK US!! HOW
MUCH DO WE HAVE TO CONTRIBUTE
DURING THE PROJECT OF $8500??
CONFUSING ABOUT MATHCHING FUNDS

29. • CHECKING ADEQUACY OF FINANCIAL
ACCOUNTING POLICIES ARE IN PLACE.
• BOOK-KEEPING FOR VERIFICATION –
INCLUDES QUOTATIONS,CHEQUES, BANK-
STATEMENT & TIME-SHEET. USING BE SPOKE
SOFTWARE – QUICK BOOKS
• SENDING FINANCIAL AND NARRATIVE
REPORTS ON DEADLINES.
WHAT DONOR REQUIRES!!

30. THANK YOU