Accounting
The recording of all financial transactions in a consistent, practical and accessible format is essential for good financial management. Accounting records also provide valuable information about how funds have been used and whether the organisation is achieving its objectives.
Every organisation must keep an accurate record of financial transactions to show how funds have been used. To ensure completeness all funds should be accounted for. Regular reconciliation of bank and cash is vital. And financial records and systems should be regularly verified and authorised by an independent person to ensure procedures are being followed correctly.
NSPs need to develop their own internal accounting and filing systems, where every transaction is:
- documented (i.e. purchase orders, invoices, receipts, delivery notes
- authorised (approved by budget holders or linked to budget lines)
- verified (by cheque signatories, the internal treasurer, auditors)
- recorded in a single common format (which could be manual or electronic).
Additionally, NSPs may need to help their partner NGOs and CBOs develop or improve their own accounting and record keeping systems. The complexity of such systems will depend on the size and capacity of each NGO or CBO and should allow them to generate financial information for analysis and decision making as well as to report to NSPs and donors.
This should form part of the capacity review.
Issues to consider
The most appropriate means of recording financial transactions will depend on factors such as the size and level of development of NGOs and CBOs, the volume of transactions and the capacity of staff.
- Manual systems may be easiest for new NGOs and CBOs but will require modifications as the organisation grows
- Spreadsheets in computer software such as Excel can be a pragmatic transitional method
- Dedicated accounting software tends to be most efficient for large NGOs and CBOs with multiple projects and budget lines.
Special attention may be needed for controlling cash transactions, especially for newer or smaller organisations. Items to consider include:
- all cash coming in should be banked intact
- an imprest system (where cash-in-hand and valid receipts always add up to a fixed sum)
- regular reconciliation of cash
- double entry book-keeping
- setting and controlling levels of authorisation for expenditure
- systems and facilities for the safe keeping and storage of cash.
NSPs need to help NGOs and CBOs develop accounting principles which reflect the requirements of:
- ‘common sense’, so that systems and procedures are seen as relevant and practical
- double-entry book-keeping, so that growing organisations can keep track of different budget lines
- national accounting standards and requirements
- international accounting standards and requirements
- donor standards and requirements (both international and local).
