NGO support toolkit (English)  >  NGO Support Programme management  >  Finance 

Budgeting and reporting

A system of clear financial reporting is important for donors who require a financial report (with evidence of the proper use of funds) to justify further disbursement of funds. Actual expenditure can also be tested against the budget and workplan and in the event of significant potential variance, authorisation can be sought. Financial reports also form part of the internal controls by giving a summary of the broad picture of income and expenditure.

It is important to link financial reporting to the programmatic reporting and to the monitoring and evaluation framework in order to match the money spent to the beneficial results achieved.

NSPs have an important role in helping NGOs and CBOs clarify what needs to be reported and with what regularity. The resources and time to meet these requirements need to be structured into the budget and workplan. It is usual for the NSP to give the format of reporting to the NGO.

NGOs and CBOs normally undertake three kinds of routine financial reporting:

• internal reports to the management, governing boards and membership
• reports to donors (generally via the NSPs as intermediaries)
• statutory reports required by in-country legislation.

NSPs need to comply with the reporting requirements of donors, and NGOs and CBOs need to comply with the reporting requirements from NSPs, since very often the financial reports are linked to the next disbursement of funds.

Issues to consider

• Some individuals may need training in financial reporting. This should be included in the budget. Technical staff may introduce help to write financial policies and procedures
• Internal reporting tends to be dependent on the size, complexity and experience of NGOs and CBOs. In the case of new or small organisations, internal financial reporting should be as regular as required, normally concentrating on analysis of expenses by main budget categories and regular cash analysis to ensure solvency and identify cash-flow needs.
• As organisations become more experienced they should expect to provide regular internal reports showing analysis of income and expenses, subdivided by projects and donors, detailed cash-flow projections for the year, the follow-up actions taken as a result of feedback to previous reporting.

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