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org
Presented by: Cheryl-Lynn Freeman

Free financial resources and guidelines: www.ngoaccounting.org Accounting software training/training on implementing financial internal controls, financial management & bookkeeping: cheryl@allaboutmzansi.com

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Purpose of running NGO seminars Series seminars: Marketing, Governance, Organisational Management www.ngoaccounting.org

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Marketing and Media Seminar by Frank Julie Date: 6 October 2012 Venue: CAB Building, c/o Jeanette & Lee Street, Brackenfell (behind Pick 'n Pay Hypermarket) Topics that will be covered: - Developing a media action plan. - Effective Marketing Strategies - Resources available to promote projects and NGO

Governance Seminar by NPO Laywer Ricardo Wyngaard Date: 10 November 2012 Venue: CCFm Radio, 146 Main Road, Muizenberg Topics that will be covered:
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Introducing Non-Profit Governance Recent governance developments in South Africa Board Recruitment and Orientation Risk Management within Non Profit Organisations

Organisational and Staff Management Seminar with Rita Isaacs
She has over Over 25 year’s expertise in human resources, business development and administration She has an outstanding record of never losing a CCMA case

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Date: 8 December 2012 Venue: CAB Building, c/o Jeanette & Lee Street, Brackenfell
(behind Pick 'n Pay Hypermarket)

Topics that will be covered:
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Formation and implementation of an effective staff structure - Preparing job profiles to best suite the organisation - Effective management of staff

www.ngoaccounting.org
Presented by: Cheryl-Lynn Freeman

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EXPENSES – costs incurred/used due to day to day operations INCOME – amounts received into the NGO (from funders/donors) ASSETS – resources of value usually owned by the NGO LIABILITIES – amount owed to third parties (external funds – eg banks) DEFERRED GRANT – funding received applicable over succeeding (Liability) years. - Specific projects (terms & conditions) - Unused funds returned or fully spent over period

DOUBLE ENTRY PRINCIPLE: For every debit, there is a corresponding credit

1. 2. 3. 4. 5. 6. 7. 8.

Professional fees to writers of accounting notes – R 20 000 Supplies and DVD materials were purchases – R 10 000 Incurred fundraising expenses – R 15 000 Received Donations from C Freeman – R 5000 Bought DVD packaging on credit (30 days term) – R 6 500 Monthly rental was paid – R 8 000

Paid monthly salaries for project management staff – R 85 000
Bought office furniture – R 25 000

ACCOUNT 1) Professional fees Bank 2) DVD Materials Bank 3) Fundraising Costs Bank 4) Bank Donations Income

DEBIT 20 000

CREDIT 20 000

10 000 10 000 15 000 15 000 5 000 5000

5) DVD Packaging
Creditors Control 6) Rent Expense Bank

6 500
6 500 8 000 8 000

7) Salaries
Bank 8) Furniture Bank

85 000
85 000 25 000
SESSION 2: UNDERSTANDING AFS

25 000

Accounting records – income, expenditure, assets & liabiities (GAAP) AFS within 6 months after Y/E

– statement of income & expenditure - balance sheet (assets, liabilities, equity)

2 months AFS – Written report from Accounting Officer
Keep books of accounts, supporting vouchers, records of subscriptions by its members, income & expenditure statements, balance sheets & accounting officer reports, for at least 5 years

- snapshot at one point of time of the financial position/ net worth of the non-profit -organisation ceased operating at that date, what would be left over after debts are paid from assets that have been converted into cash? -Balance Sheet is in two parts. One part records all balances on assets accounts; the other records all balances on liabilities accounts plus the income and expenditure account balance.

Assets from which benefit >12mnths Assets from which benefit <12mnths = Liquid Retrenchment estimate – staff policy Accumulated surplus/deficits - General & Specific funds/Net Worth Amounts payable <12mnths

Summary of income received & utilisation thereof in the form of expenditure

This represents the total income received - Recognised on cash basis according to policy Represents operational expenditure Actual cash spent per project activity, according to funder requirements

- represent the true worth of the organisation – in the form of capital and/or cash reserves which have been built up from surpluses in previous years. Severance
pay Staff liability + General + Specific = Total Funds Funds accumulated – not project specific Liability = spend per funder agreement

Movements in bank/funds due to funding operations, changes in funding or investments. Operating + investing + financing = total cash movement Movements in funding received & spent
Movements in investments e.g. fixed assets A + B + C = D

Movements in financing activities

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1. How long ago was the last audit conducted? 2. What does the Auditor’s Opinion say – is it qualified or unqualified? Balance Sheet 3. Does the organisation have enough ready cash (see ‘Cash at Bank’ listed under Current Assets) to pay off its immediate debts (see Creditors)? 4. How long could the organisation survive if all of its funding dried up? (Calculate the ‘survival ratio’) How does this compare to last year? Income & Expenditure (or Profit and Loss) Account 5. Is income and expenditure broadly in balance? (Look for net income/expenditure)

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6. Is there a significant increase or decrease in activity levels from the previous year? 7. What is the balance of direct project costs vs. admin costs? Is it reasonable for the size and nature of the organisation? 8. How ‘donor dependent’ is the organisation? (Calculate the ‘donor dependency ratio’) Budget Monitoring Report 9. Is expenditure broadly in line with the budget? (+ 10%) 10. Is income broadly in line with the budget?

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11. Are there any significant variances? If so, have they been satisfactorily explained? 12. What action is being taken to correct significant variances – eg under-spending as a result of delayed activity plans? 13. Are there any large bills outstanding which could substantially affect the figures shown? 14. Are we owed any large sums of money? What is being done to retrieve them? 15. Are there any un-budgeted expenses which may occur in the rest of the year?

SESSION 2: UNDERSTANDING AFS


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16. What is the projected end-year outcome? Is this outcome satisfactory? If not, what steps can be taken to change the result? Cashflow forecast 17. Is there enough cash in the bank to fulfil the activity plan in the next six months? 18. What grants are due and are they still expected to come through on time? 19. Are spare cash balances invested to produce the best return? General 20. What non-financial figures are being produced to show how the programme of activities is progressing?

SESSION 2: UNDERSTANDING AFS

www.ngoaccounting.org
Presented by: Cheryl-Lynn Freeman

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Financial Plan of what NGO expects to accomplish Receiving and spending Financial Tool - organization’s financial stability

short and long term goals financial road map for the staff measure of accountability and transparency management and board provide oversight


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Thoughtful and Deliberate Realistic Consistent Flexible Inclusive Measurable Ongoing Process


Planning part of Organizational Culture Drive Collaboration between Functions Adapt to Changing Conditions


Annual Operating Budgets Department Budgets Project/Activities Budgets

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Establish Budget Calendar Identify Organizational Priorities Determine key Budget Assumptions/Parameters Consolidate Department Budgets Review & Revise Board Review and Approval Review Final Budget with Staff Monitor and Reporting on Progress meeting Budget Goals

Lists Major Tasks Identifies Who is Responsible Establishes Overall

Timeframe & Specific Deadlines


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Budget Assumptions will include: Organizational Priorities Overall Growth Projection Goal Staffing Projections Guidelines on adding new projects and/or activities

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After Organizational Priorities are Identified: Set clear annual goals that are aligned with org priorities Develop Action Plan to achieve these goals Determine the resources/budget needed to carry out the Action Plans

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List sources of revenue
Review Past History Determine likelihood of funders and sources renewing

Make list of potential new funders and rate likelihood of securing funding from them

INCOME Govt Grants Fnd Grants Businesses Individual Events Fees

FY 2012 550,000 330,000 40,000 150,000 20,000 50,000

FY 2011 500,000 300,000 35,000 140,000 20,000 45,000

% Increase 10% 10% 14% 7% 0% 11%

Earnings
Total

10,000
1,150,000

10,000
1,050,000

0%
10%

Program Fundraising

General Management
Pooled Expenses

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Personnel Contract Services Office Rent Supplies Communications Travel/Meeting Marketing

INCOME Govt Grants Fnd Grants Businesses Individual Events Fees Earnings Total EXPENSES Total

Programs 500,000 300,000 31,800 50,000

Mg/Gen 25,000 15,000 4,100 50,000 10,000 20,000

FR 25,000 15,000 4,100 50,000 10,000 30,000 10,000

TOTAL 550,000 330,000 40,000 150,000 20,000 50,000 10,000 1,150,000

881,800

124,100

144,100

881,800

124,100

144,100

1,150,000

INCOME

TOTAL

Percent

Govt Grants
Fnd Grants Businesses Individual other

550,000
330,000 40,000 150,000 80,000

48%
29% 3% 13% 7%

Total
EXPENSES Program Services

1,150,000

100%

881,800

77%

Fundraising
Management & General TOTAL

144,100
124,100 1,150,000

13%
11% 100%

January February March

April

May

June

Income

100,000

100,00 85,000 0 85,000 95,000 100,000

Expenses

95,822

95,822 95,822 95,833 95,833 95,833

Difference

4,178 (10,822)

4,178 (10,833)

(833)

4,167

Cash at Beginning of Month

243,35 250,000 254,178 6 247,534 236,701 235,867

Cash at End of Month

247,53 254,178 243,356 4 236,701 235,867 240,034

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Monthly, Quarterly and Annual Actual to Budget Reports Cash Flow Reports Donor Reports Financial Dashboard

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Generally happens when there is a short fall between budgeted revenues and expenses Generally requires Board Approval if over 10% Budget revisions may require one of the following to cover the short fall: 1) Cutting Expenses 2) The use of organizational reserves

The Budget charts the direction for allocating and maximizing the use of resources in order to achieve the organization’s strategic and annual goals The Budget process is an integral part of the annual planning process The Budget includes indicators and a monitoring mechanism for measuring and reporting on progress towards achieving the financial goals

www.ngoaccounting.org
Presented by: Cheryl-Lynn Freeman

from department of social development

Good financial controls

GENERAL

Check that actually tasks of approving and managing the finances are shared, so that no one single person can control all aspects of financial management process.  Check that your financial policies require more than one single employee or governing board member to be able request, approve, make payments and withdraw money from the bank.  Check that bank reconciliations are done by someone who does not sign the cheques, have access to cash nor records cash transactions.  Check that the financial records are reviewed regularly by people other than the person who is responsible for maintaining the records. Check that your governing board receives regular, preferable a monthly, financial report and a list of all cheques drawn by your organisation. Check that salary records are kept (locked in a filled cabinet) for all staff, detailing attendance and leave entitlements. Check that you have an annually audit.

Good financial controls

MANAGING BANKING Check that signatories take their responsibilities seriously. Remember, signatories are responsible for any cheques they sign. Check that signatories never sign black cheques. Cheques should only be signed once they have been written out in full. Check that your cheque book is not left lying around. It should always be kept locked in a safe place.  Check that you never issue uncrossed cheques, unless it is a cash cheque. Always cross cheque payments ‘Not Tranferable’. Check that you never withdraw money from your savings account. Always transfer money from the savings account into the cheque account.  Check that you always bank any money promptly, such as money generated from donations, sales or fees. Check that monthly bank reconciliations are undertaken and any discrepancies (differences either over or under) are immediately investigated.  Check that you never cash personal cheques from petty cash.

Good financial controls

MANAGING RECEIPTS

Check that you always issue serially numbered receipts (with the

name of your organisation) for all cash received.

Check that you keep all cancelled receipts. These are still a part

of your financial records.

Check that receipts books are kept in a safe and locked place.
Check that you keep a written record of any donations or

pledges to the organisations. MANAGING PETTY CASH

Check that when payments are made with cash, petty cash

vouchers and receipts are submitted.

Good financial controls

MANAGING EXPENDITURE

Check that all expenditure and payments are approved in writing by the person nominated by your governing board.  Check that you use a purchase order for all purchases.  Check that you always obtain quotes before you purchase equipment and other services and file them with the purchase order.  Check that once the purchase has been approved that competitive quotes are obtained before the item is purchased. Many organisations have a policy that if a purchase is over R3,000, three quotes should be obtained first. Check that when you receive goods or services that they are in working order. Check that the quality of the goods or services you have received are the same as those you ordered.  Check that you fill in the guarantee and post it to the manufacturer.  Check that you make all payments for goods and services by cheque.  Check that you receive an invoice for your purchases and that you file this along with all the other documentation relating to the purchasing.  Check that you monitor your budget against expenditure to ensure that you can afford the purchase you are making.  Check that the funds are available before you make the purchase and that the necessary person/people approved the expenditure.

Good financial controls

MANAGING ASSETS  Check that you have established an assets register and that you regularly maintain it.  Check that all equipment and other items listed on the assets register has an identification mark or number. This can be a sticky label which is attached.  Check that you protect against loss and theft of equipment. Take out the necessary insurance.  Check that you use log books for motor vehicles.  Check that you follow-up on any advances you may have given and get them reimbursed as quickly as possible. For example, if you give an advance for travel to a workshop, ensure that once the person returns they reconcile the advance.  Check that you are receiving money by the due date. If there are overdue amounts owed to your organisation, chase them up.  Check that your financial reporting deadlines are adhered to according to your contract with each funder.  Check that your grant payments are received according to the time line contained in your funding contract.

Good financial controls

MANAGING THE MONTHLY FINANCIAL CHECK

Every month your bookkeeper and treasurer (or two other people

nominated by your organisation) should review the operations of the previous month.

Specifically, they should: Check what cheques were made out for cash Check if there were they any `odd’ or unusual payments. Check the wages book and all other payments. Check which items are running over or under budget and ask and why.

and what they were for?
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Check which funds were received and whether they were deposited
Check the bank reconciliations. Check that any other money received (such as donations, sales,

membership fees) was deposited.