Finance Management Internal Control Assessment Supervision Guideline

THE RED CROSS AND RED CRESCENT
SOCIETIES
Internal Financial Control Supervision Guide
Prepared by:
Samuel Asamoah
Senior Finance Development Advisor
Norwegian Red Cross

2011
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Table of Contents Pages
1. Background 3
2. Introduction 5
3. Overview of the office 8
4. Salaries 9
5. Bank and Cash 10
6. Petty Cash 10
7. Fixed Assets 12
8. Disbursements 12
9. Procurement 14
10. Per diem/Travel 15
11. Computers 16
12. Income Generation(Sustainability ) 17
12.1 Sustainability strategies 17

12.1.1 Governance 17
12.1.2 Overhead recovery element 17
12.1.3 Cost structure 18
12.1.4 Income generation activities 18
12.1.5 Programme realization 19
12.1.6 Length and breath of donations 19
12.1.7 Objectives 19
13. Financial projects, forward planning and financial targeting 20
14. Conclusion 21
15. Attachments
15.1 Area of particular risk(internal financial controls) 22
15.2 Internal Financial Control Checklist 24
15.3 Evaluation of Accounting System 27
15.4 Summary of the overall assessment of branches, divisions 28
Internal Control Supervision Guide- By Samuel Asamoah- Senior Finance Development Advisor 2
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1. BACKGROUND
Finance Development has an intrinsic link with all departments that operate under the umbrella of the
National Societies. This aspect is a consequence of its fund raising portfolio that is critical to the Red
Cross as the largest humanitarian organization in the world. National societies operate with same
partners or stakeholders yet their accounting and finance systems generally remain disintegrated.
Hence a long term development strategy for the Red Cross must by necessity include a finance
development component that is inclusive of all the societies in the area giving the organization an
operational coherence.
This Supervision Guide will enable cross reference and create the necessary checks and balances
making the National Societies accountable to partners and stakeholders on a global scale. This
accountability and transparency move will enhance the existing confidence and trust with all players in
the Red Cross equation. Additionally, it will assist in the preparation of external audits that increase
confidence in the reliability of the financial statements and to safeguard against theft, waste and error
within the National Societies. It is a given that the National Societies will benefit from this Financial
Internal Control Supervision Guide as would other NGOs
The idea of a Regional Financial Internal Control Supervision Guide arose came from lack of
supervision by the national societies finance department to the provinces or regions where bulk of funds
transferred by stakeholders are being utilised. This tool and its effective utilisation wwill pave way for
effective monitoring and utilization of Programme funds at the headquarters and particularly at the
provincial branch. In addition, it will ensure effective compliance of the internal financial control
procedures, follow-up of external Audit recommendations (management letters) and also to prepare the
provincial branches for external audits
The tool has been simplied so that any accountant in the finance department at headquarters who deals
directly with the day-to-day financial issues related to the provincial branches can visit the province and
carry out internal control using the tool. These visits would enable the accountants to share information,
support and train the provincial finance officers on areas where they observed some weaknesses.
There are many similarities in one NS following much along the lines as that of other national societies.
Good examples are programme structure and implementation, financial reporting to partners, cash flow
management, financial accountability, budgeting and last but not the least financial record-keeping.
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The main rational of the regional internal financial control supervision guide, therefore, is to test more
vigorously internal financial control procedures within all circles of National Societies both at the
headquarters and the provincial branches, divisions or regions and to ensure that adequate systems are
in place for strict compliance of the external auditors recommendations. To achieve this, the contents of
the supervision guide have been simplified for easier comprehension by the Project Accountants or
headquarters finance staff. This will permit NS accounts to use the document in a more effective and
efficient manner enabling them to check and monitor the use of program resources, programme
effectiveness and provincial branches eligibility of running effective programmes.
In addition, the supervision guide aimed at providing a balance in the National Societies internal
financial control procedures in a way that ensured partners’ confidence and maintained the integrity of
National Societies financial systems and assets without unduly restricting the Societies ability to get the
work done and to be productive.
The core areas of this Supervision Guide are; the overview of Provincial Branch Offices, Bank and Cash
Disbursements, Procurement Procedures, Salaries/Payroll, Travel and Per diems, Fixed Assets,
Computers, and Income Generation Activities.
It is essential to note that the responsibility for establishing and maintaining an adequate system of
financial controls within the National Societies lies with the management, therefore, it would be
appropriate that after the review or evaluation of the divisional or regional finance offices, a
comprehensive report is prepared based on the core areas of the supervision guide highlighting findings
and recommendations for the senior management to take appropriate action. Failure to do so would
ultimately defeat the aim and objective of this supervision guide.
The author of this guide hopes that its effective utilization will complement efforts to minimize waste and
theft, if not to totally eradicate it. This will help to build confidence with National Societies partners and
donors. The author will appreciate any contributions or any other constructive and objective discussions
on the use of the Supervision Guide. My email address is samuel.asamoah@redcross.no
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2. INTRODUCTION
ASSESSMENT OF THE ADEQUACY AND EFFECTIVENESS OF INTERNAL CONTROLS
The internal control structure of an organization may be defined as consisting of the policies and
procedures established by an organization to provide reasonable assurance that the organization’s
objectives are achieved.
The management of the national societies is responsible for establishing systems of internal control.
The objectives of such systems are to provide management with reasonable, but not absolutely
assurance that assets are safeguarded against loss from unauthorized use of disposition, and that
transactions are executed in accordance with managements’ authorization and recorded properly to
permit the preparation of financial statements in accordance with generally accepted accounting
principles.
As part of any review of the systems of internal control, the following might be considered as those
controls that are significant to the author and prospective users of this document:
SCOPE OF OUR REVIEW
For the purpose of the internal control review, the following classification and categories may be
considered significant control areas:
CONTROL ENVIRONMENT
The control environment represents the collective effect of various factors on establishing, enhancing or
mitigating the effectiveness of specific policies and procedures. It is generally reflects the overall
attitude, awareness and actions of the national societies’ board members and management. The review
should specifically focus on:
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• Financial management capacities
• Management viewpoint and operational style
• Organization structure
• Methods of assigning authority and responsibility
• Management control methods
• Personnel policies and practices
ACCOUNTING SYSTEMS
The accounting system consists of the methods and records established to identify, assemble, analyse,
classify, record and report an entity’s transactions and to maintain accountability for the related assets
and liabilities. An effective accounting system gives appropriate consideration to establishing methods
and records that will:
i. Identify and record all valid transactions;
ii. Describe on a timely basis the transactions in sufficient details to permit proper classification of
transactions for financial reporting;
iii. Measure the value of transactions in a manner that permits recording their proper monetary
value in the financial statements; and
iv. Present properly the transactions and related disclosures in the financial statements.
Under this section it is imperative to review the following areas:
• Budgeting and funds management
• General record keeping
• Reporting to donors
• Etc
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CONTROL PROCEDURES
Control procedures are those policies and procedures in addition to the control environment and
accounting system that management has established to provide reasonable assurance that the national
societies’ objectives will be achieved. Control procedures have various objectives and are at various
organizational and data processing levels. Generally, they may be categorized as procedures that
pertain to:
• Proper authorization of transactions and activities
• Segregation of duties that reduce the opportunities to allow any person to be in a position to
both perpetrate and conceal errors or irregularities in the course of his or her duties. This
involves assigning different people the responsibilities for authorizing and recording
transactions, and maintaining custody of assets
• Design and use of adequate documents and records to ensure the proper recording of
transactions and events, such as monitoring the use of pre-numbered payment documents.
• Adequate safeguards over access to and use of assets and records, such as secured facilities
and authorization for access to computer programmes and files.
• Independent checks on performance and proper valuation of recorded amounts, for example
reconciliations, comparison of assets with records, computer-programmed controls,
management review of reports that summarise the details of account balance and user review
of computer generated reports
The control procedure review, therefore, should focus on the following areas:
• Authorisation of transactions and activities
• Bank reconciliations
• Asset management controls
• Electronic data processing controls
• Written policies and procedures
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• Segregation of duties
• Use of pre-numbered documents
SOME KEY TIPS TO THE APPROACH
The approach may comprise the following key steps
i. Ascertain policies and procedures in place and recorded these in outlines;
ii. Performed tests to confirm that policies and procedures in place have been correctly recorded;
and
iii. Evaluated policies and procedures in place having regard to best practice, experience of the
national societies’ environment and circumstances prevailing at the national societies.
3. OVERVIEW OF THE ORGANISATIONAL’S OPERATIONAL OFFICES
The main objective is to ensure that each field office has an organogram, there is a clear job description
and that there is separation of duties among staff.
Areas to strengthen:
 Check if the delegation has organisation chart
 Check if employees have job description and enquired if they are review periodically.
 Check if the finance and staff policy and procedure manuals are in place and check the
authorization levels.
 Check the general office sitting arrangements, filling systems and the general office
compound appearance.
Observations:
Recommendations:
Comments:
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4. SALARIES
The objective of the above is to ascertain whether or not the salary system is operating effectively. It is
also meant to ensure that payroll disbursements are made only upon proper authorization to bonafide
employees, that payroll disbursement are properly recorded and the related legal requirements that
include taxes, social security etc. are met.
Ensure that each employee has a personnel file, containing updated salary, employment status,
ID, pictures, evaluations.
Ensure that staff manual - (policies & procedures) exist at the national head office and all the
provincial branches and that all rules and regulations are adhered to.
Ensure that there is a clear job description for all employees.
Ensure that each employee has a genuine and authentic contract
Ensure that payroll related taxes, Pay As You Earn (PAYE), social security, employer and
employee share of the social security and others withheld and paid to the government agencies
on a timely basis.
Ensure that a separate payroll bank account is maintained, if this is possible.
Ensure that the all field offices have a payroll and salary slips and that they are filed properly.
Ensure that amounts paid correspond with contract amount.
Ensure employees are issued salary slips on a monthly basis.
Observations:
Recommendations:
Comments:
5. BANK AND CASH
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The main objective is to establish whether or not bank accounts are reconciled on a monthly basis and
those reconciliations are reviewed by an independent person and to determine whether cash receipts
are recorded timeously and intact.
Number of bank accounts
Balances at the end of the year/ during the time of finance team visit to field offices.
Ensure that bank reconciliation's are done and reviewed by the appropriate person.
Ensure that there is a register to keep track of cheques, requisitions and cash receipts
Check of dormant accounts, if any, advice for the closure
Verification of where cheques and cash receipts are kept
General filing-Bank Reconciliation statement and Bank statements
General filing-Invoices, vouchers and proper justification of expenditures. Be mindful of photo
copies of documents, authenticity of supporting documents, check numeral accuracy both
vertical and horizontal
Check of any inter-programme transfers, it there are any, verify why this was done and check on
the one who approved such inter-programme transfer.
6. PETTY CASH
The objective is to establish whether or not cash accounts are reconciled on a monthly basis and those
reconciliations are reviewed by an independent person and to determine whether cash receipts are
recorded timeously and intact. These are mainly for small purchases or reimbursements in cash. In
short, they are for payments of small and incidental expenses.
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Ensure that a maximum expenditure which can be paid with petty cash is in line with the
organizational policy.
Does the delegation maintain/own a SAFE? Is the SAFE kept in a locked box?
Ensure that the access to the petty cash is limited to one person who is the fund custodian.
Ensure that petty cash disbursements have supporting documentations.
Ensure that Petty cash vouchers filled out with supporting documentations, name of person being
re-imbursed and proper authorization.
Check if Petty cash are reconciled and reviewed by the PS on a weekly basis.
Check on who approves Petty cash and how it is operated (Imprest system).
Observations:
Recommendations:
Comments:
7. FIXED ASSETS
The objective is to ensure capital items are properly authorized & recorded. Procedures exist for
acquisition of fixed assets & controls exist to safeguard fixed assets.
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 List of Fixed assets
Check if the delegation has fixed assets register and if they are updated on regular basis.
Check the tagging of fixed assets
Ensure that each vehicle has a logbook & make certain that they are filled in on daily basis
Check if they have Vehicle service & maintenance book
Check if they have copies of Vehicle and other fixed assets insurance
Observation :
Recommandations:
Comments:
8. DISBURSEMENTS:
The objective is to enhance the checks and balances in financial management systems.
To ensure that cheques are properly authorized. That there is adequate segregation of duties in the
accounts department and that there is proper control over issued and cancelled cheques.
Areas to be strengthen:
Ensure that all disbursements, except those from petty cash are made by pre-numbered cheques.
Ensure that requests for re-imbursement and other invoices are checked for mathematical
accuracy and reasonableness before approval.
Are unpaid invoices maintained in an unpaid invoice files.
Ensure that expenses/expenditures approved in advance by authorized person.
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Ensure that cheque vouchers are attached to payment receipts after payments have been made.
Necessary Checks
Check signatures and make sure that they are employees of the field offices and have the
authority to sign cheques.
Check and make sure that all payments are supported by appropriate documentations'
Check and make certain that invoices PAID, are stamped PAID to prevent duplication of
payments
Check and be on guard against photo copied-invoices, vouchers etc. and make a material test for
numerical accuracy.
Check cheque vouchers to ascertain whether they are adequately referred to cheques.
Check when purchase orders are used, that all purchase transactions are used with pre-
numbered purchased orders.
Observations:
Recommandations:
Comments
9. PROCUREMENT
The essence of a good procurement system is to facilitate the purchase of goods and services on a
timely and cost effective basis and ensure that value for money is obtained on all purchases. It may be
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the view of many businesses including national societies that value for money must by necessity cover
the three E’s: Efficiency, Effectiveness and Economy.
Efficiency: Ensure that the maximum useful output is gained from the resources devoted to each
activity, or, alternatively, that only the minimum level of energy and work necessary is
used for a given level of output
Effectiveness: Making sure that funds have been applied for the correct activity and the desired results
are achieved. There is no benefit in doing the wrong things well.
Economy: The practice by management of the virtues of thrift and good housekeeping. An
economical operation acquires resources in appropriate quality and quantity at the
lowest cost.
For each of the above to be possible, procurement should, to the maximum extent possible, be made on
a practical, open and freely competitive basis. This dictates that invitations to supply should be solicited
from all qualified and available suppliers. From these, a supplier should be selected based on both
qualitative and quantitative factors such as price, speed of delivery, reputation and previous
performance.
The objective is, therefore, to ensure that all purchases are properly authorized and are within
budgetary limits and that there is adequate separation of duties in the purchasing functions. To ensure
that a procurement policy exists and it is strictly followed by all.
Areas to Strengthen:
Ensure that requisition for purchases are authorized and properly coded
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Ensure that there is a responsible person who reviews procedures for budget availability, coding
and numerical accuracy.
Ensure that there are no accumulated unpaid bills/invoices for the end of the year
Ensure that there is segregation of duties:
Purchasing
Receipts of sale and services
Voucher approvals
Observations:
Recommandations:
Comments:
10. PER DIEM/TRAVEL
The objective is to make sure that all travel and per diem are properly authorized and are within
budgetary limits
Check if the delegation has a copy of the Per Diem policy which should include when and how
they are disbursed.
Check per diem policy compliance.
Check if each employee of the delegation has a copy of the per diem rate from the national head
office.
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Check if Programme officers attached budgets and list of participants for a training workshop and
that the list was signed for by participants as acknowledgement of receipts.
Distribution of incentives to Volunteers and beneficiaries-Ensure that the list of items distributed
and cash received by the beneficiaries are duly signed for as acknowledgement of receipts of
such items or cash.
Observations:
Recommandations:
Comments:
11. COMPUTERS
The objective is to ensure that control exist to prevent unauthorized access to the computers and make
sure that files are backed up.
Check on number of computers and software.
Check if employees have access to the computers
Check if all staff are competent enough to use computers
Check conditions and maintenance of computers
Check those who have access to e-mails
Check and make sure that backups are done on regular basis.
Observations:
Recommendations:
Comments:
12. INCOME GENERATION (SUSTAINABILITY)
12.1 SUSTAINABILITY STRATEGIES
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National Red Cross Societies exist due to grants and donations received from their partners. Unlike
firms and government organizations, they are sustained by voluntary contributions. Although the
national societies may receive important income from revenue-generating programmes, it is
fundamentally supported by those from whom it seeks contributions and grants, that is, by fundraising.
Sustainability, which simply means financial continuity and security, is a key concern to most of the
national societies in the southern African region. This section briefly outlines what the national societies
can focus on to reduce uncertainty over its future sustainability.
This section does not seek to provide ways by which the national societies can become independent of
partners, rather, it seeks to provide recommendations on how national societies in Southern Africa and
beyond can become less donor dependent and secondly, less susceptible to fluctuations in funding.
The recommendations given below are only in outline as detailed review was not conducted.
12.1.1 Governance
The national societies’ sustainability should be made an explicit responsibility of one organ in the
governance structure. In a narrower sense, responsibility for fundraising and related sustainability
activities should be assigned to a specific body within the societies.
When considering individuals for inclusion in the body charged with responsibility for sustainability
issues, the societies should recognize that specific skills, personal attributes and significant time
commitments are required. Among the skills and attributes are the ability to mobilize funding for a cause
(of course with support from the technical team) and diplomacy. Professional stature, social standing
and international reputation and pre-eminence in the relevant field are some of the other obvious ones.
12.1.2 Include an overhead recovery element in all project proposals
Money raised in this way should be the primary source of funding for recurrent “indirect” expenditure i.e.
that element of expenditure which, although not attributable to one specific programme, does in fact
vary with the level of activity. In addition, using this strategy will encourage the national societies to
maximize the variable (project-activity-related) element of its “overheads”. When projects come to an
end, relevant “variable” cost (staff cost, communication etc) should also cease.
12.1.3 Examine cost structure and make sure that it does not drain the national societies'
resources when donor support funding is not forthcoming
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 The cost structure should have a direct relationship to the income structure
 Consider linking contracts of key programme staff to the duration of known grants
 Evaluate the mix of consultants to employees
 Compare the national societies overhead rate to those of other sister national societies outside the
Southern African region.
 Consider preparing overhead budgets outside the programmes and draw up a funding plan.
 Ensure that there is a proper control and monitoring over overhead cost.
12.1.4 Engage in Income Generation Activities (IGA)
Encourage departments to come up with ideas for IGA’s. One way of encouraging this is by setting up
an innovation award for departments coming up with good IGA’s.
12.1.5 Build on an impeccable track record of achievement (programme realization) and

integrity
The national societies must strive hard to remain attractive to donors. This way, sustainability will be
more assured.
The national societies should remain attractive to donors and other stakeholders as long as it is effective
in pursuing its programme objectives and does so economically. In addition, the objective should, of
course, be focused to avoid spreading resources too thin.
12.1.6 Length and breadth of donations
The national societies should seek to expand its donor base (“don’t have all your eggs in one basket”).
Additionally, it should seek to enter into multi-year contracts rather than one-year agreements with its
partners.
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12.1.7 Objective
The objective of the income generation is to ensure that self sustainability issues are addressed and
there is an adequate strategy for self sustainability.
Listing of assets for income generation-including contracts e.g. leasing contracts which indicate
duration and amount to be gained by the organization.
Amount of income generated by the assets on monthly basis
Segregation of Income Generation Funds from Programme funds/separate bank accounts.
Utilization of Income generation funds and check if there are any inter-provincial transfers.
Ensure that there is an Annual budget for Income Generation activities and that they are updated
on monthly basis.
Ensure that district levels report income generation activities/financial report to the branch on
monthly basis.
Ensure that provincial branches report income generation activities/financial report to the national
head office on monthly basis.
Ensure maintenance of Income Generation assets- check if they are done on regular basis and
physical check assets.
Percentage (%) of core cost budget covered by the field and national head office incomes
generated from their income generation activities.
Observations:
Recommendations:
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Comments:
13. FINANCIAL PROJECTIONS, FORWARD PLANNING AND FINANCIAL TARGETING
Financial projections, forward planning and financial targeting refers to continuous process of analyzing,
classifying, recording and summarizing costs within the discipline and controls of the formal accounting
system and reporting them to users on a regular basis.
Financial projections
The national societies should prepare a cash flow analysis on a monthly basis. It is imperative that such
projections be consolidated into short, medium and long-term budgets for each cost centre. At the end
of each quarter and at the end of each year, actual performance should be compared to the projections
(budgets) and explanations for variances provided.
Forward planning
The finance heads or directors should request all divisional or regional heads to prepare
forward/strategic plans for their divisions, regions or provincial branches.
Capacity to attract and retain staff
The capacity to attract and retain staff may vary from one national society to the other. In some national
societies, there are small pool of expertise available whilst others may have the availability of expertise,
however, their remuneration packages may compare unfavourably against the market. This scenario
results in high staff turnover amongst experienced staff and the consequence of which the national
societies may be unable to attract competent staff in the long term and be able to run and sustain their
financial management systems. With the former, it might be largely due to lack of competitiveness in the
labour market and the opportunities for promotion, tenure and access to accredited training are
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inadequate. As mentioned earlier, consistent high staff turnover has a direct link with salaried staff and
their quality.
The circumstances under the latter might be questionable whether the national societies can possibly
hope to attract and retain all the human resources they need to develop as it is, and to the satisfaction
of all stakeholders. This constraint may pose a serious obstacle to building capacity and to long-term
organizational sustainability.
Fowler (2000) warned that organizational sustainability is more than just a question of dollars and cents.
He noted that sustainability revolves around the relationship between “resources, impact and
organizational regeneration”. In other words, it is not enough to have resource availability. National
societies must also make an impact on its environment and be willing and able to adapt and learn from
its environment.
14. CONCLUSION:
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15. ATTACHMENTS
15.1 AREA OF PARTICULAR RISK
The internal control over accounting systems helps to keep accurate track of the organizational
activities. As the accounting system produces the reports that are the eye and ears of management, it
is appropriate that they are protected and supervised.
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The following represent areas of high risk and are particularly important to ensure that adequate control
procedures are put in place to protect the organisation from waste and theft. Below are examples of risk
areas:
THE BANK ACCOUNTS
Reduce cash on hand and use cheques where possible

Separate bank accounts for restricted and general funds
Keep the cheque book locked away
Blank signed cheques should never be used/blank cheques should never be signed.
Perform monthly bank reconciliation
THE PURCHASING FUNCTIONS
Segregation of duties between the person ordering goods, receiving goods and making the
payments
Keep good suppliers file
Obtain minimum of three (3) quotations
Prepare a CBA for approval by a senior executive
Use purchase orders, preferably pre-numbered
Use good received notes for receipts of goods
Present suppliers invoice, purchase order and good received note together for payments
CASH RECEIPTS
Segregation of duties between the person receiving cash and the bookkeeper
A cash receipt should be prepared
Enter all cash receipts into a cash receipt summary
Deposit all receipts at the bank}
CASH PAYMENTS
Use payment vouchers for all payments

All payments to be correctly authorized
Supporting documents to be stamped upon payment
Payments to be recorded in a payment journal
PAYROLL
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Keep good personnel records

Payment calculation to be submitted for appropriate authorization
Staff to receive a salary slip
FIXED ASSETS
Ensure proper purchasing procedures are followed (see 2 above)

Allocate a reference number for the assets and fix a permanent tag to the items
Maintain a fixed asset register
Perform regular counts and checks on fixed assets
STOCK
Ensure proper purchasing procedures are followed (see 2 above)

Check goods received on arrival, both quality and quantity
Complete goods received note for each delivery
Perform a periodic physical stock counts.
15.2 INTERNAL FINANCIAL CONTROL CHECKLIST
A. Organisation structure
Internal Control Guidelines Y N
1. Is there a plan showing the organization’s structure?
2. Are lines of authority and responsibility laid down in writing and communicated to all?
3. Do job descriptions exist for all staff and do these include details of delegated tasks and limitations
of delegated authority?
4. Is there adequate segregation of key tasks to provide automatic ‘double check’?
5. Are all staff and volunteers competent, properly trained and qualified for the tasks they have to
perform?
6. Is there an internal inbuilt control structure?
B. Budgets
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7. . Does the budgeting process involve the identification and approval of short, medium
and long-term objectives and the resources required to meet those objectives?
8. Is there a formalized budgeting timetable?
9. Is performance measured against approved budgets at regular intervals and corrective action taken,
if appropriate?
C. Controls over Income
Postal receipts
10. Is incoming post opened in the presence of two responsible people?
11. Are all cheques and cash received in the post date stamped and recorded immediately on opening?
12. Are entries made checked by someone higher than the person making the entry?
13. Are staffs responsible for opening the post rotated on a regular basis?
14. Is unopened post kept secure?
Collection boxes
15. Are legal requirements for public collections complied with?
16. Are collection boxes numbered and a record kept of their allocation and return?
17. Are collection boxes sealed?
18. Is there a dual control in place over the counting, recording and accounting for collections received?
Internal Control Guidelines
19. Is money collected paid directly into the bank account?
Fund-raising events or campaigns

20. Are fund-raising events costed before implementation?
21. Are records kept for each fund-raising event?
For ticket events

22. 22.1 Are all tickets pre-numbered?
22.2 Are records kept of all people issued with tickets to sell and which numbers they have
been allocated?
22.3 Are records kept of which tickets are sold?
22.4 Is there a reconciliation of the money received against tickets sold?
22.5 Are all unused tickets recorded and kept in a secure place?
Banking & custody procedures

23. Are cash/cheques received by post/hand banked promptly?
24. Are all funds held securely until banked?
25. Are keys of the safe or cash box signed for when used?
26. Are the contents of the safe or cash box insured?
27. Are the organization’s funds always kept separate from staff/personal funds?
28. Is the petty cash reconciled and signed for at the end of every month by the Head of Finance
Department?
Cheques
29. Are records of cash and cheques received agreed with bank paying-in slips?
30. Are paying-in slips agreed with bank statements, both in amount and date?
31. Are all other direct payments into the bank checked to ensure they can be identified and verified
against proper documents?
32. Are all the above checks performed by someone independent of the recording of income
transactions?
D. Controls over Expenditure

33. Is all expenditure properly authorized?
34. Is supporting documentation held for all expenditure e.g. invoices?
35. Are all instruments of payment (e.g. cash, cheque books, bank transfer forms etc) properly
safeguarded with access limited to nominated persons?
36. Is the preparation of the documentation for payment authorization done by someone other than the
person authorizing the payment?
37. Is the delegation of authority and applicable limits for payments, placing orders, entering into
contracts or incurring any other liability on behalf of the organization documented and available to
all?
E. Controls over Purchases

38. Are invoices checked against orders made?
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39. Are records kept of orders placed but not yet carried out?
40. Is the quality and quantity of goods supplied checked against orders made?
41. Is regular stocktaking undertaken?
42. Are payments only made against original invoices?
43. Is Comparative Bid Analysis prepared in line with set purchase limits?
F. Payments
Payments by cheques
44. Are there at least two signatories for cheques?
45. Are blank cheques ever signed?
46. Are all payments clearly recorded including payee, date, amount and nature of payment?
47. Are cash payments minimized as much as possible?
48. Are there spot checks of expenditure against supporting documentation?
Payments by cash
49. Are all cash payments made from a fixed amount of cash available i.e. not directly from cash
received
50. Is the cash available amount replenished from the bank and not from incoming money?
51. Do all payments have supporting documentation?
52. Is supporting documentation authorized by someone other than the cashier or the claimant?
53. Are all payments made recorded?
54. Are regular checks of the cash made by someone independent of the cashier? Are the results of
these checks documented?
G. Wages and Salaries

55. Are personnel records kept for each employee separately from the wages records?
56. Are checks made to verify the existence of employees being paid?
57. Is the appointment of staff and salary levels properly authorized?
58. If cash payments are made are these paid by someone other than the person preparing the payroll
and are signed for?
59. Are social charges deducted and paid in accordance with local legislation?
H. Controls over fixed assets
60. Is a list of fixed assets held and updated regularly? Is this list reconciled to the accounting records
on a regular basis?
61. Are fixed assets checked regularly to ensure they remain in good condition and are of use to the
organization?
62. Has insurance cover been considered?
63. Are improvements on fixed assets decided upon and authorized by a set committee?
64. Is there a building and equipment maintenance policy?
65. Is there a transport management policy?
66. Are there title deeds or lease agreements for clear ownership of assets?
I. Investments
67. Are full records kept of all investments held and records including investment certificates kept in a
secure place?
68. Has an investment policy been formulated?
69. Is performance regularly reviewed?
70. Are there controls in place to ensure all dividends and interest due are promptly received?
71. Are all purchases and sales of investments properly authorized and accounted for?
72. Are investments embarked on in line with the Red Cross Principles?
73. Are investments diversified to minimize the impact of one potential failure?
J. Bank accounts and Deposits

74. Are secure records held of all accounts?
75. Are bank reconciliations performed on a regular basis by people independent of recording cash
transactions?
76. Are all discrepancies on the bank reconciliations fully explored and resolved?
77. Are instructions to open or close accounts properly authorized?
78. Are checks made to ensure there are no dormant accounts?
K. Accounting
79. Are proper and up to date records kept of all transactions?
80. Is the accounting system computerized?
26
81. Is project accounting integrated with the general accounting system?
82. Are all major balance sheet accounts (e.g. debtors, creditors, inventories) reconciled on a regular
basis and is the reconciliation independently reviewed?
L. Reporting
83. Are regular and reliable reports produced summarizing the organization’s operations?
84. Are reports sent to donors in accordance with their requirements, accurate and sent on time?
85. Are reports sent validated prior to distribution and is all underlying documentation held?
86. Are annual financial statements subjected to an external audit and are the financial statements
together with the external auditors’ report published?
87. Are monthly management reports prepared indicating actual performance against key performance
objectives? Are variances analysed?
M. IT Security
88. Is access to the organization’s IT systems properly safeguarded e.g. use of passwords etc?
89. Is data backed up on a regular basis?
90. Are backups properly safeguarded?
91. Do you hold valid licenses for the software being used?
92. Are serial numbers of all IT equipment recorded?
N. Legal status agreements

93. Has the legal status of the NS been ratified by the relevant government?
94. Does the organization have documented procedures covering the areas of budgeting, information
gathering, accounting, reporting etc?
95. Are the procedures reviewed and updated on a regular basis?
Source: Federation Secretariat Risk & Audit Management Dept.
27
15.3 EVALUATION-ACCOUNTING SYSTEM
EVALUATION OF THE SYSTEM-WIDE REQUIREMENT OF NATIONAL SOCIETIES AUTOMATED ACCOUNTING SYSTEM

YES NO REMARKS
1. BASIC LEDGER
1.1 Is the accounting system catered for general ledger; Account receivable, Account
payable, inventories etc?
1.2 Are these modules integrated?
2. MULTI-CURRENCY
2.1 Can the system record transactions in various currency and the base currency of
home currency (for stat. Reasons)
3. TRANSATION ANALYSIS
3.1 Can the system analyze the various codes and identify the source of funds
programmes, department, regions, and expenses type?
4. AMOUNT DIGITS
4.1 What is the minimum digit and decimals for the transactions?
5. TRANSATION TEMPLATES
5.1 Templates are preset of transaction lines with known account codes transaction codes State the decimals and
any calculations (i.e VAT). This minimises data entry, errors and duplications. Does the digits
system define templates transactions?
6. CHART OF ACCOUNTS DEFINITIONS

6.1 Can the system accomodate a Chart of Account based on the National Societies
needs?
6.2 If yes, what are the definitions?
7. REPORTING
7.1 Can the system provide standard reports such as Trial Balance, income and
expenditure Accounts, Cash flow statement and Balance sheet?
8. AUDIT TRAIL
8.1 Can the system provide comprehensive audit trails on all activities?
9. ACCOUNTING PERIOD
9.1 Can the system maintain ledgers by 12 periods per annum?
EVALUATION OF THE SYSTEM-WIDE REQUIREMENT OF NATIONAL SOCIETIES COMPUTERISED ACCOUNTING SYSTEM

YES NO REMARKS
11. SYSTEM SECURITY
11.1 Does the system have comprehensive features such as User log-on ID and
password, system function access control and report access controls?
12. SYSTEM FIT

12.1 Can the system meet the key requirement of the national society? (one time
procurement)
13. COST Indicate the cost

Indicate aapproximate
cost
28
13.1 Is the system expensive?

13.2 Is the ongoing cost of the system (maintenance support etc) expensive?
14. LOCAL SUPPORT

14.2 Is local support to the national society available whenever needed?
14.3 If yes, how do you rate the reliability and accessibility of the system local support?
(ratings 1-10 and one (1) being the best).
14.4 If no, does the system have any regional support offered by the system local vendor?
OTHER MAJOR COMMENTS

Prepared by: Samuel Asamoah, IFRC Regional Finance Development delegate, Harare.
15.4 SUMMARY OF THE OVERALL ASSESSMENT OF THE PROVINCIAL BRANCHES/DIVISIONS/REGIONS
Branches/Di 1 2 3 4 5 6 7 8 9 10 Overall
visions/regi rating
ons
A
B
C
D
E
F
G
H
F
I
Key of internal control areas

1. Overview of the project office
2. Procurement procedures
3. Salaries
4. Cash & bank balances
5. Disbursements
6. Fixed assets
7. Travel and per diem
8. Computer information system
9 Assets verification of project office
10. Income Generation
Key
S. Strong
A. Acceptable
N/I Needs improvement
W Weak
N/A. Not tested/not applicable

Finance Management Internal Control Assessment Supervision Guideline

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THE RED CROSS AND RED CRESCENT

Internal Financial Control Supervision Guide

Norwegian Red Cross

Table of Contents Pages

3. Overview of the office 8

5. Bank and Cash 10

10. Per diem/Travel 15

12. Income Generation(Sustainability ) 17

12.1 Sustainability strategies 17

13. Financial projects, forward planning and financial targeting 20

ASSESSMENT OF THE ADEQUACY AND EFFECTIVENESS OF INTERNAL CONTROLS

procedures established by an organization to provide reasonable assurance that the organization’s

objectives are achieved.

SCOPE OF OUR REVIEW

considered significant control areas:

should specifically focus on:

• Financial management capacities

• Management viewpoint and operational style

• Methods of assigning authority and responsibility

• Management control methods

• Personnel policies and practices

and records that will:

i. Identify and record all valid transactions;

transactions for financial reporting;

value in the financial statements; and

Under this section it is imperative to review the following areas:

• Budgeting and funds management

• General record keeping

• Proper authorization of transactions and activities

transactions, and maintaining custody of assets

and authorization for access to computer programmes and files.

reconciliations, comparison of assets with records, computer-programmed controls,

of computer generated reports

• Authorisation of transactions and activities

• Asset management controls

• Electronic data processing controls

• Written policies and procedures

• Use of pre-numbered documents

SOME KEY TIPS TO THE APPROACH

The approach may comprise the following key steps

i. Ascertain policies and procedures in place and recorded these in outlines;

national societies’ environment and circumstances prevailing at the national societies.

3. OVERVIEW OF THE ORGANISATIONAL’S OPERATIONAL OFFICES

and that there is separation of duties among staff.

 Check if the delegation has organisation chart

include taxes, social security etc. are met.

ID, pictures, evaluations.

Ensure that there is a clear job description for all employees.

Ensure that each employee has a genuine and authentic contract

Ensure that a separate payroll bank account is maintained, if this is possible.

Ensure that amounts paid correspond with contract amount.

Ensure employees are issued salary slips on a monthly basis.

5. BANK AND CASH

are recorded timeously and intact.

Number of bank accounts

Check of dormant accounts, if any, advice for the closure

Verification of where cheques and cash receipts are kept

General filing-Bank Reconciliation statement and Bank statements

General filing-Invoices, vouchers and proper justification of expenditures. Be mindful of photo

copies of documents, authenticity of supporting documents, check numeral accuracy both

vertical and horizontal

the one who approved such inter-programme transfer.

short, they are for payments of small and incidental expenses.