financial framework - sightsavers · the strategic framework breaks down the strategy into key...

1 Financial Framework 2013-2017

Financial Framework 2013-2017


Contents 1. Introduction ............................................................................................................ 4 2. Governance ............................................................................................................ 9 3. Financial planning, reporting and fund management............................................ 15 4. Income processing ............................................................................................... 29 5. Cash and bank account management .................................................................. 37 8. Procurement and assets ...................................................................................... 72 9. Internal and external audit .................................................................................... 77 10. Financial records and accounting procedures .................................................... 88 11. Appendices ........................................................................................................ 98

The coverage period for this Financial Framework has been extended to 2017, to allow the completion of an upgrade to our chart of accounts structure within our SUN financial system. An update to the framework is scheduled for 2018, to reflect that upgrade and other general changes to and developments in our financial management practices.

Front cover: A young girl poses for a photo with her mother in Govindapur, Satkhira in Khulna division, Bangladesh. © Sightsavers/Allison Joyce


Glossary The following acronyms and abbreviations are used throughout this Financial Framework.

AD Area Director

AO Area Office

CD Country Director

CMP Commitments Management Process

CO Country Office

DFP Director Finance and Performance

FA Finance Assistant

FC Financial Controller

FMF Financial Management Framework

FO Finance Officer

FSSM Finance and Support Services Manager (all references to FSSM refer to FO if there is no FSSM for the office)

GAS Global Accounting System

GAM Group Accounting Manager

HH Haywards Heath (Sightsavers’ head office)

HIAC Head of Internal Audit and Control

PM Programme Manager

PO Project Officer

PPR Planning, Performance and Reporting Team

RD Regional Director

RFSSM Regional Finance and Support Services Manager

RO Regional Office

SMT Strategic Management Team

TM Treasury Manager


1. Introduction Why do we need a Financial Framework?

Our vision and mission Sightsavers’ vision is of a world where no one is blind from avoidable causes and where visually impaired people participate equally in society.

Mission: Sightsavers is an international organisation working with partners in developing countries to eliminate avoidable blindness and promote equality of opportunity for disabled people.

The strategic framework breaks down the strategy into key objectives to focus on.


Financial Framework

“Use resources strategically and effectively” is one of the key objectives in the strategic framework. To fulfil this objective, there needs to be a proper and effective financial management and control framework that is integral to the day-to-day activities of the organisation.

Sightsavers is registered as a UK Charity and as such both the charity and all its subsidiary organisations are regulated by the UK Charity Commission. The charity owes a statutory duty of care to its donors to ensure that funding received is spent as intended and in accordance with the objectives, as set out in Sightsavers’ governing document. A proper and effective system of financial management and control is an essential part of fulfilling this statutory duty. It is also the hallmark of any efficient organisation.

Sightsavers financial management and control framework is multifaceted incorporating; governance; organisational structure; appropriately skilled, qualified, accountable and supervised managers and staff; documented corporate policies, established internal procedures and processes and external monitoring including audit. This Financial Framework document pulls together key information on the main areas of financial management and control within Sightsavers.

The main objectives of the Financial Framework document are:

• To outline the globally applicable financial policies and procedures. • To incorporate supplementary local processes applicable in the context of each

office. • To be a central reference point for all Sightsavers staff. • To convey an important message to our external stakeholders that Sightsavers

has sound financial controls and accountability as part of our day-to-day activities as an organisation.

The document is a “framework” and is not designed to provide a position on every possible circumstance, so guidance from the CO, RO and HH finance managers and directors should be sought where there are matters of uncertainty.

Who should use the Financial Framework?

The Financial Framework is not only relevant to our finance staff, it is a tool for everyone in Sightsavers to use and be familiar with, for example:

Do you manage an office or team at Sightsavers?

Do you work directly with Sightsavers’ partners?

Do you travel on behalf of Sightsavers?


Do you authorise payments?

Do you handle cash in your role?

Do you incur expenditure chargeable to Sightsavers?

Do you get involved with forecasting and funding plans?

Do you purchase equipment for partners and projects?

Do you have involvement with auditors?

If so then you will need to use, understand and make reference to the Financial Framework document.

How to use the Financial Framework?

The Financial Framework has been structured according to the main financial activities carried out within Sightsavers. Most chapters also show roles and responsibilities, and some useful dos and don’ts. The Framework chapters follow a logical order but are self contained. To navigate to a particular section form the contents page, place the mouse cursor over the chapter heading, hold down the Ctrl key and left click the mouse.

It is intended that the Framework will not duplicate policies and procedures documented in other established Sightsavers manuals, but will reference these documents where applicable. In most instances, this reference will be accompanied by a link to the location of the document on Iris. The final pages of this Framework contain a list of the most relevant policies and procedures along with a description and a link to their location.

Local procedures sections

It is not possible to cover all aspects of local financial management in the global document as there are different laws, regulations and processes according to the local setup in each country. For this reason, there are additional sub sections for local procedures, which country, area and regional offices will complete to supplement the main framework. Where a particular process is documented in another document such as a staff handbook then reference to the document and page number should be made in these local procedure sections. It is the joint responsibility of the AD/CD/RD and FSSM to ensure these local sections are up to date and distributed among all staff in the office. Some sections do not contain local procedures sections as they refer to global processes.


Mechanisms for updating the Framework

A formal review and update process will be carried out every two years and this will be the responsibility of the HIAC with support from the Global Finance Team. If any member of staff identifies that an interim update of any section is required, they should advise the HIAC.

An up to date version of the manual will be stored on Iris. An email will be sent to the Global Finance Team to advise when an update to the Framework has been posted. It is the responsibility of each member of finance staff to ensure that the staff in their office have been informed and inducted on each new version released.


2. Governance This chapter explains Sightsavers’ responsibilities, in particular around risk management and legal and regulatory compliance.

2.1 Summary of roles and responsibilities

Roles Responsibilities

Council of Trustees • Ensure the organisation complies with all relevant laws and regulations and its own governing document (the Royal Charter).

• Review and approve Sightsavers’ audited accounts. • Review Sightsavers’ risk log. • Approve and oversee the implementation of

Sightsavers’ policies. • Review and approve request for registering a new

office.

Audit Committee • Review management’s and the HIAC’s report on the effectiveness of systems for internal control, financial reporting and risk management.

• To review the risk management strategy twice a year and make recommendations to Council.

• Review the legal issues register.

Strategic Management Team

• Update Sightsavers’ risk log. • Comply with and implement Sightsavers’ policies. • Monitor the implementation of Sightsavers’ policies. • Oversee the process of registering a new office.

Director of Finance and Performance

• Oversee the global audit process.

Country/Area/Regional Directors and Cost Centre Managers

• Ensure that they and their teams comply with and implement Sightsavers’ policies.

• Monitor the implementation of Sightsavers’ policies within their team/office.

• Oversee the legal compliance of their cost centre and the cost centres that report to them.

• Notify the DFPO and Governance Manager of any legal issues with a material risk of financial loss, giving rise to a risk of reputational damage and/or requiring the appointment of local legal counsel.

• Ensure statutory financial reporting and audit is conducted on a timely and accurate basis.



Regional Finance Managers, Country/Area Finance Officer/Manager

Financial Controller

• Ensure that all tax and other statutory deductions are properly calculated and paid within the statutory deadline.

• Ensure that financial reporting complies with any financial reporting regulations.

All • Keep up to date with relevant policies and processes and apply these at all times.

2.2 Sightsavers’ responsibilities

• Sightsavers owes a statutory duty of care to its donors to ensure that funding received is spent as intended and in accordance with its objectives.

• Sightsavers must ensure compliance with all relevant laws in the countries in which it operates.

• Sightsavers must ensure that charitable funds and assets are used reasonably and unused funds must be kept safely and appropriately.

• Sightsavers must keep financial records up-to-date and accurate.

The governance set up adopted by Sightsavers to meet these responsibilities is outlined in the Overview of Sightsavers Governance, which is available on Iris - https://iris.sightsavers.org/Docs/An Overview of Sightsavers' Governance.doc.

2.3 Sightsavers’ financial risks and how they are managed

The management of risks is a requirement of UK charity accounting standards and in particularly the 2005 Charities Statement of Recommended Practice (SORP). Sightsavers’ risk management framework consists of a risk log which is regularly updated by the SMT and reviewed by Audit Committee and Council. The log lists the key risks, including financial risks, which could prevent Sightsavers achieving its objectives and also sets out the key risk management strategy to address each risk. The most up-to-date risk log can be found on Iris.

In addition to the organisational risk register, Country Office management teams are required to undertake a risk assessment, including identifying mitigation strategies, as part of their Country Strategy Plans. SMT review country office risks to assess whether any common issues emerge that require central intervention or guidance.


2.4 Legislation

It is Sightsavers’ policy that the organisation complies with the laws for each of the countries in which it works. This includes compliance with taxation provisions, registration requirements, employment law, social security and pension acts and other relevant laws.

The AD/CD/RD has responsibilities to ensure that Sightsavers is complying with the law in that country. Matters relating to registration should always be copied to the DFP, Head of Governance and Legal and RD.

Other Sightsavers global experts should have input as necessary when there are queries relating to compliance with law (for example, if it appears that a local law is contradictory to a Sightsavers established policy). In certain cases, it will prove necessary to take professional legal advice. The Head of Governance and Legal maintains a list of legal issues that is reviewed by Audit Committee. AD/CD/RDs should ensure that he is informed of any legal issues with a material risk of financial loss (>£5,000), giving rise to a risk of reputational damage and/or requiring the appointment of local legal counsel.

A legal guidance questionnaire is included in Chapter 11 of this Framework as a resource for AD/CD/RDs to help them identify the various areas where legal compliance may be an issue.

2.4.1 Registration requirements Matters relating to setting up and registering an office for fundraising purposes will primarily be the responsibility of the DFP in collaboration with the Director of Global Fundraising and the Head of Governance and Legal. The process for registering a new programme office is summarised in the box below:

Programme office registration process

• Council approval to work in the country must be obtained before registration.

• RD, in consultation with DFP then leads registration process.

• Registration must be complete before commencing work.

• Local specialist legal advice should be sought.

• Clarify documentation requirements with the responsible government official.

• Ascertain in-country fundraising regulations and do not commence fundraising unless registration permits.

• Original registration documents must be securely stored at the CO.

• Copies must be provided to Head of Governance and Legal and DFP.

• Where a country office is established, FSSM must ensure Sightsavers is registered with the local tax authorities.


2.4.2 Taxation It is Sightsavers’ policy to comply with the local tax requirements of each country. There are a number of taxes that can arise in the different countries in which Sightsavers works. The main areas are as follows: income tax and other payroll taxes, import duty, value added tax (or other sales tax) and withholding tax. Information on these main areas is contained within the relevant chapters.

Advice should be sought from HH Finance/HR and external auditors if there are any concerns over complying with local tax requirements. The CD must ensure that this happens as soon as the concern is raised to prevent the possibility of penalty payments.

2.4.3 Restricted funds Some supporters ask Sightsavers to spend their donations on specific activities or projects. These funds are known as restricted funds and Sightsavers has a legal requirement to ensure that the donation is spent as the donor requested. Restricted funds therefore have to be separately accounted for.

Sightsavers has established a Financial Management Framework (FMF) to ensure that restrictions are complied with, amongst other functions. The FMF is accessed via the internet at the following location https://fmf.sightsavers.org. Further details about fund management and restricted income can be found in section 3.5 of this framework.

2.4.4 Statutory financial reporting Sightsavers’ registration in the UK requires it to undertake an annual statutory audit covering its global group. The financial statements must comply with the charity Statement of Recommended Practice (SORP), to give a true and fair view and the auditors also have to confirm that they have been prepared in accordance with the Charities Act, Charities (Accounts and Reports) Regulations and the Royal Charter, which is the governing document. The audited accounts must be approved by the trustees at the Annual General Meeting which must be convened no more than 10 months after the year end of 31 December.

Some of Sightsavers other offices have local statutory reporting requirements and rules about the format of the accounts and submission dates. Other offices have to submit audited accounts (in a non-specified format) as part of the requirements of being a registered NGO. Country and Regional Management teams must ensure Sightsavers complies with all local statutory financial reporting and audit requirements. Internally, Sightsavers has a policy that all programme offices will have an external audit regardless of the local requirements. Further information on this is in chapter 9 of this framework.

https://fmf.sightsavers.org/


2.4.5 UK Bribery Act The UK Bribery Act became law on 1st July 2011. Under this Act, the existing offences for UK nationals and residents of giving or offering and receiving or agreeing to receive a bribe are retained. In addition, a new offence was introduced of bribing a foreign public official. The Act also introduced a new corporate offence of failing to prevent bribery. This means that Sightsavers could be prosecuted for failing to prevent bribery by an employee or other associated person if it does not have adequate procedures.

Sightsavers has a zero tolerance attitude to bribery and has well developed policies to counter it, including the procurement policy, travel policy and the sustainability policy. Sightsavers’ procedures also contribute to preventing bribery through the maintenance of good financial controls as outlined in this document.


2.5 Summary of dos and don’ts

Do

• Ensure the detail of any new office registration is discussed in advance with and the DFP and legal advice is sought – RD before commencement of the registration process.

• Ensure that all tax and other statutory deductions are correctly calculated and paid within the deadline – FSSM.

• Proactively read and comply with Sightsavers’ approved policies - all staff.

• Undertake appropriate risk assessment as part of Country Strategy Plans and for major projects and activities – AD/CD/RDs.

• Ensure local requirements around audit and statutory reporting are complied with.

Don’t

• Make facilitation payments or engage in any other form of bribery and corruption.

• Delay discussing and addressing any tax issues which may incur penalties and damage to reputation.

• Commence local fundraising without checking that your registration permits this.

• Wait until an incident happens to read the relevant policies.

• Worry if you do not fully understand a policy, ask your line manager to explain or refer to the policy owner.


3. Financial planning, reporting and fund management This chapter explains Sightsavers’ key planning processes and how these fit together in support of organisational strategic objectives.


Role Responsibilities

Planning, Performance and Reporting team

• Coordinate the organisational planning and forecasting process and provide a consolidated summary to SMT.

• Support all staff in planning, forecasting and fund management.

• Support the annual Strategic Alignment Process.

Country/Area/Regional Director/Heads of departments

• Annually update the country 3 year financial plans. • Regularly review the Financial Management

Framework (FMF). • Keep the unrestricted allocations and the forecast up

to date. • Review the organisational management accounts on

Iris and locally produced detailed management accounts on a monthly basis to identify and report any issues or concerns around actual income and expenditure reported.

Finance Officer/Manager

• Ensure all planning and forecasting schedules are complete, accurate and submitted as per timetable.

• Ensure the AD/CD/RD and the Programme Team are provided with monthly management accounts showing actual and forecast spend broken down into individual projects and management costs categories as well as the country funding position (income pipeline, secured to date, remaining gap etc.).

Programme Manager/Officer

• Ensure spending on a project is not expected to exceed the total of secured restricted and unrestricted allocation on a project.

• Ensure the spending is in line with the donor funding agreement and that expenditure incurred on restricted funded project is coded to donor fund codes in line with the Coding Guidelines.

• Ensure expenditure by project on local management accounts reconciles to partner reports and is



consistent with expectations from the forecasting process.

Fundraisers • Review the FMF regularly and support Country Teams to ensure it is up to date.

Investment Committee

• Review the investment strategy and policy to confirm that it remains appropriate.

• Oversee Sightsavers’ investment activities to confirm that they comply with the agreed policy.

3.2 Planning and performance process

The diagram on the next page depicts Sightsavers’ planning and performance process. The diagram depicts the key stages starting with Strategy as defined in Vision, Mission and Strategy Implementation and Monitoring (SIM) card which informs the setting of Resource Allocations and Targets for key measures. The outcome of this is the Long Term Country Strategy and Financial Plans (3-5 years) which in turn inform the short term Financial and Operational Planning including forecasting and fund management over the next 1-2 years. Monitoring of outputs and performance then feeds into onward action plans and where applicable reallocation of resources and the refining of the strategy.


Planning and performance process: Objective is to “join up” planning and performance activities into a coherent process for Sightsavers.


Every year, the PPR team issues a planning, forecasting and fund management process timeline, which establishes how the planning and performance process will be completed in that year. Each year this process follows the following steps:

• Fundraising strategy and detailed Income Planning, • Strategy gaps review through the Strategic Alignment Process (see below), • Calculation of cost envelopes based on available income • Support cost planning within available income envelope • Programme planning within available programme envelope and sign off

The illustrative planning timetable is shown in the diagram on the next page.


3.3 Resource allocation

Resource allocation is a key part of these central operational planning activities. The three key aspects of operational planning and resource allocation are discussed below. Each of these is managed through the FMF system.

Financial Plans

• Long term strategy plan defining what each team would like to achieve over the next three to five year period.

• These plans are approved by SMT. • Each plan contains a three to five year financial plan

which lays out proposed expenditure in order to implement the strategy.

• Each team has a financial plan figure for each year which is reviewed and updated each year.

Forecast

• Teams can only forecast to spend funds that have been made available to them for the year through the resource allocation process. This means that each team can only forecast to spend the total of their “unrestricted allocation”, earmarked funds and their “secured restricted funding” at any point in time.

• Management accounts will clearly show both the financial plan and the forecast for each team.

• Formal updates to the forecast are presented to SMT two to three times per year.

• Cost centre managers should update the forecast data on an on-going basis as the funding picture changes constantly.

Funding

• The FMF includes a “funding module” that is a database of all restricted funding proposals being managed by fundraising teams. This database is linked to the financial plans to identify restricted funding for each item of expenditure.

• The financial plan also includes a column for allocating unrestricted funds to expenditure, to provide a full picture of the funds available.

3.3.1 Strategic Alignment Process Each year, early in the planning process, the programme portfolio is reviewed to ensure it is adequate to deliver the longer term organisational strategy. This process is led by the Strategic Programme Development; Evidence & Research team (SPIDER) and each country portfolio is assessed for strategic fit going forward. The outcome of this process will inform more detailed programme portfolio planning as the SAP provides directions for project exits, redesigns or the need for new projects


to be designed in any given country. This later step will be based on available resources based on income.

3.3.2 Commitments Management Process Financial planning is also supported by an organisation wide Commitments Management Process (CMP). The purpose of the CMP is to critically assess new activities (programmatic, fundraising or other activities) that arise outside of the annual planning process. The CMP is designed to review their quality and ensure alignment with the strategic plan as well as proper SMT sign-off. More detail about the CMP is included in the organisational Commitments Management Process which is available on Iris.

3.4 Financial monitoring and reporting

Sightsavers has a framework of financial monitoring and reporting to keep track of progress and use of funds on an ongoing basis. The objective is for the timely preparation and publication of user-friendly accounts and other reports, since out of date or inaccurate information is unhelpful for decision making. The main reports and responsibility for completion are as follows:

3.4.1 Global management accounts Monthly global management accounts pack consist of a Statement of Financial Activities (SOFA), Balance Sheet, KPI schedule and supporting schedules, including commentary. While much of the information within the pack is at the organisational level, expenditure is analysed out by cost centre. The global management accounts are prepared by the PPR team from the Global Accounting System (GAS). The accounts are loaded onto Iris and provided to SMT in advance of each monthly SMT meeting.

Columns on the SOFA show actual spend against financial plan and forecast figures for each cost centre. As such it is imperative that AD/CD/RDs and other cost centre managers are reviewing the accounts on a monthly basis to ensure the numbers for their cost centre are accurate and understood, and to be able to provide explanations for any irregularities.

3.4.2 Local management accounts In addition to the global management accounts, each AO, CO and RO must be producing monthly local management accounts in a format which fits with the local requirements. At a minimum these local management accounts must track expenditure against forecast and financial plan at the project and management cost category level. The source information for the management accounts pack must be


GAS. These management accounts should be distributed and discussed with the AD/CD/RD and Programme staff.

The FSSM is responsible for ensuring that the management accounts pack is prepared but the CD, PM and POs are responsible for analysing the information, reconciling to their own records and partner reports and raising queries where they find discrepancies.

3.5 Fund management

3.5.1 Fund types Section 2.4.3 defines restricted income and explains that Sightsavers has a statutory requirement to ensure that restrictions are complied with. It is important to understand some of the terminology associated with fund management and the implications of these terms. Definitions are as follows:

Unrestricted

• Money received to support any aspects of Sightsavers’ work and costs • No donor requirements • In some cases, Sightsavers may choose to set these funds aside for a specific

purpose. These are referred to as ear-marked or designated.

Soft restrictions

• Funds raised to support an area of Sightsavers work, usually geographical (region or country) or sectoral (eye care, education etc). The list of soft restricted fund pots is maintained by the PPR team.

• Allocated to programme expenditure at year end and can be moved from project to project if necessary

• Funds contribute to overall income forecasts agreed by SMT, on which the unrestricted allocation to countries and other directorates is based

Standard (Hard) restriction

• Funds raised for specific activities, commonly specific projects • Often the funding agreements will require component funds to be raised. These

are funds which are required as a contractual obligation on the part of Sightsavers for a particular grant, eg where a donor funds a maximum percentage of a budget.

• Funds raised contribute to the income forecasts agreed by SMT, on which restricted funding targets for countries are based.

• These funding agreements often include overhead recovery and it is important that a fair recovery is built in. Sightsavers has an indirect rate that can be used to support these discussions. The PPR team can advise on this.


3.5.2 Financial Management Framework The Financial Management Framework (FMF) is used for all aspects of financial planning and fund management. Part of this system exists to provide fundraisers with details of projects (including the amount on the financial plan and the amount forecast to be spent on the project) and the ability to record restricted funding proposals. Funding teams are able to update the FMF directly to show their intention to fundraise against a particular project.

No approvals are required as every project or programme is available to fundraise against unless it has been recorded as not suitable by the AO/CO/RO. However, all significant applications must be checked and approved by an appropriate member of the fundraising team, who will ensure that other members of HH staff are involved as appropriate. For proposals over £500k the Commitment Management Process should be followed where an authority to proceed is obtained from SMT.

The FMF also includes allocations of general funds and soft restrictions to specific cost centres. Cost centre managers must make sure that these allocations are allocated correctly to programme and management costs within the FMF to reflect the expenditure forecast. These allocations must be updated as forecast changes.

It is critical that all relevant members of fundraising and programme staff regularly review FMF and are aware of any projects within their responsibility that have a restriction. It is especially important that staff are aware of budgets/forecasts that have been agreed with donors and advise the fundraiser of any potential changes to planned expenditure at the earliest opportunity.

3.5.3 Fund accounting In order to monitor the usage of income received and to facilitate donor reporting and overhead recovery, Sightsavers operates a system of fund accounting within GAS. Under this approach, every income transaction must be recorded in GAS with a “Donor Fund” code that relates to the particular funding agreement under which the income is received. In addition, every expenditure transaction must be recorded with a “Donor Fund” code that relates to the income stream that is funding this activity.

Details on the code to be used and the funding available are contained within the FMF system. Where there is a requirement of component funding within the donor agreement a component code will also be set up and should be used to denote committed unrestricted resources. Where no funding or no co-funding agreement is in place a code of U001 should be used, indicating that the expenditure is funded from Sightsavers’ unrestricted resources.


3.6 Government and other institutional grant funding

Funding from large institutional donors, including governments, typically comes with stringent terms and conditions that give rise to specific financial management requirements. Members of staff involved should work with the relevant fundraiser, RFSSM and PPR team to ensure donor requirements are complied with from the outset. Key areas from a financial management perspective, depending on the donor, are likely to include:

Grant financial management key areas

Notes

Budgeting Budgets for project proposals should be produced following the proposal budgeting guidance - https://iris.sightsavers.org/Pages/Donor-Financial-Management.aspx .

Component funding source

The donor may require Sightsavers to provide a percentage of the funds for the project and may have set rules on what expenditure can be counted as component funding. It is extremely important to consider, before signing up to a new contract, how Sightsavers is going to fund the remaining percentage. This should be discussed with the fundraiser and PPR teams initially.

Financial Capacity Assessment

The partner Financial Assessment Tool (FAT) is explained in detail in chapter 7. When entering into a contract it is vital that the partner understands the donor’s requirements and has the capacity to implement these. As such the financial capacities of the proposed partners must be assessed in the early stages of the application.

Systems set up:

Once the contract has been approved it will be important to consider the system setup at HH, RO, CO and at partner level.

• Coding

• It is important to be able to map expenditure from Sightsavers’ system into the donor’s required codes and format. Also as the donor will usually be interested in how the partners have spent funds transferred from Sightsavers, it will be essential that the partner can examine and report their expenditure in line with the donor coding and reporting format. Where the project is multi country it will need to be decided if it will be managed and coded to the RO cost centre.

• Funds transfers and reporting

• The frequency of funds transfers and the associated reporting from HH to CO to Partner should be agreed up front.


Grant financial management key areas

Notes

• Expenditure monitoring spreadsheets

• A spreadsheet should be established for capturing all expenditure on the project, extracted from SUN accounts and from partner reports. This should be updated on a monthly basis and circulated to interested parties. The spreadsheet should also be reconciled back to SUN accounts on a monthly basis.

• Record keeping

• Donors may have rules regarding record keeping both in terms of what is kept, where it is kept and how long it is kept for. This will relate to partner information as well as Sightsavers information and so an agreed process should be established for this up front.

Project specific bank account

Some donors require that a separate bank account is opened for managing the project funds. If this is required this will be opened at HH. For ring fencing purposes, the decision may be taken to also have a separate account at AO/CO/RO level. This should be discussed with the RFSSM, fundraiser and PPR before initiating the process.

Procurement Donors often have very specific, and sometimes, complicated rules around procurement including the number of quotes required and the country of origin of the assets. Advice should always be sought from the fundraiser and the Corporate Services Team before undertaking any procurement.

Time recording Some donors will require that staff funded or part funded through a project they are funding record the time they spend on the project using some form of timesheet. The fundraiser will advise on this area.

Audit requirements Some donors have specific requirements around project audits which must be complied with. Completion of the audit will often be the trigger for the release of the next tranche of funding so this is very important. More details are included in chapter 9.


3.7 Reserves and investment

3.7.1 Reserves The definition of reserves in the Charities SORP is "that part of a charity's income funds that is freely available for its general purposes." This definition of reserves therefore normally excludes restricted funds as these would not be readily available for general purposes. Such ‘non-available funds’ could include endowment funds or other restricted funds. Designated funds are also included: these are unrestricted funds that the trustees have decided to earmark for a specific purpose. However, the designation is for administrative purposes only and does not legally restrict the use of the funds.

Sightsavers has a reserves policy in place which defines the level of funds that should be held to ensure continuity of programmes. Sightsavers’ reserves policy is on Iris at the following location - https://iris.sightsavers.org/Docs/Reserves Policy, Nov 2010.doc. A statement of this policy is made in the trustees’ annual report in accordance with SORP guidance.

Key features of Sightsavers’ reserves policy are:

• It defines and differentiates between restricted and unrestricted reserves • The target level of unrestricted reserves is informed by income and expenditure

forecasts based on planned activities, combined with an analysis of the potential risks

It is the responsibility of SMT, in particular, the DFP to monitor reserves on an ongoing basis compared to the target range. It is also critical that the impact on reserves is considered when reviewing forecasts and future financial projections, and in development of the investment policy.

3.7.2 Investment Sightsavers has an investment policy which sets out the criteria for investment of surplus funds in accordance with the overall reserves policy. Sightsavers’ investment policy can be found on Iris at - https://iris.sightsavers.org/Docs/Investment Policy and Strategy, Nov 2010.doc. Investment activity is only to be carried out centrally and permission from SMT would be required if other offices were to get involved in this area. Sightsavers engages investment managers and a tender for this professional appointment is carried out every five years.

The standard process for day to day administration of investments is as follows:


• An ongoing spreadsheet summary of investments is maintained by the HH Finance Officer.

• This is updated for acquisitions, disposals, name changes/restructures as each transaction is advised by the Investment Managers. It is Sightsavers policy to sell any donated shares received (unless a particular restriction attached to the donation prevents this).

• A monthly report is prepared by the Investment Managers and this is checked by the HH Finance Officer. The investment portfolio is revalued each month end based on the report from the Investment Managers. The monthly report is reviewed by the DFP and Treasurer.

• An Investment Committee (IC) has been established which is a formal sub-committee of the Council of Trustees and includes the DFP and Treasurer. The IC has to ‘consider and decide on issues relating to ‘the management of investments, pensions and treasury activities’ (per the Committee’s TOR).

The IC meets quarterly and, in addition to other activities, meets with and reviews the performance of the Investment Managers against agreed benchmarks.



Do

• Ensure the planning and performance process is understood by your teams – all cost centre managers.

• Ensure the FMF is up to date with secured restricted amounts – fundraisers.

• Review the global management accounts pack on a monthly basis – all staff.

• Ensure local management accounts pack is prepared, reviewed and reconciled to partner reports – AD/CD/RD and FSSM.

Don’t

• Forecast to spend above funds raised at that particular time.

• Miss deadlines for submitting important information or for closing off month end process.

• Assume all responsibility for financial analysis rests with the finance staff.

• Undertake investment activities without SMT approval.


4. Income processing This chapter explains how Sightsavers recognises and manages its income.

4.1 Summary of roles and responsibilities Role Responsibility

Database and Donations Team

• Process income received from supporters onto Progress.

• Oversee the activity of the outsourced supplier in processing donations.

Funding teams • Update and monitor the Financial Management Framework (FMF) to prevent double funding and uncoordinated approaches to the same donor in different countries.

UK Finance Team and Planning, Performance and Reporting Team (PPR)

• Manage the interface of income data from Progress to the Global Accounting System (GAS).

• Reconcile income between donor databases (e.g. Progress) and GAS.

• Ensure income is recorded against the correct fund code.

4.2 Progress

Progress is a database that is used to support fundraising activity, particularly individual supporters. It contains important and confidential details about each of Sightsavers’ supporters, such as address, bank account, contact history etc. This information is subject to the requirements of the Data Protection Act. Queries regarding Data Protection should be addressed to the line manager and if external advice is needed should be escalated to the DFP.

In order to keep records secure, Progress must only be accessed by authorised staff members using regularly changed passwords. The Database and Donations team has responsibility for processing UK and some other donations onto Progress, including the data feed from the outsourced supplier. The information recorded on the database can be selected and used for fundraising activities.

The Fundraising teams in India, Italy and Sweden maintain their own local CRM solutions which work in a similar way to Progress.


4.3 Global Accounting System (GAS)

Each business unit in GAS has an income control account (83xx) and these are credited with all the income arising during each month. At month end, an interface file is extracted from Progress and uploaded to GAS debiting the 83xx accounts and crediting the various income category/cost centre/fund combinations.

4.4 Income recognition

In accordance with the Charity SORP, income must be recognised when Sightsavers becomes legally entitled to it, it is reasonably certain of receipt and it can be measured. For most of Sightsavers’ income, this is when it is banked or first appears on a bank statement. Legacies are recognised either on receipt or on notification of an impending distribution. Some income from institutional donors may be classified as “performance related” income under the SORP guidelines. In this case, it is recognised in line with the performance of specific deliverables. Where income is received in advance of its recognition, it is deferred and included in creditors. Where entitlement occurs before income is received the income is accrued and included in debtors.

4.5 Income reconciliation

Given the basis of recording income as set out above, it is imperative that Progress and GAS are reconciled on an ongoing basis to ensure completeness of income. This work is undertaken by the Income Systems Officer, reporting to the Treasury Manager. Processes within this role constitute a key control over income processing. This includes reconciling each credit transaction in the 8305 account to Progress data and maintaining detailed reconciliation records and advising where journal adjustments are necessary to correct any errors. Separate income reconciliation arrangements are in place for income which is not recorded on Progress.

4.6 Money handling guidelines

Sightsavers has adopted money handling guidelines (https://iris.sightsavers.org/Docs/Money Handling Guidelines.pdf) which have to be signed as read and understood by all staff members who are involved in income processing. These set out Sightsavers’ requirements for money handling and ensure that donations are securely handled and processed in tact and in accordance with Charity Commission requirements. The vast majority of banking is now undertaken by the outsourced donations processing (see 4.8 below) company but where cheques or cash are received into Sightsavers they must always be kept securely in the safe overnight and when there are fewer than two members of staff in the office.


In the UK, the completion of the paying in book is undertaken and cheques collected and banked once each week.

4.7 Gift Aid

Gift Aid is the name for the system whereby Sightsavers can treat a donation as if it has been paid less a deduction of basic rate income tax. Most donations from UK taxpaying supporters are subject to a Gift Aid declaration. These declarations are completed by supporters and stored within Progress. Gift Aid forms processed by the outsourced supplier are stored on their database but are fully accessible to Sightsavers. A valid, current declaration must be retained in support of every claim made. The Database and Donations Manager has responsibility for Gift Aid claims and prepares these after each month end using a report run from Progress. The claim is approved by the Financial Controller prior to submission to HM Revenue and Customs (UK tax authority). The finance team are informed of the details and liaise with the Database and Donations Manager when the claim is received.

Sightsavers is also able to reclaim tax on some donations made by Ireland Supporters. However, the system is different to the UK requirements and is dependent on the supporter concerned completing an official form entitled:

‘TAX RELIEF FOR DONATIONS TO ELIGIBLE CHARITIES AND APPROVED BODIES’.

4.8 Outsourced income collection and processing

Sightsavers outsources much of the income collection and processing activity. Specifically, the outsource organisation supplies specified response handling, payment processing, data capture, fulfilment, management reporting and mailings under contract to Sightsavers.

The contract contains key control provisions, including the organisation making external or internal audit reports available to Sightsavers. Sightsavers also has the right to conduct audits and monitor the performance of services provided through the use of service level agreements around donation handling and fulfilment services. Sightsavers also ensures that the organisation complies with the Data Protection Act and is fully PCI compliant.

Sightsavers receives weekly data feeds that are used to update Progress and validation checks are performed against the organisation’s system to ensure accuracy. Income is subsequently reconciled between Progress and the bank account.


4.9 Other fundraising offices

Income for the Ireland office is largely processed by the outsource company in conjunction with the Database and Donations team, although some local banking takes place.

Currently USA donations are handled by an administrator in the US and are put onto Progress as they arise by the Database and Donations team. Similar arrangements exist for Sightsavers Middle East with donations are processed by the Finance team.

It is recognised that Progress, in its current form, is not suitable for use in all international markets. The Italy Office use a local database for storing information relating to Italian supporters, as do the India office. Sightsavers’ fundraising in other new markets will be supported by a new database, which will be configured to ensure that all legal and data protection issues are complied with and to ensure that the system links to GAS. This is being piloted for Sweden fundraising in 2014.

4.10 In-country fundraising

Sightsavers recognises that in-country fundraising can provide the opportunity for offices to extend their programmes and hopefully increase Sightsavers’ impact. However, no in-country fundraising can take place unless it has been confirmed that Sightsavers’ registration in the country concerned permits this activity. This should be checked and confirmed with the RD and DFP prior to any application for, or receipt of, funds. The following steps also need to be considered for each opportunity that arises:

• Prior to undertaking any fundraising initiative (but assuming registration has been checked as mentioned above) the office concerned must contact the Development Manager (Programme Countries) in order to prevent uncoordinated approaches to the same donor in different countries. In addition the office must contact PPR and the regional office for initial advice and guidance.

• It is critical that the status of the FMF for the project concerned has been checked (assuming it is a restricted funded fundraising opportunity) to avoid the possibility of double funding. The proposal form should be completed on the FMF system by either the office or the Development Manager (Programme Countries).

• It is important that Sightsavers’ money laundering policy and guidelines are

followed at this point to ensure that the appropriate checks have been made and documented. The appropriate ethical checks should also be completed to ensure due diligence has been carried out before committing to any funding or partnership contracts.


• If the fundraising initiative involves development of a proposal, it is important that the RO is made aware of this and the proposal has been signed off the by the Development Manager (Programme Countries) or relevant member of the UK fundraising team. If the initiative involves signing a contract with a donor, advice should be sought from the Operational Planning Manager, Governance Manager and the relevant funding team contact.

• The Development Manager (Programme Countries) and finance should be advised

when the fundraising income is actually received. The Finance team will advise as to the necessary GAS journal entry to record the income. The in-country fundraising team will update the status of the restriction on the FMF.

• The Finance team should liaise with the Database and Donations team and any

other relevant Europe-based staff, to ensure that Progress is updated accordingly to reflect the donation.

• It is expected that any in-country fundraising income arising will usually be in the

form of cheque or bank transfer. However, it is possible that local cash donations may arise. In this case, the money-handling guidelines adopted in the UK should also be used to ensure the cash is securely handled and banked in tact. See section 4.6.

• All fundraising income, whether received in the UK, Europe or overseas needs to

go through the income control account (account code 8305 in the GAS business unit). This process ensures that the reconciliation between GAS accounts and the fundraising database Progress captures all relevant income. For all in-country income, the FSSM should post to the relevant income code (0***) and then MUST inform the Finance team of all the details so a batch header can be produced and the income can be moved to the control account. Other income such as bank interest, dividends and rental income do not go through the income control account and are posted to the relevant income account.

4.11 Gifts in kind

Gifts in kind in the form of Mectizan® tablets are included as income in the accounts at the donor’s wholesale price at the date the tablets are recorded as being received overseas for use. Tablets accepted by Sightsavers in a particular country will contribute to the global gifts in kind income figure in our accounts. It is therefore vital that the Director Neglected Tropical Diseases and the Group Accounting Manager are kept informed and copied in on all communication including:

• Output statistics and relevant project reports for Sightsavers’ programmes and where they are received for the country as a whole.


• Correspondence on the number of tablets being allocated to Sightsavers on the application form sent from the Ministry of Health /National Oncho Task Force to the Mectizan® Distribution Programme (MDP). This internal communication must take place before the application is submitted to ensure Sightsavers is able to accept the number of tablets quoted on the form.

• Correspondence relating to approved tablet numbers from the MDP • Completed tax certificates.

The tablets are accepted by the US subsidiary organisation, Sightsavers Inc. The number of tablets that will be accepted is at their discretion and, to facilitate their decision making, data on the number of tablets to be accepted by Sightsavers will be requested from COs in June each year. This will be compiled and submitted to the Board meeting of Sightsavers Inc.

Other gifts in kind are included at valuation and are recognised as income when utilised.


4.12 Summary of DOs and DON’Ts

Do

• Ensure relevant staff read, understand and apply the money handling guidelines – cost centre managers.

• Ensure any bankings are kept securely in the safe until deposited with the bank – all finance staff.

• Ensure that any in-country fundraising is correctly recorded in the fundraising and accounting systems. – AD/CD/RDs and Finance staff.

• Follow grant management guidelines and engage RGROs at all stages.

Don’t

• Accept in-country fundraising before ensuring this does not break the terms of registration and before discussing with the RO and relevant funding team.


4.13 Local procedures

Record any locally applicable procedures here.


5. Cash and bank account management This chapter explains how Sightsavers manages its cash and bank accounts.



Director of Finance and Performance

• Together with the Treasurer, FC and TM authorise opening of new bank accounts and any amendment to the bank signatories.

• Act as authorised signatory for all Sightsavers bank accounts.

• Authorise transfer requests of funds to country, area and regional offices

Financial Controller • Deputised by the TM, has a responsibility for bank and cash management at HH.

• Review and sign bank reconciliations. • With TM, act as initial authority for bank opening,

closing and any amendments to signatories

Treasury Manager • With FC, has the responsibility for bank and cash management at HH.

• Review and sign bank reconciliations. • With FC, act as initial authority for bank opening,

closing and any amendments to signatories to ensure bank accounts are up to date

• With FC, authorise the funds transfer requests on line for payments and interbank transfers

• Must ensure that Petty Cash control is in place in all country offices and that reconciliations are performed monthly

Country/Area/Regional Director

• With support from the FC, has responsibility for bank and cash management at the AO/CO/ROs.

• Must ensure that the signatories to bank accounts are up to date and that the TM is informed of any required changes.

• Authorise the funds transfer requests in line with delegated authorities.

• Must ensure effective petty cash control in their office including reconciliations, secure storage and initiation of surprise cash counts.


• Responsible for the day to day management of bank and petty cash, including regular review of bank



statements and cash balances and raising up of any issues or irregularities with their Director.

5.2 Bank and money handling

Sightsavers has a Treasury policy that underpins all activities in bank and cash management. Roles and responsibilities are defined within it and are as set out above.

Sightsavers maintains several bank accounts managed either from the UK or in each country of operation. The principal bankers used by Sightsavers are: HSBC, Standard Chartered Bank (UK and most overseas offices), AIB (for Ireland). Sightsavers AO/CO/ROs should only operate one bank account. The exception will be where a separate bank account is used for managing and ring-fencing funds from a restricted funding donor. All bank accounts must be approved by FC/TM/DFP/Treasurer.

It is important to keep cash holding to a minimum since funds held as cash are generally less secure than funds held in a bank account. An upper limit for the size of cash payments should be fixed by each office.

5.3 Opening a new bank account

When opening a new bank account, or applying to work with a new bank partner, this must be actioned with full reference to the requirements of the Treasury policy.

An office wishing to open a new bank should prepare a formal request to outline all the details to include:

• Which currency the account should be opened in • What will the account be used for, general funds, restricted funds etc. • When the account needs to be opened • The proposed list of signatories • The proposed maximum balance that will be held in the account

This should be sent to FC/TM for review and first approval.

The bank mandate will be drawn up by the Treasury team to record all account signatories and the signatory limits. The mandate should be signed and the original returned to HH Treasury Department to be finally authorised by the DFP or the Treasurer. The mandate will then be couriered to the relevant office for presenting to the bank. The office must maintain all of the documentation to support this process.


AO/CO/RO staff must not take steps to open a new bank account without notifying HH Treasury Department. Collection of signatures can be a time consuming process so staff must give HH Treasury department as much notice as possible for all requirements.

5.4 Amending bank signatories

The cheque signatory frameworks are established in the bank mandates for all Sightsavers bank accounts. Any office wishing to make changes must first contact the RFSSM before informing HH Treasury Department who will draw up a new mandate and get authorisation from the DFP or the Treasurer. It is not permitted for an office to bypass this head office control by liaising directly with the bank, even if the bank’s own control processes will allow changes on the basis of local signatories only. The AD/CD/RD has responsibility for informing HH a month in advance of any authorised signatory leaving the organisation to ensure they are removed as signatories. The nominee for replacement must also be notified at this time if possible to ensure effective and timely changes are made.

The RFSSM should undertake a review of signatories of AO/CO/RO bank accounts at least annually. The Treasury Department in HH will perform a full bank account review at each financial year end, so that all bank accounts, signatories and balances can be confirmed and consolidated for the year end external audit.

5.5 Closing a bank account

An office wishing to close a bank account must give their justifications for doing so to either their RO then directly to HH Treasury Department. The HH Treasury Department will prepare a closure letter, signed by two of the signatories as per the relevant mandate. This will be followed up by confirmation, in the form of proof on the bank statement, that the account in closed and this detail is kept on file at HH Treasury Department.

AD/CD/RD/FC/TM has responsibility to make sure any funds still in the account are transferred to another approved bank account or, where the funds relate to a restricted funding donor, that the funds are dealt with in accordance with the donors requirements.


5.6 Key bank account management policies

Policy UK and Fundraising Offices

Country/Area and Regional Offices

Authorised signatories

• UK accounts limited to SMT members, other fundraising offices accounts will include local signatories for operational purposes as approved by the DFP.

• The TM has responsibility for ensuring bank mandates are up to date

• All signatories must have completed their probation period

• Signatures must include as a minimum:

– HH – FC/TM followed by DFP and Treasurer

– RO – RD – AO/CO – AD/CD and PM

(or equivalent where these posts do not exist)

• For a regular sized office the standard practice is to have 3 local signatories: - CD, PM and PO and all cheques should require 2 signatories, with the CD being one if possible. If there is more than one PO then a list B should be established so that both PO cannot sign a cheque.

• The AD/CD/RDs together with the RFSSMs have responsibility for ensuring all bank mandates are up to date.

• Finance staff cannot be signatories to bank accounts. Any exception to this must be approved by the DFP.

• All signatories must have completed their probation period. If, in the case of AD/CDs, this presents a significant operational problem for the office, the RD can seek approval from the DFP to add the AD/CD before completion of probation. In this case, as an additional control, the RFSSM should conduct a detailed review of month end checklists and bank statements until the end of the probation period.




Signing levels • Cheques up to £5,000 may be signed by a single signatory

• Cheques above £5,000 must be signed by two signatories

• Signing levels will depend on the circumstances in each office but must be approved by HH and RO.

• An overriding requirement is that there should be two local signatories, one being the AD/CD/RD. Where, in exceptional circumstances, there is only one local signatory, an upper limit of typically £1,000 is placed on what can be signed by one signatory. For amounts in excess of this, a second signature will be provided to the bank by fax from the RO or HH.

BACS and Internet Banking payments

• For Bank Automated Clearing System (BACs) transactions, each payment must be signed-off by the FD (or another SMT member in their absence) and electronically reviewed and approved by FC/TM for processing by the bank

• Setting up and transmitting of BACS payments must be done by two different members of the finance team who have securely retained passwords/smart card and pins.

• For Internet Banking Payments each payment is either loaded through Proactis and B4B into the electronic banking systems or approved through manual request for entry onto the electronic banking

• Internet banking payments are not permitted from AO/CO/RO bank accounts. Internet banking represents a considerable risk as the people with access may not be the authorised signatories to the account.

• AO/CO/RO bank accounts can only have read-only internet banking access for verification of balances.




systems. It is then reviewed and approved by FC/TM or delegated back up for processing by the bank

Overdrafts • Overdrafts are not permitted without the authorisation of the DFP/FC/TM

Cheque security

• Cheque books must be retained in a secure location. • Cheque signatories must not have direct access to cheque

books. • Cancelled cheques should be retained. • Cheques should never be signed before the payee and

amount has been completed.

Supporting documentation

• All payments must be made only on the basis of authorised documentation.

• All payments must be documented on a payment journal voucher which should:

• have a sequential voucher number • be correctly coded up with account code, cost centre

and other relevant codes • be attached to the supporting receipt/invoice and • have been signed by the person authorising the

expenditure • If receipts/invoices are not issued by the supplier, a receipt

should be drawn up by the respective office and signed by the supplier.

• All attachments (i.e. receipts, invoices) must be stamped as “PAID” once the cheque has been passed for payment.

5.7 Fund transfers from the UK

The aim of the funds transfer process is to ensure that Sightsavers can remit funds to offices in a timely and efficient manner, and at an amount that sufficiently meets the forecast local expenditure of each office. Where possible, funds which are not required for very short term expenditure should not be requested. In this way, Sightsavers can maximise surplus funds centrally and manage them efficiently to get a good return.

A request for transfer of funds should be entered into the eProcurement system, based on forecast local expenditure for the next period (usually a month), fund balances at country office and partner level and management accounts. At the time of publishing this version a project is in progress which will centralise the payment of


partners and high value suppliers through the HH Finance Operations payment hub. Funds transfer requests by the AO/CO/RO must be adjusted down to account for payments which will be made from the UK. AD/CD should review and approve the transfer request within the eProcurement system.

All transfers will automatically be assigned within the system to the RFSSM who should undertake a technical review for discrepancies with the forecast and should monitor balances at a CO and partner level. After the RFSSM each request will be assigned in line with the approvals policy documented in section 8.2. The DFP will approve all transfers to Sightsavers offices regardless of value and all transfers to Sightsavers partners over £20,000

FSMM is requested to confirm receipt of funds in the system and inform HH Finance Operations of any discrepancies in the amount due to bank charges or errors.

To facilitate an effective funds transfer process, the Sightsavers’ Treasury Policy refers to an active approach to foreign currency hedging which is adopted within a defined hedging framework.

5.8 Bank reconciliations

A bank reconciliation is a check between bank statements and the accounting system. Entries are matched up to leave the “outstanding” or “unmatched” items. These items are generally due to timing differences between a payment being made and entered to the accounting system and the payment clearing the bank. However, the reconciliation can also help identify erroneous, duplicated or fraudulent payments. To complete the bank reconciliation the bank statements and payment voucher files must be reviewed in detail.

Bank reconciliations are a key control over funds held in Sightsavers’ bank accounts and, therefore, this activity must be completed at least monthly for each account and in a timely manner following the end of the period being reconciled. Any outstanding items must be identified, dated and given a detailed explanation on the reconciliation and should not be more than three months outstanding.

At HH, the volume of bank transactions is extremely high and as such bank reconciliations for the main accounts are completed regularly using the module available in the accounting system for uploading up-to-date bank statement information received from internet banking. All HH bank reconciliations must be signed by the FO, and must be reviewed and approved by the FC/TM.

In the offices outside Europe, bank accounts must be reconciled at least monthly as part of the month end checklist. The month end checklist must be reviewed and signed by the AD/CD/RD. Further information on the month end checklist procedures can be found in section 10.8 of the framework.


5.9 Surplus funds

Sightsavers’ policy is that no surplus funds should be held overseas.

The HH Treasury team uses internet banking software, where available, to review the cash position each day and identify any surplus funds after taking account of payments pending (transfer of funds to other offices etc). The outcome of the review of cash position is recorded on an ongoing Excel spreadsheet called ‘Cashflow’. This is reviewed in conjunction with the cashflow projections from the forecast data In the FMF.

Any requirements to place short term surplus funds in alternative banks must be approved by the Treasurer and DFPO in advance and under the requirements of the Investment Policy.

Interest receivable is identified from bank statements or separate advice from the financial institution concerned. It is posted to the Accounting system by the FO and is adjusted as a debtor as necessary at year end.

5.10 Petty cash and other cash balances

Petty cash held in Sightsavers’ offices represents a significant risk if not controlled properly. Petty cash amounts held must be maintained within agreed local limits according to the local situation. Wherever possible, payments should be made by cheque to avoid the need for cash. AD/CD/RDs are responsible for ensuring this and will be accountable for cash losses from their office.

Sightsavers has money handling guidelines for staff who are involved with cash income processing, these are outlined in chapter 4. Key petty cash management policies are outlined in the table below:

Policy Detailed requirements

Imprest system • Sightsavers uses the Imprest system for all petty cash holdings. At any one time, cash plus petty cash vouchers equal the pre-agreed float level (the maximum agreed cash level).

• When cash needs to be topped up, the vouchers and cash should be counted and checked to the Imprest amount. If this agrees, a cheque should be written for cash for the amount of the vouchers (with accompanying bank payment journal voucher). All documents accompanying petty cash vouchers (e.g. receipts, invoices etc) should be stamped as “PAID” to prevent duplicate payments.

• Foreign currency holdings must be kept to a minimum and should not exceed the equivalent of £250 in total.


Policy Detailed requirements

• Petty cash receipts (e.g. from those returning from trips) must be banked as soon as possible.

Cash counts

• Cash counts must be performed at the end of each month by two people independent of the day to day petty cash handling process. Cash balances must reconcile to GAS.

• In addition, surprise cash counts should be instigated by the AD/CD/RD at a different time to the month end cash count, to ensure that the petty cash and other currency floats held are properly maintained. This must also include foreign currency petty cash. These can be undertaken by another senior, non-finance member of staff if the Director is unavailable.

Secure storage • Cash should be kept in a locked tin in a locked safe. • Appropriate key holding arrangements should be

made by the AD/CD/RD and documented. Generally only one person should have a key at one time.

Documentation • Every petty cash payment must be authorised and supporting receipts must be attached to the voucher. The person receiving the cash must sign the voucher confirming receipt of the cash.

• When cash is received into the office the person receiving the cash must sign to confirm receipt.

• Record of month end cash counts and mid month surprise cash counts must be signed, dated and included in the month end checklist.

• A full reconciliation of CO petty cash must be provided to HH Treasury Department as part of the month end checklist as these are balance sheet accounts that must have a signed document in the audit file for review each month.

Cash theft • Report this to HH and RO immediately using the fraud reporting process

• Report to the police and obtain written notice or report from the police authority

• Report the incident to the insurance company


5.11 Payments for fuel

This section only applies to locations which have dedicated office vehicles.

Fuel cards are typically loaded with a credit by paying the fuel company a cheque and then this credit is reduced each time the vehicle is refuelled. The usage of these cards is limited to the fuel company concerned, but within their premises the fuel card is the same as cash and carries the same risks to Sightsavers of misappropriation.

Reconciliation of fuel card statements – the FSSM must ensure that a statement is provided to Sightsavers by the fuel company on a regular basis. Each transaction should be agreed to supporting documentation e.g. bank payment documentation for the top ups and receipts for the payments.

Monitoring of fuel usage – each time the vehicle is refuelled this should be recorded in the logbook with details of the amount of fuel purchased. These figures should be agreed to the receipts provided. Every quarter the amount of fuel used per kilometre should be calculated and this should be checked for reasonableness. This control is intended to identify fuel being purchased but not used for Sightsavers’ vehicles. This should be done for all Sightsavers’ vehicles regardless of whether a fuel card is being used.

Segregation of duties – the fuel cards should be the responsibility of the drivers, whilst monitoring of the usage of fuel cards is the responsibility of the finance department.

Similar processes also need to be in place to monitor the fuel used in country office generators. This includes analysis of fuel usage by the generator.



Do

• Retain undisbursed cash in a secure tin in a safe – FSSM.

• Carry out periodic and surprise cash counts – AD/CD/RD.

• Follow Sightsavers procedures around amending bank account signatories and opening new bank accounts. – AD/CD/RD and finance staff.

• Monitor the usage of fuel cards.

Don’t

• Keep staff who have left the organisation on bank mandates.

• Pre-sign cheques.

• Use internet banking for making payments (except in UK Finance).

• Hold excessive amounts in petty cash or foreign currency cash.

• Leave the management of bank and cash in the hands of just one person.


6. Staff expenditure

This chapter explains how Sightsavers puts into practice the management of staff expenditure.



All staff

• Follow the procedure for using Sightsavers’ credit

cards, claiming expenditure and handling travel advances correctly.

• Ensure travel advances are retired on a timely basis. • Ensure FSSMs are made aware of any changes to

payroll information.

All line managers • Review and ensure that staff expenditure claim forms have been filled in correctly, are backed up by supporting documentation and are reasonable.

Finance Officers/Managers

• Prepare the monthly payroll including any salary advance deductions.

Country/Area/Regional Directors and Financial Controller

• Review and authorise the monthly payroll calculations. • Ensure all expenditure claims have been correctly

authorised.

6.2 Expense reimbursement

Sightsavers will reimburse reasonable, authorised and necessary expenditure incurred by staff during the course of their work. Such expenditure may include travel, meals or accommodation costs during work related trips. Details of allowable expenditure are included in the expenses policy in the UK and staff handbooks elsewhere.

Staff must claim for any expenses promptly, using a standard claim form. In the UK, expenditure claims are made using the electronic form available in the Proactis system. Each item of expenditure must be accompanied by a scanned original receipt or voucher and this should be checked by the member of staff (usually line manager) responsible for authorising the claim. The Finance Officer/Manager should double check that all claims for reimbursement are relevant and genuine. Payments for approved claims must be entered to the relevant accounts in GAS. In the UK, reimbursement is made via bank transfer, separate from the payroll.


6.3 Advances to staff

6.3.1 Advances Advances may be given for travel or so that a staff member can pay for office or programme expenditure. The text below describes the process for a travel advance but the same approach should be taken for office or programme advances.

A travel advance can be requested by staff (excluding those in Europe) to cover expenditure incurred in connection with Sightsavers official activities. Administration of travel advances is time consuming and ties up Sightsavers’ resources, so they should usually only be granted where credit cards are not widely accepted and Sightsavers does not have an office that can settle a travellers expenses or on the grounds of security. Viable alternative options should also be considered prior to granting e.g. transferring funds to a partner to either settle the travellers' expenses or from which the traveller can draw down on during their stay or transferring funds for collection in country via agencies such as Western Union. Where cash is genuinely the only option available then insurance arrangements must be sufficient to cover this. Any advances which exceed £2,500 must be submitted to DFP for approval in advance, with justification for the amount.

Staff must not be allowed to build up advance balances over time and must account for expenditure and return unspent balances as per the process below.

Travel advance process

Time Responsibilities

Before travelling

• The travelling staff member fills in a travel advance

form several days before funds are required. • The form is authorised by the line manager • The FSSM/FO obtains, counts and hands over the

cash to the travelling staff member who must sign for it. This must be in the presence of another staff member.

• The FSSM/FO records the advance to the relevant staff advance code on GAS.

During the trip • The traveller obtains and keeps receipts or invoices for all expenditure made from the advance.

• They also keep receipts for any currency exchanged during the trip.

• The traveller should take steps to avoid bringing significant sums of foreign currency back to their office which cannot be used or exchanged. For example if visiting another Sightsavers office, any local currency remaining at the end of the visit can be handed to the FSSM for that office and obtain a receipt.


Time Responsibilities

On return to the office • The traveller must immediately return any cash still held.

• The FSSM/FO should count this and sign the receipt voucher and process the receipt on GAS.

• The FSSM/FO should bank this money at the earliest opportunity.

• Foreign currency receipts should usually be banked straight away. The cash should only be added to the foreign petty cash if it can be used immediately for another advance. Foreign petty cash should not exceed £250.

Within 5 working days of returning to the office

• The traveller completes the tour expenditure form, listing each item of expenditure and attaching receipts. (Failure to complete this on a timely basis means that the office’s expenditure is understated in the accounts)

• Where exceptionally it has not been possible to obtain a receipt, the expenditure should be listed with an explanation as to why it was not possible to obtain a receipt.

• The line manager checks and authorises the form and deducts any inappropriate or personal expenditure.

• Where the line manager is not based in the same office, the tour expenditure form should be checked and processed by the FSSM/FO, and then sent to the line manager for review and authorisation. Some offices prefer to carry out this process quarterly. In such a situation, a register must be maintained to complete the audit trail.

• The FSSM/FO checks the form and receipts and makes the entry into GAS using a general journal

• The cost centre manager must authorise the general journal voucher. If the retirement is greater than £1,000 a second approval is required from the cost centre manager’s manager.

• No additional advances can be given to a staff member who has not retired a previous advance.

At the time of publication, a project is in progress to move the processing of staff travel advances onto the Proactis system. The process is very similar to that outlined in 6.2 for UK staff expense reimbursement with the exception that entries in SUN will clear down travel advance debtor balances rather than generate reimbursement payments.


6.3.2 Employee loans Employee loans are occasionally granted to staff (AO/CO/RO only) in accordance with the Employee Loans Policy. Where loans are provided, the following rules apply:

• The loan amount must not exceed the value of three month’s salary; • An employee can only have one loan at any time; • A written agreement must be signed by Sightsavers and the employee and contain

the repayment period and repayment amounts (usually equal amounts each month).

The FSSM should ensure that the loan is recorded against the employee’s loan account and to include the deductions in the monthly payroll calculation.

6.4 Use of corporate cards

A credit card policy has been established and approved which sets out the detailed procedures. The policy can be found on Iris. Sightsavers credit cards ARE NOT to be used for personal expenditure.

Permanent staff are usually eligible to obtain a corporate card (either a credit or prepaid card) provided the following apply:

• they undertake regular travelling as part of their duties at Sightsavers. • they regularly travel to or within countries where credit cards are widely accepted. • their line manager is in agreement that a corporate card would facilitate their work.

Corporate card management

Details

Security • The unique PIN (personal identification number) ‘attached’ to the card should be kept securely by the member of staff. In some countries, the PIN rather than a signature is required to complete a purchase.

• The card should also be kept securely and if it is not expected to be used again should be returned to HH Finance for cancellation.

Documentation and authorisation

• A receipt must be obtained for every transaction. • Each month card statements will be loaded into

Proactis and each cardholder will receive an email saying they have a claim to complete in the system.

• The card holder should complete the official credit card expenditure form on Proactis listing out each transaction and attaching the relevant scanned invoice/receipt/voucher.


Details

• The form should be thoroughly checked and authorised by line manager on Proactis.

• Where a travel advance has also been taken for the trip, expenditure should be cross referenced to prevent duplicate claims.

6.5 End of contract benefit scheme

In some countries, to supplement local benefits Sightsavers has instituted a specific end of contract benefit scheme. The salient features of this benefit are as follows:

End of contract benefits will vary from country to country dependant on the availability of government schemes, provident and gratuity funds. Details of these benefits can be obtained from the staff handbook or through the Regional HR manager. Any changes to these schemes must be approved by the Director of HR and Organisational Development and the DFP.

End of contract benefit summary

• Staff members in the relevant countries are entitled to one month’s salary pro rata for each year of service completed (or half a month where local statutory laws specify this). Payment arrangements vary from country to country.

• Staff can apply for an interim payment which must be approved by the RD. Confirmation of the amount must be sought from HH Finance.

• The payment of an end of contract benefit may be a taxable benefit for the employee depending on the country. As such the FSSM must ensure, where applicable, that relevant income tax is deducted from the payment to the staff member.

• When an interim or final payment has been made, HH Finance must be informed.

• A provision is maintained and updated twice a year in the accounts for the end of service benefit. This prevents an office being hit with an exceptional large expenditure item when a staff member leaves.

• The relevant Regional HR manager is responsible for updating HH Finance with any changes to staff or salaries.

• AD/CD/RDs and FSSMs must ensure they incorporate an estimate of the change in the end of contract benefit in their forecast.

• Sightsavers will reduce a staff member’s end of contract benefit to recover any outstanding staff financial obligation to Sightsavers (e.g. loan or unretired travel advances).


6.6 Managing payroll

Each office has a payroll to document the calculation and approval of salary payment to each staff member each month.

In the UK, due to the large number of staff members and frequent changes to standing data, payroll software and a payroll bureau are used to administer the payroll. In most other Sightsavers offices, the smaller number of staff and strong surrounding control framework mean that securely kept spreadsheets can be used to administer the payroll.

The payroll records are maintained by each FSSM. These records contain confidential information and must be kept securely, with the use of passwords etc.

Monthly payroll process

Step Responsibility Detail

1. Several days before pay date, update the payroll records for any changes.

FSSM/FO The types of changes and records that should be checked include the following: • New staff member (copy of

contract or memo from line manager /director confirming details).

• Leaving staff member (letter of resignation or memo from line manager/director confirming details).

• Salary increase (pay award letter from director or in the UK, an authorised listing from HR).

• Overtime earned (authorised overtime form)

• Changes to tax rates (official evidence of new government tax rates).

• Staff salary advance repayments (advance approval letter signed by director or HR if in the UK)

• In the UK, a payroll log produced by HR summarises the changes each month.

2. Calculation of net pay and deductions for each staff member.

FSSM/FO • Produce a payroll summary listing each staff member and their pay calculations. In the UK



the payroll summary is completed by the payroll bureau.

3. Review, approve and sign the payroll summary.

AD/CD/RD • It is important to that the review is thorough and includes a comparison with the previous month’s summary andcheck the payroll summary against the known changes listed in process number 1.

4. Preparation of a general ledger journal for the payroll.

FSSM/FO • A GAS General Journal is prepared to post gross pay to the relevant cost centres and record the payroll liabilities in the control accounts.

5. Provide payslip to each staff member

FSSM/FO • Payslip shows the basic salary, allowance, overtime, gross earning, statutory and other deductions and net pay (take home pay). Payslips must be provided promptly.

• In the UK these are provided electronically via a secure website.

6. Transfers net pay via bank transfer direct to each staff’s bank account.

FSSM/FO/authorised signatories

• In the UK, DFP does a final review and authorises the BACs and related reports before payment is made.

7. Records payroll payments using GAS payment journal vouchers.

FSSM/FO • Record payroll payments using GAS payment journal vouchers.

• Whilst it may not be appropriate to attach the payroll records to the journal vouchers, these payments must be cross-referenced to the payroll records, and the staff authorising the journal must check that the totals agree to the payroll

8. Complete returns and pay tax, social security and other deductions

FSSM/FO

• Tax, social security and other deductions must be completed and paid to the relevant authorities within the official due date.



within the official due date.

• Advice should be sought from Head Office Finance/HR and external auditors if there are any concerns over complying with local tax requirements.

• Sightsavers does not condone late payment of such liabilities under any circumstances.

9. Check that the statutory payments are done on time.

AD/CD/RD and FC • Constant follow up to check that the statutory payments are done on time, including checking that the proof of receipt by the tax authorities is attached to the payment voucher.

10. Reconcile all payroll control accounts as part of the month end process

FSSM/FO

• All payroll control accounts and related accounts should be reconciled as part of the month end process

11. Complete and submit any annual tax or social security returns to the authorities within the statutory timetable.

FSSM/FO • Failure to meet the timetables may result in fines and/or damage to Sightsavers reputation.

12. Ensure provision for end of service benefits has been correctly updated.

FSSM/FO and CD • It is the responsibility of local management to ensure provision has been correctly made for pension, end of service benefit or Provident Funds.


6.7 Summary of do’s and don’ts

Do

• Submit and pay all statutory payments on time.

• Ensure that all payroll files are kept securely.

• Ensure that all payroll control accounts are reconciled as part of month end process.

• Claim any expenses promptly using the standard claim form and following the right procedure.

• Use travel advances only when credit cards are not widely accepted and retire them promptly.

• Complete and submit the credit card expenditure within the deadline.

Don’t

• Forget to obtain and keep the receipts when travelling.

• Give travel advances before staff retire the previous advance.

• Forget to follow the correct procedures when line manager is based in a different office.

• Assume that because payroll is a monthly routine process, crosschecking is therefore no longer required. Check, and check again as people can make mistakes.

• Leave payroll files unprotected. All payroll files must be kept securely.


7. Project expenditure and partner financial accountabilities

This chapter explains the required processes for the effective management of Sightsavers’ project expenditure including partner financial support and accountabilities.




• Ensure valid Project Funding Agreement (PFA) is in place (and in date) for every project and that the key financial responsibilities are included.

• Ensure an agreed format and timetable for reporting and reviewing project expenditure is in place.

• Carry out monthly high level review of project expenditure in the office.

• Review allocation of resources to projects and that the Financial Management Framework is up to date.

• Approve all transfers to partner bank accounts within the Proactis system.

• Oversee the implementation of the Financial Assessment Tool (FAT) as part of the Partnership Policy.

Programme Manager/Officer

• Review project budgets to ensure they are in line with planned activities and the PFA.

• Perform a detailed review of project expenditure for each project at the transaction level ensuring it is line with activity progress.

• Ensure project expenditure per GAS is as expected when compared to partner and project reports.

• Check partner funds transfer request to ensure alignment with planned activities and budget/forecast.

• Conduct joint partner visits with the FSSM/FO and assist in following up on financial issues raised.


• Ensure all expenditure relating to a project is correctly coded.

• Regularly monitor expenditure against forecast and the project budget and prepare regular management accounts for the AD/CD/RD and programme staff to review.

• Assess partner systems at the point of initiating a new partnership.



• Build capacity of partner finance staff by use of the monitoring/support visits and trainings.

• Advise programme staff on any financial risks the CO may be exposed to in the partnership

• Support partners in preparation of budgets and ensure these are in line with Sightsavers funding plan.

• Carry out regular assessment of partners by using the FAT and adjust reporting and funding framework. Support continuous improvement in the process.

• Upload partner transfer details onto Proactis for approval by the AD/CD/RD.

• Review financial reports submitted by partner staff and seek clarification for any queries that may arise. Document any issues arising and follow up for appropriate action.

Oversight of regional partners or partners in countries without offices should be carried out in line with the roles and responsibilities above but the responsibilities should be assigned to the most appropriate role.

7.2 Project planning

The organisational financial planning processes are set out in chapter 3. Project planning should take place in line with the requirements of this and Commitments Management Process.

7.3 Partner financial support and accountability

7.3.1 Partnership policy “Develop Effective Partnerships” is a SIM card objective for the organisation as a whole. Sightsavers’ Partnership policy defines partnership as ‘a mutually beneficial and interactive relationship which is shared for a specific purpose and which works towards a shared goal of positive programme impact’.

All Sightsavers’ dealings with partners (including financial monitoring and accountability) should reflect this context and the more detailed requirements of the partnership policy (available on Iris - https://iris.sightsavers.org/Pages/Programme-policies.aspx).


7.3.2 Project approval and agreements Sightsavers’ projects are approved through the Commitments Management Process which links into overall organisational planning.

The key financial outcomes from this process are the expenditure plan and the agreement with the partner. Sightsavers has a Project Funding Agreement (PFA) template and this should be used in drawing up the agreement with the partner. This document captures the obligations of the various parties, within the context of a particular project and should be in place for all Sightsavers’ projects. Occasionally, a Letter of Understanding may be required to bridge the gap between project cycles, although this should be avoided where possible. To meet financial management requirements, all agreements must contain the following key financial information:

Key financial information

Notes

The financial obligations of each party and the arrangements for transferring funds for the project. This must refer to the electronic transfer of funds.

In the section outlining Sightsavers’ financial obligations the words “subject to the availability of funding” must be included. The partners need to provide and confirm all bank details, including providing a bank statement as evidence.

Requirements for the partner to set up a project specific bank account

Sightsavers expects partners to set up a specific bank account for the use of Sightsavers’ funds.

Frequency and format of partner financial reports

This includes supporting documents i.e. bank and petty cash reconciliations and bank statements

Requirements for partners to maintain original supporting documentation

This includes receipts and invoices for all financial activities and that Sightsavers reserves the right to inspect all financial records relating to Sightsavers’ funding. Note failure to do this can result in loss of donor funds particularly where funded by donor governments.

Project budget must be attached

Project budget outlining the cost of activities for each year of the project plan as prepared in conjunction with the partner and agreed.

Specific regulations and reporting formats must be included. This includes the requirement to produce monthly forecast data as required.

Where the project is being funded by an institutional or government donor who has specific contractual regulations around the programme and financial management of the project (e.g. procurement regulations), reference to the regulations must be included within the agreement and copies attached.


Key financial information

Notes

The agreement must be signed on behalf of Sightsavers’ by an appropriately authorised signatory.

The AD/CD is able to sign agreements but must have the authority of the office e.g. RD, DFP etc with the correct level of delegated authority to do so.

The requirement to undertake an external audit on an annual basis should also be included if required by a donor or if the country office determines that this is necessary.

7.3.3 FAT and assessment of partner financial systems Sightsavers’ global finance team has developed a Financial Assessment Tool (FAT) which can be used to facilitate assessing partner financial systems. The tool is one of several which have been developed to help implement the Partnership Policy and the relevant documents can be found in appendices to the Partnership Policy itself. Detailed guidelines are included with the FAT spreadsheet which is available from the RFSSM. The table below gives a summary of these.


Process Notes When/Who? • At the project planning stage, the FSSM/FO (ideally

in a joint visit with programme staff) should undertake a visit to the partner to obtain an overview of the partner’s financial systems.

What? • The FSSM/FO should discuss and score the financial systems checklist with the members of partner staff who have a responsibility for finance. This includes a series of questions under eight competency areas.

How? • The FSSM/FO concerned must be familiar with the concepts of the Partnership Policy and approach the assessment with great tact and diplomacy. It can be difficult to agree with partner staff those areas where their capacity or competence is weaker. A less experienced finance officer/manager may therefore need to be accompanied by a RFSSM or the PM in the first instance to ensure that the assessment is conducted in an appropriate manner and in the spirit of the overall Partnership Policy. The FAT includes detailed guidelines on its application and should be the key reference point when conducting the financial assessments on partners.

Assessment • Once individual scores are agreed, the partner is automatically rated as either high, medium or low competency

• These scores should inform the financial management framework that is established with the partner, including how frequently funds are transferred, how frequently financial returns are required and what format should be used. The frequency of financial monitoring visits will also be affected.

• Once the assessment has been approved and agreed by all concerned, any capacity building needs should be taken into account in project plans. Both parties will also be clear as to the nature of the financial monitoring framework and this must be formalised and agreed.

Reassessment • The FAT for each partner should be periodically re-assessed. Hopefully, over time, a strengthening of competence should be recorded with more longstanding partners moving to medium and eventually high competency.


The FAT is a recognition that not all partner organisations are identical and that a tailored approach to financial management, amongst other things, may be required.

7.3.4 Partner financial monitoring and capacity building Sightsavers preferred approach to partner financial monitoring is to combine ‘checking’ procedures with supporting partners in their understanding of what is required and in strengthening their internal processes accordingly. A suggested approach to partner finance visits would include the following steps:

Step Notes

Develop a plan for visits at the start of the year

• The plan should take account of the frequency of visits derived from the FAT and should be approved by AD/CD. Ideally some of the visits will be in conjunction with programme staff.

• The plan must be shared with the RFSSM.

Prior to each visit, develop terms of reference (TOR)

• This must clearly state: • The timing and purpose of the visit • What the FSSM would like to cover • Which partner staff will need to be available • The expected outputs from the visit • Specific areas the partner would like to cover • Be approved by the AD/CD and the Partner.

Revisit recent Financial Returns from the partner and highlight any issues

• The last report from a finance visit and any external audit reports available should be reviewed. Discussions with programme staff and the country/area director should also feed into the visit preparations.

Introductory meeting to confirm the purpose and scope of the visit

• The actual visit must start with an introductory meeting to confirm the purpose and scope of the visit and reassure the participants as necessary.

One to one meeting with the partner financial officer

• Arrange one-to-one meeting with partner financial officer or equivalent, to discuss and observe their financial arrangements.

Carry out sample checking on the accounting records

• This must include some verification of information reported in the partner financial returns noting which vouchers/returns have been checked. Any irregularities must be discussed with the partner finance officer.

Coaching and training • Allow time for any coaching and training requirements identified for partner staff.


Step Notes

Close out meeting • Provide a written list of issues, and go through the key matters arising. Agree any recommendations and actions with the partner.

Update the CD/AD/RD • Meet with the AD/CD/RD or other relevant programme staff to give feedback on any significant issues that have arisen.

Prepare and circulate report

• Ensure that any recommendations are clearly prioritised (i.e. graded). Any action plan must clearly state responsibilities and deadlines.

• Draft report should be circulated to the AD/CD/RD/PM. Once the report is approved, it should be sent to the partner ideally within 2 weeks of the visit.

Ensure partner completes management response

• Partners should complete the management responses to issues raised within two to three weeks.

7.3.5 Partner financial reporting and transfers of funds Partner financial reporting is a key control to demonstrate the accountability of each partner. The frequency of partner financial reporting and funds transfers should link to the results of the FAT. Funding is usually provided in advance, however, some partnerships are established on a reimbursement basis, with Sightsavers funding project work in arrears.

Partner financial reports are used for monitoring two key areas:

• Detailed reported expenditure for the period compared to budget and activities and funds transferred.

• Reconciliation of the month end financial position including review of controls such as bank reconciliations, bank statements and petty cash counts.

Sightsavers expects the monitoring of the financial position to form part of a partner’s internal monitoring activities but Sightsavers staff will play a key role in reviewing the partner financial reports and further transfers of funds, incorporating the following stages:


Step Partner financial report review and funds transfer process

Preparation • Maintain a list of all partners/projects and record for each month end when a return is due

Timetable • Issue a timetable to partners a week before month end indicating deadline for submitting reports

Submission • On receipt of report tick off on the checklist of reports due, acknowledge receipt and explain that any review questions will be sent later.

Review • Finance Officer should undertake a thorough review of the report, document and file for audit purposes. The review should follow the checklist in Appendix 4 of this framework, which should be filed with the partner report.

Raise and resolve issues

• Return should be discussed with the relevant member of programme staff to share information and ensure that the financial return reflects known developments with the project(s) concerned.

• Contact the partner to resolve any queries and ensure evidence on how queries have been resolved is kept.

• File hard copy reports.

Arrange funds transfer • The FSSM/FO and the responsible PM/PO should propose and agree the next transfer in the light of the forecast, the latest financial position per the return and known activities. This should be entered onto the Proactis system.

• The proposed transfer must be approved by the AD/CD using Proactis.

• A letter drafted by a member of programme staff should be sent to the partner advising of the transfer to be made. This should include a brief explanation of the planned activities that the funds transferred are intended to cover.

• The partner should acknowledge receipt of funds when this has occurred (by letter or email) and Proactis should be updated to reflect this.


7.3.6 Partner budgets A budget is a financial representation of how much the proposed project activities will cost. Partners are responsible for the implementation of budgeted activities and for developing the budget, but Sightsavers should support partners with the development. Key considerations in project budgeting are outlined below.

Step Project budgeting

Preparation • Use the experience from similar projects (actual spend, not just previous budgets) to guide future budgeting for the project.

• Identify the planned programme activities for the duration of the project.

• Decide on the budget format. Some donors require budgets to be prepared in their own formats. If this is the case it is much easier if the partner can build up their budget in this format.

• Also be aware of donor currency for budgeting and agree on appropriate exchange rates.

Activity based budgeting

• Break down the programme activities into their component parts and write a description of each item (such as ‘per diem for facilitator at training course’).

• Record the unit cost that will be used to budget for each item (for example, $20 for per day for the per diem).

• Determine the quantity of units for the activity (for example, 5 days, being the number of days that the facilitator will be attending the training course)

• Calculate the budgeted cost usually via the formula in the spreadsheet. (In the example given here, the budgeted cost of per diems for the course facilitator would be $100).

• Take account of any expected change in unit costs over the project period for example due to inflation.

Eligible costs

• For government funding and other institutional contracts, the FSSM/FO must be aware of any restricted or ineligible costs, i.e. costs the donor won’t fund or items which must be sourced from certain countries. This may affect costs in the budget.

General points

• The project budget and how much of this will be funded by Sightsavers should also form an important part of the MoU

• A spreadsheet is typically used to develop project budgets. It is very easy to over-write a crucial formula or enter an incorrect amount in a spreadsheet and, for this reason, budgets must always be double-checked by someone who has not been involved in the detailed preparation.

• If a partner does not have a “chart of accounts” for the projects in place, country finance staff are encouraged to work with the partner to develop one.


7.3.7 Separate partner bank account for Sightsavers funds Sightsavers’ standard approach for partners is to establish a separate named Sightsavers bank account. This is not always possible. In situations where it is usually impossible to establish a separate Sightsavers bank account or in the case of one off activity, the FSSM must get an approval from the RFSSM. It is important that the compensating controls are clearly identified and evidence of this consideration and approval should be retained with the project planning documents.

7.4 Sightsavers’ internal project expenditure monitoring

• All expenditure related to a particular project, regardless of whether this is local expenditure, head office procurement or any other type of expenditures will be coded to a unique project code, partner code, fund code and relevant cost centre in GAS. Finance staff should use “Advanced Inquiry” to extract information from GAS on a monthly basis to review.

• Programme and finance staff must work together in monitoring progress on project expenditure. Programme staff should verify that actual expenditure is in line with the budget using reports provided by the finance staff. Queries should be raised and resolved for any variances. A checklist of all the monthly tasks around the preparation and review of financial information should be maintained, with each task being signed off by the responsible person.

• Programme staff must ensure they are receiving monthly Project Expenditure reports from their finance teams in a format which meets their requirements.

• Examples of the types of checks that should be undertaken by PMs and POs are:

Key project expenditure review questions

Notes

Is there any expenditure against projects which have not yet started, have already finished or which due to funding gaps are not currently in forecast?

If so these should be investigated with the FSSM to identify and resolve the problem. Reference to the period covered by the MoU should be made.

Is year to date expenditure in line with full year forecast on a project by project basis?


Key project expenditure review questions

Notes

Is current month expenditure on a project in line with expectations given monthly transfers to partners, and Sightsavers’ direct project expenditure and procurement activity in the month?

Variances to expectations must be queried with the FSSM as they could indicate errors such as: a miscoding, a duplicate payment or in extreme cases a fraudulent payment.

Are all transfers to partners identified from the accounting system backed up by receipt notifications from the partner and has the partner provided a financial report outlining their expenditure against the transfers received?

If a partner is not providing financial reports to the agreed timetable, further funds transferred must be held back until this is rectified

Has expenditure been cross referenced to the Financial Management Framework to judge whether there is a danger of under or overspending compared to the full year forecast with particular focus on secured restricted funded amounts?

Any issues relating to actual expenditure of secured restricted funds should be raised up with the Fundraisers and PPR team as early as possible because it may mean we are breaking contractual arrangements with the donor or that we need to negotiate carrying forward funds to the next year.



Do

• Ensure that all Sightsavers’ projects are supported by a PFA. Ensure that the PFA is approved by the right level of authorised signatories – CD/AD/RD

• Make sure Finance and Programme staff work together on aspects such as partner financial reporting and visits.

• Ensure project expenditure is closely monitored by the Programme staff- CD/AD/RD and Programme staff

• Ensure GAS is the single source of truth for financial reporting and any excel or other format reports are reconciled to GAS.

Don’t

• Start a project without an agreed PFA.

• Fail to follow up on variances between recorded expenditure in GAS and expected expenditure for each project.


8. Procurement and assets This chapter explains key aspects around managing our procurement and assets.

8.1 Sightsavers Global Procurement Policy and Guidelines

In 2010 a new Global Procurement Policy and Guidelines were produced and approved by Council. These are available on Iris (https://iris.sightsavers.org/Pages/Employee-Support.aspx) and are key documents for everyone involved in procuring goods or services on behalf of Sightsavers and their partners to understand and refer to. The Global Procurement Policy sets out Sightsavers procurement principles, the procurement process and authorisation thresholds and responsibilities. The accompanying guidelines provide detailed guidance specific to overseas offices and UK/Europe offices. They cover key areas such as ICT, vehicle and travel and commodity procurement. Local procurement in overseas offices is also covered by the guidelines. All staff involved in procurement at any level must familiarise themselves with the policy and guidelines. As set out in the policy and guidelines and in accordance with the Global ICT Security Policy no ICT hardware or software should be obtained/purchased/installed by anyone at any time without the prior consent of the ICT Manager. With regards to vehicle procurement the policy and guidelines set out the following requirement: The Programme Procurement Team are the organisational experts in the field of vehicle procurement. They have established contacts with key suppliers as well as the latest information on suitability of vehicles and pricing. The team should be involved in every vehicle purchase from the very start of the procurement. The Procurement Policy and Guidelines apply to construction as well as the procurement of goods and services.


8.2 Delegated authorities

The following delegated authority structure should be applied for all procurement activity within Sightsavers:

Delegated Authority for approval of purchase orders/payments

Role Approval Limit

Country/Area Directors and other Cost Centre Managers who do not report directly to an SMT member

£10,000

Regional Directors/Other non SMT directors and Cost Centre Managers reporting to an SMT member

£20,000

SMT member £50,000

Chief Executive Officer £250,000

Treasurer >£250,000

Country level payroll journals should be approved by AD/CD/RDs regardless of value. Additional technical approvals will be required for certain types of expenditure as per the Procurement Policy/Guidelines. 8.3 Procurement taxes

It is Sightsavers’ policy that the organisation complies with the laws for each of the countries in which it works. This includes compliance with taxation provisions, registration requirements, employment law, social security and pension acts and other relevant laws. This includes procurement taxes such as those outlined below:

Tax Details Import Duty Most offices have obtained exemption from this duty and

the Global Procurement Policy provides more details on this. In particular the policy defines that facilitation payments are not permissible.

Value Added Tax (VAT)

VAT is a sales tax (TVA is also similar to this). It arises on outputs (sales or other taxable supplies) and inputs (purchases). This can be a complex area for charities like Sightsavers that do not usually carry out much trading activity but nevertheless have to pay input VAT on some purchase categories. Much of this VAT is not recoverable. However, legal registration and investment programmes in some countries come with benefits like VAT exemptions.


Tax Details Withholding Tax Some offices have to account for the withholding tax on

professional payments (such as audit fees) or rental payments. The FSSM/FO should ensure that such tax payments are deducted and accounted for within the appropriate deadlines.

8.4 Management of tangible assets

Tangible assets are physical items used in the course of Sightsavers daily activities. Fixed assets or ‘capital’ items are generally high value items that have a useful life lasting more than one year. Examples of fixed assets are vehicles, furniture and computers. Fixed assets should be kept securely and maintained to ensure they are fit for the required purpose. Key responsibilities in respect of fixed assets are as follows:

Key responsibilities in management of assets

Details

Allocation of asset reference

Fixed assets should be allocated a unique asset reference and this should be recorded on the asset concerned.

Fixed asset register The unique asset reference should also be recorded in the Fixed Asset Register, along with other details of the asset concerned including cost, location, condition etc. The HH Finance Team maintains a central register of all vehicles. AO/CO/RO must inform the team of any vehicle additions and disposals and submit the required paperwork.

Physical check Regular physical checks on all fixed assets should be initiated by the AD/CD/RD. This should provide the opportunity to confirm existence of recorded assets and identify any that are in poor condition that may require repairing or scrapping.

Insurance Adequate insurance cover should be obtained for all fixed assets

Maintenance The AD/CD/RD should delegate responsibility for maintenance of fixed assets. In particular certain office equipment may require annual maintenance and vehicles should be serviced according to manufacturer’s recommendation and the extent and nature of use.

Disposal Any disposal of fixed assets must be properly authorised by RD or UK Director. FSSMs must ensure that HH Finance is informed of any additions and disposals of fixed assets as part of the month end checklist.


8.5 Monitoring of equipment transferred to partners

In order to ensure that the objectives of the project are being met and, for example, that equipment is not sitting idle for want of parts or maintenance, it is important that appropriate follow up and monitoring of the use and continued functioning of this equipment over it’s useful economic life is undertaken by Sightsavers.

Country/Area and Regional Offices should maintain a record of equipment transferred to partners and should check these items as part of their routine programme monitoring visits.



Do

• Understand and refer to the Global Procurement Policy and guidelines.

• Inform HH Finance and the RFSSM on any changes to fixed assets.

• Ensure that all fixed assets are covered with adequate insurance.

• Check actual fixed assets against the registers on regular basis.

Don’t

• Purchase or install any ICT hardware or software without consent from the ICT manager.

• Start the process of procuring a vehicle without the involvement of the Programme Procurement Team.

• Dispose of any fixed asset without approval from RD or SMT.

• Forget to keep the local asset register up to date for all fixed assets (not just those that have been capitalised).


9. Internal and external audit This chapter explains key aspects of managing our internal and external audit.



Audit Committee • To consider the appointment, and assess independence, of the external auditor.

• To approve the internal audit programme. • To review internal and external audit reports and

management letters. • To consider management’s response to any major

internal or external audit recommendations.

Head of Internal Audit and Control

• To undertake and report on a number of internal audits during the course of each year in accordance with the internal audit programme approved by the Audit Committee and the CEO.

Director of FP • To approve the appointment of all external auditors on the recommendation of AD/CD/RDs.

Financial Controller • To manage the global external audit process including issuing of the timetable and terms of reference for auditors, preparation of audit material ahead of audit fieldwork, coordinating the liaison with the global external auditors and preparing the financial statements.

• To review recommendations of AD/CD/RDs on the appointment of external auditors.

Head of Internal Audit and Control and Regional Finance Managers

• Support AO/CO/ROs to comply with the global external audit timetable.

• Review and follow up on recommendations from AO/CO/RO audits.

• Collate reconciliations of balances in local accounts to GAS.

• RFSSMs to ensure that the HIAC is provided with RFSSM visit reports.

• Ensure donor audits are completed in accordance with donor’s requirements.


• Ensure the Sightsavers external audit tendering process is complied with.



• Ensure that the AO/CO/RO complies with the global external audit timetable and provides any information requested from head office.

• Ensure they are available during the external audit and respond to any issues raised by the auditors.

• Ensure the financial statements have been reviewed and agreed ahead of the external audit fieldwork.

• Ensure external audit management letters are reviewed and acted upon.

• Ensure that the requirements of donor audits are complied with and understood by all relevant staff and partners.


• Ensure financial statements including trial balance, income and expenditure reports and balance sheet are prepared and reviewed in advance of the auditors field work.

• Ensure information requested by local or UK office is provided as quickly as possible.

• Ensure donor audits are completed in accordance with donor requirements and that the RGRO, RFSSM, PPR and HIAC are kept up to date with progress and any issues raised.

Fundraising teams • Ensure they are in close liaison with the AO/CO/RO before and during donor audits on process and findings.

9.2 Audit Committee

The Audit Committee is an official sub-committee of Council made up of trustees and non-trustee members who have particular expertise in audit related issues. The Committee meets three times a year and among other responsibilities reviews and approves plans and reports produced by the HIAC.

The Audit Committee provides the HIAC with unrestricted access to all the records, personnel, property and operations of Sightsavers, for the purpose of undertaking audit procedures.

The terms of reference for the Audit Committee are included in the ‘Overview of Sightsavers’ Governance’ document which is available on Iris - https://iris.sightsavers.org/Docs/An Overview of Sightsavers' Governance.doc.


9.3 Internal audit

Sightsavers has established an internal audit function to provide independent assurance to Council and SMT regarding the internal control framework, and operation of risk management strategies set out in the risk log.

9.3.1 General internal audit process The objectives for internal audit can include providing assurance on the following:

• The operation of risk management strategies • The reliability and integrity of information and safeguarding of assets (core

controls). • Compliance with policies, plans, procedures, laws and regulations. • The economical and efficient use of resources. • The accomplishment of established objectives and goals for operations or

programs.

The HIAC reports to the chair of the Audit Committee (a trustee) and the Chief Executive.

The HIAC prepares an annual plan of work each year based on a number of factors including coverage of risk management strategies, what has been audited in recent history, areas of concern etc. This comprises both thematic audits and geographic audits, including focus on specific country offices.

Internal Audit Process – General

Details

Set up terms of reference (TOR) for the system under review

This should cover aspects such as timetable, scope, risk management. Agree the TOR with the relevant manager

Ascertain and document the system and controls

Walkthrough the system to confirm what has been documented

Evaluate the controls Ensure they are adequate and consider whether risk management strategies are operating

Additional compliance tests

Where necessary carry out additional compliance tests to confirm operation of the relevant controls in practice

Discuss risks and issues identified

Discuss with the relevant manager and agree reporting points. Draft an internal audit report and action plan.


Internal Audit Process – General

Details

Management agreement The relevant manager should agree the report and complete a management response in the action plan to the points raised

Audit follow up The HIAC also coordinates the follow-up on the implementation of internal audit recommendations.

The UK external auditors may place reliance on internal audit procedures and as such it is important that electronic working papers are retained to back up findings reported. The working papers should be sufficiently detailed to enable the external auditors to re-perform a test if necessary.

9.3.2 Overseas programme office audits Overseas programme offices are included in the audit plan following the risk assessment exercise referred to above. Specific factors considered for overseas programme offices include the date of the last audit visit, funding profile, office capacity etc. The approach in respect of programme office audits is similar to the thematic audits. However, the scope is broader to take account of the fact that visits happen less often.

Typically the TOR includes the following broad topics (although other aspects are also covered depending on time available and other factors specific to each country office):

• Compliance with the Financial Framework • Compliance with the Partnership Policy • Security of staff and reputational risk • Compliance with the Procurement Policy • Government funding

9.4 Regional Finance and Support Service Manager visits

There is additional ‘internal audit’ related activity taking place in Sightsavers which should also be noted. In particular, RFSSM visits to AO/COs involve an element of checking and testing. Guidelines for these visits are in place in terms of the process to be adopted, what should be reported, timescales, working papers etc and these have been circulated to the regions. A summary of key findings is submitted to Audit Committee each quarter.


9.5 Statutory audit

Sightsavers’ policy is that all offices should be subject to an annual external audit. In the UK and some other countries this is also a legal requirement. Any statutory requirements for audit for each international programme and funding office should be confirmed with the local external auditors. It is the responsibility of each AD/CD/cost centre manager and FSSM (supported by the RFSSM) to ensure that these are complied with.

External auditors for offices other than the UK are appointed by the DFP on the recommendation of the AD/CD/RD. The UK external auditors (who sign off Sightsavers’ global financial statements) are re-appointed annually by the members of Sightsavers (effectively Council, on the recommendation of the Audit Committee). All external auditors are subject to a five year service and price review and a retender every ten years as a minimum (see tender process guidance in Appendix 2)

Specific terms of reference have been established for audits of Sightsavers’ AO/CO/ROs, which are detailed in Appendix 2. The scope is wider than a routine audit to enable Sightsavers to obtain greater value from the financial audits carried out.

The results of the overseas office audits are reviewed by the UK external auditors and so it is critical that the global audit timetables allow for completion of the office audits in time for this review. The exception is India where local regulations require a year end of 31 March so a different audit timetable has to be adopted. An audit timetable is circulated each year by the FC.

Broadly, the expected process for the external audits is as follows:

External Audit Process

Details

Planning meeting

The planning meeting is held with the external auditors before the year end to update them on any developments and agree fees and the audit timetable. In the UK there is a requirement for the auditors to present a detailed planning document to the Audit Committee, once the initial planning meeting has taken place.

Audit fieldwork The audit fieldwork should take place in accordance with the agreed timetable. The FSSM must complete the draft accounts and working papers by the audit start date. Audit preparations are a top priority for the FSSM at the start of the year and work plans should be established accordingly.

Accommodating the audit team

The audit team must be situated in a suitable area and have access to all relevant documents. It is useful to ensure that Sightsavers’ staff are on hand to deal with any queries arising. The FSSM must be available at all times during the audit. The AD/CD/RD must also be on hand at several pre-agreed times.


External Audit Process

Details

Adjustments made

Any adjustments made must be promptly communicated to the HH Finance Team in order that they can be reflected in the Sightsavers’ global accounts.

Close out meeting

At the end of the fieldwork part of the audit, there should be a closeout meeting with a senior member of the audit team, the AD/CD/RD and FSSM. In the UK this will involve the DFP and the FC as a minimum. Any issues of concern and potential adjustments should be discussed at this close out meeting. This is also a good opportunity for the auditors to advise of matters that will be reported in the management letter and to give Sightsavers officials an initial chance to comment on these. It is also sensible to reiterate the deadlines for receipt of draft accounts and draft management letter from the auditors.

Draft accounts and management letter

Once draft accounts and management letter have been received, these should be reviewed in detail by the FSSM and in overview by the AD/CD/RD. Management responses should be drafted for the recommendations made by the auditors in their management letter. These together with any comments on the draft accounts should be promptly advised to the external auditors.

Final signed accounts

Once final accounts have been signed by all relevant parties, they should be despatched promptly to the UK in time to meet the pre-advised deadline. The final management letter should also be copied to the RFSSM and HIAC. Submission of a reconciliation between the local accounts and GAS is also required and should be prepared by the FSSM.

Finalising UK Audit process

When the UK audit process is nearing completion, accounts and UK management letter are reviewed by the Audit Committee. Comments from this Committee are addressed as necessary. A key stage is the technical review by the external auditors and changes after this has taken place should be kept to a minimum.

Approval of accounts

The final accounts are approved at Sightsavers’ Annual General Meeting. An Annual Review document is also prepared which summarises the key messages contained in the accounts, and presents the information in a more user friendly way for fundraising purposes.

Post audit sharing of issues

Once the main global audit is complete, the HIAC prepares an analysis of matters arising in all audit management letters and shares this with the Global Finance Team and Audit Committee. A similar schedule of internal audit issues is also prepared and circulated.


9.6 Donor audit

Many donors require the audit of project expenditure to ensure expenditure has been incurred and to assess compliance with rules on areas such as procurement, travel, changes from budget, visibility, staff costs/time records, record-keeping etc.

The key message is clear: Get it right at the planning stage. Avoid possible repayments and reputational damage with the donor that could affect Sightsavers globally, if an unsatisfactory audit takes place. Partners and Sightsavers staff must be made fully aware of contract and audit requirements. Once mistakes are made they are not easily rectified.

Donor Audit Process

Details

Before the audit

Preparation of audit evidence

The audit evidence should be organised, clear and well presented, and all primary, supporting documentation should be made available. This should be considered at the point of processing the transaction and filed alongside the journal vouchers.

Audit file A clearly labelled, well-organised audit file should be compiled. The file should help the auditor to understand the project and to establish the audit trail. All specific requests for information from the auditor should be met but generally the audit file should include:

• Signed agreement with the donor plus any modifications; • Agreed budget with the donor plus any modifications; • Agreements with partners and copies of CATs and FATs (if

applicable); • Narrative reports submitted to the donor; • Financial reports submitted to the donor; • Reconciliation of the donor reports to Sightsavers’ accounting

system • Working papers demonstrating, where applicable, how partner

reports have been utilised to prepare donor reports • Project monitoring reports • Any other documentation relevant to the contract e.g.

correspondence with the donor, partner transfers etc

Pre audit internal testing

Some sample testing performed internally in advance of the audit may be considered helpful in order to locate any issues in advance. If an internal audit is scheduled in advance of an external audit review, this will be included in the scope.

During the audit


Donor Audit Process

Details

Staff availability Ensure key staff are available during the audit and can give the auditor an appropriate amount of their time.

Cooperate Proactively manage the audit process to ensure that auditors are given all the documents they have requested before they leave the office or before the report is produced.

Scope of the audit

The scope of the audit fieldwork will depend on the donor’s requirements but will typically include examination of:

• Sample of transactions charged to the project • Purchasing documentation (e.g. quotes, invoices, tender

documents, contracts with suppliers, purchase orders etc)

• Staff costs (e.g. timesheets, payrolls, payslips, contracts etc)

• Cash and bank account reconciliations • Assets purchased and documented under the contract

(including physical confirmation) • The adequacy of controls over the security of assets • Proof of transfer to partners

Post audit

Donor requirement

The auditors will be required to report on specific matters under the terms of the donor’s contract. The auditors must always provide Sightsavers with a draft report for discussion and amendment before the final report is distributed. Generally, the auditors’ report will conclude on the following:

• Whether the project accounts properly reflect the project costs incurred in the execution of the project

• Any instances of non-compliance with the contract terms • Proposed audit adjustments or details of any ineligible

expenditure. • Recommendations for improvements in controls and processes

and Sightsavers’ response to these (a ‘management letter’)

Ineligible expenditure

If the auditors identify any ineligible expenditure, this should be immediately reported to the fundraising team. They may take a different view and can discuss this with the auditor in order to minimise ineligible expenditure.

Internal circulation

The draft audit report must be circulated to the fundraiser, RFSSM and PPR before it is agreed and submitted to the donor. After input has been obtained from these parties the AD/CD must authorise the management response and action points before submission to the donor. An electronic copy of the final report must also be sent to the fundraiser, PPR and the HIAC.


Donor Audit Process

Details

Post project audits and retention of records

Some donors retain the right to audit several years after the project has finished. Consequently, safe retention of records is vital. For example, the EC have the right to audit the project records up to seven years after submission of the final report which can be up to 13 years from the start of the project. The donor requirement for retention of records should be identified at an early stage and appropriate arrangements for storage made both during and after the project



Do

• Maintain internal audit working papers to enable the external auditors to re-perform a test if necessary.

• Set up an audit file that is organised, clear and well presented prior to audit.

• Ensure that key staff are available during the audit and can give the auditor an appropriate amount of their time.

• Ensure the AD/CD/RD is involved in the audit process.

Don’t

• Forget to share draft audit reports on government funded projects with the HIAC as well as fundraiser and RFSSM.

• Forget to store records for government funding contracts securely and for the required period of time.

• Forget to tender external auditors at least every five years.


10. Financial records and accounting procedures This chapter outlines the requirements for maintaining and retaining accounting records and internal reporting requirements.



Financial Controller • To approve new UK GAS codes and users.

Group Accounting Manager

• Oversee the process of submission and review of month end checklists from AO/CO/ROs.


• To ensure all vouchers are reviewed, checked to supporting documentation and authorised.

• To ensure there is adequate segregation of duties around the entering and posting of transactions to GAS and the preparation and review of month end checklists.

• To undertake a thorough review of the month end checklist, bank statements and voucher files and to submit signed checklist to HH Finance Team according to timetable.

• To authorise new supplier code set up request.

Finance Officer/Manager • To ensure all fields on journal vouchers are correctly filled in, entered to GAS and have appropriate supporting documentation.

Regional Finance Managers

• To ensure all overseas transactions are completed to timetable.

• Oversee the process of submission and review of month end checklists overseas offices.

• To approve new overseas GAS codes and users.

10.2 Chart of Accounts

10.2.1 Account codes An organisations’ chart of accounts sets out the common coding for income, expenditure and balance sheet items and facilitates the production of cross-organisation reports such as the monthly and yearly management and financial


accounts. Sightsavers has consistent account codes used throughout its offices. The full chart of accounts can be found at https://iris.sightsavers.org/Docs/Full Chart of Account Codes.xls. The first one or two digits of the code indicate the category of code as set out below:

Account Prefix Account Category

0*** Income

1*** Staff Costs

2*** Travel Costs

3*** Office Costs

4*** Fundraising Costs

5*** Asset Acquisitions

6*** Programme Costs

7*** Balance Sheet – Assets

8*** Balance Sheet – Liabilities

9*** Funds

10.2.2 Analysis codes Analysis codes represent additional fields which provide useful information mainly for analysing expenditure in a variety of ways such as by cost centre or project. The current list of analysis codes together with the accounts they should be used with are as follows:

Analysis Code

To be used with

Notes

Cost Centre All account codes

This code is very important for expenditure lines as it will inform which country or department a particular cost is charged to and will be monitored against financial plan and forecast.

Partner All expenditure codes only

Sightsavers internal management costs are tagged with a “0” partner code. All project expenditure relating to a partner should be tagged with a unique partner code which also indicates the country eg. KEN001 is a Kenya partner code. Project expenditure not relating to a partner should be tagged with “SSI” partner code


Analysis Code

To be used with

Notes

Project All expenditure codes only

The project code is a very important code for fundraising, fund management and monitoring purposes. Each country has a unique two digit prefix indicating the region and country e.g 55 = West Africa, Mali. Sightsavers management costs are tagged with a “0” project code except where a project code is used to collate global costs relating to, for example, the annual meeting or costs of an IT project.

Theme All expenditure codes only

Theme codes are used for analysing costs across the strategic themes.

Funding Activity

All expenditure codes only

This code is used for analysing expenditure in more detail for various purposes such as fundraising campaigns and donor reporting.

Donor Fund All account codes

This code should be used to track income and expenditure from a particular donor agreement. All income and expenditure should be coded to the relevant Fund Code given in the FMF.

EV (Employee/Vehicle)


The EV code allows expenditure incurred by staff or in relation to a vehicle such as travel costs to be analysed by individual.

VAT (Value Added Tax)


This code is used by head office Finance to record VAT rates on goods and services procured.

10.3 Accounting transactions

All offices use a set of standard accounting transaction types (journal types) when inputting data to the GAS system. These transaction types are country specific and can only be used by staff from that office and head office system administrators. Sightsavers has standard template paper journal vouchers for each transaction type.

Each journal voucher has a unique transaction reference to identify the office entering the transaction and to give a sequential number with the aim of preventing transactions being entered to GAS twice or being missed altogether. Missing or duplicated entries can just relate to human error but can also indicate irregular or even fraudulent payments. Every voucher must be authorised before being entered to the system and it is crucial that the person reviewing the month end checklist, reviews the journal files to check all have been correctly posted.


Pre-numbered journal vouchers should be used to ensure a complete sequence of vouchers. These vouchers must capture the following information:

• Full details for the transaction so that the authoriser or someone viewing the transaction in GAS can understand the nature of the transaction. For payments the payee and the items/services procured should be indicated. Descriptions should provide information that is not available from the coding. For example “Taxi fare for CD” is a useless description as the account code and EV code will tell you that. The description should indicate information such as the purpose of the trip and the company used.

• Completion of all required GAS data entry fields which includes account and analysis codes, accounting period and date.

• The journal must be signed by the person completing the voucher • Evidence by way of signature for review and authorisation of the journal. All

vouchers must be reviewed by the CD/RD/AD. • Every journal voucher must have supporting documentation attached and when

the authoriser signs the journal they are indicating they have checked and agreed this supporting documentation.

The types of accounting transactions input to the system are as follows, using Sri Lanka as an example:

Journal Code

Transaction type GAS Unique voucher reference (example)

Notes

SRB1P Bank Payments from the main bank account

SRI-B1P001 This is principally for cheque payments so each unique voucher should represent a unique cheque number.

SRB2P Bank payments from a 2nd bank account if applicable

SRI-B2P001 As above

SRB1R Bank receipts from the main bank account

SRI-B1R001 All cash receipts to the office should be banked in addition to cheque receipts.

SRB2R Bank receipts into a 2nd bank account if applicable

SRI-B2R001 As above

SRP1P Local currency petty cash payment

SRI-P1P001

SRP2P Foreign currency petty cash payment

SRI-P2P001 Foreign petty cash should be kept to a minimum and any significant amounts banked.


Journal Code

Transaction type GAS Unique voucher reference (example)

Notes

SRTFR Transfer SRI-TFR001 This voucher is typically used for transfers between bank accounts by way of a bank letter.

SRGJN General Journal SRI-GEN001 General Journals are used for other transactions which are mainly entries not impacting cash or bank and corrections.

10.4 General Journals

General Journals represent an important area for control in an office. Bank and Petty Cash vouchers are usually well understood and monitored but General Journals are just as important to review as they can hide erroneous or inappropriate transactions. The main types of transactions that we expect to see on General Journals are as follows:

Transaction types

Description

Travel advance retirements

There are 3 stages to a travel advance.

1. When a person takes a travel advance from the office this will be recorded on a bank payment voucher coded to the individuals advance account.

2. When the excess cash is returned to the office this will be recorded on a bank receipt journal which partially clears the balance on the persons advance account.

3. When the person submits their expenditure form the accounting entry is to charge the relevant expenditure codes and clear the individuals advance code. There is no movement of cash/bank balances in this 3rd transaction, so a General Journal is used.

Payroll All salary journals are entered into GAS in a consistent and standard format across all offices. The correct procedure is to post the payroll costs through balance sheet control accounts as a separate journal from the actual payments from the bank. There are two reasons for this:

• The gross salary expenses relating to an individual do not equal the actual bank payment.


Transaction types

Description

e.g. statutory deductions have to be made e.g. tax and national insurance or to reflect loan repayments.

• The monthly salary calculations and journal will be completed prior to the date the salaries are paid.

Bank Charges Bank charges are recorded when the bank statement is received and is not instigated by a cheque or cash payment so a General Journal is used for this purpose.

Accruals At the year end offices are asked to accrue expenditure which relates to the current year but will not be paid until the following year. The journal does not relate to an actual payment so a General Journal is used.

Prepayment A prepayment entry is made when a payment has been made in advance which covers a period running into the following year, e.g. annual rent. At the year end an entry is made to reduce expenditure by that portion which relates to the following year. The payment has already been made so a General Journal is used for this.

Correction of errors

A General Journal is typically used to correct an entry to the system which had errors. For example an amount or account could be incorrect or an entry could have been posted twice by mistake. It is very important that the AD/CD/RD or person authorising the journal understands the reason for this entry and that it is cross referenced clearly to the original entry.

Transactions other than those mentioned above would not normally be using a General Journal voucher so clarification should be sought where this is happening.

10.5 Transactions generated through Proactis eProcurement and eExpenses

Entries which relate to Proactis Purchase Orders/Invoices and Expenses are automatically generated in the SUN accounting system. The transactions will have been subject to online approval within the system and audit trail of these approvals is maintained. It is the approvers responsibility to undertake a thorough review of transactions in Proactis before approving including checking the purpose of the transaction, the amounts, the coding and the attached supporting documentation in the same way that they would when reviewing a paper journal voucher.


Purchase orders in Proactis generate three entries to the accounting system as shown below:

Stage in Procurement Process Accounting Period

Account Code

Commitments C Ledger

Accrual A Ledger

Actual A Ledger

Total A+C

Ledger

FMF

1. Purchase Order raised and fully approved (Commitment)

Jan-13 6251 10,000 10,000 10,000

2. Good or services receipted in the eProcurement system (Accrual)

Feb-13 6251 -10,000 10,000 0 0

3. Invoice Received and processed in the system (Invoice)

Mar-13 6251 -10,000 10,000 0 0

4. Invoice Paid (Payment) Apr-13 No entries to expenditure Account Codes at the point of payment.

Total YTD Jan-Apr-13

6251 0 0 10,000 10,000 10,000

If there are quantity or value discrepancies at any of these stages then further approval will be required in the system.

A cost centre manager needs to be aware of expenditure at the Commitments stage as well as at the accrual and invoice stage because these amounts are included within the Management Accounts and on the FMF.


10.6 Setting up a new account or analysis code

When an office requires a new account or analysis code they must submit a form to the Finance Systems team using the Service Desk portal. This will be authorised by the Systems Accountant or FC for UK codes and the RFSSM for overseas codes.

10.7 Accounting system users

Requests to have new users set up in the accounting system should be directed to the Systems Accountant for approval and the Head of Finance Systems will authorise UK users and the RFSSM will authorise overseas users. The AD/CD/RD or FSSM must inform the Systems Accountant when a GAS user is leaving the organisation to ensure their access is removed.

10.8 Month end procedures and checklist

The PPR team provides the SMT with Global Management Accounts.

• In order to provide these promptly all entries to GAS for a particular month must be completed by the 3rd working day after month end. At 5pm UK time on the 3rd working day the period on GAS will be closed.

• To ensure entries are complete and accurate it is best practice to enter transactions evenly throughout the month and not allow them to build up at the month end. This also reduces the risk if there is system down time at month end.

• In UK Finance a checklist is completed by the Finance Officer/Manager to ensure all month end tasks have been completed. This is split into two parts. Part A is a list of tasks, which must be completed by the 6th working day. Part B is a list of reconciliations, which must be completed by the 15th working day.

• AO/CO/RO completion and submission to HH Finance Team of a month end checklist is a key control around accounting transactions and entries to the accounting systems. It is the FSSMs responsibility to complete the summary of balances and subsequent sections of the month end checklist including all attachments supporting the balances and checklist. They need to sign off all the completed sections and attachments to confirm that the information provided has been reviewed and is accurate.

• It is the AD/CD/RDs responsibility to thoroughly review and authorise the work of the FSSM in order to ensure that efficient financial management controls are in place within their office. This must not be considered to be a simple sign off exercise. A thorough review of the checklist with the voucher folders for the month


and related bank statements can help identify serious errors or fraud. The AD/CD/RD can delegate this responsibility to the PM if they are absent at the month end to ensure that the timeline is complied with. However, in this case they MUST review and sign off this work on their return to the office.

• Detailed guidance notes for preparing and reviewing the checklist are included in Appendix 3 to this Framework.

• After reviewing the checklist the AD/CD/RD should sign off the approval section on the front page of the checklist. This confirms that they have reviewed and approved the checklist as a whole and that the information contained within it is correct. It also confirms that they are satisfied that the FSSM has completed and reviewed all relevant sections and has attached all relevant supporting documentation.

• The month end checklist should first be submitted to the RFSSM for review of accuracy, completeness and correct approval.

• The month end checklist must be submitted to the RO to allow for submission to the HH Finance Team by the 10th working day.

• Tests to verify the accuracy of checklist balances compared to GAS balances will be performed at the RO and by the HH Finance Team and explanations for discrepancies will be sought

10.9 Retention of accounting records

UK charity law requires the retention of records for six years after an accounting period. Transactions from all Sightsavers’ offices populate the Global Accounting System and as such the six year requirement must be observed in all offices. Where local requirements are more stringent, these should be complied with.

This requirement applies to paper records and also the ability to review electronic records. Records should be labelled, referenced and stored in a secure location. Precautions against fire and theft should be taken.

Note that some funding contracts may specify their own requirements for keeping records which may be more stringent than UK Charity Law. This is the case for the EC. These requirements may also apply to our partner organisations. It is extremely important that these requirements are noted and observed to ensure financial penalties are avoided.



Do

• Use Sightsavers chart of accounts and analysis codes.

• Complete month end processes to deadlines.

• Retain accounting records for six years after an accounting period.

• Pay attention to the fact that some government funding contracts may specify their own record keeping requirements.

Don’t

• Sign off the month end checklist without doing sufficient checking

• Archive accounting records in an unsafe area.


11. Appendices 11.1 Appendix 1: Sightsavers Legal Guidance Questionnaire

To be completed annually and when any major change in the legal environment takes place by each AD/CD/RD.

Legal Guidance Questionnaire Yes No Details

1. Legal advice

1.1 Do you have an independent, qualified advisor on legal matters (including employment)? If so give name and address.

1.2 Do you have an independent, qualified advisor on tax matters? If so give name and address

1.3 What in-house legal capability do you have? Please provide details of which areas of law the capability exists for (e.g. employment, tax, pensions etc)

2. Registration

2.1 Is Sightsavers registered with the government?

2.2 What is the registration number

2.3 Is there a date of renewal of registration and what is the date?



2.4 Is there an MoU with the government?

2.5 Is the MoU legally binding?

2.6 What benefits does this give us? • Exemption from income tax? • Exemption from VAT? • Exemption from import tax? • Rights to raise local funds? • Other – please specify

2.7 What are our responsibilities under this agreement?

• To have an annual audit? • To prepare reports on activities? • To provide details of partners? • To provide details of staff? • To provide copies of budgets? • To donate old assets to the government? • Other – please specify

2.8 Does the registration allow in-country fundraising?

2.9 By law how long do financial records have to be kept?

2.10 By law how long do employment records have to be kept?

3. Employment Law

3.1 Do you have a copy of the Employment Code of your country?



3.2 Has the employment code been reviewed for compliance?

3.3 What are the arrangements for ensuring up to date with any changes to relevant employment law?

3.4 Are there any non-nationals working in the office?

3.5 Do all your non-nationals have working visas?

3.6 If not, have we applied for these working visas?

4. Contracts of Employment

4.1 How many people work from your country offices (including staff operating in other countries of the region but managed from your office)?

4.2 Is there anyone who works regularly in your office who does not have written an employment contract? Please give details, if yes:

4.3 Are all contracts for indefinite periods?

4.4 If not, what fixed term contracts are in place and for whom?

Name

Contract Length Employed Since



4.5 What termination payments are payable by law on contract termination:

• what are the statutory requirements for termination payments.

• what does your handbook or contract of employment commit to in terms of termination payments, if different from the statutory regulations.

• what is your custom and practice in the case of termination payments.

4.6 Are all staff aware of the following: • Disciplinary Process • Code of confidentiality • Conflicts of interest • Employment Procedures

4.7 Is there a staff handbook for distribution to staff?

4.8 When was the last Pay Benchmarking Survey carried out and what date was it applied from?

4.9 Are staff (excluding temporary staff) paid by cheque / bank transfer?

4.10 Are all staff paid in local currency?

4.11 Are all staff provided with a payslip?



5. Tax Law

5.1 Is income tax payable by members of staff?

5.2 Do you have a copy of the rules for calculating tax?

5.3 Is tax deducted from salaries?

5.4 If so, how often is it paid over to the Revenue Services?

5.5 Do non-nationals pay tax? And on what income?

• Salary costs • Housing costs • Tuition fees for school children? • Medical costs? • Work expenses? • Other – please specify

5.7 Is there a complete record held of salaries / benefits received by all staff?

5.8 Does this include details of benefits paid from the UK to foreign-held accounts?

5.9 Is the office exempt from paying tax under local charities law?

6. Provident Funds / Pension Schemes



6.1 Is there a national pension scheme to which Sightsavers contributes?

• What % salary does Sightsavers pay? • What % of salary does the employee

contribute?

6.2 If not, is there a Sightsavers provident fund open to all staff?

• What % salary does Sightsavers pay? • What % of salary does the employee

contribute?

6.3 Is the provident fund regulated by external law?

6.4 Does the fund have to be registered with the regulatory authorities?

If so have we done this?

6.5 Is there a full document explaining how the fund will work, shared with all staff?

6.6 Are all contributions paid into an account? (one or one per employee?)

6.7 Can these funds be used by an employee before leaving Sightsavers? If so under what circumstances?

6.8 Please provide details of any other end of service/gratuity schemes.



7. Banking and Currency

7.1 What bank accounts do we have?:

Bank Account no. Currency

Purpose

7.2 Who are the signatories to these accounts? (insert extra rows if differs between the various accounts)

Name Position

7.3 Detail the signing limits and restrictions in place on the bank mandate?

7.4 Does the bank have an up to date version of the Sightsavers generated bank mandate?

7.5 Is the latest complete Sightsavers mandate in line with the bank’s own record of signatories?

7.6 Are there any restrictions on changing currencies in country?



7.7 What is the upper limit for petty cash holding in the office?

7.8 What is the upper limit for foreign currency petty cash in the office?

7.9 Do you have access to internet banking for read only purposes?

7.10 Have you confirmed with your bank that internet banking payments are blocked on your accounts?

8. Audit and accountancy

8.1 Is there a local statutory requirement for office accounts to be produced annually?

8.2 Do these have to be signed off by an accredited local auditor?

8.3 Are there fixed requirements regarding format? If so please detail these?

8.4 Is there a statutory requirement to locally adopt any accounting policies which differ from Sightsavers policies?

8.5 Which member of staff is responsible for maintaining accounting records?

9. Money Laundering, Misuse of Funds and Fraud reporting



9.1 Are you and your team familiar with Sightsavers Money Laundering policy?

9.2 Are you and your team familiar with Sightsavers fraud policy?

9.3 Are your team aware that the fraud policy relates to projects as well as to Sightsavers offices?

10. Funding

10.1 Do you receive any funds other than those sent from HH? If yes, please give details.

10.2 Are you allowed to receive local funds under the terms of your registration?

10.3 Do you give receipts for all funds received?

11. Leases

11.1 Do you have leases for your offices?

11.2 When do these expire?

11.3 Has the lease been signed?

11.4 Are requirements regarding withholding tax on rental payments being complied with?

12. Insurance



12.1 Do you have insurance cover for the following?

12.2 Office building?

12.3 Office contents?

12.4 Cash in the office?

12.5 Cash in transit?

12.6 Employer’s Liability? (Please notes if this is required by law)

12.7 Public liability? (Please note if this is required by law?)

12.8 Group personal accident?

13. Licenses

13.1 Do we have software which was purchased locally? If so please give the details of the software?

13.2 Do we have up to date licenses for this software?

13.3 Have you informed the ICT Manager of any locally purchased software?

14. Health and safety



14.1 Do you have a copy of the health and safety legislation published in your country?

14.2 Is there a single contact for health and safety in the office?

14.3 Has a Health and Safety Risk Assessment been carried out for your office? Please note the date of the last assessment.

14.4 Have all identified actions on this assessment been completed?

14.5 Are you aware of the Global Health and Safety Policy, and have you implemented all the required elements of this Policy in your country office and operation?

15. Other agreements

15.1 What other significant agreements have been entered into with third parties?

16. Additional information

16.1 Please document any additional information relevant to legal compliance in your office. Add further lines where required.


11.2 Appendix 2: External audit arrangements

11.2.1 External audit arrangements – overseas offices

1. Audit arrangements and timings are agreed directly between the AO/CO/RO and the local audit office, but must be consistent with the international audit timetable issued by HH Finance. The scope of the audit is laid down in the Terms of Reference (see below) issued by Sightsavers UK. Audit fees should be negotiated by the AD/CD/RD each year, except for the year of appointment when the DFP will approve the fees following the tender process.

2. Standard formats for production of year end accounts accompany the Terms of Reference. Accounts should be prepared in the required formats by Sightsavers accounts staff prior to commencement of the audit.

11.2.2 Tender process 1. An external audit service and price review is conducted and documented

periodically, and at least every 5 years. If in our opinion audit and control review processes are not operating at appropriate level or the price is out of line with the work performed then we should retender. Regardless of this review, the service must be retendered at least every 10 years.

2. A timetable for retendering should be prepared highlighting the key events that will take place, such as (in no particular order):

• Issue of tender documents to participating local audit firms (see 9. below) • Deadline for submission of tender documents • Meetings with participating firms • Evaluation of tender documents (see 10. below) • Making the decision • Conveying the recommendation to the DFP

3. A copy of the timetable and audit tender document should be submitted in advance to the DFP/FC.

4. For the tender process to be worthwhile, it is expected that between three and four local audit firms are invited to participate, perhaps including the incumbent firm. Tender documentation should include the Terms of Reference.

5. The criteria for selection will place emphasis on “value for money” rather than the cheapest option. The table below shows the matrix that should be used in


making the assessment. Each audit firm should be scored against the different criteria.


Category Assessment Criteria Auditor 1 Auditor 2 Auditor 3 Auditor 4

Cost The thresholds should be set locally with reference to the tenders received. The score is between 1 and 5 as follows. 5 – cheapest cost 1 – most expensive

Qualifications 5 – At least 2 of the staff in the audit team must be chartered accountants with minimum of 5 years audit experience 4 – At least 2 of the staff in the team must be chartered accountants with minimum of 2 years audit experience 3 – One of the staff in the team must be a chartered accountant with minimum of 5 years audit experience 2 – Other qualifications in accounting with 5 years experience 1 – Other qualifications in accounting with at least 2 years experience

Firm Experience 5 – At least 5 years experience auditing international organisations including INGOs 4 – At least 2 years experience auditing international organisations including INGOs 3 – At least 5 years experience auditing international organizations not including INGOs 2 – More than 5 years audit experience 1 – Less than 5 years audit experience

Firm Reputation 2 – Linkage with an international accounting firm 0 – No linkage with an international accounting firm


Category Assessment Criteria Auditor 1 Auditor 2 Auditor 3 Auditor 4

Ability to form a working relationship

Country offices to provide a score out of 5 at their discretion following meeting with the auditor.

Audit approach Review the approach set out in the tenders and score them on the following basis: 5 – Addresses all aspects of the terms of reference and complies with auditing standards 4 – Addresses most aspects of the terms of reference and complies with auditing standards 3 – Addresses some aspects of the terms of reference and complies with auditing standards 2 – Address few aspects of the terms of reference and complies with auditing standards 1 – Addresses any number of aspects of the terms of reference, but does not comply with auditing standards

Specialist expertise Assign a rating from 1 to 3 based on specialist expertise or additional services available.


6. Once a decision has been reached, the recommendation should be forwarded to the DFP. This should be supported with a working schedule incorporating a table, indicating how each firm scored against the set criteria, with a summary showing the overall result and conclusion.

7. The DFP may refer back to the AD/CD/RD to seek clarification on any particular issue, should the need arise.

8. A letter confirming appointment to the selected firm will be issued and signed by the DFP. This will be posted to the AD/CD/RD, who will then send it to the selected firm.

9. The AD/CD/RD will write to the other firms involved in the tender process to inform them that they have not been successful, but thanking them for participating in the exercise.

11.2.3 Re-appointment of an external auditor 1. Re-appointment of external auditors will be made annually, in writing, by the

AD/CD/RD following the completion of the audit.

2. Re-appointment should not be seen as a foregone conclusion. The AD/CD/RD should review the performance of the auditors prior to confirming re-appointment, taking into account (amongst other things) the following:

a. Were the Terms of Reference met, including meeting the deadline of submitting audited accounts to HH?

b. Did the audit process run smoothly? c. Did the auditors maintain contact with you throughout the audit

exercise and was there good communication? d. Were the meetings held with the audit partner (to discuss the audit

process and findings) meaningful and useful? e. Did the auditors carry out their task in a professional manner?

3. If it is concluded that performance has been poor and they have not provided

value for money, assurances must be sought from the external auditors to improve the level of service in future years. If the AD/CD/RD is not satisfied, it may be appropriate to go through the Tender Process (again) before the five year cycle has been completed.

4. It is not envisaged that the AD/CD/RD will go through the tender process on an annual basis.

5. Should the services of the auditor be terminated, the AD/CD/RD shall confirm this in writing to the audit partner. A copy of the letter should be passed to the DFP.


11.2.4 Terms of Reference for the external audit A) Terms of Reference

These Terms of Reference should preferably be incorporated into the main Letter of Engagement (alternatively be included in a separate Letter of Engagement), to be signed by both the Regional / Country Director and the Auditors. The Terms of Reference should be discussed with the Auditor to clarify any issues before the Letter of Engagement is issued.

1. Where there is a local legal requirement for the office to undertake an external audit:

a) First and foremost, the external auditors should carry out such work that they need to do in order to be able to form an opinion on the financial statements.

b) The format of those financial statements may need to comply with local Government requirements.

c) In addition to a) and b) above, Sightsavers (UK) specifically requires the external auditors to undertake the work as listed below in section B (except where this work has already been undertaken in a). above).

2. Where there is no legal requirement for the office to undertake an external audit, then Sightsavers (UK) requires the external auditors to undertake the work as listed in Section B.

3. The scope of the audit is limited to the transactions directly processed by the office in question. Income and expenditure attributable to the office which is processed in Head Office (or elsewhere) falls specifically outside the scope of the audit. However, a note to the accounts may disclose these transactions if the management of the local office wishes to include them.

4. It may be a requirement from an official donor or a preference from local management that an audit is undertaken of a particular partner organisation. In this instance, the scope and timing of work for this audit should be discussed with the local audit office.

5. The audit should be completed in time for the signed, audited Financial Statements, Auditors’ Report and Management Letter to be presented to the Country Director, Regional Director, Financial Controller, Head of Internal Audit and Control according to the Global Audit timetable.

6. The Financial Statements and Management Letter will normally be presented in English. Where the primary set is in another language, an additional set must be issued in English.

8. All Financial Statements should be prepared in the currency of the local office.


B) Specific Sightsavers requirement to be included in the Terms of Reference

As noted in Section A of the Terms of Reference, Sightsavers (UK) specifically requires the following to be undertaken where it is not covered by 1a) and 1b).

a. A review of the accounting system and the completion of an audit so that an opinion can be formed on the following. These opinions should be separately stated in the Management Letter:

i. Whether the financial statements give a true and fair view of the state of affairs of the office as at 31st December.

ii. Whether the financial statements are a true reflection of the transactions during the year and have been prepared in accordance with Head Office requirements.

iii. Whether funds received have been properly recorded, verified and spent on Sightsavers’ business.

iv. Whether the onward disbursement of funds to partner organisations has been made in compliance with Sightsavers’ control procedures (ie. A signed protocol agreement should be in place for each project and the accounting and reporting requirements set out in the agreement should be complied with).

v. Whether the fixed assets as listed in the separate Fixed Asset Register are in existence and are in a reasonable state.

vi. Whether the insurance policies (for fixed assets and other policies) are current and adequate to cover Sightsavers.

vii. Where there is a specific requirement that an audit is undertaken of a particular Partner Organisation, the will include testing and evaluating controls around partner transfers and effectiveness of financial monitoring.

b. Preparation of a Management Letter, detailing any weaknesses found within the accounting system & internal controls and recommendations for corrective action. These should be graded in line with our standard internal audit gradings (Grade 1: significant weakness requires urgent attention, Grade 2: important issue but less urgent, Grade 3: other). Where no such weaknesses have been identified, a Management Letter should be issued to that effect. It is expected that any non-compliance with the Financial Framework that is found during the audit will be reported in the Management Letter.

c. The auditors should specifically certify whether or not the local tax regulations as prescribed by law have been correctly applied in respect of staff employed by Sightsavers in that office.


d. The auditors should test a sample of five month end checklists to confirm that they have been properly prepared and reviewed and include their conclusion in the Management Letter.

To assist in the smooth running of the external audit, the local Regional / Country office will:

e. Prepare a set of financial statements (to include an income and expenditure account, a balance sheet and a set of accompanying notes), adopting the format as shown below in section C.

f. Prepare a list of assets in use at the Sightsavers office, noting date of purchase and / or sale.

g. Prepare a schedule of funds transfers received from Head Office, indicating the date received into the local bank account.

h. Prepare a schedule for staff loans, showing balance brought forward, amount advanced, amount repaid and balance carried forward for each member of staff (also indicating the highest amount outstanding at any point during the year).

i. Preparation of a schedule for travel advances, showing balance brought forward, amount advanced, amount repaid and balance carried forward for each member of staff (also indicating the highest amount outstanding at any point during the year).

C) Guideline profroma for country/area/regional financial statements

1. Header sheet

Sightsavers

(Royal Commonwealth Society for the Blind)

Sightsavers Office, xxx

Year ended 31 December 20xx

Financial Statements


2. Income and expenditure Account

Sightsavers (Royal Commonwealth Society for the Blind)

Income and Expenditure Account


Note

INCOME

Transfer from Head Office 2 xxx

Bank interest xxx

Gain on sale of fixed assets xxx

Donations from fundraising xxx

Other income 3 xxx

TOTAL INCOME Xxx

EXPENDITURE

Transfers to partner organisations for projects

4 xxx

Expenditure incurred on projects xxx

Total Project expenditure 5 xxx

Other expenditure 7 xxx

TOTAL EXPENDITURE Xxx

SURPLUS/(DEFICIT) Xxx

Adjustments Xxx

MOVEMENT IN HEAD OFFICE FUND Xxx


3. Balance Sheet


Balance sheet as at 31 December 20xx

Note

CURRENT ASSETS

Staff Debtors 8 xxx

Non Staff Debtors 9 xxx

Prepayments 10 xxx

Cash at Bank 11 xxx

Petty Cash xxx

xxx

CURRENT LIABILITIES

Accruals 12 xxx

Other Creditors 13 xxx

Total Project expenditure xxx

NET CURRENT ASSETS Xxx

Represented by:

HEAD OFFICE FUND

Balance brought forward Xxx

Total income during the year xxx

Total expenditure during the year (xxx)

Movement on Head Office Fund Xxx

Balance carried forward Xxx

OTHER FUNDS 14 Xxx

TOTAL FUNDS Xxx


4. Notes to the accounts



NOTES TO THE ACCOUNTS

1 Accounting Policies

2 Analysis of Transfers from Head Office, by date

3 Analysis of Other Income, by category

4 Analysis of Transfers to Partner Organisations, by partner

5 Analysis of Total Project Expenditure, by project

6 Analysis of Office Expenditure, by account code

7 Analysis of Expenditure for other Sightsavers offices, by item

8 Analysis of Staff Debtors – loans vs advances, by staff member

9 Analysis of Non Staff Debtors, by item

10 Analysis of Prepayments, by item

11 Analysis of Cash at Bank, by account

12 Analysis of Accruals, by item

13 Analysis of Other Creditors, by item

14 Analysis of Other Funds

Optional

15 Analysis of Head Office / Other Office transactions attributable to this Office, specifically excluded from these accounts but shown here as a separate note.


11.3 Appendix 3: Guidelines for preparing month end checklists

GLOBAL ACCOUNTING SYSTEM

MONTH END CHECKLIST GUIDANCE NOTES

Introduction The Global Accounting System (GAS) was developed to provide an integrated solution to Sightsavers’ accounting and financial reporting requirements across all offices worldwide. At the centre of the system is the SUN Accounts database which is held and maintained in the UK office. AO/CO/ROs remotely input accounting transactions to SUN Accounts over Citrix and extract financial reports accessing information within SUN accounts using an application called Advanced Inquiry.

Due to this remote access to GAS it is vital that appropriate controls are in place to ensure integrity of the Database, to identify irregularities and to ensure accurate information for decision making. The GAS month end checklist forms a very important part of the control framework to achieve this objective. The usefulness of the Checklist, however, is limited to the amount of independent review and scrutiny undertaken by the AD/CD/RD as part of their financial management responsibilities. The AD/CD/RD must therefore recognise the month end checklist review process as a key accountability in ensuring financial control of the office and devote sufficient time to understanding and verify the balances and transactions. Effective review and communication with the FSSM through the process should help to identify possible irregularities or even frauds.

This document therefore aims to:

1. Explain the respective roles of AD/CD/RD and FSSM

2. Give guidance to AD/CD/RD in reviewing the checklists and provide some additional information on the important key areas

3. Provide detailed guidance to FSSMs on how to extract information from GAS in completion of the month end checklist.

1. Area/Country/Regional Directors

The AD/CD/RD as heads of their respective units have the responsibility of ensuring that effective Financial Management Systems and Controls are in place within their office. To achieve this they need to ensure that:

• Proper accounting records are maintained • There are adequate controls to safeguard the assets of the organisation


• There are procedures that should help prevent and detect errors, fraud and other irregularities.

The month end checklist is designed to assist the AD/CD/RD in managing these responsibilities. The following are the key areas that the AD/CD/RD needs to review:

Bank Balances The AD/CD/RD needs to get assurance that the bank balances reported are accurate and can be supported by the amounts acknowledged by the bank as held in the account through the bank statement. This is achieved through the bank reconciliation statement which is a form comparing the balance reported on the checklist and that shown on a bank statement and detailing the reasons for any differences between these two figures. The AD/CD/RD should check the following:

• Undertake a detailed review of the bank statements for the month to ensure understand the payments that have gone through the account. This should be done with reference to a bank transaction listing and the payment vouchers for the month.

• Check that a bank reconciliation statement has been attached for each bank account held by the country office

• Check that a copy of the bank statement is attached for each bank account • Check that the bank statement balance on the reconciliation form agrees to the

closing balance on the bank statement. • Review the reconciling items on the bank reconciliation form ensuring that they are

reasonable and follow up on old or unusual items. The reconciling items would usually be uncleared cheques written close to the month end that have not yet appeared on the bank statement.

• Check that the FSSM has properly reviewed and signed off the form

Petty Cash – Local & Foreign Currencies The AD/CD/RD needs to confirm that the petty cash reported is correct and was physically held by the office at the reporting date. The AD/CD/RD should check the following:

• Check that a petty cash count form for each currency has been attached indicating that the cash was counted on the reporting date.

• Check that the form has been signed by the person preparing the form (normally one who keeps the cash) and authorised.

• Ensure that two people have been involved in the cash count and that they have signed the form accordingly.

• The AD/CD/RD should periodically initiate independent and surprise cash counts involving somebody outside of the cash count. The date of these counts should be included on the checklist.


• The AD/CD/RD should review a GAS petty cash transaction listing and compare this to the voucher files.

Staff Loan & Travel Advances Balances The CD/AD/RD needs to ensure that the figure reported as staff loans and travel advances is accurate and is supported by the individual breakdown of balances and movement from previous periods. The will assist in ensuring that loans and advances are managed properly in line with Sightsavers policies and procedures. The AD/CD/RD should check the following:

• Check that loans and advance movement form has been completed. • Review form to pick up loans and advances with no movement and also any

unexpected new high value advances • Follow up on any outstanding or unusual items and request explanations.

Control Accounts – Salary and Statutory deductions These are control accounts which aim to ensure that payroll payments and deductions are managed properly and payments are correctly made to third parties. The balance on these accounts should be zero at the end of each month to demonstrate that all payroll liabilities have been met. Therefore any figure which is there has to be explained as it could indicate that some payroll payment has not been done or has not been correctly done.

The AD/CD/RD should therefore check that the FSSM has reasonably supported any figure that is appearing on this line.

Accruals & Prepayments Sightsavers overseas offices usually operate on a cash accounting basis. This means that income and expenditure is recognised when a payment is made or income received.

However at the end of the year there may be some expenditure transactions which have not been processed yet but which need to be accounted for as part of the year’s activities. (Accruals). There may also be payments made during the year for certain services where the benefits spread beyond the current accounting year (Prepayment). Accruals and prepayments are explained in detail in the Financial Framework. These provisions are generally made at the end of the year in December and should be reversed or paid out in January or February. There normally should be a zero balance in the subsequent months.

The AD/CD/RD should ensure that if any figure is appearing on the checklists on the prepayment and accruals line, it has been properly supported by an attached detailed breakdown of its costs which has been reviewed or explained by the FSSM.


Supplementary Information: The AD/CD/RD should review the following:

• ensure high value items are authorised and correctly reported by reviewing the high value transactions sheet

• Any additions to, or disposals from, fixed assets are authorised

Other Sections of the month end checklist The other sections of the checklist (section 1 and 2) contain some detailed technical checks to ensure that entries have been correctly made in GAS during the period. All parts of this section have to be completed and should be signed off by the FSSM.

The AD/CD/RD should review section 1 with reference to the payment vouchers ensuring that the voucher numbers correspond with the paper vouchers used. Particular attention should be paid to reviewing the General Journal files and to ensure that the reason for each journal is fully understood.

The supplementary questions in section 2 provide important additional information around the financial controls within the office. The questions and answers should be discussed with the FSSM before sign off.

The AD/CD/RD should ensure that the FSSM has reviewed and signed off all the sections of the checklist. In most of the offices, the Finance Department has an Admin Assistant(AA) who prepares most of the checklist and an FSSM to review the schedules. However, some COs do not have an AA and all the schedules are prepared by the FSSM. In such arrangements the AD/CD/RD is required to undertake a much more detailed review and sign off all the sections so that there should be clear segregation of duties between preparation of the checklist and review.

AD/CD/RD Approval After reviewing the above, the AD/CD/RD should sign off the AD/CD/RD approval section on the approval page of the checklist. This will confirm that they have reviewed the whole checklist and believe the balances indicated on the checklists to be accurate and complete. It also confirms that they are satisfied that the FSSM has completed and reviewed all the relevant sections of the checklist and has attached all the relevant documents to support the balances in the checklist and in GAS.

The AD/CD/RD can delegate this responsibility to the PM if they are absent at month end, to ensure that the timelines are complied with. However, they must review and sign off the checklist retrospectively on their return to the office,


2. Finance and Support Services Manager

The FSSM is responsible for the completion of the summary of balances and subsequent sections of the checklist including all attachments supporting the balances and checklist. He or she should sign off all the completed sections and attachments to confirm that the information provided has been reviewed and is accurate.

The following are guidelines on how to extract the information from GAS to the checklist:

Summary of Balances We have placed folders in Inquiry under each AO/CO/ROs individual office folder which can be run to provide the list of balances that are required on page 1 of the checklist. The folder is named month end checklist and contains three or four reports;

• Checklist Balances • Foreign Currency Petty cash (where applicable) • Staff Loans • Travel Advances • Transaction List (For section 1 and 2)

Run these reports, changing the end period to the period you would like to complete the checklist and copy the balances to their respective lines on the summary of balances. For the staff loans and travel advances please use the total of the balances.

Please use balances taken from these reports only and not any other separate ledgers or spreadsheets that the office may have for their day to day use.

Section 1 – Journal numbers used for the month

The purpose of this section is to ensure that the GAS database is complete as explained on the checklist. In order to review this you can follow the following steps:

1. From the previous month checklist copy and list the last journal numbers used

2. From the physical voucher files extract the reference numbers of the first and last journal (for each journal type).

3. Run a transaction list report from inquiry for the full range of journals used. (Run the transaction list report from the month end checklist folder and change dates to current period and click on Reference to sort the transactions by ref numbers. You may export to Excel for a bigger view).


4. From the above report review and check that all journals have been posted and follow up on any unused numbers.

Section 2 – Coding Review and Supplementary Information There are two parts of this section:

• Coding review – This is to ensure that all transaction have been properly coded and have all cost centres, account codes, analysis codes and sector codes. Run the transaction listing report (as in 1 above) to assist in answering the line by line questions asked in this section.

• Supplementary information – This is to ensure the completeness of transactions posted and the accuracy of the month end balances. It is important to complete reconciliations between the balances on GAS and the externally or internally verified actual value of assets and liabilities. By answering these questions it will assist in ensuring that all balances are reconciled and reviewed.

Submission of month end checklist to Head Office. • The preparation and review of the month end checklist must be completed by the

7th working day after the month-end. • The AD/CD/RD approval page of the checklist and the bank statement only should

be scanned. These two and the rest of the electronic file of the month end checklist should be emailed to the RFSSM and GAM at HH.

• The rest of the signed copy of the checklist and original bank statements should then be properly filed at the relevant office and retained for Audits and RFSSM Reviews.

• Queries raised by the RFSSM or HH Finance Team should be answered in a timely manner.


11.4 Appendix 4: Partner return checklist

This partner return checklist should be completed when reviewing every partner financial return and should be attached to the return when it is filed. Each return should be subject to a programme and finance review as guided by the shaded areas below.

Check Completed (tick) Comments

Finance review

Programme review

Brought forward balances agree to previous return closing balances

Funds received from Sightsavers agrees to our records

Check arithmetical accuracy

Agree bank reconciliation to bank statements

Review variance explanations and confirm that they are reasonable

Confirm that financial performance aligns with programme performance

Review closing bank and cash balances, discuss with programme staff and adjust transfer if required

Review for any indication of fraud or other corrupt practices. Report to HH in line with the fraud reporting policy if identified

Signed: .......................................................... Finance reviewer

…………………………………………. Programme reviewer


11.5 Appendix 4: List of organisational policies

The name of each policy below is a hyperlink to the location of that policy on Iris.

Financial Policy and Control Framework

Investment This policy sets out how funds not required for expenditure in the short term are invested for the continuing benefit of Sightsavers. The policy is to invest the funds in a diversified portfolio with the emphasis on capital preservation rather than maximising total return. AO/CO/ROs do not hold excess funds and to prevent build up of funds monthly fund transfer requests from HH are reduced by any unspent balances from the previous month. The Investment Committee, a committee to the Council of Trustees, undertakes periodic reviews of the investment strategy and policy and to ensure investment activities comply with policy.

Treasury The objective of this policy is to manage the risks associated with Sightsavers’ treasury management operations. The policy objective is to provide a framework to

• assess and manage credit risk • centralise control of foreign currency exposure • establish foreign currency forecasting guidelines • ensure effective management of cash • manage hedging of foreign currency exposure

Reserves This policy defines the level of unrestricted funds that Sightsavers should hold at any one time to ensure, as far as possible, the continuity of programmes and fulfilment of other commitments. The Trustees have set the level of what is called free reserves (unrestricted general funds) at about 25% +/- 5% of the projected total resources due to be expended from unrestricted funds in the following 12 months.

Procurement policy Procurement guidelines

The procurement of goods and services forms a major part of our programme activities with our partners, as well as our own operations in Europe, Africa, Asia and the Caribbean. Sightsavers has a duty to all of its stakeholders to ensure that resources are used strategically and efficiently in accordance with the organisation’s strategy and procurement represents a key area in this. The


Financial Policy and Control Framework

purpose of the global procurement policy is to provide Sightsavers staff with clear procedures for procurement and supply chain management. It is also available to inform and support partner organisations in matters of procurement and supply chain management. Details and links to the policy are included in Chapter 8 of this document.

Conflict of interest This policy is to ensure fairness in Sightsavers’ decision making processes, to protect the reputation and integrity of Sightsavers and its interests, and to ensure broad public trust and confidence in the activities of Sightsavers.

Delegation of financial authority

All transactions should be authorised by a member of staff to whom the authority has been delegated. The approval of a transaction must be properly documented.

Whistle Blowing This policy states that where an employee honestly and reasonably believes that any inappropriate, underhand or illegal practices may be taking place, they should report this using the whistle blowing procedure. It has links with the fraud reporting policy but the scope is broader.

Fraud Reporting The fraud policy aims to ensure that Sightsavers’ financial integrity and reputation are preserved and that any financial losses arising as a result of fraud are minimised. The policy states that fraud will not be tolerated by the organisation and proven involvement in fraudulent activity by a member of staff will invoke the disciplinary procedure and may lead to prosecution. Anyone having reasonable suspicions of fraud should refer this to their line manager, unless that person is directly involved with the fraud. In accordance with the policy anyone with a suspicion of fraud is also obliged to report this to the HIAC and DFPO. Assurance is given that all efforts will be made to ensure that no employee will suffer in any way as a result of reporting reasonably held suspicions. The policy also includes a flow chart summarising the reporting lines for fraud.

Money Laundering This policy is to raise awareness that Sightsavers could become an inadvertent victim of money laundering and/or terrorist financing.

Programme Partnership This policy outlines the principles and approaches that are fundamental to Sightsavers’ programme partnerships.

financial framework - sightsavers · the strategic framework breaks down the strategy into key...

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