As a lead partner, if you implement your grants and projects with the

help of local partners, it makes sense to assess and strengthen their skills, confidence and systems to manage financial resources efficiently and

effectively (MANGO, 2013).

GOOD PRACTICE

GUIDE FOR LEAD

PARTNERS: How do you help build your partners’ financial capacity?

Compiled by: Mary Caspillo-Brewer

UCL Institute for Global Health

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 1

Good Practice Guide for Lead Partners: How do you help build your partners’

financial capacity?

Compiled by: Mary Caspillo-Brewer, Institute for Global Health, University College London February 2014 Made possible by funding from the Association for Research Managers and Administrators Joan Hughes Bursary 2013 and the Institute for Global Health, University College London

Introduction Capacity building is defined by non-governmental organizations (NGOs) as: “the process of developing and strengthening the skills, instincts, abilities, processes and resources that organizations and communities need to survive, adapt, and thrive in the fast-changing world (Philbin, 1996)”. Building capacity through financial management is a key way of achieving a more effective organisation. This then leads to an improved programme of activities. With strong financial management capacity, the group or organisation becomes more able to control its own affairs. Without it, the future is often uncertain: it may be impossible to predict when money will be short and, crucially, it may become impossible to fund programmes (Cammack, 2007). As a lead partner, if you implement your grants and projects with the help of local partners, it makes sense to assess and strengthen their skills, confidence and systems to manage financial resources efficiently and effectively. And if you are an implementing partner, having strong foundations for managing your funds will ensure fruitful and lasting partnerships (Management Accounting for Non Governmental Organisations). This guide is a compilation of resources freely available on the Mango website http://www.mango.org.uk/Guide with the exception of pages 14-16. Some resources were also copied with Mango’s kind permission from the course handbooks on Grant Management Essentials and Financial Sustainability Essentials. These materials from Mango are intended for capacity building of development and relief NGO staff and their partners and may not be reproduced for commercial gain. This guide is a work in progress. Suggestions and additional inputs are very much welcome. Contact me by email at m.caspillo-brewer(at)ucl.ac.uk.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 2

Top Tips for Partner Capacity Building Mango has identified the following very useful tips on how lead and implementing partners can work together to develop an effective capacity building strategy, and thereby strengthen partnership relationships.

1. Building trust Strong partnerships are built on trust and open communications. It is important for the partners to be clear about their respective roles in the capacity development process. Lead partners must reassure implementing partners that the process is not a ‘fault finding’ mission, rather a great opportunity to strengthen their organisation. Senior managers and Board members, not just finance staff, must be actively involved throughout the process to ensure ownership and a high-level commitment to change. Board involvement (where possible) is critical for capacity assessment and strategy development.

2. Where are we now? First, we need to identify if and where a partner needs to strengthen capacity. One of the best tools to identify gaps in financial systems and skills is Mango’s free Finance Health Check. The Health Check helps the partner NGO to self-assess their current practice against a series of best practice statements covering budgeting, accounting, financial reporting, internal control, grant management and staffing. The statements also provide standards to aim for and track progress against. See Appendix for a copy of the Mango’s free Finance Health Check. Sometimes a more detailed, external, financial systems review is needed – eg where a significant ‘scaling up’ of operations is planned. It is important to select suitably qualified finance professionals to carry out the review and give practical advice going forward.

3. Where are we going? The results of the capacity assessment should be shared openly with partners and at all levels in the local NGO. The partners can then work together to create a capacity building action plan, with achievable targets, around the key areas of staffing, skills and systems. The costs of implementing the action plan must be clearly laid out in a budget and agreement reached to finance the plans.

4. Staffing resources Financial management systems are only as good as the people operating them. It is therefore essential to recruit the right people to key positions. A capacity building strategy must include a plan to ensure there is enough of the right people to keep the accounts, provide financial reports, and oversee the management of financial resources. If an implementing NGO is taking on a major new programme, it will need additional hours in the finance team, so this must be included in the programme budget. As an NGO grows and its accounting systems become more sophisticated, it will need to recruit more qualified finance staff or those with specific accounting software skills.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 3

See Appendix for more information about how to recruit the best finance staff and a sample Job Description.

5. Skills development

For partners to be well equipped to manage their programme funds, all staff and Board members need the confidence to use financial management tools in their everyday work. Programme officers need to build and manage project budgets. Senior managers and Board members need to plan, monitor and control resources to fulfil objectives. Finance officers need to prepare timely and accurate door reports. But local NGOs often lack these key skills. Investing in a structured skills development plan will pay dividends. Options for skills development include:

Finance skills training for programme staff and Board members Focussed one-to-one support for finance staff when new systems are introduced Mentoring support to senior managers.

6. Systems Development

If a partner NGO’s systems need a major update, such as introducing a computerised accounting package, they may need expert help and advice to implement the changes. It is important to involve the senior management team and Board in the selection of external consultants to ensure their cooperation and support.

7. Create support networks A great, free way to continue developing skills and confidence is to create local networks with other NGOs to share knowledge and advice. For example, lead partners could encourage local partners attending a workshop to set up a support group that meets regularly to discuss and resolve common challenges.

8. Review and celebrate successes Once the capacity development strategy is underway, make time to regularly check in to review progress together. It is great to acknowledge growth and improvements. This builds confidence and morale and the learning can be shared with others too.

Top Tips for Assessing Partners’ Finances As a grant-making organisation, you need to have confidence in the implementing partners you work with. You want to know if their financial management is strong enough to use and account for the funds properly. But how do you go about assessing the financial management of a potential partner or even a longstanding one? Here are some top tips that Mango has identified to help you in this process:

1. Develop a partnership relationship from the start

An assessment should be the first stage in developing an effective and long lasting relationship between partners. Keep in mind the power dynamics that external funding

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 4

can create and make sure assessments are sensitive to the local organisation’s priorities and constructive from their point of view.

2. Be clear about the purpose of the assessment

Do you see the assessment as a ‘test’ to be ‘passed’ as a condition for funding? If so, the grantee may not volunteer information about problems in case they ‘fail’. Or do you see the assessment as a tool to identify opportunities for improvement? If so, be prepared to give your partner the chance to resolve any issues or even offer your assistance to help build your partner’s capacity. If your assessment is aiming to do both of the above at once, have a list of minimum standards which must be met but also look at a wider range of financial management issues to identify areas for improvement. (see points 4 and 5 below).

3. Assess the quality of relationships with their partners and beneficiaries If your grantee is itself making grants, look at how it works with its own partners. Do they carry out assessments? Are there formal grant agreements? Are there reasonable reporting requirements to ensure accountability? How closely do grantees work with the people they aim to help to ensure activities meet their priorities? Do they provide financial reports to communities?

4. Talk to a range of people in the organisation

It is tempting to think that you only need to talk to the finance staff when doing a financial assessment but financial management is for everyone. If possible, talk to the Executive Director, all Senior Managers, field staff and beneficiaries as well as the Accountant.

5. Use Mango’s health check

Mango’s Health check is a tool for organisations to assess themselves against best practice and identify areas for improvement. It covers best practice in the ‘Four Building Blocks’ of good financial management: budgeting, basic accounting systems, financial reporting, and internal controls, as well as staffing. See Appendix for a copy of the Mango’s free Finance Health Check and for a sample of Partner Assessment Tool

6. Visit Mango’s minimum requirements checklist

Mango’s Minimum requirements checklist separates the ‘must haves’ from the ‘should haves’ which could assist you in deciding on your assessment priorities. See Appendix 3 for a copy of the Mango’s Minimum requirements checklist.

7. Assess governance issues

Good governance has a fundamental impact on the effectiveness of financial management. Find out: whether the Board meet regularly? Do they review budgets and financial reports? Is there anyone on the Board with financial knowledge or experience? Are there any conflicts of interest?

8. Review the audited financial statements and other financial reports

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 5

The audited financial statements give an independently verified picture of the organisation’s financial activities and balances. See Appendix for Mango’s checklist for 20 Questions to ask when reviewing financial reports.

9. Don’t look at figures or financial systems in isolation Avoid relying solely on checklists, tools or numbers to make an assessment decision. They all help you to gain an understanding, but it is important to consider each organisation in its own context.

10. Have a standard approach to ensure consistency and fairness If your organisation has several individuals assessing many applications, it is important to develop a standard approach and tools or criteria, but leave plenty of room for flexibility and personal judgement by the assessors.

Reading Project Budget Monitoring Reports A 'budget monitoring report' is a financial report that shows actual income and expenditure, for a certain period, compared to the budget, for the same period. These reports are one of the most important tools for managers, allowing them to check that projects are still on track, in financial terms. Any areas that are not on track can be identified, and action can be taken to put things right before any situation gets critical. For lead partners, budget monitoring reports are also important to determine how much funds are to be transferred to the partner organisation and to keep a track record of their expenditures. Finance staff should prepare budget monitoring reports regularly throughout each project, normally once per month. Programme staff and managers should review the reports straight away, once they are prepared. It is good practice to organise a regular review meeting, including both programme and finance staff, to discuss the financial position and decide on any actions that need to be taken.

1. Look for the date of the report How recent is it? Reports are only really useful if they cover a period that is pretty recent - not more than a few weeks ago.

2. Look at the ‘bottom line’

What is the total expenditure to date compared to the total amount in the budget? Is it about what you would expect for this period?

What is the overall difference (or ‘variance’) from the budget? Plus or minus 10% is generally acceptable.

Is total income what you expected? Have you received all the income you were expecting from your donors?

3. Look at the budget variance column

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 6

Identify significant variances – i.e. where actual expenditure is more than 10% different from the budgeted amount, or where the actual expenditure is a significant amount.

What, if any, reasons are given for these variances? Are they reasonable? Are the variances temporary (i.e. a timing issue that will work through

eventually) or are they permanent (i.e. where you have really spent more or less than the budget)?

How can the funds be found to pay for any permanent negative variances (i.e. where expenditure is more than the budget)?

4. Look at the % of the budget (or grant) that has been used Generally, is expenditure for each line about the level you would expect for this

period? What message does expenditure to date on project-related costs tell you? For

example, if it is half way through the year and only 25% of the budget is used so far, perhaps the project is at risk of not being completed on time. But if you have spent 75% of the budget, perhaps you are at risk of running out of funds.

Are there any items showing zero expenditure which might cause concern? E.g. vehicle insurance.

5. Look for ‘linked’ budget items Are different budget items behaving consistently? E.g. if training activities are delayed, then all training-related budgets should be underspent to a similar level, perhaps including venue hire or travel as well as trainers costs.

6. Look for unusual or unexpected expenditure or income Could this be an indication of either miscoding or abuse of funds / fraud?

7. Look at the narrative reports Does the narrative report tell the same story as the budget report? For instance, if the narrative report says that some activities are delayed, then expenditure should be reduced too.

8. Look for solutions Can any permanent underspends be used to fund permanent overspends? Be

very careful about conditions that donors may have placed on restricted funds – you may not be able to change how you are planning to spend money.

Can any areas of overspend be controlled or reduced in future months? Note that some costs are fixed and so cannot be controlled.

Can you find additional sources of income, if you need them? Do you need to think about the exact timing of when you receive funds and when

you schedule expenditure? Maybe some big expenses could be delayed, if needs be.

Does the budget still describe the activities you are actually carrying out? If the budget is out of date, then it may be worth re-doing it. This normally needs negotiation with your donors, your staff and the people / organisations you are aiming to help. It is not something to do too often – not more than every three or six months. But it can help to make sure that your work is really relevant to your beneficiaries.

All these solutions will need to be discussed with programme managers. Decisions about changes to the budget or expenditure cannot be made by finance staff on their own.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 7

See Appendix for a copy of a Budget Monitoring Report.

Who does what in Grant Management? The table below lists the key tasks in grant management with recommendations for who should take the lead responsibility and provide additional support when required. Practice in your own organization may of course be different, and you might like to go over the list and assign roles accordingly. Who does which task is less important than making sure that every task is assigned to someone so that nothing slips through the net. Key: F = Finance staff, P = Programme staff

Task Lead Support

1. Review donor contract and assess conditions P F

2. Negotiate specific grant conditions P

3. Sign donor contract (agreement) P

4. Set up financial systems to manage contract obligations

F P

5. Establish lines of communication with donor representative(s)

P

6. Prepare reporting framework and timetable P F

7. Where there are sub-grantees, prepare guidance manual and support structure

F P

8. Ensure new and existing staff are aware of the grant conditions

P F

9. Ensure all purchases are made according to donor procurement requirements

P F

10. Submit claims for income from donor P F

11. Manage the donor funded budget P

12. Monitor income & expenditure, including commitments

P F

13. Write narrative donor reports P

14. Prepare project financial reports as per reporting schedule

F P

15. Submit reports to donor as per reporting schedule P F

16. Review whether a contract amendment is needed (budget change, activity change or time extension)

P F

17. Submit change requests to donor P F

18. Ensure project reports reconcile with the organisation’s financial accounts

F P

19. Close the grant ensuring all conditions have been met P F

20. Carry out a review to identify learning points P

21. Prepare for project audit F P

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 8

Strategic Financial Management Lead partners should play a strategic role in helping partners achieve financial sustainability. Below are some key messages that you can share with your partners. Strategic financial management is looking at, and taking action on, the financial issues which:

Affect the organisation’s overall direction; or Affect the organisation’s ability to achieve its objectives today and in the future

In practice, strategic financial management is about two key issues:

Financing the long term objectives of the organisation; and Reducing the impact of threats to the organisation’s financial resources.

This is closely tied up with the concept of financial sustainability. An organisation is financially sustainable if they have:

A diversified funding bases Availability of unrestricted funds Availability of financial reserves Strong stakeholder relationships

A diversified funding base It is important to have a financing strategy which produces several different sources of income. It does not make good sense to put “all your eggs in one basket”. To rely on just one or two donors for your income makes you vulnerable to external threats. Diversification means securing funds from as wide a base as possible – the local business community, national and local government and the general public – and not just from external, institutional donors such as USAID or DfID. Availability of unrestricted funds Funds that are received from donors for a specific purpose are known as restricted funds: you are legally obliged to use them for the reason that the donor gave them to you. In contrast, unrestricted funds can be used for anything at all that helps you to achieve your mission. The more unrestricted funds you have, the more freedom of action you have. You can choose and change the projects that you want to run and you can cover costs that donors are reluctant to fund, like core costs. We have to look beyond institutional donors for sources of unrestricted funds, for example: membership fees, advertising income, fee income, general appeals and bank interest. Having a regular source of unrestricted income is essential for the next feature of a financial sustainable NGO… Availability of financial reserves Reserves are financial resources that an organisation builds up during its lifetime (from surpluses of unrestricted income) and puts aside to meet unexpected events in the

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 9

future. These funds are sometimes kept in a special ‘reserves’ bank account and are shown separately on the annual financial statements. Building up reserves has a number of obvious advantages for NGOs. It reduces their dependence on donors, helps during cashflow shortages and helps to withstand financial shocks and unplanned expenditure. Strong stakeholder relationships The more that you can build up and manage a positive relationship with donors, the stronger position you will be in. True ‘partnerships’ occur when back-up and financial support is provided in the good times and the bad times. The key to financial sustainability is to develop your relationships with an eye to the future as well as meeting today’s needs. This means building the confidence of donors over time. For instance, it may not be appropriate to press them for funds today, if you believe that you might win more funds from them in the future. It is a mistake to take funds for projects that you cannot deliver, just because the money is available. This will harm your relationship with the donor and reduce the chance of winning funds that you really need next year or the year afterwards.

Developing a Financing Strategy A financing strategy is integral to an organisation’s strategic plan. It sets out how the organisation plans to finance its overall operations to meet its objectives now and in the future. A financing strategy summarises targets, and the actions to be taken over a three to five year period to achieve the targets. It also clearly states key policies which will guide those actions. A suggested structure and contents for a financing strategy are outlined below. 1. Where are we now? This section summarises where the organisation is at the start of the strategy. This includes an assessment of the key risks facing the NGO and the opportunities and resources it has available. 2. Where would we like to be? This section summarises key financial targets for three to five years’ time, and is informed by the risks and opportunities identified in the first section. It will include as a minimum:

The desired funding mix – the balance and sources of restricted and unrestricted funds.

Donor dependency – linked to the funding mix, this is the realistic and appropriate level of funding to accept from donor agencies (expressed as a percentage of overall income).

Level of general reserves – usually expressed as the number of days that the organisation could continue without external funding.

3. How do we get there?

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 10

This is the ‘meat’ of the financing strategy. It describes what actions you will take each year to finance the strategic plan and achieve the financial targets identified in the second section. This might include sections on:

how to increase the mix and level of unrestricted funds how to finance core costs how to build up reserves how to replace and maintain fixed assets how to apply funds to achieve maximum benefit

For example, actions to increase the percentage of unrestricted income might include:

increasing or introducing fees for users of services to recover some or all of the costs of providing the service;

introducing income-generating activities; making use of under-utilised resources (eg renting out office space, vehicles); increasing the priority given to fundraising for unrestricted funds.

4. Key Policies This section will include policies that guide the financing strategy. The examples given are for guidance only, and may not be appropriate or detailed enough for your organisation. Reserves policy – what level of reserves you aim to build up, and how surpluses will be handled.

Example: It is our policy to maintain general reserves equivalent to 6 months of operating expenditure. This policy is reviewed by the Board every three years. General fund surpluses in a given year will be added to this reserve. If the reserve level exceeds the policy level, we will spend it on behalf of the beneficiaries in line with our strategy.

Core costs policy –what method will be used to recover programme support costs from projects and funders. It will also clarify the policy on subsidising ‘poorer’ projects and how that will be decided and managed.

Example: It is our policy to apportion overhead costs to projects on a monthly basis, in proportion to the direct costs incurred by each project. Each project should generate enough income to cover both its direct and apportioned indirect costs, unless the Board authorises otherwise for particular cases.

Pricing and cost recovery policy – where charges are to be made to service users, this will explain the basis and formula used for the charging, and the pricing structure.

Example: It is our policy to charge users of the clinic for consultation, drugs and lab tests. The basis for the charge is cost plus 10% to cover overhead. Patients unable to pay may apply to our 'Special Scheme' for assistance.

Ethical policy – this will explain who the NGO will or will not accept funds from and what funds may or may not be used for. This will be particularly relevant to NGOs involved in advocacy work.

Example: It is our policy to consider the ethical nature of all funds offered to us before accepting. For example, we will not accept funds derived from any illegal

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 11

source, or from corporates engaged in arms dealing or child labour. We will not accept funds that create a conflict of interest. We consider each case in line with our values.

The table below is a summary of resources, tools and skills available to managers on responding to challenges

Key Challenge Key documents Practical tools and skills needed

1. How to finance strategic objectives, now and in the future

- How to decide on the appropriate funding mix

Finance strategy Resources Audit Ratio Analysis- ‘Donor Dependency’ and ‘Survival’ ratios

-How to charge for services Pricing/cost recovery policy

Consolidated service budgets Contribution Analysis

-How to finance overheads Overheads and apportionment policy

Contribution Analysis Fundraising Skills

-How to apply unrestricted income

Unrestricted income policy Donor’s terms and conditions Project/master budgets

Consolidated service budgets Funding Grid

-How to replace capital items that depreciate over time

Replacement and disposal policy Fundraising Strategy

Planning Skills Fundraising/Marketing Skills

-How to make best use of available resources

Strategic planning document Procurement policy Budgeting policy

Strategic planning Cost effectiveness analysis

2. How to survive external threats to the organisation

- How to identify and be prepared for external shocks

Contingency plans Insurance policy

Risk assessment Strategic analysis Scenario planning

-How to build and present researches in a not-for-profit organisation

Reserves and contingencies policy

Communications skills Fundraising/marketing skills

-How to build and maintain good relationships with supporters

Communications policy Fundraising Strategy

Communications skills Negotiation skills Fundraising/marketing skills

-How to integrate financial management into programme management

Delegated authority and accountability policy Job descriptions Training policy

Change management skills

Building Reserves Financial reserves are an organisation's savings. They are extremely useful, helping to strengthen an NGO’s sustainability.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 12

They help an NGO to pay for activities that donors will not fund, or handle unplanned events (eg responding to new needs, or paying for legal costs or sickness cover). General reserves have to be built up from unrestricted income. (This is because any surplus on a restricted project is tied to the same restrictions as the original project: it cannot be used to cover other costs.) "Not-for-profit" does not mean that NGOs are not allowed to make a surplus. Every NGO should plan to build up reserves as part of its financing strategy. What level of reserves? It is often useful to set a target level of reserves to cover specific costs, such as:

The cost of keeping the organisation running for 2 or 3 months, The cost of closing the organisation down (including closing down activities,

paying off staff, terminating leases etc) Generally, many NGOs plan to hold enough reserves to pay for around 3 months' expenditure. The board should decide what policy to follow, after considering the specific goals, risks and opportunities that your NGO faces. It is normally illegal to have negative general reserves: it can mean that you are paying for general costs out of restricted funds. If you find yourself in this position, then you must give it attention straight away – maybe by getting professional advice. How can you generate reserves? There are four ways that an NGO can build up reserves from unrestricted income:

Maximise unrestricted income - eg by charging fees for services, or by fundraising for the whole organisation, rather than for specific projects.

Make the best possible use of restricted funds to free up unrestricted funds - eg by applying them to 'difficult-to-fund' budget items and retaining as much surplus as donors allow.

Maximise project income - eg by making sure that projects are fully costed, including a contribution to core costs.

Minimise expenditure – eg by promoting a culture of minimising costs, or negotiating hard for discounts from suppliers.

Overhead costs 'Overhead costs' or ‘core costs’ are the central administrative costs that NGOs have to pay to run the organisation (like office rent or staff training). NGOs often find it hard to raise funds to pay for their core costs. Strategies for paying for core costs There are various strategies, including:

Prepare an accurate budget for core costs. This will help you keep them to a minimum and show exactly how much funding you need.

Allocate as much as possible to specific projects. For example, a shared vehicle making journeys for a specific project, or a shared photocopier making copies for a particular project activity. This reduces your core costs, by re-classifying them as project costs.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 13

Claim any money that donors provide for core costs. Donors may allow you to claim a certain amount for 'administration', 'core costs' or 'management fees', eg 7% of the total budget.

Identify specific sources of funding for core costs. This is tough but some NGOs manage it!

Use unrestricted funding to pay for core costs. For instance, some NGOs use fees they charge for services, or donations from the public, to pay for core costs.

Allocating direct costs to projects In the example illustrated below:

a shared vehicle travels 500 kilometres in a period the vehicle running costs for the same period are Mshs 10,000 (Mangolian

Shillings).

The vehicle usage log book shows which journeys were made for Projects A, B and C and general purpose ('Other') journeys. The costs of the journeys recorded for the projects are allocated as ‘direct costs’ to those projects, which leaves Mshs 4,000 in 'core costs'.

Apportioning indirect costs to projects It is good practice to apportion (ie share out) your core costs to each project or activity that you run. This helps you work out the total cost of running each specific activity. Total costs equal direct costs plus a share of core costs. Core costs may be apportioned to different projects in a number of ways. For example, suppose you employ a Programme Manager who manages three projects. You could charge 33% of her salary to each project. You could also do the same thing for office rent. Rather than splitting costs equally between projects, you might choose to work out how much to charge each project based on:

The number of staff working on the project (or their total salary) The size of each project budget Their actual use of services (eg number of photocopies made or kilometres

travelled)

Generally, it is best to use a simple method and to be consistent.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 14

Writing a fundraising strategy Source: http://www.fundingcentral.org.uk A fundraising strategy need not be a long or complicated document. A one to two page summary is much more likely to be useful than a lengthy document. The basic information every fundraising strategy – or plan – should include is:

What funding is needed – how much, what types of activities, when? Where funds will come from? What activities need to happen to raise funds, when do they need to

happen and who will do them? A fundraising strategy would normally form part of the wider business plan for an organisation. As with a business plan, it’s useful to plan fundraising in broad terms three to five years ahead – and have more concrete targets and plans 12 months ahead. If you are a small organisation, fundraising is likely to form a part of your wider role and writing a strategy can help identify what you need to do in this area of your role. It can also identify where you may need additional support from Trustees or volunteers. For larger organisations where an individual (or individuals) has responsibility for fundraising, developing a fundraising strategy can be a useful way to establish what colleagues will expect of you and where you will need input from other colleagues (e.g. finance or project managers). Whether you are a large or small organisation, the basic elements of your fundraising plan are very similar. Working through the questions in this checklist will help you develop your own simple strategy. We aim to help you in every step of this journey – signposting to tools and sources of information about each element in your fundraising strategy. Developing you grant fundraising strategy checklist What kind, and how much, funding do we need?

What kinds of activities (and costs) do we need to fundraise for in the next 12-24 months?

How much funding do we need for each area? If you planning to seek project funding, do you know what the full cost of the project will be (rather than just the direct costs)?

Are there other funding or finance options that we could use to deliver this activity?

What happens when funding comes to an end? Where will funds come from? Which funders might potentially support our work? Run a search now of thousands of public sector and private funders listed on Funding Central. You can also receive weekly email updates about the latest opportunities and forthcoming deadlines - register now. Which individual funders do we plan to approach for each activity: what are their deadlines; processes; priorities? Read our introductory guides to the types of funders. What activities do we need to undertake?

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 15

What information will we need to gather together for our application? Take a look at our key stages in applying for funding and our guide to making better applications for ideas. What are the key deadlines for grant funding: when are programmes launched? When is the deadline for applications? When would we hear whether we are successful? When do we need to provide reports of activity? When would funded activity need to happen by? Read our guide to the timelines involved. What opportunities do we have to promote our organisation to funders? How might we improve our profile? Read our advice about building relationships with funders. Do we have a clear case for support that outlines what we need (and why) to potential funders? What resources will we need?

Do we need to improve our financial reporting systems to be able to understand our costs better, or to be able to report on grants?

Can we monitor the impact of our activity and demonstrate our success to potential funders?

Have we identified who will undertake the research, preparation and submission of each application? Who will be responsible for reporting on any grants received and liaising with funders? Might staff need any training?

Where could we find extra support? Can my local Council for Voluntary Service provide help with applying for and managing grants? Do they offer any training?Could we use volunteers in our fundraising activity?

What will other staff need to do to support fundraising? E.g. can finance help prepare budgets? Can project managers help identify participants who could provide testimonials to include with our applications?

How might Trustees support fundraising? Do any Trustees have links with, or experience of, the funders we plan to approach?

Top Tips for Successful Fundraising Source: http://www.grantnet.com/HelpfulReports/fundraisingstrategy.pdf

1. You should always demonstrate the need for the project and a lack of provision within the geographical area your project will cover. Funders are always keen to see research regarding the uptake of similar projects, their success and the number of potential beneficiaries the proposed project may reach.

2. You should aim to provide evidence that the beneficiary group(s) has been involved in the planning of the project and that contacts made with other professionals will demonstrate an understanding of the beneficiary group(s) and how the project will meet those needs.

3. Be sure that you provide details of how you plan to review, monitor and evaluate your project, again the involvement of your beneficiaries within each step of this process will be particularly favoured. You should clearly state how the results will be measured and how they will contribute to your organisation’s overall aim.

4. Ensure that applications for funding are prepared well ahead of submission deadlines and ensure that all the supporting documentation you need is available and up to date. As stated within this article, you should ensure you list all the funders you plan to approach within your Raising Money section and detail deadlines etc so that you have a timetable of deadlines that may be referred to easily and on a regular basis.

GOOD PRACTICE GUIDE FOR LEAD PARTNERS: 16

5. All staff should have some involvement in writing and reviewing the strategy and each staff member should have their duties and timescales for completion clearly stated within the organisational planning section of the strategy.

6. Ensure that your fundraising strategy states achievable targets and goals so that you are not setting yourself up to fail. You should remember that an unsuccessful grant application does constitute failure, rather it should be used to inform future applications, for example, does more time need to be set aside to complete an application? Do the objectives of the project meet the funding criteria as much as they are able to?

Useful Fundraising Strategy templates can be downloaded from: http://www.fit4funding.org.uk/uploads/files/fundraising_strategy.pdf

Sources 1. Cammack, J. (2007). Building Capacity Through Financial Management: A

practical guide. Oxford, United Kingdom: Oxfam GB. 2. Management Accounting for Non Governmental Organisations. (n.d.). Top Tips

for Partner Capacity Building. Retrieved February 25, 2014 from Mango: http://www.mango.org.uk/Guide/TT26PartnerCap

3. Philbin, A. (1996). Capacity Building in Social Justice Organizations . Ford Foundation.

4. http://www.fit4funding.org.uk/uploads/files/fundraising_strategy.pdf 5. http://www.grantnet.com/HelpfulReports/fundraisingstrategy.pdf

APPENDICES

Appendix 1

Mango’s Health Check

How healthy is financial management in your

not-for-profit organisation?

Version 3 2009

Mango’s Health Check

© Mango 2nd Floor East, Chester House, George Street, Oxford OX1 2AU

• Phone +44 (0)1865 423818 • Fax +44 (0)1865 423560 • E-mail training@mango.org.uk • Website: www.mango.org.uk

These materials may be freely used and copied by development

and humanitarian NGOs for capacity building purposes, providing Mango and authorship are acknowledged.

They may not be reproduced for commercial gain.

Revised and Updated October 2009

Mango is a UK-based charity which provides training and technical support in financial management for not-for-profit organisations working in the developing world.

Registered charity no. 1081406 Registered company no. 3986178

Contents

Introduction ............................................................................................ 1

Sections:

1 Planning & budgeting ............................................................................................ 3

2 Basic Accounting systems ............................................................................................ 4

3 Financial reporting ............................................................................................ 5

4 Internal controls ............................................................................................ 6

5 Grant management ............................................................................................ 7

6 Staffing ............................................................................................ 8

Interpreting your score ............................................................................................ 9

Additional Resources ............................................................................................ 10

Glossary ............................................................................................ 11

About Mango

Mango is a UK based charity which exists to strengthen the financial management of not-for-profit organisations, including NGOs. Mango publishes freely available tools, like this one, as well as running training courses and providing finance staff to work with NGOs. See www.mango.org.uk for more details.

What can Mango’s Health Check do?

Mango’s Financial Health Check can help you assess the health of your organisation’s financial management. It is designed as a self assessment tool so that you can identify the areas where you need to improve.

The Health Check is a set of statements of good practice. They cover all the key areas of NGO financial management. For each statement, you need to consider how well your own organisation is in line with good practice. By the end of the Health Check you will be able to tell if the financial management in your organisation is healthy or sick - and whether you need to call a doctor!

You may like to run the Health Check again after a year or two, to assess and monitor your progress.

What can Mango’s Health Check NOT do?

Every organisation is different and financial management systems must reflect this. A ‘one size fits all’ approach cannot work. But the key aspects of good practice are the same for most organisations most of the time. The Health Check focuses on those key aspects. They are the foundation stones of good practice.

Mango’s Financial Health Check only provides a general indication of the health of your organisation’s financial management. It is not an exhaustive list of all aspects of financial management. It is not an audit and it does not describe a standard set of procedures which are relevant in every situation.

In the context of a donor assessing a partner’s financial systems, it would be tempting to set a ‘pass rate’ that qualifying partners should achieve. The Health Check is not designed for this purpose. That approach would influence the way in which organisations score themselves, and may be too arbitrary. It is similarly inappropriate to compare scores of two organisations and make conclusions about differences between them.

Who is Mango’s Financial Health Check designed for?

It has been particularly designed for small and medium sized not-for-profit organisations (or field offices). This may include Non Governmental Organisations, schools, medical centres, churches etc. It is not designed for the head offices of international organisations.

How to use Mango’s Health Check

The Health Check can be run by any member of staff or a trustee. You do not need specialist financial skills to complete it. It includes explanations of each section and a glossary of the financial terms used.

The most useful way to use this tool is to complete it in a 2-3 hour workshop meeting, with input from the Treasurer, Chief Executive Officer, Senior Managers, and a selection of budget holders, finance staff and field staff (ideally 5- 7 people).

Taking each statement of best practice in turn, discuss whether it is true, or is in place, or happens in your organisation. Agree on a score based on what actually happens, not what is supposed to happen, or what is documented in your finance manual. The scores available are 5,4,1 and 0 only.

Explanation Score

Our practice is totally in accordance with the statement 5

Close to 5, but not quite there 4

Close to 0, but not that poor 1

This is not in place, or is not true or does not happen 0

Clearly a degree of judgement is required to decide between ‘4’ or ‘1’, and it is not an exact science. If you cannot give yourselves a clear cut 5 or 0, you need to decide which one you are closer to.

Often the real value in this exercise is not the score itself so much as the conversations and the

details of issues discussed. Make good notes and keep a list of action points as they come up.

Ring the score for each statement. Add up the total for each section and transfer it to page 9 to get a total. Then interpret the score using the guidance given.

Comments

Mango welcomes comments on its tools. Please send any comments or suggestions you might have on the Health Check to Terry Lewis, tlewis@mango.org.uk. Thank you!

Section 1 Planning & budgeting

Budgeting is about working out how much your planned activities are likely to cost. Both programme and finance staff should be involved in setting budgets, to create a foundation for good cooperation and coordination during spending and budget monitoring.

Budgets have a crucial role to play in strong financial management. Budgets should be approved by the Board of Trustees, to check they reflect the planned strategic direction of the organisation. Project managers can use a budget to guide implementation and check on progress. Overhead costs that are shared by many projects also need to be carefully controlled by an assigned budget holder.

The codes used for your budget lines need to correspond to the codes used in your accounting system. Otherwise it will be difficult to track actual spending against expected spending in your budget monitoring reports.

A cash flow forecast is as important as a budget. It constantly looks 3-6 months into the future, starting with the actual cash available now. It helps you to prioritise the timing and scale of planned activities and to spot cash flow problems in good time.

Ref Statement of best practice Score

1.1 Budgets are prepared in good time for all the costs of running the organisation 5 4 1 0

1.2 Both finance and programme staff are involved in setting budgets 5 4 1 0

1.3 Project budgets are based on the costs of planned activities 5 4 1 0

1.4 Budget worksheets include explanatory notes and clear calculations 5 4 1 0

1.5 A separate budget is prepared for core costs (overheads) 5 4 1 0

1.6 Organisational budgets are approved by the Board of Trustees 5 4 1 0

1.7 A named individual (budget holder) is responsible for implementing and managing each budget 5 4 1 0

1.8 Budget codes match (or correspond to) accounting codes 5 4 1 0

1.9 All planned operational costs are adequately funded 5 4 1 0

1.10 A cash flow forecast is prepared every month 5 4 1 0

Total score for planning & budgeting

Section 2 Basic accounting systems Every financial transaction should be backed up by a ‘supporting document’, e.g. a receipt, invoice or sign sheet (eg for many travel reimbursements). This is the evidence that a specific transaction has taken place.

Every transaction involving paying out or receiving money should be written down in a cashbook. It can be kept in a physical cashbook or petty cashbook, on an Excel spreadsheet or as part of a computerised accounting package. Every entry in the cashbooks should be referenced back to the relevant supporting document.

It is important to check the accuracy of the accounting books at the end of each month by carrying out two essential ‘reconciliations’. The bank statement balance is compared to the bank cashbook closing balance. A physical cash count is done to check the closing balance in the petty cash book.

Accounting works by assigning codes to each transaction entered in the cashbooks. The unique list of accounting codes that an organisation uses is called its “Chart of Accounts”. Another set of codes can be used to assign transactions to a specific project or donor. These are called ‘cost centre’ codes.

Ref Statement of best practice Score

2.1 Every payment made has a supporting document providing evidence 5 4 1 0

2.2 All cash or cheques received are recorded on pre-numbered carbon copy receipts (if NGO does not receive cash or cheques score 5) 5 4 1 0

2.3 All payments and receipts are recorded in cashbooks (date, description, amount) 5 4 1 0

2.4 There is a separate cashbook for each bank and cash account 5 4 1 0

2.5 Every entry in the cashbooks is cross referenced to a supporting document 5 4 1 0

2.6 All cashbooks are updated at least once per month 5 4 1 0

2.7 All cashbooks are written neatly in permanent ink or on computer 5 4 1 0

2.8 A standard Chart of Accounts is used to code (or classify) each transaction in the cashbooks 5 4 1 0

2.9 Transactions are also classified by project or donor using a standard list of ‘cost centres’ 5 4 1 0

2.10 A bank reconciliation is done each month, for every bank account 5 4 1 0

2.11 A cash count reconciliation is witnessed and recorded each month 5 4 1 0

2.12 The organisation keeps track of amounts owed to others (eg suppliers) and owed by others (eg staff) 5 4 1 0

Total score for basic accounting systems

Section 3 Financial reporting

The Board of Trustees need financial reports to oversee the finances of the organisation. Managers need up-to-date figures to monitor projects and make decisions. Donor agencies need reports to check the use of their money, and often as a condition for further funding. Increasingly, organisations are sharing financial information with beneficiaries to increase accountability and build confidence. An annual external audit verifies the accuracy of the financial statements.

The monthly financial reports should include an Income and Expenditure report showing money coming into the organisation and how it was spent. If the report compares the amount spent against budget, it is called a Budget Monitoring Report. The budget is supposed to be a tool not a straight jacket. Project managers should use financial reports to help make decisions so that the money is used efficiently and effectively to achieve desired outcomes.

It is also important to report on balances held at the end of each month or quarter. Balances includes the amount of money held (cash and bank), as well as amounts owed to the organisation (such as unaccounted working advances) and owed by the organisation (eg to suppliers / tax authorities).

Reports should be produced showing the relevant level of detail according to their use (eg for a single project or donor) or consolidated. Reports should also have the right format for their use, eg donor formats as per grant agreements, standard formats for annual audited accounts, accessible formats for beneficiaries, user friendly formats for managers.

NB: Donor reports are considered in Section 5: Grant Management.

Ref Statement of best practice Score

3.1 The board reviews financial reports every quarter 5 4 1 0

3.2 Senior managers discuss financial reports at least once every three months 5 4 1 0

3.3 Reports include details of cash and bank balances, amounts due (eg from staff) and owed (eg to suppliers) 5 4 1 0

3.4 Budget holders receive budget monitoring reports every month 5 4 1 0

3.5 Budget monitoring reports include explanations and comments about differences 5 4 1 0

3.6 Financial reports are used to help make decisions 5 4 1 0

3.7 Financial information is shared with beneficiaries at least once per year, in an accessible way 5 4 1 0

3.8 Annual audits are up-to-date (signed within 6 months of the year end) 5 4 1 0

Total score for reporting

Section 4 Internal controls NGOs use a lot of different internal controls to make sure that:

Assets are safeguarded

Accounting records are accurate and up to date

Fraud and errors are prevented and detected

Staff are protected

Note: the other sections of the Health Check also include important controls. For instance cash and bank reconciliations are important for checking accuracy of accounting records and identifying fraud.

Ref Statement of best practice Score

4.1 Cash is kept safely in a locked cashbox or safe, in the custody of one individual 5 4 1 0

4.2 All cash received is banked intact, ie without any being spent (if no cash is received, score 5) 5 4 1 0

4.3 All cheques are signed by at least two authorised signatories 5 4 1 0

4.4 Cheques are signed only when all the details have been properly filled in (ie no signatories ever sign blank cheques) 5 4 1 0

4.5 Bank reconciliations are checked by someone who did not prepare them 5 4 1 0

4.6 There is a written policy detailing who can authorise expenditure of different types or value 5 4 1 0

4.7 All transactions are properly authorised 5 4 1 0

4.8 Cash payments are authorised by someone other than the cashier 5 4 1 0

4.9 Different steps in the procurement process, (eg ordering, receiving and paying) are shared among different people. 5 4 1 0

4.10 Expenses claims for staff advances are checked by the same person who authorised the advance 5 4 1 0

4.11 Staff salaries (including advances and loans deductions) are checked each month by a senior manager 5 4 1 0

4.12 Statutory deductions (eg payroll taxes) are properly made and paid on time 5 4 1 0

4.13 All fixed assets (eg vehicles, computers, equipment) owned by the NGO are insured and controlled using a fixed assets register 5 4 1 0

4.14 There is an approved policies and procedures manual in place which is relevant to the organisation, and known by staff 5 4 1 0

4.15 A properly registered audit firm is selected by the trustees 5 4 1 0

Total score for internal controls

Section 5 Grant management

Most NGOs get at least some of their funding as grants from donor partners. It is important to have a grant agreement in place that outlines the amounts and timings of funds to be transferred.

Donors tend to fund specific projects with specific budgets which form part of the agreement.

The grant agreement may also contain a number of grant conditions, including procurement rules and reporting requirements. Programme and Finance staff need to work together to ensure consistency between the narrative and financial reports about the same project.

Often NGOs work with several different donors at the same time. It is very important to keep track of which donor is funding which project (or part of a project). It is very bad practice to ‘borrow’ money received from a donor for a specific project for another purpose.

Ref Statement of best practice Score

5.1 There is a signed grant agreement in place for each grant 5 4 1 0

5.2 Senior Managers check the grant conditions are reasonable before signing agreements 5 4 1 0

5.3 Grant conditions on procurement are known by finance staff, budget holders and procurement officer(s) 5 4 1 0

5.4 There is compliance with the terms and conditions in grant agreements 5 4 1 0

5.5 Donors receive financial reports in the right format and on time 5 4 1 0

5.6 Donor financial and narrative reports are consistent and clearly linked to each other 5 4 1 0

5.7 Donor funds are kept for the activities they are meant for and never ‘borrowed’ for other activities 5 4 1 0

Total score for grant management

Section 6 Staffing

Good financial management is dependent on staff with the right skills, support, and attitude to carry out their responsibilities. All staff have a role to play in financial management. The accounting staff are part of a wider team including the Executive Director, Programme Managers and the Board. Integrating good financial management into programmes involves budget holders and finance staff working hand in hand through all the stages of the financial cycle (plan-do-review).

It may be difficult to assess the technical competence of accounting staff. Good indicators are the timeliness of reports, the neatness of files and records in the accounts office, and auditor’s comments or recommendations.

Ref Statement of best practice Score

6.1 The board includes someone with the skills needed to oversee all financial activities 5 4 1 0

6.2 The finance staff have the skills (and qualifications) needed to carry out all financial activities 5 4 1 0

6.3 Managers and programme staff have the financial skills they need to manage budgets and implement controls 5 4 1 0

6.4 Finance staff and budget holders work together well in payments processing and budget monitoring 5 4 1 0

6.5 Different roles within the finance function are clearly defined, known and followed 5 4 1 0

6.6 Senior staff lead by example in following control procedures 5 4 1 0

6.7 Finance staff are recruited freely and fairly on the basis of merit only 5 4 1 0

6.8 All staff receive the training and support they need to carry out their financial management responsibilities 5 4 1 0

Total score for staffing

Interpreting your score Record your score for each section in this table. Then compare it to the columns on the right and ring or shade the appropriate risk assessment for each section. Finally add up your total score and see the advice below.

Section Your Score

High Risk

Medium Risk

Low Risk

1. Planning and budgeting 0 - 25 26 - 40 41 - 50

2. Basic Accounting Systems 0 - 30 31 - 50 51 - 60

3. Financial reporting 0 - 20 21 - 35 36 - 40

4. Internal controls 0 - 40 41 - 60 61 - 75

5. Grant management 0 - 15 16 - 25 26 – 35

6. Staffing 0 - 20 21 - 30 31 - 40

Total Score 0 - 150 151 - 240 241 - 300

Your score is over 240

Well done! Your financial management is in good shape. The risks of not being able to complete your work because of financial problems are low. But do also consider the risk assessment in each section: effective financial management requires strength in all six areas. Use this opportunity to make improvements and further reduce your financial risk.

Your score is between 151 and 240

Not bad! There is clearly some good financial practice in place, but still plenty of room for improvement. There is a risk that financial problems will prevent you from doing your work. Low scoring sections require immediate attention from managers.

Your score is less than 150

Work to be done! You have serious problems. Your financial management is not in good health. There is a high risk that you will face financial problems in the near future: funds may be misused, or donors may withdraw their financial support. Managers and trustees should meet urgently to discuss how the situation can be improved. You should consider calling in assistance as soon as possible. This must be dealt with right now.

Additional Resources

Your auditor or other NGOs may be able to help you identify how you can improve your

financial management. You may also find the following Mango resources helpful.

1 Mango’s Guide to Financial Management for NGOs

Mango’s free Guide to Financial Management for NGOs is available from

www.mango.org.uk. It is like an online reference book and includes a comprehensive

introduction to:

What NGOs do and what this means for managing them

Key financial responsibilities of NGO trustees, managers and staff

Financial management basics:

­ budgeting, bookkeeping, reporting and controls

Financial management advanced issues including:

­ assessing and achieving financial sustainability

­ giving and receiving grants

­ accountability to beneficiaries

­ accounting software

­ finance manual

­ fraud.

It is packed with free material to download, practical tools and case studies. Free

downloadable materials include the Course Handbook for the FM1 training course (see

below), a simple Excel based bookkeeping system suitable for field offices, standard forms

for you to tailor to your own organisation, and sample job descriptions for you to edit.

2 Training courses

Mango runs training courses on NGO financial management in regional centres around the

world, including:

FM1 - Practical Financial Management for NGOs - Getting the basics right (5 days)

FM2 - Strategic Financial Management for NGOs (3 days)

FM3 - Financial Management for Effective Programmes: A Programme Officer's Survival

Course (2 days)

FM9 - Assessing and Building Partners' Financial Management Capacity (1 day)

TFT1 - Training for Finance Trainers: How to Take the Fear Out of Finance (4 days)

See www.mango.org.uk or contact the training team on training@mango.org.uk or by phone

on +44 (0) 1865 423818 for more details.

3 Capacity building support

Mango recruits finance professionals for NGOs all round the world. We help NGOs find

support staff who have strong capacity building skills as well as technical skills. They work

with NGOs for anything from two weeks (reviewing systems) to months (developing systems

and training staff) or years (managing systems and staff).

See www.mango.org.uk or contact the recruitment team on financestaff@mango.org.uk or

by phone on +44 (0) 1865 433 342 for more details.

Glossary

Account code A code for a specific type of transaction. Transactions are given a code which describes what type of income or expenditure they are - e.g. 5050 Transport costs, 5600 Office rent etc.

Bank reconciliation Comparing the month end balance on the bank statement to the month end balance in the cashbook and identifying any differences.

Budget The best possible estimate of the cost of a set of activities over a given period of time, and of how you are going to pay for those activities

Cashbook A book or spreadsheet that lists all of the receipts and payments made in to and out of a particular bank or cash account.

Cash reconciliation Comparing the month end physical cash counted to the expected month end balance in the petty cashbook.

Cash flow forecast A report that shows the expected timing of receipts and payments for the next 3-6 months (or longer).

Chart of accounts A list of all account codes, including a description of each code.

Core costs Costs shared by many projects. Also called overheads or indirect costs.

Cost centre A label for a group of costs which are looked at together. For instance, different projects are often treated as different cost centres.

External audit A review of the year-end financial statements carried out by a professionally qualified and legally registered auditor resulting in an opinion about whether they give a true and fair view.

Fixed asset An item of high value owned by the organisation for use over a long period. Normally office equipment, vehicles and property.

Fixed asset register A register (list) of the assets owned by the organisation, including details such as: reference number, date bought, purchase price, and location.

Payment voucher An internal document raised for each payment. It provides a unique reference number and evidence of authorisation. Supporting documents are attached to it.

Petty cash records The cashbook where cash transactions are recorded, and the supporting documents relating to each transaction.

Procurement The process of purchasing goods and services. Steps in the process may include requesting, authorising, selecting suppliers, ordering, receiving and paying.

Receipt book register A register (list) of receipt books as they come from the printers showing dates when each one is issued, finished and returned.

Reconciliation The process of comparing information held in two sets of records that describe the same transactions.

Supporting document The original documents that describe each transaction. These may include, receipts, invoices, delivery notes, sign sheets etc

Statutory deductions Amounts which must be taken from an employee’s pay before they receive it, such as income tax or national insurance contributions.

Transaction Any exchange of goods, services or money in return for other goods, services or money. Most commonly receipts and payments.

Trustee A member of an NGO’s most senior governing body, who shares overall responsibility for the NGOs work.

Working advance A sum of money entrusted to someone to spend on behalf of the organisation, which needs to be accounted for.

Appendix 2. An approach to Partner Assessment 1 Objectives and methodology 1.1 Objectives of the assessment

Ascertain structure, management, resources and strategy Establish level of technical capabilities Establish financial position and processes

1.2 Methodology

Review relevant documentation Discussions with partner’s board/committee and management team Discussions with field staff and beneficiaries

2 Assessment criteria

The overall assessment is made against seven organisational criteria:

2.1 Organisational vision Does the organisation share your vision? Does the organisation have a mission statement or other statement of aims

and objectives? Does the organisation have a constitution/governing document? Are the organisation’s activities consistent with its mission/objectives?

2.2 Overall organisational capacity

Does the organisation have a successful track record of working with you? Does the organisation have a successful track record working with other

organisations/agencies? Does the organisation have an overall record of achievement in the relevant

field?

2.3 General management Is there an organisation chart/organogram showing the structure of the

organisation and how posts and committee relate to one another? Are there clear responsibilities for board/committee members? Are there clear reporting processes to the board/committee? Is there a manual of all administrative procedures which clearly assigns

responsibilities? Is there evidence of regular minuted board/committee meetings? Is there a functioning office with adequate telephone and e-mail facilities?

2.4 Financial management Does the organisation have current annual accounts? Are the accounts independently audited? Are there documented financial procedures clearly assigning responsibilities? Do the procedures allow for an adequate level of internal control? Does the organisation maintain adequate financial records, including:

A cash book detailing all cash transactions and cash in hand? A bank book detailing all bank payments and receipts Files of all purchase documentation including original receipts and

invoices? A file of bank statements and a record of bank reconciliations?

Is there an up to date budget for the current financial year including an indication of costs already covered by other partners/donors?

Are regular financial reports provided to the board/committee? Does the accounting system make a clear separation of funds received from

different partners/donors and how these have been spent? 2.5 Procurement

Are there documented purchasing and procurement procedures specifying who is authorised to approve purchases?

Is there a requirement for obtaining quotations/tenders for large purchases? Is there an inventory of all equipment owned by the organisation?

2.6 Human resources

Does the organisation have skilled and experienced staff who will be able to successfully implement the planned project?

Does the organisation have sufficient staff to meet its responsibilities effectively?

Is there an open and participative working environment? Does the organisation have adequate recruitment and HR procedures,

including: Transparent job advertising, short listing and interview procedures References for all new staff Employment contracts for all staff Regular staff appraisals Disciplinary and grievance procedures Annual leave entitlements

2.7 Project management

Does the organisation have up to date project files containing: Background information including project design, baseline studies,

stakeholder consultations Project plan/timetable Project budget Monitoring and evaluation reports Donor conditions

Is the organisation able to demonstrate how beneficiaries are involved on the whole project process from design to evaluation?

Appendix 3. Top Tips for Recruiting the Best Finance Staff In these financially uncertain times, it is more important than ever to ensure that you recruit the best finance staff for your organisation. To help you find the right finance staff for your organisation, Mango have put together seven top tips.

1. Make sure the job description accurately reflects the role This is an area which is often overlooked within the recruitment process. However investing time in putting together a robust job description will save you time and money in the long term. Having an accurate job description allows you to attract candidates who are interested in the content of the role on offer and will ensure that everyone’s expectations are managed throughout the process.

2. Be clear on the skills and experience required for the role Take time to define the specific skills, experience and competencies required for the job and ensure that there is some way of measuring these throughout the recruitment process. This will ensure that only candidates that meet your criteria will reach the final stages of the process.

3. Make the job description and particulars as attractive as possible Candidates are more likely to be attracted to positions which offer some degree of flexibility or where there are opportunities for career development. If you are able to offer this, ensure that this is made clear in the job advertisement and in the job description.

4. Use a structured interview and assessment process Research has shown that past behaviour is an effective predictor of future performance so it is a good idea to ask candidates for examples of when they have demonstrated the skills and experiences required for the specific role.

5. Conduct an appropriate skills based test at interview Studies have also shown that combining an interview with a skills based test is the most effective way of identifying the best person for the job. A test will allow you to eliminate candidates that are not able to perform the tasks required for the role and will also give you a level of understanding of the training or support that the successful candidate may require.

6. Involve employees in the recruitment process Source: http://www.mango.org.uk/Guide/TT15Recruit

SAMPLE Job Description

ORGANSATION NAME JOB DESCRIPTION Job title: Finance Overall job purpose:

Reports to: Supervisor to: Key responsibility areas and associated tasks:

1. Managing staff in the finance department so that all staff perform are able to fulfil

their responsibilities, including but not limited to:

Participation in post design, recruitment and selection

Induction and training of new staff

Effective delegation, support and follow up

Maintaining a motivated and effective team

Periodic establishment of objectives and carrying out regular performance

reviews

2. Ensuring that necessary financial planning procedures are carried out, including but

not limited to:

Working with and facilitating budget holders in development of their budgets

Ensuring donor formats and conditions are complied with

Consolidation and review of budgets

Cash flow forecasting

Participating in development and implementation of financing strategy

3. Processing transactions, including but not limited to:

Cash handling – receiving and paying cash

Issuing invoices, chasing debts

Ensuring proper control of cheque books and receipt books

Authorisation of payments and Local Purchase Orders (or other financial

commitments)

Processing payments on time, managing liabilities

Processing staff working advances (floats) and accountabilities

Payroll preparation and processing

4. Maintaining proper books of account and supporting documents, including but not

limited to:

Establishing appropriate books and records for cash, bank, fixed assets, stocks,

debtors, creditors

Keeping all books up to date

Carrying out reconciliations to ensure accuracy (eg cash count and bank

reconciliations)

Carrying out frequent data back ups

Maintaining proper physical files and computer files and folders to enable easy

retrieval of information by the organisation and others

5. Producing accurate, useful and timely reports, including but not limited to:

Reports for budget holders, senior management, Board, donors and beneficiaries

6. Ensuring good team work and cooperation between finance and programme,

including but not limited to:

Participation in regular project management meetings

Ensuring programme staff are trained in relevant aspects of financial

management

Ensuring a proper understanding of field operations, including risks and

practical limitations.

7. Ensuring adequate internal controls are in place

8. Ensuring that an annual audit is always carried out in good time

© Mango Charity No.: 1081406 www.mango.org.uk

Appendix 4 -Minimum Standards Checklist The Minimum Standards Checklist highlights the 7 most critical aspects of financial management that should always be in place in every NGO, together with the reasons why. It also lists some additional areas of best practice.

A. Minimum Requirements

Standard Why

1. A valid supporting document for every transaction, (securely filed and stored for the minimum period required.)

Protection for staff, evidence and details of transaction.

2. A cash book for every bank account, reconciled every month. To organise and summarise transaction information; check for errors and omissions.

3. A Chart of Accounts – used consistently in the accounting records and budgets

Principle of consistency; to facilitate production of financial reports.

4. A budget detailing costs and anticipated income for all operations.

Planning, fundraising, control and reporting.

5. Clear delegation of authority – from governing body through the line management structure.

To know who is responsible for what and within what limits.

6. Separation of duties – sharing finance duties between at least two people.

To prevent temptation to steal and reduce opportunity to commit fraud; to share the load.

7. Annual financial statements – preferably audited by an independent person.

Accountability to stakeholders; transparency.

B. Good Practice

8. Additional accounting records when staff are employed (wages book) or assets owned (assets register).

To meet statutory and audit requirements; for control purposes.

9. Budgets based on real activity plans, which include the full cost of running a project.

Realistic, more likely to meet targets.

10. Budgets with clear calculations and notes. Easy to read and make adjustments. Easy to justify calculations.

11. Separate core costs budget. Encourages active management and financing strategy for core costs.

12. Monthly cash flow forecast. Helps to identify and take action to avoid short-term cash flow problems.

13. Use of Cost Centres when working with multiple donors and/or projects.

To separate restricted funds and related transactions; to facilitate reporting to managers and donors.

14. Funding grids, if more than one donor is funding an organisation or project.

To avoid double-funding situations and identify areas of shortfall.

15. Budget monitoring reports at least monthly to managers (and also regularly to beneficiaries).

To monitor progress; control purposes.

16. Written policies and procedures, including a code of conduct for staff & board members.

To prevent confusion about organisation rules and expected practice.

17. Diversified funding base – mix of restricted and unrestricted funds.

Less vulnerable to financial shocks; helps to build up reserves.

18. A reasonable level of reserves. Less vulnerable to financial shocks; helps overcome cashflow problems

© Mango Charity No.: 1081406 www.mango.org.uk

Appendix 5. Partner Finance Monitoring Checklist

Partner Name:.……………………………………………………………………………………………………….… Project Code/Title: ………………………………………………………………….Budget Total:……………….. Completed by:……………………………………….………………….. Date:…………………….……………….. Please refer to assessment list, queries on previously submitted reports and previous monitoring points on issues to follow-up.

Guide Questions Yes No Remarks

1. Conduct a cash count and bank reconciliation in custody with the cashier. 1.1. Is there a cash count conduct regularly, at least once a

month? 1.2. Who do the cash count and who do the verifying? 1.3. Does the total cash balance reconcile with the cash count? 1.4. Where is the cash kept, is it in a secure place allowing access

only to the cashier? 1.5. Is total cash holding appropriate to the Partner’s operation? 1.6. Are chequebooks properly locked in the safe? 1.7. Is the Partner’s bank account in the organisation name? If not,

what is the control in place.

2. Check whether collection is deposited timely. Review file of deposit slips. Trace amount deposited as against what is recorded in the cashier’s Cash Book. If partner has a check account: 2.1. How often do they deposit collection to bank? 2.2. Compare the deposit slip with cashbook records to see that it

is updated timely with correct amount. If partner has only cash on hand: 2.3. Check that receipts are recorded to cashbook timely.

© Mango Charity No.: 1081406 www.mango.org.uk

Guide Questions Yes No Remarks

3. Process map the system of handling and recording cash receipts. Establish what are the books/records maintained by the cashier and the finance officer. 3.1 Is an official receipt issued for all collections? 3.2 Are there persons other than the cashier who are allowed to

issue an official receipt? 3.3 Does the cashier maintain a cashbook where receipts and

disbursements are recorded?

4. Review file of official receipts issued. Check numerical sequence, missing official receipts etc. 4.1 Are the official receipts printed? And pre-numbered? If no,

what is the control in place? 4.2 Are receipts issued in a sequential manner? 4.3 Are there missing official receipts? 4.4 Are cancelled, spoiled official receipts stamped ‘Voided’ and

filed?

5. Obtain the existing policy on delegation of authority. 5.1 Is there any policy on limits of payments by petty cash,

cash, and check? Obtain document. 5.2 Is there any delegation of authority document stating

authorisation level for purchase and payment transactions?

6. Conduct a test of disbursement transactions. On a random basis,

select from at least 3-months transactions and vouchers to check

documentations and approval on payment.

6.1 Is a voucher system for payment being implemented? 6.2 Is there any delegation of authority document stating

authorisation level for purchase and payment transactions? 6.3 Are ‘Petty’ expenditures paid through the Petty Cash Fund? 6.4 Are petty cash vouchers prepared to cover petty expenses? 6.5 Does the paid petty cash voucher exceed the limit for

payment? 6.6 Are all cash/check vouchers properly approved by the

authority as stated in the delegation of authority document? 6.7 Are the cash/check vouchers pre-numbered? 6.8 Are cash/check vouchers supported with appropriate

supporting documents? (Approval requisition, quotations, supplier’s delivery or invoice, receipt)

© Mango Charity No.: 1081406 www.mango.org.uk

6.9 Do the cash/check vouchers bear the required approval? 6.10 Are checks ‘crossed’ or made payable to the ‘Payee’ only? 6.11 Are there supplier’s official receipt to attach every payment

vouchers? Has the invoice or receipt been tampered with or amended?

6.12 Are paid vouchers and supporting documents stamped

‘PAID’? 6.13 Have we witnessed what has been declared as being built

or purchased? If possible, take a look at the goods and make judgment on validity of the amount.

6.14 Have we met with beneficiaries, who have attended the

workshop to confirm the duration and reimbursement cost? 6.15 During our monitoring visits try to meet with all partner’s

staff to verify that they matched with reported expenses.

7. Test check balances of cash and bankbook, and trace posting to the General Ledger. 7.1 Are ledger entries properly referenced to the supporting

vouchers? 7.2 Are the balance of the cash and bankbook accurate? 7.3 Are the account balances posted in the General Ledger

correctly?

8. Review financial report: Budget vs. Actual 8.1 Are the balance from General Ledger posted correctly to

financial report? 8.2 Is the report prepared in accordance with donor’s format

and the budget format? 8.3 Is the Partner funded by more than one donor, if yes, are

the requirements of the other donors consistent with XYZ’s? What are the constraints?

8.4 Is the financial report prepared on a monthly basis and

timely? 8.5 Does the Partner review, analyse variances and take

corrective action on the result of the monthly financial report?

8.6 Are recommendations and feedback from XYZ being

implemented or taken into account?

9. Reporting to XYZ 9.1 Does the Partner meet the deadlines indicated in the

© Mango Charity No.: 1081406 www.mango.org.uk

contract? 9.2 Are reports received before the next transfers are made?

10. Check the handling of stock and fixed assets? 10.1 Are assets required to run the project? Do we already

have an asset that can adequately perform the desired function?

10.2 Are there proper identification tags on all the assets?

(Check sample or total) 10.3 Are the assets properly utilized and solely for the project? 10.4 Are fixed assets e.g. vehicles properly kept in a secured

place? 10.5 Are all assets entered in the fixed assets register with

complete information (Acquisition date, identification no., model, serial no., amount, location etc.?

10.6 Are budget purchased in conformity with budget? 10.7 Is there a proper chain of accountability for use of assets? 10.8 Are assets utilized for the sole purpose of the project? 10.9 Is fuel consumption in line with budget/ expectations? Are

frequencies of vehicle breakdowns monitored or vehicles independently checked?

10.10 Is there an appropriate insurance policy for each vehicle

funded by XYZ? 10.11 Are assets disposal in conformity with the procedure

stipulated in the project? 10.12 Are stocks maintained? 10.13 Are stocks recorded regularly updated and signed off by

a responsible officer?

11. Float and Loan Registers 11.1 Are the registers up to date? 11.2 Are there any large, outstanding floats or loans? If yes, why? 11.3 Are liquidations being made promptly?

12. Salary Advance Register 12.1 Are the registers up to date? 12.2 Have all advances been deducted from the monthly salaries?

© Mango Charity No.: 1081406 www.mango.org.uk

12.3 Has any member of staff consistently been receiving salary advances?

13. Existence of competent personnel 13.1 Is there a finance team of at least one person? 13.2 Does the finance team have adequate accounting skills?

14. Proper filing of accounting documents 14.1 Are accounting/ supporting documents properly filed? 14.2 Is the filing system consistent? 14.3 Document easy to retrieve and crosscheck? 14.4 Are document kept in archives for the time duration

specified in the country legislation or contract?

15. Proper utilisation of fund – Programme Visits (Beneficiaries)

15.1 Is there a calendar of visits (scheduled or impromptu)? 15.2 Are field visits being carried out in line with the calendar? 15.3 Are resources reaching the beneficiaries in line with the

project proposal? 15.4 Purchases made for beneficiaries, are the assets in good

condition and with beneficiaries?

16. Proper utilization of fund – Control of activities and utilization of

assets against approved budget.

16.1 Is there a signed contract with approved budget annexed? 16.2 Does the financial report match the activity report? If not,

why not – can any variances be explained? 16.3 Is there any overspend for activitiy against budget? If yes,

and expenditure continues at the current rate, will there be enough money to complete the project?

16.4 Are amendments to budget lines preceded by formal

demand duly authorised?

17. Training and support 17.1 Have the areas of weakness been identified? 17.2 Have the training and support plan been established and

planned? 17.3 Have the training and support been conducted?

© Mango Charity No.: 1081406 www.mango.org.uk

Appendix 6. 20 Questions to ask when Reviewing Financial Information Mango's 20 Questions checklist is a great tool to help you make sense of different types of financial reports This checklist is part of Mango’s Guide to financial management for NGOs (available at www.mango.org.uk). Auditors’ Report on the Annual Financial Statements 1. How long ago was the last audit conducted? 2. What does the Auditor’s Opinion say – qualified or unqualified? Balance Sheet 3. Does the organisation have enough ready cash (see ‘Cash at Bank’ listed under Current

Assets) to pay off its immediate debts (see Creditors)? 4. How long could the organisation survive if all of its funding dried up? (Calculate the

‘survival ratio’) How does this compare to last year? Income & Expenditure (or Profit and Loss) Account 5. Is income and expenditure broadly in balance? (Look for net income/expenditure) 6. Is there a significant increase or decrease in activity levels from the previous year? 7. What is the balance of direct project costs vs. admin costs? Is it reasonable for the size and

nature of the organisation ? 8. How ‘donor dependent’ is the organisation? (Calculate the ‘donor dependency ratio’) Budget Monitoring Report 9. Is expenditure broadly in line with the budget? (+ 10%) 10. Is income broadly in line with the budget? 11. Are there any significant variances? If so, have they been satisfactorily explained? 12. What action is being taken to correct significant variances – e.g. under-spending as a result

of delayed activity plans? 13. Are there any large bills outstanding which could substantially affect the figures shown? 14. Is the organisation owed any large sums of money and if so, what is being done to retrieve

them? 15. Are there any un-budgeted expenses which may occur in the rest of the year? 16. What is the projected end-year outcome? Is this outcome satisfactory? If not, what steps

can be taken to change the result? Cashflow forecast 17. Is there enough cash in the bank to fulfil the activity plan in the next six months? 18. What grants are due in the rest of the year and are they still expected to come through on

time? 19. Are cash balances invested to produce the best return? General 20. What non-financial figures are being produced to show how the programme of activities is

progressing?

© Mango Charity No.: 1081406 www.mango.org.uk

Appendix 7 - Example Donor Report

Japan International Foundation (JIF) - Donor Report Quarter 1

Project Title: LHRC - Legal Advice Service Project Period: 1 July 200x to 30 June 200x

Currency: US Dollars Report Period: 1 July 200x to 30 September 200x

A B C D = B/A * 100 E F

Code Description Total Actual Balance Utilisation Notes Forecast

Budget Qtr1 Available % Qtr2

12 months

Non-Personnel project inputs

NP1 Tools and equipment 1,500 1,734 (234) 116%

Original specified equipment no longer

avialable; newer model purchased 0

NP2 Computer equipment 0 0 0 - 0

NP3 Vehicles 20,000 18,966 1,034 95%

Purchased July, delivery delayed until

October 1,000

NP4 Communications 900 230 670 26% 230

NP5 Publicity 740 312 428 42%Posters/leaflets purchased in bulk

225

NP6 Workshop materials 700 0 700 0%

August workshop cancelled as no vehicle,

back on track in Qtr2 175

NP7 Food & accommodation 2,760 60 2,700 2%

4 sessions only Qtr1 as no vehicle, back on

track in Qtr2 700

NP8 Reference books 425 225 200 53%1st batch arrived, 2nd batch not yet ordered

200

NP9 Transport and travel 5,740 660 5,080 11%Vehicle delivery delayed by customs

1,450

NP10 Other: Car Hire 0 1,050 (1,050) n/a

Hired local vehicle as new car held by

Customs until mid October 525

Sum NP Non-Personnel project inputs 32,765 23,237 9,528 71% 4,505

Project Personnel

PP1 Salaries 10,500 1,125 9,375 11%Legal Advisor started 1 Oct 200x

2,625

PP2 Benefits and taxes 3,045 326 2,719 11%Legal Advisor started 1 Oct 200x

760

PP3 Recruitment 730 980 (250) 134%Had to re-advertise for Legal Advisor post

0

PP4 Staff Training 1,575 0 1,575 0%Training is planned for January onwards

0

PP5 Other: Volunteers expenses 2,040 32 2,008 2%Only 4 sessions run Q1, on track from Q2. In

line with NP7 500

Sum PP Project Personnel 17,890 2,463 15,427 14% 3,885

SUB TOTAL A [NP + PP] 50,655 25,700 24,955 51% 8,390

Agency Management Support

AM1 End of project evaluation 500 0 500 0%Will take place in Qtr4

0

AM2 Programme support 3,799 1,928 1,872 51% 7.5% of Sub total A 629

Sum AM SUB TOTAL B 4,299 1,928 2,372 45% 629

Total Project Cost 54,954 27,628 27,326 50% 9,019

SUMMARY:

18,231

12,789

(27,628)

3,392

BALANCE OF FUNDS B/F FROM LAST YEAR:

FUNDS RECEIVED FROM JIF THIS YEAR:

TOTAL EXPENDITURE TO DATE:

BALANCE OF FUNDS HELD: