Financial Operation Manual
30 September 2009
This report contains 185 pages
Hong Kong Red Cross
Financial Operation Manual
September 2009
Contents
1 ROLES AND RESPONSIBILITIES 1
1.1 PURPOSE 1
1.2 INTERPRETATION 1
1.3 SECTION SUMMARY 2
1.4 RELATIONAL DIAGRAM ON SCHOOL FINANCIAL MANAGEMENT 3
1.5 RELATIONSHIP BETWEEN SCHOOL SPONSORING BODY AND THE IMC SCHOOLS 4
1.6 OVERVIEW OF INDIVIDUAL ROLES AND RESPONSIBILITIES 6
2 BASIC ACCOUNTING CONCEPTS FOR SCHOOLS 10
2.1 PURPOSE 10
2.2 INTERPRETATION 10
2.3 FINANCIAL YEAR 10
2.4 SECTION SUMMARY 11
2.5 OVERVIEW OF FINANCE PROCESS 12
2.6 ALLOCATION OF ACCOUNTING DUTIES 13
2.7 ACCOUNTING RECORDS 14
2.8 KEY ACCOUNTING TREATMENTS / CLASSIFICATION OF ACCOUNTS 16
2.9 CONSISTENCY WITH HONG KONG RED CROSS AND EDUCATION BUREAU (EDB) GUIDELINES 17
2.10 STATUTORY AND OTHER REQUIREMENTS OF THE INCORPORATED MANAGEMENT COMMITTEE (IMC) 18
2.11 PRUDENT MANNER IN SPENDING GOVERNMENT, OTHER EDUCATION-RELATED SCHEMES AND DONATION FUNDS 19
3 BUDGETING & MONITORING 20
3.1 PURPOSE 20
3.2 INTERPRETATION 20
3.3 INTRODUCTION 20
3.4 SECTION SUMMARY 21
3.5 ANNUAL BUDGET SETTING 22
3.6 MONTHLY FINANCIAL PERFORMANCE REVIEW 25
3.7 BI-ANNUAL BUDGET REVISION 27
3.8 APPROVALS MATRIX 29
3.9 ROLE OF BUDGET COMMITTEE (terms of reference) 30
4 BANK ACCOUNTS, AUTHORITY & RECONCILIATION 31
4.1 PURPOSE 31
4.2 INTERPRETATION 31
4.3 SECTION SUMMARY 32
4.4 PRINCIPLES OF BANK ACCOUNT CONTROL 33
4.5 OPENING A BANK ACCOUNT 34
4.6 CLOSING A BANK ACCOUNT 36
4.7 APPOINTMENT, CHANGES AND CANCELLATION OF BANK/ CHEQUE AUTHORISED SIGNATORIES AND LIMIT 38
4.8 SETTING UP OF AUTOPAY – DIRECT DEBIT SERVICES 41
4.9 MONTHLY BANK RECONCILIATION PROCESS 43
4.10 APPROVALS AND AUTHORITY MATRIX 45
5 CAPITAL COMMITMENT, FIXED ASSETS, DEPRECIATION, IMPAIRMENT & PROVISIONING 46
5.1 PURPOSE 46
5.2 INTERPRETATION 46
5.3 SECTION SUMMARY 47
5.4 POLICIES AND DEFINITIONS 48
5.5 FIXED ASSET COUNT PROCEDURES 49
5.6 FIXED ASSET ADDITIONS 51
5.7 DISPOSAL OR WRITE OFF OF FIXED ASSETS 54
5.8 DEPRECIATION 56
5.9 IMPAIRMENT AND PROVISIONING 62
6 EXPENSE AUTHORISATION, ADVANCEMENT, REIMBURSEMENT AND DISBURSEMENT 63
6.1 PURPOSE 63
6.2 INTERPRETATION 63
6.3 SECTION SUMMARY 64
6.4 MAKING CLAIMS FOR EXPENSE REIMBURSEMENT 65
6.5 DISBURSEMENT FOR EXPENSES INCURRED 68
6.6 ADVANCEMENT OF EXPENSES 70
6.7 EXPENSE AUTHORITY LIMITS 71
6.8 RESTRICTIONS ON NATURE OF EXPENSES 73
6.9 SALARY PAYMENT OVERVIEW 74
6.10 PAYMENT OF SALARIES TO TEACHING AND NON-TEACHING STAFF 76
6.11 SALARY DISBURSEMENT 80
6.12 SALARY APPROVALS MATRIX 82
7 PROCUREMENT & TENDERING 83
7.1 PURPOSE 83
7.2 INTERPRETATION 83
7.3 SECTION SUMMARY 84
7.4 PURCHASE REQUISITION AND ORDERING 85
7.5 TENDER PROCESS 89
7.6 UNBUDGETED PURCHASE 94
7.7 PURCHASES USING DESIGNATED OR GENERAL FUNDS 97
7.8 GOODS RECEIPT AND INVOICE PROCESSING 99
7.9 PAYMENT PROCESSING (CHEQUE PAYMENT) 102
7.10 PAYMENT PROCESSING (INTERNET BANKING) 105
7.11 SUPPLIER LIST MAINTENANCE 108
8 REVENUE COLLECTION 110
8.1 PURPOSE 110
8.2 INTERPRETATION 110
8.3 SECTION SUMMARY 111
8.4 COLLECTING FEES 112
8.5 PROCESSING FEES RECEIVED 115
8.6 RECEIVING NON-EDUCATION BUREAU (EDB) FUNDS 117
8.7 RECEIVING EDUCATION BUREAU (EDB) FUNDS 120
9 INVESTMENTS 122
9.1 PURPOSE 122
9.2 INTERPRETATION 122
9.3 SECTION SUMMARY 123
9.4 MAKING INVESTMENTS 124
10 CASH AND CHEQUE HANDLING 127
10.1 PURPOSE 127
10.2 INTERPRETATION 127
10.3 SECTION SUMMARY 128
10.4 KEY PRINCIPLES OF CASH HANDLING 129
10.5 PETTY CASH REIMBURSEMENT 131
10.6 PETTY CASH REPLENISHMENT 133
10.7 SECURITY & CONTROL - CASH COUNT PROCEDURES 136
10.8 RECEIPT OF CASH 137
10.9 RECEIPT OF CHEQUE 139
10.10 CHEQUE PAYMENT 141
11 JOURNAL ENTRY, POSTING & ADJUSTMENT 143
11.1 PURPOSE 143
11.2 INTERPRETATION 143
11.3 SECTION SUMMARY 144
11.4 MAKING JOURNAL ENTRIES 145
11.5 MAKING JOURNAL ADJUSTMENTS 147
11.6 RETENTION OF ACCOUNTING RECORDS 149
11.7 SEGREGATION OF DUTIES 150
12 IT ENVIRONMENT ON FINANCE SYSTEM 151
12.1 PURPOSE 151
12.2 INTERPRETATION 151
12.3 SECTION SUMMARY 152
12.4 ACCESS CONTROLS AND RESTRICTIONS 153
12.5 IDENTIFICATION, USER ID AND PASSWORD 156
12.6 CREATING A NEW USER ACCOUNT 157
12.7 MAINTENANCE OF MASTER SUPPLIER DATA 159
12.8 CREATING A NEW VENDOR CODE 161
12.9 CHART OF ACCOUNTS 163
12.10 CREATING A NEW ACCOUNT CODE 164
13 REPORTING (FINANCIAL AND BUDGET) 166
13.1 PURPOSE 166
13.2 INTERPRETATION 166
13.3 SECTION SUMMARY 167
13.4 FINANCIAL CLOSE PROCESS 168
13.5 MONTH-END CLOSE PROCESS 170
13.6 YEAR-END CLOSE PROCESS 173
13.7 REPORTING REQUIREMENTS 176
14 STATUTORY REQUIREMENTS & INTERNAL AUDIT 179
14.1 PURPOSE 179
14.2 INTERPRETATION 179
14.3 SECTION SUMMARY 180
14.4 EXTERNAL AUDITING 181
14.5 AUDIT COMMITTEE 182
14.6 INTERNAL AUDIT CONTROL 184
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/ Financial Operation Manual / Date Issued: 30 September 2009Section No.: 1
ROLES AND RESPONSIBILITIES
1 ROLES AND RESPONSIBILITIES
1.1 PURPOSE
· To meet financial management obligation, the Hong Kong Red Cross has a mechanism stating clearly the responsibilities and duties of personnel responsible for managing financial resources (including authorisation / delegation / approval level for the use of financial resources) and for monitoring each of the Incorporated Management Committee’s (IMC) financial management of the School.
· Each personnel member should have capabilities that match their responsibilities. IMCs should have a plan of their organisation, defining and allocating responsibilities and identifying clear lines of reporting for all aspects of the school’s operations.
1.2 INTERPRETATION
· Responsibility for the interpretation of this Procedure rests with the School Head Office
1.3 SECTION SUMMARY
THIS SECTION SPECIFICALLY INCLUDES THE FOLLOWING:1.4 / Relational diagram on School Financial Management / A diagram to show the organisational structure for the financial management of the four IMC schools, including reporting lines.
1.5 / Relationship between School Sponsoring Body and the IMC Schools / Principles regarding the working relationship between Hong Kong Red Cross (HKRC) and the IMC Schools in term of maintaining a regular consistent level of communications and consultation.
1.6 / Overview of individual roles and responsibilities / Summary table to show the key roles and responsibilities for all parties involved with the financial management of the IMC Schools (detailed role descriptions may be found in the Appendix A.2)
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/ Financial Operation Manual / Date Issued: 30 September 2009Section No.: 1
ROLES AND RESPONSIBILITIES
1.4 RELATIONAL DIAGRAM ON SCHOOL FINANCIAL MANAGEMENT
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/ Financial Operation Manual / Date Issued: 30 September 2009Section No.: 1
ROLES AND RESPONSIBILITIES
1.5 RELATIONSHIP BETWEEN SCHOOL SPONSORING BODY AND THE IMC SCHOOLS
1.5.1 Primary Considerations
· According to the Education (Amendment) Ordinance 2004, the Incorporated Management Committee (IMC) is responsible for planning and managing financial resources available to the school, which include managing its funds and assets (except raising funds including borrowing money; and entering into any contract or agreement involving funds other than Government funds where guidelines have been issued by its School Sponsoring Body), maintaining proper books of account and other financial records as stipulated in the Code of Aid (COA), and preparing the annual audited statements of the accounts as required by the Ordinance.
· According to the Ordinance, Hong Kong Red Cross (HKRC) being the school sponsoring body is responsible for overseeing the performance of the IMC and providing guidelines in raising funds. For the best interest of both parties and to fulfil their respective mandatory responsibilities, the IMC has asked HKRC to provide guidance and mentorship at critical financial processes to ensure that a highly accountable financial management system and practices could be upheld, and also to minimise the risk of malpractices.
· Both HKRC and the IMCs of Red Cross Schools agree to maintain close communications and consultation between them at the finance management framework as well as operation levels, particularly in allowing ample time for deliberation before changes of the agreed framework or deviations from the agreed practices may occur.
1.5.2 Two levels of Communication and Consultation
a) Financial Management Framework
· The financial management, principles and procedures adopted by the IMC, like other school management and procedures, are stated by a Service Agreement signed between the HKRC Council and the IMC.
· The Service Agreement enlists the support and guidance offered by the HKRC Finance Office for school staff in their daily financial operations, and stipulates that any changes of such management framework, principles and procedures (in the forms or manuals or written guidelines) require sufficient communications and consultation between the 2 parties in advance.
· In terms of financial management, there must be prior formal discussions in both the HKRC Finance Committee meeting and IMC meetings before a change is officially adopted by the IMC.
· Mr Allen Yam, HKRC’s Director and Alternate School Manager of the IMC, and Ms Winnie Wan, HKRC’s Senior Executive Manager (Education) and a School Manager of the IMC, will serve as the key communication person between the 2 parties to facilitate early attention of either party if a change in the agreed management framework is proposed.
· Regular review of the performance of those involved parties in meeting their obligations as set out in the Service Agreement would be made to streamline operations and clarify misunderstandings, initially on a half-yearly basis. Incorporated Management Committee (IMC) will conduct the regular review in consultation with the School Sponsoring Body.
b) Financial Operation Level
· The detailed financial operations of each Red Cross School is stipulated in the Financial Operation Manual (FOM) approved by the IMC after consultation with the Hong Kong Red Cross (HKRC) Finance Committee.
· The HKRC’s Senior Executive Manager (Education), being a School Manager, represents the IMC and its Honorary Treasurer to play its monitoring role of the daily financial practices and procedures stipulated in the FOM. This role is reflected in her role for approval in certain financial transactions and commitments with greater liability submitted by school staff.
· The HKRC’s Senior Finance Manager and Finance Manager of the HKRC Finance Office are the key technical advisors to Senior Executive Manager (Education) in exercising her approval authority in the aforesaid transactions and commitments. It is the duty of Senior Executive Manager (Education) to seek the advice from the HKRC Finance Office to clarify any doubts when there is a deviation from the written policy.
· In cases where there may require a flexible application of the stipulated financial practices and procedures, the IMC Chairman and / or Honorary Treasurer must seek prior consultation with the HKRC’s Secretary General and / or Senior Finance Manager. Such areas of divergence from the stipulated practices should also be reported to the HKRC Finance Committee and IMC on a post fact basis.
1.6 OVERVIEW OF INDIVIDUAL ROLES AND RESPONSIBILITIES
· Please refer to Appendix A.2 for further details on roles and responsibilities
ROLE / COMMITTEE / MEMBER / KEY RESPONSIBILITIES / FREQUENCY OF MEETINGS /Incorporated Management Committee (IMC)
See Appendix A.2.1 / Sponsoring body managers
Parent manager(s)
Teacher manager(s)
School Principal
Alumni manager(s)
Independent manager(s) / Accountable to the Permanent Secretary for Education and the sponsoring body for the performance of the school
Supervising the management of the school
Adhering to management policies, safeguarding assets and securing the completeness and accuracy of records / At least 3 times a year
Budget Committee
See Appendix A.2.2 / School Principal
Honorary Treasurer
One designated IMC manager
Accounting staff from
School Head Office and School General Office / Discussing and agreeing budget policy
Review and authorisation of annual budget and budget revisions / Twice
Audit Committee
See Appendix A.2.3 / 2-3 Incorporated Management Committee (IMC) Managers (Non-Executive functions, hence excluding School Supervisor, Principal, Honorary Treasurer, and other IMC Managers that are involved in the school’s financial operation) / Reviewing the Annual Accounts
Reviewing the design and implementation of the school’s financial management and internal control procedures prior to endorsement by the IMC / At least once a year
Tender Opening and Vetting Committee
See Appendix A.2.4 / Two staff members appointed by the Principal / Opening & vetting of tender documents
Recording tender details / Ad-hoc when tender process initiated
Tender Approving Committee
See Appendix A.2.5 / School Supervisor
Incorporated Management Committee (IMC) School Manager (1 IMC Manager for tender price ≤ HK$250,000 and 2 IMC Managers for tender price > HK$250,000)
School Principal
1 Teaching Staff / Reviewing tender recommendation
Approving & signing off tender / Ad-hoc when tender process initiated
School Supervisor
See Appendix A.2.6 / Co-signing IMC statement of accounts with the Honorary Treasurer
One of the authorised signatories for cheque / banking facilities for amount ≤ HK$3,000 and amount > HK$30,000
Signing and approving school payroll list
Reviewing and approving tender as a member of Tender Approving Committee / N/A
School Managers
See Appendix A.2.7 / IMC appointed School Sponsoring Body Manager is one of the authorised cheque signatories for amount > HK$3,000 and ≤ HK$30,000
IMC Managers who are members of Tender Approving Committee will review and approve tender / N/A
Honorary Treasurer
See Appendix A.2.8 / Supervising the Principal and School General Office staff in assisting the IMC to comply with section 40BB of Education Ordinance (EO)
Co-signing IMC statement of accounts with the School Supervisor
One of the authorised signatories for cheque / banking facilities for amount > HK$30,000 / N/A
School Principal
See Appendix A.2.9 / Leading the preparation of budgetary planning for their schools
Reviewing the school’s bank accounts
Approving payments/purchases / N/A
School General Office Staff
See Appendix A.2.10 / Approximately 2 full time General Office staff at each school (role also includes non-finance activity) / Maintaining proper book of accounts for their school
Preparing cheques and vouchers
Checking and verifying purchases and payments
Preparing monthly payroll, Provident Fund contributions and tax return for school staff / N/A
Senior Executive Manager (Education)
See Appendix A.2.11 / Reviewing the school’s Annual Accounts
Approving payments
Point of escalation for matters relating to HKRC
Member of Incorporated Management Committee (IMC) / N/A
School Head Office Accounting Supervisor
See Appendix A.2.12 / Supervising the maintenance and upkeep of accounting records
Ensuring that the school complies with Standard Accounting Practice and special requirements of various government departments and funding bodies in financial reporting / N/A
School Head Office Finance Executive
See Appendix A.2.13 / Assisting the Accounting Supervisor
Checking journal postings made by the schools / N/A
Hong Kong Red Cross (HKRC) Finance Manager
See Appendix A.2.14 / Maintaining user access to EPICOR system / N/A
Hong Kong Red Cross (HKRC) Finance Office
See Appendix A.2.15 / Senior Finance Manager
Finance Manager
Accounting Supervisor / A working partner providing technical accounting guidance and advisory support to School Head Office for matters relating to financial management strategies and processes / N/A
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