Atlas Alliance Secretariat
Revised 3.11.2016
Financial Management
Contents
1. Introduction 3
2. accountability to donors 3
3. Accountability to rights holders 3
4. Partnership agreement 4
5. Budgeting 4
a) budgeting process 4
b) planning 5
c) controlling 5
d) reviewing 5
6. System for book-keeping and accounting 5
7. bank accounts 6
8. Financial Reviews 7
9. External auditing 7
10. Right of access and inspect 7
11. Human and physical resources 8
a) Human resources 8
b) Fixed assets 8
c) Procurement 8
12. Risk of mismanagement of Funds 8
13. Ability and responsibility to complain and raise concerns 9
Financial Management and internal control ckecklist 11
1. Introduction
This Manual sets out the principles and practices to be applied when managing resources supported by the Atlas Alliance.
Proper financial management is a prerequisite for enabling every organisation to respond to the needs of stakeholders and beneficiaries.
Accountability is the underlying driving force for responsible financial management, which strive to apply the following principles:
· Fair and true: founded in laws and regulations, based on international financial reporting standards, and without fraudulent behaviour
· Timely, accurate and complete: correct and complete information delivered on time
The contents of this manual provide minimum standards for responsible financial and resource management when supported by the Atlas Alliance.
The applicable authorised requirements and procedures for financial management at every organisation shall be communicated and distributed to all staff. This pertains to both members of Atlas Alliance and its local partners.
2. accountability to donors
This manual relates principally to funds provided by Norad and the Atlas Alliance, but are available for use for all funds.
The Atlas member organisation is the direct recipient of funds from Atlas Alliance and Norad, thus legally bound towards Norad in ensuring safe and sound management of funds.
Every organisation is expected to have its own set of authorised procedures and guidelines.
3. Accountability to rights holders
The Atlas Alliance is committed to be accountable to rights holders, sometimes referred to as beneficiaries.
This means that we strive to deliver and give support as promised. It also entails that we encourage member and local partner organisations ask affected communities what would help in order to get the rights they are entitled.
The Atlas Alliance encourages practical measures to enable affected communities to raise concerns and complain, and we will endeavor to respond to the complaints in a relevant way. We expect our member and local partner organisations to seek to work in the same way.
We expect that partners should ensure that the following provisions are in place to ensure accountability to stakeholders:
· Intended beneficiaries of projects shall be informed of the objectives, planned activities and the available resources. This should happen both through announcements at public meetings, and through public postings of key project information, including financial information.
· There shall be clearly accessible channels for beneficiaries to comment, raise concerns or complain. It should be possible to lodge complaints anonymously.
· To assure beneficiaries of impartial treatment, it should also be possible to complain directly to the Norwegian partner organisation.
· The complaints mechanisms should also deal with complaints of sexual harassments.
There should be established mechanisms for dealing with complaints that ensure that there is professional and unbiased follow-up. This should include the maintenance of a complete record of all comments or complaints, with a description of follow up actions.
4. Partnership agreement
All financial relationships between the Atlas Alliance and its members will be based on a legally binding contract: the partner agreement. This agreement will contain the following:
· Amounts of support
· Currency of amount
· Project period
· Disbursement plan and requirements for each disbursement
· Explicit clauses of ways in which funds cannot be used
· Reporting requirements
· Auditing specifications
· Right for Atlas Alliance to access and verify
· Ability of, and protection for, partner staff and beneficiaries to raise concerns and complaints
· Authorised bank details
· Signatories and contact persons
· Attached authorised budget, including cost rates for travel and accommodation
The details of many of the above sections should reflect the content of this manual.
5. Budgeting
a) budgeting process
The process of budgeting can be divided into 3 main areas:
Planning is the preparation of the budget from data available, within the parameters of the organisation.
Controlling is the monitoring of the budget, usually month by month, to ensure that the actual income and expenditure match up with the estimates originally set.
Reviewing is the identifying of over- and under-budgeting and adjusting the total expectation for the year. This knowledge also feeds to the following year.
b) planning
The first stage of a budget is to decide what you want to achieve over a particular period.
When constructing a budget the following steps are important:
· Identify the budget period (this may be more than one year for a project)
· Identify the activities to be financed in each period
· Calculate the cost of covering all the activities for the period
· Forecast the timing of these costs correctly over the period being planned
One of the main tasks in preparing a budget is costing i.e. working out in advance what the items in the plan will cost. Often this is done around cost centres, for example salaries or travel. Within each of these main activities there will be more cost centres. For example, in the case of travel using the organisations vehicle, there may be fuel, insurance, road tax, maintenance, repairs, driver's salary and depreciation. Identifying cost centres is one way of breaking a plan into parts so that nothing is overlooked - and successful budgeting depends on not overlooking expenditures.
A distinction is usually made between 'running costs' and capital costs. Running costs are those which are incurred continuously e.g. salaries, rents, travel. These costs or expenditures are sometimes divided into Recurrent costs (those which recur continuously such as salaries and travel) and Non-Recurrent costs (those which occur at intervals such as whitewashing a building). Sometimes running costs are known as 'revenue expenditure'.
Capital costs relate to items that are incurred once only or periodically, and that will last for a longer period, typically for more than a year e.g. buildings, vehicles and equipment. Capital costs are sometimes referred to as investments.
All sources of incomes to the project/programme (ie. Other financial sources, donors, membership fees etc) must be included in the overall budgeting.
Check the budget for completeness and accuracy.
c) controlling
To "control" one has to produce 'budget and actual' statements. These should clearly identify 'variances' or deviations, being the difference between the original estimate and the income or expenditure to date.
Budget revisions are recommended when needed. Re-allocations must be presented and explained to the Atlas Alliance secretariat as soon as the information can be presented clearly.
d) reviewing
Reviewing takes place towards the end of the financial year or project period. Adjustments may be possible to ensure that adjustments can be made for under- and over-budgeting. It is also an opportunity for an organisation to identify areas that need to be improved during the next financial year.
6. System for book-keeping and accounting
The following points are designed to serve as a set of minimum standards:
· Accounting – by partner and Atlas member organsiation, should be computer-based.
· An account of partner organisation’s property, financial assets and liquid funds needs to be updated regularly and entered on the balance sheet.
· The balance sheet should also display a detailed account of the partner organisation’s assets and liabilities.
· All donors to local partner shall be known and listed in the annual account.
· The book-keeping locally should be updated weekly and at the latest be up-to-date by the end of each month.
· All entries hould be documented with original vouchers, bank transcripts or invoices with confirmed payment; they should be consecutively numbered and archived according to the journal entries (posteringsjournal).
· Vouchers relating to foreign exchange transactions must be verified with reference to the sources of the exchange rates being applied
· Allowance / Per Diem vouchers should have attached:
o List of names
o Titles
o Period
o Type of allowance
o Signed by the payee
o Signed by the recipient
o Approved by the director
o Standard rate
· Original bank transcripts from a local bank should be available for each month.
· Reconciliation of the bank statement must be completed each month.
· Bank reconciliations must be approved by a senior manager separate from the accounting staff conducting the bank reconciliation.
· Fixed assets and inventories must be listed be listed on a fixed asset register, and the register should be reconciled with the general ledger every six months as a minimum
· Each month's accounts must be closed punctually and monthly financial report should be produced and submitted to project manager and secretary general / director monthly by a pre-set date.
· The accounting shall comply with generally accepted accounting principles and must not contain elements in violation of country laws and regulations.
7. bank accounts
All partners receiving funds from the Atlas Alliance must submit a bank verification to the Atlas Alliance before any payment will be made. The Atlas Alliance recommends that all members of the Atlas Alliance implement the same requirement for their partners.
Funds sourced from the Atlas Alliance cannot be used as loans, salary advance or mixed with other funds.
Donor funds should be placed in interest-bearing accounts both in Norway and the project country.
As a rule, withdrawal of funds by partner should be done by credit transfer or checks. Cash withdrawals are only exceptional, and then with smaller amounts. All withdrawals should have a minimum of two signatures.
8. Financial Reviews
It is important to question and establish an open dialogue on the the financial management of the project/programme. Financial review(s) provides insight into routines (administrative as well as financial), and will improve the understanding of the local project management. This provides an opportunity to improve routines and systems to ensure sound financial management and internal control within the project/programme.
The Atlas Alliance has developed a checklist on financial reviews related to project/programme visits. The Atlas Alliance recommends that financial reviews are conducted regularly throughout the co-operation. The Atlas Secretariat can upon request carry out financial review(s) if the Atlas member organisation either wants to keep control outside the partnership, or if there is a need for additional capacity or objectivity in the review.
9. External auditing
External auditors must be state authorised in country of operation, whether in Norway or any other country. Most countries have a national audit institute or similar, which is a member of IFAC (https://www.ifac.org/about-ifac/membership/member-organizations-and-country-profiles)
Instructions from the auditor in Norway should be sent directly to the auditor appointed in implementing country. Reporting from the local auditor should be communicated directly to the auditor in Norway.
The appointment of the local auditor should follow proper procurement procedures, including competitive proposals or tenders.
Organisations are advised to make use of the same auditor over more than one year but change after a maximum of five years, to avoid lapse of objectivity.
If the organisation/partner has several donors, it is advisable to use the same auditor as this is more cost-efficient This will help the auditor see the complete picture
Audits must be performed in accordance with International Standards on Auditing (ISA).
Norwegian auditors will not approve project accounts not audited locally. The auditor’s task is not only to identify mistakes and insufficiencies, but also to give advice on improved routines and quality.
The contract for auditing should include a review of controls and the issuance of a management letter by the auditors. Management at the organisation or partner should approve an action plan, outlining the actions that will be taken to address any issues identified by the auditor, within one month of receiving the audit. The following year's annual report should include an overview of the status of the implementation of the recommended actions.
10. Right of access and inspect
The Atlas Alliance and every member organisation has the right to access and inspect local partners financial routines and systems. Account books, receipts and bank statements shall be kept available for verification as well as external auditor at any time during the agreement period.
The Atlas member organisation may use internal or external actors (for instance auditor) for the inspection. The partner will be informed prior to actual inspection. An inspection may take place for various reasons; a) as a routine check/control, b) if there is reason to believe mismanagement of funds, c) any other reason.
11. Human and physical resources
a) Human resources
All employees must have written job contracts and all tax and national insurance regulations must be complied with.
All recruitment procedures must be properly documented, including shortlisting of candidates and reasons for choosing candidates.
b) Fixed assets
All fixed assets must be listed on a fixed assets register. A simple excel file will suffice. All assets should be marked with an identification code.
Property such as cars, motor cycles, computers, etc in project countries should be insured. However, this must be assessed for each object based on the value of the object and the insurance premium.
Disposals of assets must be properly authorised and involve something similar to a procurement committee.
c) Procurement
All procurement must be initiated by a requirement based on need. For estimated cost beyond a pre-authorised limit, a procurement committee must be put into action. Specifications should be announced or brought to the notice of particular suppliers as decided by the procurement committee. The procurement committee should agree on at least 3 alternative suppliers for amounts above USD 100 and below USD 500. Amounts above USD 500 should be announced for open competition.