Financial Capacity Management Orientation to SEVAI-RCI team in Trichy.

Shri.K.Sivakumar,CA, orients SEVAI-RCI Fiance Associated staff members on Finance Capacity Management

Noted Chartered Accountant, Shri. K.Sivakumar, Secretary, Gandhi gram enlightened the SEVAI /RCI-Financial management personnel on 29^th September 2018 about the practical ways to build financial management capacity applies to non-profit organization.Shri.K.Sivakumar said, “ He described good practice in the specific tasks of financial management, for example, planning and budgeting and financial controls and added how NGOs s build their own capacity, the leadership teams need to do to guide their organization’s longer-term direction and improve governance and he described other financial management aspects such as building reserves that can be built into an organization’s structure to make it more sustainable. An NGO is required to make many statutory compliance based on its activities, income, size, and covered jurisdictional areas, liabilities under various laws concerned such as the labor and employment law. These NGO statutory requirements fall under the broad categories of the quarterly compliance, half-yearly compliance, and annual compliance. Broadly, the annual compliance by NGOs, whether these be trusts, societies, or section-8 companies, are to be made with few or all of the following regulatory bodies/offices: The Income Tax Department, The Office of the concerned Registrar of Societies/Charity Commissioner/Registrar of Companies, The Offices of the directly concerned Legal Authorities relating to the Labor and Employment Law, Shops and Establishments Act, Pollution Control, etc.FCRA Division, the Ministry of Home Affairs, Govt of India. Again, in general, the annual compliances by NGOs comprise few or all of the following documentary tasks or activities: Annual Report and the updated List of the members of Governing Body, Financial Statements, Income Tax Returns, Compliance under the FCRA, 2010, Important Resolutions, and Compliances under the above-mentioned legal authorities applicable. The most important section of a financial management policy of an NGO is the procedures for accounting. The accounting procedures describe the methods that the organization has adopted for maintaining daily accounts and carrying out day to day activities. The accounting policy describes both the external and internal controls that are in use by the organization. Financial Management is a vital activity in any organization. It is the process of planning, organizing, controlling and monitoring financial resources with a view to achieve organizational goals and objectives. It is an ideal practice for controlling the financial activities of an organization such as procurement of funds, utilization of funds, accounting, payments, risk assessment and every other thing related to money. Building Financial Management Capacity should be well practiced by programme staff and managers of non-government organizations, and charities, as well as for large NGOs and donors working with their partner NGOs. Shri.K.Sivakumar spoke to the participants about linking Capacity-Building and Finance, Assessing financial management capacity, Planning and budgeting, Accounts record-keeping, Financial reporting, Financial controls, External audit, Organizational aspects of financial management, Tools for Building Financial Management Capacity and NGOs with capacity building measures that will allow for sustained growth in challenging circumstances. He added “Building Financial Capacity is the importance of “hard” aspects of financial accountability such as developing robust financial systems and implementing transparent financial processes. Financial management is crucial for the success of any organization. Successful enterprises watch their finances very closely and therefore take the right decisions at the right time, ultimately leading to success. NGOs need to focus r financial management to be a priority with adequate financial knowledge.  NGOs work smoothly towards implementing projects and need to pay enough attention to financial control. This practice makes the NGOs strong to financial management. NGOs should realize that managing their finances is of critical importance and they should incorporate necessary measures towards risk management, resource mobilization and budgeting. It is the responsibility of NGO leaders to plan their expenditures and investments and manage funds in a way that leads to sustainable projects. Being accountable to the donors: Most NGOs rely completely on funding and therefore having proper accounting systems in place becomes all the more important. As NGO needs to be accountable to the donor agencies and individuals who support the cause. With proper systems in place NGOs can keep track of your expenditures and submit timely reports to them. This would lead to enhanced trust between NGOs and the donor, thereby increasing the chances of NGOs getting a continuous support from them. With limited funding it is important for an NGO to manage all the funds in a careful manner. Furthermore, proper finance systems will also help the NGO maintain financial reports and showcase their entire spending to the regulatory bodies as per the agreed terms. Achieving objectives: Every NGO is guided by certain policies and procedures, which are related to its overall objectives. Each decision that is undertaken by the authority is driven towards successful achievement of its set goals and objectives. Without organizing finance, it will be difficult for the organization and its employees to reach its aim and fulfill purpose of its existence. Enhancing credibility: Managing finance is a matter of skills and tactics that ideally changes from time to time. With excellent finance management, NGOs enhance their image that enhances its value and making them more credible. By framing well defined financial plans and policies NGOs also earn good reputation within its community. They can also improve their current position and look forward to gain trust, faith and reliability. Since preparing, drafting and making a financial policy consumes lot of time, policy-deciders must consider the most significant and relevant factors, before getting into actual discussion about the policy. Of all these factors, budget processes and systems within an NGO have maximum effect on financial policies. Therefore, financial policy strategists ask potential questions to have clear understanding about the overall organization and more importantly, its financial aspects. All financial decisions, activities and plans are done in accordance to a set of procedures that form the basis of the financial policy. Once the financial objectives are confirmed, the next move is to frame policies to guide its further proceedings. Financial management policy of an NGO is a manual that covers all the accounting policies, procedures and systems of the organization. Primarily, there are two purposes for framing a financial policy. The financial management is one of the most significant functions of NGOs. Financial control is at the heart of financial management. A well planned and competent financial control ensures proper use of money, financially protected members and safe assets. Financial decisions also effect on overall management and activities of NGOs. With proficient and tactical finance strategies with changing time and circumstances, Non-Governmental Organizations can successfully manage their financial resources and ensure steady growth and development within the concern. Cash Handling & Transaction: Cash payments are firmly documented by NGOs in their financial management policy. Small amount of cash payments are quite common on daily basis, therefore you should have procedures to deal with such transactions. Cash Account & Transactions: Cash transactions are resorted in case of small expenses and when/where banking services are not available. Refer to your country laws related to cash payments and procedures set by law. In certain countries, there is a certain limit, exceeding which no claims can be settled through cash payments and these should be by account payee cheques only.Daily Cash Balance: Closing balance cash denomination are entered under the Daily Cash Balance section and signed by the accountant. This register is usually maintained right from the beginning of the financial year. Withdrawing Cash from Banks: When there is a need to withdraw cash from banks, make sure that you use a Cash Withdrawal Form/Money Indent. This form should be duly filled up and signed by the staff, involved in handling cash. Try to avoid cash transactions as much as possible as they do not leave any accounting trail and hence can be questioned at a later date. If there is no other option left then follow proper procedure so that the transaction can be recorded. Cash Payments: For making cash payments, most organizations use a payment voucher. All the vouchers are printed and have an individual serial number. When a cash payment is to be made, the voucher is approved by the responsible authority. The payee also signs the voucher on receiving the payment. This voucher is then filled and recorded. Cash Verification: It is mandatory to verify the cash balance at the end of the month. The competent authority ensures that the cash account record has been signed by the person handling cash and the person handling finance. In case of any discrepancy noticed during this period, the physical verification is recorded and reported in written document to the concerned person immediately. Controls to be exercised: Some of the important controls which are in practice include: No access to third parties towards the safe or accountant. Cash is only paid to third parties in front office. Only one person is designated to handle cash and is solely responsible for it. A fixed time period is specified for cash disbursements. Emergency payments can only be released during other times. Strict observance of minimum and maximum cash limits. Cash receipts/payments accounting is done on day-to-day basis. Petty Cash: Petty cash is a system that is used for tracking small purchases that aren’t suitable for check or credit card payments. Petty cash is maintained based on imprest System (a form of financial accounting system). The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished. Clearly specify a limit of imprest level in your policy. The accountant is the one and only designated person for handling petty cash. Actual cash is checked on spot and then confirmed by the finance manager. The person in charge of funds will reimburse for any incongruity. All petty cash requests are duly signed by authorized supervisor/finance manager on pre-numbered voucher. Cash book maintenance: Cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals.  The cashbook is an important bookkeeping document for any organization. It is a book of entry which is prepared following a voucher for a particular transaction. Maintaining a cashbook helps in keeping a record of all transactions in which cash/bank receipts are involved”.K.Sivakumar concluded. -Kris