World Best Financial Management Manual for Organization, Company or Industry

FINANCIAL MANAGEMENT

Introduction to manual

This manual provides information regarding policies and procedures to be followed in order to conduct different activities within ORGANIZATION OR COMPANY, INDUSTRY. The ORGANIZATION OR COMPANY, INDUSTRY standards are an important part of this document and play a vital role in the accomplishment of our objectives. They give a guideline for our communication and contact with each other.

Access to Manual

Every staff member of ORGANIZATION OR COMPANY, INDUSTRY should have the right to access this manual. All future changes in shape of revisions, updates etc. will be sent to concerned employees and they should carefully read and understand these revisions, updates etc.

Purpose

The financial management system is developed to maintain an effective system of internal control and to monitor compliance with the system. The system primarily includes:

Documentation and recording of transactions;

Authorizations required and necessary checks for financial transactions;

Procurement procedures;

Developing and maintaining control over assets.

The system includes:

Necessary internal control to ensure reliability of accounts, streamline, detect and prevent any deliberate or unintentional errors, misuse of financial authority, resources and assets.

The system is carefully developed to balance necessary control and to avoid delays caused by the controls.

All financial functions, policies, procedures in the organization shall be governed through the financial system. 

Financial statements are prepared in accordance with the approved accounting standards as applicable in Pakistan & International level:

·       International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) & Accrual Based Accounting.

The ORGANIZATION OR COMPANY, INDUSTRY follows accrual accounting system and adjusts entries at the end of the financial year. Expenses are recorded in books of accounts when they are incurred, rather than when the bills are paid; and the income is recognized in the accounts when it is earned, rather than when it is received.

 Chart of Accounts

The organization maintains appropriate chart of accounts which has ability to document monetary transactions with an objective to produce timely, accurate and meaningful reports for the Senior Management, the Board of Trustee, the donors and others.

The chart of accounts is used as a guiding and referring tool to post accounting entries in the respective head of accounts.

In order to keep a vigilant control over accounting framework of the organization, the Assistant Accounts Manager and his staff are not allowed to make amendment (including opening a new head of account) in the chart of accounts unless specific written approval is granted by the head of Accounts Department.

For any addition or amendment in the head of accounts, the Accounts Manager will be expected to prepare a note explaining the need for the change; the note and the granted approval shall be retained by the Accounts Department for reference. 

Financial year

Financial year of the organization is from Jan 01 to Dec 31.

Financial Transactions and Related Documentation 

Financial records are maintained in such a manner that provide an Income and Expenditure Account, summarize all income and expenditure committed in a specified period; and produce a Balance Sheet, which demonstrates, amongst other things, moneys owed to and by the organization on the last day of any specified period.

All financial transactions are processed and recorded in appropriate documents. Transaction must be documented as soon as accurate, complete, and meaningful information is available, which is useful for internal and external users of financial records.

All financial records/entries must be supported by documentary evidences from origination to completion of transaction.

Computer software shall be used to record accounts data, and effective access controls, protected by passwords, shall be introduced to restrict access to various options of the financial software.

As financial records are of extreme importance to the ORGANIZATION OR COMPANY, INDUSTRY, appropriate backups of the financial data must be ensured by the Accounts Manager.

Advance Approvals

For all expenses/activities expected to cost more than Rs.10,000/-(except for the routine expenses), the advance approval must be obtained using relevant forms (travel, purchase request, events).

If no specific form for an activity is available (survey, printing, data entry etc.) written approval may be obtained through e-mails or office memos.

Payments 

All payments shall be made after the approval of payment vouchers supported by bills and/or other relevant documents as per the authority limits given below. Such supporting documents shall be checked by the designated person in the Finance Unit (Accounts Officer) prior to their submission for approval of payment before the approving authority.

1.  Expenses up to Rs. 10,000 shall be approved by Manager Finance

2. Expenses up to Rs. 50,000 shall be approved by a member of board of trustees.

3. Expenses above Rs. 50,000 shall be approved by Principal Administrator.

All payments of more than 20,000 shall be made through cheque or Pay order or Demand Draft except for those items which couldn’t be paid through cheque.

Pre-numbered Entries

All entries will be allotted sequential numbers to:

Ensure completeness,

 Proper order,

 Avoid chances of arbitrary changes in records,

Safeguard against missing vouchers,

& authorization thereof.

Any entry recorded out of the sequence would require immediate and thorough scrutiny to dispel the impression of any deliberate event. The Accounts Manager will be responsible to document any such event. The ORGANIZATION OR COMPANY, INDUSTRY shall deduct applicable taxes on all payments. All tax deductions under prevailing tax laws shall be treated appropriately as per the applicable laws. 

Review of Accounting Entries

The person making entries of financial transactions will be responsible to obtain all supporting documents in order to ensure accuracy, completeness, and genuineness of recording/making the entry. Preferably a person, other than the one who is making payment and documenting entry, will review the entries to examine accuracy of entries and documentary evidence of transactions.

In normal circumstances, payments and entries will be done by the Accounts Officer and review will be done by the Accounts Manager.

Vouchers & Forms

The Accounts Officer is responsible to record and maintain financial records, related correspondence, accounts, statements, supporting documents etc. For effective maintenance of the accounting records, all vouchers must be supported by the documents including: initiation, approval, invoice, payment etc. with necessary evidence of occurrence (such as signatures etc.) shall be required for vouchers.

Following vouchers shall be used to record transactions:

Payment Voucher

All cash payments are recorded through Cash Payment Vouchers

 All bank payments are recorded through Bank Payment Vouchers

Receipt Voucher

All receipts and collections through bank account(s) are recorded through Bank Receipt Vouchers 

All cash receipt transactions are recorded through Cash Receipt Vouchers

Journal Voucher

Journal voucher (JV) is prepared as evidence and authorization to record non-cash transactions. A non-cash transaction is one which does not involve the actual receipt and/or payment of funds but the recognition of which, in books of account, is fundamental to properly reflect the operating results and financial position of the organization. As a pre-requisite of accrual basis of accounting, all accruals will be recorded through JVs. Correction of any omission or error of disposition/classification etc. shall be routed through JV.

 Books of Accounts/Records

Some of the common books maintained by the organization are given below. Any further requirements shall be introduced as and when required by the management or as advised by the Auditors.

General Ledger;

Fixed Assets Register;

Cash Book; and

Bank Book 

Following information, books, and/or registers shall be maintained for the record and as supporting documents:

Invoices;

Vouchers; 

Cheque books;

Cheque book register

Cheque dispatch register

Bank statements & reconciliations;

Bank deposit slips;                                                  

Receipts;

Salary sheets;

Purchase requisition;

Purchase order register;

Quotations;

Purchase orders.

Goods inspection reports

Goods receiving note and

Any other record and information considered necessary

The Accounts Manager or the designated Accounts Officer will be the custodian of all accounting records, including but not limited to ledgers, statements, accounts, vouchers, invoices, bank records, record of procurement, and receipts of funds, etc.

Such records shall be kept and maintained for at least 5 years from the relevant year-end.

Foreign Currency Transactions 

Transactions in foreign currency are converted into Pak rupees at the official exchange rate on the date of transaction.

Any loss or gain in exchange rate shall be borne by the ORGANIZATION OR COMPANY, INDUSTRY.

 Assets and liabilities in foreign currencies, if any, are translated into Pak Rupees at the official exchange rate prevailing on balance sheet date.

External Audit

Financial statement of the ORGANIZATION OR COMPANY, INDUSTRY will be audited at the end of each financial year as per the provisions of applicable laws. Auditors will be appointed in the Meeting of the Board in accordance with the rules of the organization. 

FUNDS MANAGEMENT 

Bank Accounts

The ORGANIZATION OR COMPANY, INDUSTRY will maintain a bank account in the name of ORGANIZATION OR COMPANY, INDUSTRY, with approval/ authorization of the Board members, for its day-to-day operations.

It is preferred that maximum number of financial transactions are done through bank for proper documentation, minimize cash handling, transparency etc.

For day-to-day running cash transactions shall also take place as given below.

Auto Teller Machine (ATM) Card, Credit Card or other similar services which skip documentary evidences such as: approval, authorized signatures on hard copies, cheques etc. are not allowed for the ORGANIZATION OR COMPANY, INDUSTRY bank account(s).

The ORGANIZATION OR COMPANY, INDUSTRY bank account(s) shall not be operated by a single signatory; it shall be operated by joint signatories duly authorized by the Board.

Bank account signatories shall be nominated in such a manner that one signature each from the Secretariat staff and Member of the Board is mandatory.

For smooth operations and easy accessibility, those members of the Board may be nominated as signatories who are based in Islamabad.

As per changes in nominations, subsequent change of signatories shall be communicated to the bank accordingly.

For internal control, the organization shall maintain a Bank Book to record all bank transactions.

The Bank Book shall be reconciled with bank records/statement at least once a month.

The purpose of this exercise is to make sure that both records match and to identify any error(s) by the bank or organization.

Any closing balance difference between the bank and organization’s record must be explained. Common reasons for difference include:

Cheques issued by the organization but not yet presented;

Outstanding lodgments (Cheques deposited in the bank but not yet cleared)

Bank charges and interest/profit applied; and/or

Errors by the bank or in the ORGANIZATION OR COMPANY, INDUSTRY bank book entries.

Monthly bank reconciliation statements shall be prepared.

The report shall present all bank transactions starting from the beginning of the month (where last report was closed) till the end of the month.

A consolidated report of all funds in hands shall also be prepared by the Finance Officer on monthly basis.

This report will reflect all funds available in bank account(s), cash in hand, and other investments made by the ORGANIZATION OR COMPANY, INDUSTRY. 

Revenue 

The ORGANIZATION OR COMPANY, INDUSTRY shall receive funds from:   

Its donors as per the provisions of contract/ agreement of funding,

Sale of publications,

Donations,

And membership fees,

Reimbursement of various funded activities,

Profit on investments,

Sale of assets, or other sources.

All revenues shall be properly documented; responsibility of documentation lies with the Accounts Manager or the designated person(s). All receipts through cash, cheque or other instruments shall be promptly documented in the respective book along with the relevant voucher and other details. Receivables overdue by one year may be recommended for write off by the Accounts Manager keeping in view the nature and amount of receivables. A detailed report for every such case would be submitted to the Board for final approval of writing off.

CASH MANAGEMENT 

The sources of cash receipts would be:

Encashment of cheque

 Refund of advance

Donation

Receipts of sale of publications, etc.

Upon receipt of money, cash receipt would be prepared by the designated person mentioning all necessary details of the receipt including: date, amount, source, account, purpose/reason etc. 

To meet day-to-day expenditure of small amounts, a petty cash fund will be maintained by petty cashier.

Maximum limit of a cash payment is Rs. 5,000 except for the payment of utility bills, day to day office expenses, postage, etc.

Cash payments above Rs. 5,000 shall only be allowed with written permission of Accounts Manager in special cases.

No single transaction shall be split just to avoid the limit. Staff members may claim their travel and other expenses in cash; all such payments shall be subject to authorization of payment.

Maximum limit of holding petty cash is Rs. 25,000 (or as revised from time to time with the approval of a member of board of trustees).

The Petty Cash Officer (designated by Program Manager) shall be the custodian of petty cash.

Necessary arrangements such as steel box, locked safe etc. shall be made for safe custody of petty cash.

Any shortfall found in the petty cash fund would need to be made good by the custodian.

The custodian of petty cash will maintain petty cash register to record cash transactions on daily basis.

A designated senior officer (normally Accounts officer or Manager) shall periodically count petty cash to ensure that physical currency is equal to the petty cash register balance. 

EXPENSES MANAGEMENT

As a principle, separate accounting record will be maintained for each project (having separate funding agreement) with different or same donor.

Expenditures will be carried out in accordance with the approved budget heads and budget limits.

Factors such as terms and conditions set by the funding agencies will also be considered while making expenses.

Subject to the provisions of agreed terms and conditions, all financial policies and procedures of the ORGANIZATION OR COMPANY, INDUSTRY shall be applicable and followed for incurring any expenditure from the funds provided by the donor agencies.

The Accounts Manager will be responsible to prepare financial reports for the donor agencies as per agreed formats, timelines, and other conditions. 

Financial Reporting

Financial reports of transactions are prepared to ascertain balances, know level of expenditure, spending as plans etc. The financial information of full financial year is summarized to produce the Annual Accounts (i.e. Balance Sheet, and Income and Expenditure Account) to support the Annual Progress Report.

Management Reporting

Management reports shall be prepared by comparing applicable budgets with actual expenses. The report shall also compare expected income and expenditure with the actual income and expenditure during the reporting period to see the variance (difference between expected and actual figures). Any significant variance shall be analyzed and efforts shall be made to fix the variance. Financial management system should provide complete, reliable, consistent, timely and useful financial information and financial statements. Some of the reports which may be required from time to time include: 

Project wise financial reports;

Cash flow position;

Variance analysis between budgeted costs/revenue and actual data, spelling down the reasons of significant variations;

Consolidated report of all on-going projects; and

Balance sheet.

All financial reports agreed with the donors must be accurately prepared and submitted timely in the agreed format. The Accounts Manager will be responsible for the accuracy of financial reports to the donors within agreed deadlines. Any adjustments required in budget must be agreed in writing with the relevant donor agency. The Accounts Manager will also be responsible for issuing invoices to donors for the release of funds. 

Budget Preparation

Budgets are prepared in accordance with the guidelines provided by the donor agencies in consultation with the relevant program staff. The ORGANIZATION OR COMPANY, INDUSTRY programs are restricted to operate within the budget approved by the relevant donor agency. Realistic budget should be prepared, as significant under-spending or over-spending is not a good indicator for the organization. The common costs such as: office rent, utility bills, communication costs, stationary, core staff salaries etc. must be rationally distributed among various projects and donors.

While making budgets, necessary notes must be recorded for future reference. For making budgets of more than one year projects, preferably 10% increase (to cover inflation) must be taken into account for every next year’s budget. A balance must be maintained between the administrative (management) and the program related budget. Appropriate budget notes may be added to explain the final budget figures. All project budgets prepared by the Secretariat shall be approved by the board. It is desirable that the ORGANIZATION OR COMPANY, INDUSTRY develops its yearly financial projections and pursues projects with various donors. 

Monitoring of Budget Spending 

Spending against approved budget shall be regularly monitored (on monthly or quarterly basis) by the Accounts Manager and board. The Program Manager will prompt any significant over/under spending. Any significant variance between the budget and the actual spending shall be examined by the Principal Administrator and any adjustments required shall be made accordingly.  

Updated financial reports including:

Income and Expenditure Reports

Updated funds situation &

Comparison of expenses with budgets (of all on-going projects) etc. shall be presented in the Board meetings. The Board shall discuss such reports and may suggest modifications/amendments/rectifications.

PAYROLL AND RELATED COSTS

Monthly Salary 

Contract and Permanent Staff monthly salaries shall be paid according to the terms and conditions mentioned in the contract/appointment letter.

All staff, except daily wagers, shall be paid through cross cheque/bank advice issued in their name.

For the approval of staff salaries, the following information shall be presented for each staff member (preferably a computer sheet).

Monthly salary slips with the following details shall be provided to the staff members electronically. Staff members who do not use computers shall get hard copy of salary slips. 

Name of the employee;

Monthly salary with details (house rent, transportation etc.);

Overtime for the month, if applicable;

Loan/advance sanctioned to the employee (if any);

Monthly deduction on account of loan or advance (if any);

Other allowances (if any);

Deductions (taxes, PF, personal use of equipments etc.);

Net payable monthly salary;

Gross monthly salary; and 

Other payroll related information

Payment to Temporary Staff

Payments to temporary staff including:

Volunteers

Interns

Part-time

Payment to short-term staff shall be made on monthly basis according to the terms agreed in the contract/ letter of appointment through cross cheque / bank advice in their name.

If period of employment is less than one month, payment shall be made according to the terms agreed in the contract/letter of appointment, normally upon satisfactory completion of work.

Payment to daily wages staff can be made in cash if it falls within the cash payment limits.

Payment to consultants shall be made according to the terms agreed in the contract/ letter of appointment; normally the payment procedure shall be as follows

First payment of up to 25%:  Upon signing of contract

Second payment of up to 50%: On submission of (draft) deliverables. In case, deliverables are other than written items such as software, documentaries etc. second payment shall be made upon submission of deliverables for review and comments.

Third and final payment (25%):  Upon acceptance of agreed deliverables. Keeping in view the nature and length of assignment, payment schedule may be changed; agreed payment schedule must be noted in the contract/agreement with the consultant. 

Deduction of Taxes

At the time of disbursement of payments to staff, income tax will be deducted as per applicable laws and rules, in most tax efficient manner. The income tax deducted from the staff payments shall be deposited in the Government treasury through tax challan. For deductions made by the ORGANIZATION OR COMPANY, INDUSTRY, Tax Deduction certificate shall be provided upon request. Filing of tax returns is the responsibility of staff members; however, the Accounts Department will facilitate the staff members in filing tax returns. 

PROCUREMENT 

Procurement procedures have been developed to ensure that purchases are made on competitive basis, from reliable sources, on best possible terms, and proper authorizations have been obtained. All procurements shall be authorized as per the limits given in table below, revised from time to time, with the approval of the Principal Administrator. Procurement shall be made subject to the allocation/availability of budget for the specific item/service.

Up to Rs. 10,000 Accounts Manager. Procurement can be made from open market    

Rs. 10,001 to 50,000 a Member of Board of Trustees. through 3 open quotations

Rs. 50,001 to 100,000 a Member of Board of Trustees but, through Inviting sealed quotations

Rs. 100,001 and above Principal Administrator but through Inviting sealed quotations 

 

Requesting Procurement

All items of more than Rs. 10,000 value shall be purchased upon submission and approval of the Purchase Requisition Form attached as Annex. The staff member requesting an item shall fill and submit the form to the Administration Dept after getting approval from the respective department head and One Department Manager designated by the Principal Administrator.

Selection of Sources of Supply

For purchases of items of value between Rs. 10,000 and Rs. 50,000 such as equipment, furniture, renting vehicles, printing etc, the Procurement Manager will appoint an officer to collect open quotations from the potential reputed suppliers of the requested item(s). The suppliers will be asked to submit their quotations for the required items including: price, estimated delivery period, warranty, after sales service (where applicable) and other terms and conditions. Preferably the call for quotations may be issued in writing by giving complete specifications, quantities, applicable tax deduction etc. The Purchase Committee shall review the quotations and compare the quoted prices of the required quality and assess the ability of the supplier to supply required items in time, and honor warranty, where applicable. A comparative statement shall be prepared using the form attached as Annex. The Purchase Committee shall decide supplier keeping in view, lowest price, quality, ability of supplier etc. and shall sign the comparative statement to record the decision. 

For purchases or more than 50,000 written calls shall be issued for inviting sealed quotations. The mode of calling quotations (public notice or by approaching potential suppliers) shall be decided by the Purchase Committee. The call for quotations must be issued in writing giving complete specifications, quantities, and applicable tax deduction, place of delivery, last date for receipt of quotations, and date and time of opening quotations. No quotations will be entertained after the last date for the submission of quotations. The sealed quotations shall be opened in the presence of suppliers, who are present at the time given for opening of quotations, and members of the Purchase Committee. Members of Purchase Committee will sign all pages of the quotations. Each quotation will be allocated a serial number also mentioning total number of quotations received, for example 1/5, 2/5, 3/5, 4/5, 5/5 in case of 5 quotations. Any quotation which does not fulfill specified criteria shall be rejected; however, typographical errors shall be ignored. A comparative statement of all quotations shall be prepared using format given as Annex. The Purchase Committee shall select suitable supplier keeping in view the lowest price, quality standard and the ability of supplier for timely supply etc. Where quotations other than lowest price are accepted, reasons for ignoring the lowest quotations will be recorded. All members of the Purchase Committee shall sign the comparative statement mentioning the selected supplier.

Purchase Order

After selection of supplier by the relevant Purchase Committee, purchase order will be issued to the selected supplier. The Purchase Order should contain the following information:

Reference to the bid submitted by the supplier;

Quantity ordered by the organization;

Agreed date of delivery of goods;

Exact specification of the product(s);

Terms of payment;

Agreed price; and

Taxes to be deducted.

Single Quotation

Purchases on single quotation shall be allowed if the required item is manufactured or distributed locally by a single manufacturer, distributor or agent, OR in urgent cases with the approval of the relevant Purchase Committee. For procurement on urgent basis the indenting officer has to justify the urgent need, in the interest of the organization to purchase the requested item on single quotation basis.

 Inspection

All items such as equipment, furniture & fixtures, books, publications etc. supplied by the selected supplier shall be inspected by the indenting officer and/or the person designated as stores in-charge for quality checking.

 Receipt of Goods

All stores/goods from supplier or any other source shall be received by the person designated as stores in-charge, and documented by raising two copies of Goods Receipt Note (format attached as Annex). One copy shall be retained for the stores files and other shall be forwarded to the Administration Unit. The Administration Unit shall record the receipt of goods in the General Ledger. The designated Stores In-charge shall enter the received goods in the stock register. 

Processing and Payment of Invoice

Upon receipt of Goods Received Note and invoice from the supplier, the Accounts Department shall process payment of the supplier as per the agreed terms of payment. Payments shall be made through cross cheque and the following supporting documents shall be attached with the voucher:

Request for quotation

Quotations

Comparative Statement

Purchase order;

Invoice from the supplier;

Goods inspection report

Goods Received Note/delivery challan.

Repeat Order

Repeat order may be issued to a supplier within 3 months of earlier purchase at the same price provided that:

Earlier order was placed on the basis of open competition,

There has been no significant change in price(s) of the items, and supplies were satisfactory. 

Stores Handling

The Administration Officer or any other official designated by the Administration Officer shall act as the Stores In-charge. It is responsibility of the Stores In-charge to ensure that stores/items received are correctly brought on charge in accounting documents without any delay. S/he will also supervise and document all the transactions concerning stores, including printed materials.

Inventory Maintenance 

Responsibility of maintaining an updated inventory record/stock register of stores including:

Equipment,

Furniture,

Publications etc.

Lies with the designated Stores In-charge.

FIXED ASSETS 

Items shall be recognized as Fixed Assets only when:

It is probable that future economic benefit will flow to the organization as a result of its acquisition;

The cost per individual item exceeds Rs. 10,000; and/or

It has useful life of more than one year.

Cost of an asset includes purchase price, transportation/installation cost, all non-refundable Government taxes and cost of bringing the asset into working condition. Major renewals and improvements in Fixed Assets that extend useful live, enhance capacity, or substantially reduce operating costs, shall be capitalized. Maintenance and normal repairs are charged off as an expense. Gain and loss on disposal of fixed assets are taken into Income and Expenditure account.

Purpose

To carry out its activities, ORGANIZATION OR COMPANY, INDUSTRY needs material resources. The quality of these resources is dependent upon how they are used. Material resources are in large part durable goods, which need to be well-managed to be maintained in good condition. These goods include stationary, tables, chairs, shelves, computers and related accessories. The Fixed Assets Policy will aim for:

• Precise identification of goods that are part of the asset base;
• Sensible use of goods;
• Periodic taking of physical inventory;
• Effective maintenance of goods;
• Replenishment of goods when required.

 Procedures

At ORGANIZATION OR COMPANY, INDUSTRY, the management of material resources is the responsibility of the Administration, Procurement & Stores Department. The procedures involved in managing these resources are:

• receiving and recording goods;
• using goods properly;
• maintaining goods;
• taking inventory of goods;
• disposing of goods.

Material resources are managed by means of records or files.

Depreciation 

Fixed Assets are stated at cost less accumulated depreciation. Depreciation for the year is charged to income and expenditure account using straight line method so as to write-off the historical cost of an asset over its estimated useful life. Depreciation is charged to income from the year of acquisition, and no depreciation is charged in the year of disposal. Depreciation rates reflect useful life of respective assets. The annual depreciation rates, applied on straight-line basis, are as follows:

Furniture and Fixture @ 10%

Computer Equipments @ 33%

Motor Vehicles @ 20%

Identification of Assets

At the time of acquisition, all fixed assets should be assigned exclusive identification for reference with necessary identification details of the asset. Donor reference should also be included, where applicable, in the identification. This identification mark should be tagged on the asset and entered in Fixed Assets Register. A register will be maintained for all fixed assets containing:

Description & cost of each item;

Date of acquisition;

Location of asset;

Donor reference;

Rate of depreciation and per year charge; and

Accumulated depreciation

Fixed assets records must be reconciled with the General Ledger on regular basis. The Accounts Manager (or designate person) will take place physical inventory count of all fixed assets at least annually to ensure completeness and accuracy of the records. Assets purchased with grant of a donor agency will remain property of the donor unless otherwise specified in the agreed terms and conditions. Due care should be taken for the safety and maintenance of such assets. At the end of the relevant project/ program, either the assets will be transferred to the donor agency or handled according to the agreed terms and conditions.

 Insurance of Fixed Assets

Comprehensive insurance shall be procured for all fixed assets. Whenever an asset is procured, it should be insured as soon as possible. The insured value is taken at current market replacement value. Assets received from donors in kind should also be insured in the same way as bought assets.

Disposal of Assets

Disposal of fixed assets should be undertaken through tenders, auction or a private sale, whichever is suitable and as approved by the Board of Trustees or Principal Administrator. A private sale would only be considered where the sale price can be accurately assessed, and there is a possibility of fetching higher prices as compared to other modes of disposal.

At the time of intended disposal of an asset, following details must be presented in writing to the Board of Trustees or Principal Administrator for the approval of disposal of assets:

Specification and description of the asset;

Reasons for disposal;

Where possible, an estimate of the realizable value;

The mode of disposal of asset, as per the donor’s policy, where applicable; 

Draft sale agreement/transfer note, in case of intended private sale.

At the time of disposal of fixed asset the transaction shall be recorded as below: 

Cost of the disposed asset shall be removed from Fixed Assets Register;

The related accumulated depreciation shall be removed from the allowance for depreciation account; and

The profit and loss account, adjusted for the cost of removal, shall be recorded as income (gain) or expense (loss).

Inventory Management

The purpose of the inventory is the physical monitoring of the items belonging to a project. The inventory makes it possible to detect differences between information about goods in the records and the actual state of goods.

Inventory count is usually done once a year and is the responsibility of the Accounts Department.

 Procedures

The inventory procedure is composed of the following steps:

a. Creation of record cards on which it is found:

• Type of item
• description of item
• identification code
• service user or name of manager
• assigned location
• previous placement of item
• notes on condition of item
• record updates
• minutes of physical inventory

b. Removal of items

The inventory procedure described above permits the identification of dilapidated or defective goods whose presence in office presents more inconveniences than advantages, for various reasons:

• Steep rise in operating or maintenance expenses;
• excessive cost of repair;
• any other objective reason.

The Principal Administrator should give the authorization to take out of service, transfer or dispose of any items, and that should be noted in the book of assets

c. Replacement of an item

d. List of annual need