A good financial management system is derived
through sound financial procedures policy. An organisations financial procedures policy lays down procedures for ensuring that resources are put to use
properly. It is necessary that this policy is understood
by members of staff and Trustees (Board) since they
are the ones charged with the responsibility of managing the organisations resources effectively.
Ideally the financial procedures policy is developed
by the Board and the Executive Director, involving
other members of staff especially those responsible
for managing the organisations finance. The policy
document details the financial management procedures of the organisation and clearly lists the roles
and responsibilities of staff and board (Trustee)
members. It is good to state in the document that it
cannot be changed without formal approval of the
The following elements must be included in your
financial procedures policy
- Purpose of the financial policy
- Roles and responsibilities
- Accounting system
The Four Pillars of Good Financial management
Key questions to help frame the accounting system part of the
- How would we deal with cases of possible fraud if and
when it happens?
- Whom will staff and volunteers report cases of fraud
- What steps will be taken on the report?
- What is the penalty if a staff member is found to be
involved in fraud?
- Will we use manual systems or online applications for
- How many signatories will the organisation have?
- For ease of operation, whom amongst senior
management is the Board delegating its check
signatory role to?
- How will the organisation ensure that its bank
accounts are secured?
- How many accounts will the organisation operate
- How will cash transactions be managed?
- How will the organisation’s assets be managed and
- How will the organisation’s vehicles be used and
- How will staff expenses, salaries and reimbursements
- What is the salary structure for the organisation?
- What are Trustees, staff members and volunteers
- How will the organisation manage purchases and
procurement of office and project related items?
- What type of insurance is needed by the organisation?
- What does the law say on staff, vehicle and property
Internal control is a system
of common sense controls, checks and balances
designed to manage internal risk and safeguard the
organisation’s money, equipment and other financial
assets. The purpose of internal control is to minimize
losses, such as through theft, fraud, corruption, bribery or incompetence. An effective internal control
system also protects staff, an organisation’s most
Every organisation must keep an
accurate and complete record of all financial transactions that take place during the financial year so they
can show how organisation funds/grants have been
used. Accounting records include both the physical
paperwork (such as receipts and invoices) and the
books of account where the transactions are recorded and summarized.
Linked to the organisation’s strategic and
operational plans, budgets are the cornerstone of any
financial management and play an important role in
monitoring the use of organisation funds/grants. The
financial planning process includes building long-term
plans, such as a financing strategy, and shorter-term
budgets for projects, grants and programmes, and
cash flow forecasts.
Provided the organisation has kept
accurate and timely accounting records, and has set
its budgets, it is possible to produce financial reports
for the use of different stakeholders. For example,
budget-monitoring reports help managers to monitor
the progress of their projects or grants, and annual
financial reports provide accountability to external
WHO ARE THE KEY PLAYERS IN
There are seven key players or groups/teams of players in financial management in an organisation.
Those players and their responsibilities are:
Board of Director’s Responsibilities:
transparency and accountability in using the organisation’s resources according to organisational values,
vision and mission to achieve organizational goals
Management Team (a team of managers
led by Executive Director). Responsibilities:
plays important roles in acting between the board
of directors and the executive director. They are
responsible for ensuring that resources are effectively and efficiently used to achieve organisational goals
Executive Director Responsibilities:
that all income and expenses adhere to organisational by-law or charter that organizational resources are
properly used to achieve the set strategic plan and
complies with donors’ agreement and organizational
policies and procedures.
Program Manager’s Responsibilities:
transparency of the program. It is the program manager’s responsibility to deter major fraud by putting
in good basic systems and by personally making a few
key checks. This needs not be overwhelming. The
key is to judge what the really significant risks are and
to make efforts to control them. Additionally, the
program manager is responsible for ensuring that the
budget is developed based on an accurate activities
plan and monitoring the progress and utilization of
funds according to the approved budget.
Finance Manager. Responsibilities:
operation of the organisation’s financial management
and ensuring that all financial transactions comply
with organisation financial policies and procedures
and are supported with enough and valid supporting
documents. Besides this, he or she shall ensure that
financial statements are produced accurately and in a
to produce reliable and timely financial reports, which comply with
accounting principles, in order to help management
to make financially viable decisions.
The Cashier’s Responsibility:
custodian of finance assets and its related documents, such as cash,
checks, passbook, and safe key and code. In addition
the cashier is also responsible for recording the
movement of cash in the cashbook to ensure that
the accountant’s records are accurate and timely.
for a sample financial policy