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Most NGOs prepare a 'finance manual' which describes how their financial systems work. Manuals help all staff understand their responsibilities and how systems fit together. For instance, they help NGOs handle staff changes without too much disruption.
Each NGO's finance manual will be different, reflecting their circumstances and ways of working.
It is also important to consider the needs of different users when you are preparing a finance manual. Manuals should be as easy to read as possible, keeping jargon to a minimum. Larger NGOs face the risk that finance manuals put the needs of head office staff ahead of field staff.
Typically, the contents of a finance manual includes:
- The NGO's values, mission and strategy
- Key responsibilities and organisational structure
- Specific finance policies (eg budgeting, payroll, travel and subsistence, vehicles)
- Key minimum standards
- Specific finance procedures (eg procurement, banking, accounting routines)
- Chart of accounts
- Additional information, eg examples, resources materials, checklists.
Values, mission and strategy
The statement of values, mission and strategy is important for two reasons. Firstly it helps finance staff stay committed to the NGO's goals. Secondly it guides staff when they are deciding how to allocate resources and make sure their work gives value for money.
The specific policies section describes policies approved by senior managers and trustees about how the NGO should work. This might include policies on: filing supporting documents, authorisation limits, reporting requirements (for managers, beneficiaries and donors), reserves, other key controls (eg bank reconciliations), staffing requirements, developing budgets, working with beneficiaries, responding to fraud, using vehicles and many others.
Key minimum standards
It can be useful to provide a one page summary of the key minimum standards that the policies require from all staff. For instance, this might include: deadlines for preparing reports, authorising expenditure, meetings between finance staff and programme staff, reporting to beneficiaries, audits and other key controls.
The specific procedures section describes how to put the policies into practice. For instance, it might describe how to: make payments, calculate salaries (and tax), record transactions, file supporting documents, handle cash, carry out bank reconciliations, prepare reports (for managers, beneficiaries and donors), monitor cash flow and restricted funds, support programme staff, present reports to beneficiaries, handle an audit, handle fixed assets, respond to allegations of fraud and many others.
This section might also include detailed procedures of how to use accounting software.