New Agenda - Implications for NGO financial management

If NGOs were to put this new management agenda into practice, what are the implications for financial management? How would it change the way things are done on a day to day basis? What would we need to do to make it a reality?

Here are the main practical implications for financial management systems on the Two Golden Rules. The underlying aim is to integrate financial management into programme management, empower staff and build ownership.

Financial planning

Golden Rule 1: ‘Good quality dialogue with communities’

  • Involve communities at the project design/budget setting and all review stages to ensure their priorities are met. Encourage them to take a lead if possible.
  • Explain any constraints to communities/partners – like donor rules.

Golden Rule 2: ‘Enable front-line staff to make good judgements’

  • Avoid ‘top-down’ budgeting. Project staff to lead in preparing the budgets they will implement; finance staff to provide support.
  • Activity-based budgeting provides more opportunity for front line staff to get involved and is activity-focused not supply-led.
  • Delegate budgets as far as possible so front line staff can make resource allocation decisions in dialogue with local people.
  • Build flexibility into managing budgets. Recognise limitations of the budget as a project monitoring tool.

Accounting records

Golden Rule 1: ‘Good quality dialogue with communities’

  • Set up accounting systems to facilitate reporting to communities too – use cost centres to report on activities.
  • Involve programme staff in reviewing and designing the Chart of Accounts.
  • Keep the records simple, consider using colours and symbols for certain types of documents

Golden Rule 2: ‘Enable front-line staff to make good judgements’

  • Records need to be accurate, complete and easily accessed to make informed decisions about budgets and spending.
  • Need to raise awareness of the importance of keeping supporting documents for accountability and transparency.

Financial monitoring

Golden Rule 1: ‘Good quality dialogue with communities’

  • Recognise it is not just donors that we have to report to. Also provide regular financial reports to communities/ partners.
  • Discuss appropriate reporting formats with partner NGOs rather than impose a standard format.
  • Look at new ways of sharing financial information, eg produce reports to communities in a user-friendly format.
  • Recognise that budget monitoring is not the only way (or the best way) to monitor performance – allow flexibility.

Golden Rule 2: ‘Enable front-line staff to make good judgements’

  • Train staff to use budget monitoring reports in programme management.
  • Help staff by regularly talking through the financial position with them, and discussing the financial aspects of decisions.
  • Provide timely information in a way that is accessible and useful for users (whether they are programme staff or communities or partners).
  • Narrative and forecast reports to donors must reflect reality – not conceal the true situation.

Internal control

Golden Rule 1: ‘Good quality dialogue with communities’

  • Involve beneficiaries in internal audits. Ensure that internal and external audit findings are presented to beneficiaries.
  • Build trust with the communities we work with – demonstrate personal integrity and ‘good housekeeping’. Financial transparency can also strengthen trust, as well as reducing costs, corruption and suspicion.

Golden Rule 2: ‘Enable front-line staff to make good judgements’

  • Decentralise decision-making to front-line staff within an appropriate control framework, eg purchasing decisions, budget virement (transfers).
  • Accept that greater public transparency might be as effective in reducing fraud than tighter control systems

 

If you are interested in applying this New Management Agenda, please see our Who Counts? website.

 

Also see Reporting to beneficiaries and Accountability Sections of the Guide

 

If you have put any of these ideas into practice, please share your experience with other Mango users by submitting a case study.

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