CASH AND BANK MANAGEMENT

Transcription

1 MODULE 2 CASH AND BANK MANAGEMENT 2.1 The importance of having a bank account 2.2 Designated bank account 2.3 Selecting a reliable bank 2.4 Detailed information about basic banking operations 2.5 Cheques 2.6 Cash

2 COLOPHON CNV Internationaal P.O. Box GL Utrecht The Netherlands T: E: I: Author: Funding Support, Michael Schwerzel Copyright CNV Internationaal, 2015 All rights reserved. Any part of this publication may be reproduced by trade union partner organisations of CNV Internationaal without specific permission, provided that the source is cited as follows: CNV Internationaal, 2015, Toolkit Financial Management for Trade Unions (P.O. Box 2475, 3500 GL Utrecht, The Netherlands). If non trade union partner organisations of CNV Internationaal wish to reproduce parts of this publication, written permission from CNV Internationaal is required.

3 MODULE 0 INTRODUCTION AND OVERVIEW / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Purpose of the Financial Toolkit This Financial Toolkit aims to help recipients of CNV Internationaal (CNVI) funds to improve their financial management capacities. It aims to help organisations to comply with the financial standards that are set out in the contract between CNV Internationaal and partner organisations worldwide. Its specific objectives are: To improve budgeting, accounting and financial reporting of partner organisations. To improve the transparency and accountability of partner organisations. To increase knowledge on the financial standards of CNVI. To increase skills of financial staff, working at partner organisations, to comply with these financial standards. To provide for best practices, tools and templates and to be a practical guidance how to use these tools and templates. What the Toolkit is not The Toolkit: is not a set of rules in addition to the existing legal, contractual and regulatory framework and guides. is not an interpretation of the existing contractual regulations. is not a substitute for reading the contractual conditions and existing guides and instructions. Use of the Toolkit The Toolkit is developed for recipient of CNVI funds. Recipients of CNVI funds can either be Confederations (direct funding) or Federations (indirect funding). Recipients of CNVI funds can be: National Trade Union Confederations that have engaged into a contract with CNVI; Trade Union Federations being member of the National Trade Union Confederation and participating in the National Program that is mainly funded by CNVI. This Toolkit should be a guidance for organisations, and in particular for financial staff, to help them with specific tasks, like preparing a budget or a financial report. When working on a specific financial management area, organisations and financial staff can better prepare themselves by studying the corresponding module of the Toolkit first. By studying the corresponding module, organisations will better understand how to comply with the financial standards of CNVI and also be able to work with the provided templates. In principle the modules only need to be studied and used when organisations (or financial staff) are working on a specific financial management area. It s not intended as a book to read from beginning to end but as a work book: only study a module when it s relevant. 3

4 Structure and content of the Financial Toolkit The Financial Toolkit covers 8 financial management areas and is structured into 8 modules. The content of the Financial Toolkit is: Module 2 Cash and Bank Management 2.1 The importance of having a bank account P Designated bank account P Selecting a reliable bank P Detailed information about basic banking operations P Cheques P Cash P. 13 4

5 The toolkit and the financial templates can also be downloaded from the partner intranet at CNVI s website, at (see below partner login ) 5

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7 MODULE 2 BANK AND CASH MANAGEMENT / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ REAL LIFE STORY Some 10 years ago, there was a major banking fraud in The Netherlands. The bookkeeper of a major foundation managed to transfer millions of Euros to a foreign bank account and fled the country afterwards. The bookkeeper had worked for many years with the foundation. Being a hard worker he gained the trust of the executive manager. To facilitate payment procedures, the bookkeeper was entitled to issue and authorize payments up to 50,000 per payment. Apparently, the executive manager didn t want to be bothered by financial issues too much. The bookkeeper informed the bank manager that his foundation was going to make some considerable payments to foreign bank accounts because of changed policy. The bank manager wasn t suspicions and did not inform himself what these changed policies were about. In the meantime, the bookkeeper had opened several foreign bank accounts in his name. In one weekend he transferred 10 million Euros to these accounts, in 200 transfers of each 50,000. After that he fled the country. The theft was discovered only after some days and caused a huge scandal. Only after intensive police work and diplomatic interventions, the Foundation managed to retrieve a great portion of the stolen money. Being homesick the bookkeeper came back to the Netherlands and is now in prison. This scandal could have been easily prevented if the foundation had implemented simple internal control measures like separation of payments authorisations and better banking procedures. occurred. 7

8 MODULE 2: Bank and cash management 2.0 INTRODUCTION This module is about handling the money. This module presents tools that you can use to comply with the standards described in the FPMF for bank and cash operations. This module will inform you about: The importance of having a bank account Designated bank accounts How to check the trustworthiness of a bank? Detailed information about basic banking operations Detailed information about working with cheques Detailed information on handling cash 2.1 THE IMPORTANCE OF HAVING A BANK ACCOUNT Most organisations have a bank account. However, some federations have indicated that they do not have yet a bank account. As a basic rule all federations receiving funds from CNVI for the work plan, must have a bank account. Why is this important? 1. Storing money in the bank is much safer than having cash in the office 2. Making payments from bank to bank account is safe and transparent 3. Bank statements are a reliable source of information about payments made and money received. 4. Banks offer many other facilities, that clients can use, to improve their cash management Federations not having a bank account yet should be encouraged by the confederation, to open up a bank account. In principle, confederations should not pay out any instalments in cash to the federations, but always through a bank transfer. Federations can include banking costs in the budget as eligible costs. There can be no argument not to open bank accounts because of the costs, since these will be reimbursed by CNVI funds. 2.2 DESIGNATED BANK ACCOUNT CNVI prefers that the bank accounts used for the work plan, is a designated bank account. Only payments for eligible expenditures of the work plan are allowed to be paid from this bank account. Payments for other projects, or organisational costs not related to the work plan, aren t allowed. Only funds directly related to the work plan may be transferred to this bank account. This applies to: CNVI funds transferred by CNVI or by the Confederation in case of transfers to the federation Co-funding: transferred by others like Foundations or subsidies from the government Co-funding: cash contributions out of own resources 2.3 SELECTING A RELIABLE BANK If an organisation opens a new bank account at a new bank, the reliability of this bank must be checked. The question is: how to do this? The best way to do this is to ask for the bank license. Banks must always have a bank license. Bank licenses are issued by the Central bank in a country, that checks the reliability and solvability of a bank. Without such a license, banks cannot be considered reliable. 8

9 MODULE 2: Bank and cash management When asked to show their license, banks should not be hesitant to present this license. Organisations should inform themselves about the reputation of banks. They can ask similar non profit organisations who have a bank account with a particular bank about their experiences. Do they get good services, what are the costs, are questions addressed swiftly and correctly and does this bank issue bank statements regularly? If the bank shows its license and the bank has a good reputation, the federation may decide to do business with the bank of their choice. They will have a formal meeting with bank officials, sign a banking contract and open a bank account. After having opened the bank account the treasurer of the federation informs the treasurer of the Confederation about the new bank account and requests that CNVI funds will be transferred to this bank account. The treasurer communicates in writing the details of the investigation and stipulates the reasons why they have chosen this bank. If the Confederation approves, they may start transferring the funds to the designated bank account. The same procedure applies when Confederations want to open a new bank account with a new bank. They will communicate the results of their enquiry to the program officer of CNVI. 2.4 DETAILED INFORMATION ABOUT BASIC BANKING OPERATIONS The FPMF presents standards for basic banking operations. These standards are there to safeguard the funds and to ensure that funds cannot be misused. These standards are explained below. Each bank account must have three signatories, being members of the Board. The bank requires signatories for the bank account. Signatories are people who are authorized to sign cheques on behalf of the organization. At the opening of the bank account the signatories must be present in person and present their identification papers. The bank makes a copy of these papers and the signatories have to sign several documents. If the bank receives payment orders from the organization, at least one of these signatures must be present on the payment voucher. The bank must be able to verify that the payment order is verified by at least one person who has the authority to do so. Often banks give instructions on the precise number of people who has to sign the payment order, depending on the amount of the order. Each organization should have a panel of signatories from which to select the required number of authorizing signatures. There should be sufficient people nominated to ensure efficient administration of bank payments. Signatories should be regularly reviewed and the list updated when people leave the organization. Two signatures are required to make any payments from the bank account. The signatories for the bank account must be established and authorization limits set for expenditure. The basic principle is that no one should have the possibility to sign singlehandedly for payments. This is to help combating fraud and should always be honored, regardless of their position. Not even executive managers or chairpersons of the board may have such authority. Each organization needs to have procedures about authorization of payments. How to do this is explained in Module 3 Organizing Supporting documents. 9

10 MODULE 2: Bank and cash management Bank account balances must always remain in credit. No overdrafts are allowed without approval from the treasurer. Considering the payment schedule of CNVI( i.e. to the Confederations and from the Confederations to the Federations), there should never be a shortage of liquidities on the designated bank account, because all organizations receive advance payments up to 100%. In the exceptional case that there s a temporary shortage of liquidities, the treasurer is allowed to permit overdraft on the account. However, for doing that, the organization must have arranged a credit facility with the bank. In other words; the bank is willing to lend the organization money. However, there are some drawbacks to this. Banks lend money against high interest rates. These interest costs are not eligible, so it is a cost for the organization. Normally, banks are only willing to lend money if a client has collateral. Handing over collateral in exchange for a loan can be very risky for the organization as they may loose valuable assets. Especially when an organization is unsure about repaying the loan to the bank, they should not choose to loan money in the first place. For these reasons treasurers should be careful to permit any overdraft on their accounts. They should only allow this if they are sure the next advance payment is very soon to come. Financial monitoring is very helpful to prevent these situations in the first place. If the finance department monitors the balances of the bank account regularly they will notice a upcoming shortage of cash. They should warn the executive manager or the treasurer, who need to decide how to handle this problem. They may decide to delay payments or they can urge the donor (i.e. CNVI or the Confederation) to speed up the payment process. All payments, whether by cash, cheque or bank transfer, must be made only on the basis of authorized documentation. Payments should be documented on a payment voucher, which should be attached to the corresponding invoice. The persons authorizing the expenditure must sign the payment vouchers. Module 3 Organizing supporting documents presents information on the use of payment voucher, including an example. The payment voucher may include more than one item of expenditure. The vouchers should have a sequential reference number (preferably preprinted). They should also be coded with a cost centre and account code corresponding to the budget line item so that the information can be correctly recorded in the accounting or administrative system. Module 4 Accounting presents information on the accounting of payment vouchers. 10

11 MODULE 2: Bank and cash management All expenditure must be supported by invoices/receipts. If these are not issued by a supplier, a receipt should be drawn up by the organization and signed by the supplier. It s not always possible to receive an invoice from a supplier. Especially when making small cash payments (e.g. taxis, restaurants), it might be difficult to receive an invoice. However, payments must always be supported and verifiable by supporting documents. So how to act in these situations? Staff members making payments often for the work plan should carry with them a receipt book. When they do business with a supplier who cannot submit an invoice, the staff member should draw up a receipt instead. Characteristics are: This receipt describes the amount, the date and the services rendered or goods purchased. The receipt must always be signed by the staff member and the payee. The receipt is handed over to the finance department. In most situations this will happen if the staff members fill in a declaration for reimbursement of expenditures made. The Finance department files the receipt and records the payment in the bank or petty cash book. Module 4 presents further explanation of the use of the bank and cash book. 2.5 CHEQUES The FPMF presents some principles about working with cheques, when these are used for the bank account. These principles are there to safeguard the funds and are further explained here below. Cheque books must be retained in a secure location in order to avoid misuse and possible misappropriation of funds. Each organisation, especially those who have considerable amounts of cash in the house, should have a safe (or a safe place) to keep cash, cheques books and legal documents. As cheque books represent great value, they should be treated as cash, and should be kept in the safe as well. Only a very limited number of people may have access to the safe. It is advised to keep the safe in a hidden place and firmly attached to a brick wall. 11

12 MODULE 2: Bank and cash management Cheque signatories should not have access to cheque books. This is a basic principle of internal control. Keeping separated the persons who have access to the cheques (i.e. access to the safe) from the persons who have authorization to sign cheques, is an important measure to prevent misuse of cheques. More specifically, organizations must have clear procedures that describe: 1. The overall management of the cheques like responsibility, administration of cheques, handling of cheques, internal controls and security 2. Define specific task and responsibilities concerning cheques: - Who may issue a cheque and when? - Who may write a cheque? - Who may sign a cheque and to what amount? Don t ask signatories to sign blank cheques for convenience as this enhances the risk of misuse. Each cheque must be photocopied before giving to the beneficiary. Photocopies of cheques must be attached to invoices and filed. As cheques are an important proof of payment, issued cheques must always be photocopied. It is part of building the audit trail. By attaching the photocopy of a cheque to an invoice, the auditor can follow the actual payment of the invoice. The cheque number should be presented on the bank statement. The auditor can link this cheque number to the specific invoice and can reassure that the invoice has actually been paid. Of course this is not only important for the auditor, but for internal control purposes as well. Cancelled cheques should be retained. Cheques are numbered in sequence. Organizations must know for which payment cheques were issued. To keep track of all issued cheques, an organization should retain cancelled cheques as well. By doing that an organization can keep an complete overview of all cheques issued. For internal control it is important to track down each issued cheques, to prevent that some cheques are missing and possible misuse of cheques can occur. Cancelled cheques should be kept in a proper file. 12

13 MODULE 2: Bank and cash management 2.6 CASH Confederations and federations often have to pay in cash, meaning each organisation must keep cash in the organisation. Each organisation must have certain rules for their cash management in order to minimize the chances of loss of cash. Rules for Handling Cash: 1. Keep cash in a safe place Cash must be kept in a safe place, preferably in a real safe. It s important that only the necessary staff members have access to the safe. As safes have a entrance code, this code must be changed periodically. Preferably the treasurer of the organisation must change the code in attendance of the Head of Finance or bookkeeper. When the organisation does not have a safe, it should acquire one. If this is not possible, at least acquire a tin box, in which the cash can be kept. Normally these tins can be locked by a key. Only a limited number of people may have a copy of this key. Keep the tin hidden from other people, for instance in a locked desk. 2. When handling cash, keep it out of sight from other people Any cash handling procedure, (i.e. counting cash, put cash in or take it out of the tin) must be kept out of 13

14 MODULE 2: Bank and cash management sight of other people. Especially when the organisation does not have a safe. Cash in the open may catch the eye of other people and can make people anxious. Other people should not know that the organisation keeps cash in the office and secondly, they should not know where the organisation keeps their cash. 3. Keep cash amounts as low as possible As a general rule, try to pay as much by bank of by cheques, since these methods are always safer than payments in cash. Since cash can be stolen or lost, it s better to keep cash amounts as low as possible in the tin or safe. When large cash payments have to be performed (i.c. when a project team is going to perform a field trip), take cash from the bank the same day it is paid to the project team. Then there s no need to keep large amounts of cash overnight in the office. The opposite rule applies as well. When the organisation has received large amounts in cash it is strongly advised not to keep large amounts of cash in the office. These cash amounts must be deposited on the bank account as soon as possible, preferably the same day. 4. Keep a cash book Each cash transaction (cash in, cash out) must be recorded in a cash book. It is important to check the recordings and perform cash counts. These must be performed at least once an month. However, if the organisation pays often in cash, the checks and counts must be performed more frequently. Module 4 Accounting presents more information on petty cash accounting and presents examples of a petty cash book as well. 5. Keep receipts Each cash transaction must be validated by a receipt. When cash is going out, there must always be a receipt in return. Without a receipt there s actual no proof that the payment was valid. Sometimes it might be difficult to receive an invoice (e.g. taxis, restaurants). However, payments must always be supported and verifiable by supporting documents. So how to act in these situations? When staff members do business with a supplier who cannot submit an invoice, the staff member should draw up a receipt instead. This receipt describes the amount, the date and the services rendered or goods purchased and must always be signed by the staff member and the payee. This receipt is presented to the finance department. In most situations this will happen when a staff member submits a declaration for reimbursement of expenditures made. 6. Give receipts for money received When cash is received, there must be a receipt as well. The person handling the cash must write a receipt and acknowledge that cash is received. On the receipt the date, amount and reason of receipt must be written down and signed by both the receiver and the giver. Both keep one copy of the receipt. Receipts must always be kept neatly with the cash book. 7. Appoint staff members who are authorized for cash procedures The organisation must appoint certain staff members who are authorized to perform cash procedures. Preferably the person who is dealing with cash (going to the bank for collecting or paying cash, paying cash out to suppliers or staff members) should not be the same person who records the cash book. The staff member who checks the cash book should be another person as well. 14

15 8. Develop and implement a cash procedure Handling cash is sensitive and must be performed carefully. Therefore having a clear procedure is strongly advised. The procedure should translate the rules, as described above, to the specific situation of each organisation. Besides that, organisations may add other rules as well, if this is required by the situation of the organization. The highest ranking finance officer of the organisation (e.g. treasurer, head of finance) should check the workings of this procedure yearly and update it, if necessary. 15

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