Mango s Financial System. User Guide

Transcription

1 Mango s Financial System User Guide Version 3, April 2010

2 Mango s Financial System 1 The use of all of Mango s tools and materials is subject to our Policy on the Use of Mango s Tools and Materials. Copies of the policy are available on request, and from our website. For further information, please contact: Mango, Chester House, George Street, Oxford, OX1 2AU, UK Website: Phone: +44 (0) enquiries@mango.org.uk

3 Mango s Financial System 2 Contents 1. Introduction Who can use Mango s Financial System? Overview of Mango s Financial System Setting up Mango s Financial System Using the spreadsheets Preparing the accounts codes Entering your budget on to the Management Report Entering transactions in the Cash book(s) The Analysis Sheet Dealing with different currencies The Consolidation Form Preparing the Management Report Recording Non Cash information in the Registers Internal Controls using Mango s Financial System Forms Financial Controls Excel Tips Mango s Accounting Principles Mango s Financial System Spreadsheets... 36

4 Mango s Financial System 3 1. Introduction Mango s Financial System is a simple set of tools for accounting and financial management in small to medium sized NGOs. The System includes spreadsheets and forms to record financial transactions; it can produce financial reports for monitoring, and it provides the financial forms you need for key internal controls. The system can be easily adapted to meet the needs of any particular NGO. An NGO can obtain the following benefits from using Mango s Financial System: - crucial records can be kept in good order, - financial information can be prepared on time and be easily understood, - trust and respect can be built up within the staff team, - mistakes and fraud may be prevented, - staff will be able to do their job well. These issues are discussed in more detail in Mango s Guide to Financial Management for NGOs, freely available from Mango s website, We welcome any feedback on your experience of using the system, and any suggestions for improvements. Please let us know how we can make it better for you! 2. Who can use Mango s Financial System? The system is already used by many small and medium sized NGOs. They include local community organisations and field offices of national and international NGOs. Mango s Financial System may not be appropriate for NGOs that handle a large volume of transactions, or those that have special accounting or reporting requirements. Users do not need to have much experience working in finance: the system includes full explanations of all the different procedures. But they need to be comfortable working with numbers, and using Excel and computers. (The system is based on Excel spreadsheets.) If you do not have easy access to computers, then the spreadsheets and forms can be photocopied and the system run on paper. 3. Overview of Mango s Financial System 3.1 System features The main features of Mango s Financial System are: - Based on Excel spreadsheets and forms - Follows widely accepted NGO accounting principles - Is simple, flexible and transparent - Can handle the use of different currencies - Produces daily cash balances and monthly reports - Can be adapted to meet the reporting requirements of each NGO - Can be downloaded free of charge from Mango s website.

5 Mango s Financial System Structure of Mango s Financial System Mango s Financial System Cash Book Cash Book The general shape of Mango s Financial System is as follows: Preparations - A list of accounts codes is prepared and entered into the system Daily transactions - Daily cash (or bank) transactions are recorded in Cash Books. - The transactions are analysed on Analysis Sheets by account code. - At the end of the month the transactions are converted into one standard currency (referred to as the reporting currency ) and summarised on a Consolidation Form. - The Consolidation Form feeds into a Management Report. Other transactions Transactions which do not involve an immediate cash transfer are recorded in a series of Registers. These include the committed expenditure register, the assets register, the floats register, the loans register and the funding grid. Monthly reports Cash Book Analysis Sheet Analysis Sheet At the end of each month users should prepare the Management Report and the Funding Grid (and floats/loans registers as appropriate). The Management Report compares actual expenditure to the budget. The reports provides a complete financial picture, enabling managers to understand and control their financial position. Standard controls and procedures Analysis Sheet Consolidation Form Management Report Registers Committed expenditure Funding grid The system includes standard controls and procedures (supported by forms). These controls ensure that resources are used in an appropriate manner and that the accounting system meets basic audit requirements. Assets Floats Loans 4. Setting up Mango s Financial System

6 Mango s Financial System 5 There are ten steps for setting up and running the system. You may wish to enter transactions immediately (Step 4!), setting up accounts codes as you go along. However, we strongly recommend that you work through each step in turn, as this will help you set up the system properly, linking transactions in with your existing reports and will help you understand the system and ultimately save you time. Setting up: STEP 1 STEP 2 Download Mango s Financial System spreadsheets (section 5) and plan procedures for saving and backing up files. Prepare a list of accounts codes. Enter your list of accounts codes onto the consolidation spreadsheet and copy onto the cash book Analysis sheets. TIP: A MODEL LIST OF ACCOUNTS CODES IS PROVIDED! STEP 3 Enter your budget on to the Management Report (section 7). Daily use: STEP 4 Enter transactions in the cash book(s) (section 8). STEP 5 Support transactions with the appropriate Forms (section 13). STEP 6 Record non-cash information and transactions into the appropriate Registers as and when these transactions take place (section 14). At the end of each month: STEP 7 STEP 8 STEP 9 Carry out month-end internal control procedures (eg cash and bank reconciliations), (section b)). Review the analysis on the Analysis Sheets (section 9) and enter currency exchange rates, if you are using more than one currency used (section 10). Complete the entries on the Consolidation Form (section 11). Excel does most of the work but some final adjustments may be needed before information flows into the Management Report. STEP10 Prepare the Management Reports (section 12) and carry out monthly back up procedures (section 0).

7 Mango s Financial System 6 5. Using the spreadsheets 5.1 Using the spreadsheets for the first time a) The system is based on three Excel files, called: Mango System, Mango Forms and Mango Registers. There is also a model list of accounts codes: Mango Accounts Codes, and an example of how the system works in practice: Mango Model. See section 18 for full details of the contents of these files. We recommend that you set up a separate folder for these Excel files, which you only use for accounts. b) If you are not yet an expert on spreadsheets, we recommend that you read through section 16, Excel Tips, where some useful techniques and formulas are explained. c) You will find that each file contains a number of worksheets. You can move between these by pressing the Tab at the bottom left hand corner of the page. d) The main file you will use is Mango System, which holds all the main accounting records. You should save a new copy of the file with a different name at the start of every month. For example, if your financial year runs from July 2010 to June 2011 you might call the first file Accounts Jul.xls (2011 indicating the financial year end, 01 indicating the first month in the financial year). The August file would be called Accounts Aug.xls, and so on. This way the files will be listed in the folder in date order. e) Once you have saved your file you can select the Tab at the bottom of the workbook entitled Accounts List. Section 6 explains how you prepare your list of accounts. You carry on from there. f) Do remember to back up your work every day! 5.2 Procedures at the month-end At the end of each month, save the file and print out all the worksheets. Then you have to prepare the file for the next month. Save it a second time ( save as ) with the new month name, as explained in (d) above. Next, you have to remove the transactions from the last month. This has to be done with great care and in strict order as follows: a) Go to the Management Report worksheet. Make the column for the new month wider, if you need to. Go to the Working Assets section at the bottom of the spreadsheet. Enter the closing cash and bank balances from last month, and floats and loans, as opening balances in the column for the new month. If the amounts from the previous month s Consolidated report have been entered manually there is nothing else to be done. b) Move on to the Cash books. Change the month in the header and then enter the closing balance in the blue box into the opening Balance Box (Do this manually or you risk copying formulas and creating problems!). Once this has been done you can delete all the transactions entered in the previous month.

8 Mango s Financial System 7 c) Then move on to the Analysis Sheets. If you only use one reporting currency there is nothing to be done on this sheet. If you are using more than one currency then there are two important tasks on the Analysis Sheets: first enter the past month s exchange rate into the Last Month s exchange rate box. Then enter this new month s exchange rate into the This Month s exchange rate box. (If your organisation only uses one currency leave the rates in both boxes as 1.) Secondly, if during the previous month you modified any of the exchange rates next to any of the accounts restore the exchange calculation formula in Column F (the This Month s Exchange Rate column). d) Finally move on to the Consolidation Sheet. Enter the new month at the top of the Sheet. If you manually entered the previous month s totals into this sheet you can now delete all the transactions. BE CAREFUL NOT to delete the BLUE BOXES (totals). If the amounts in the monthly columns are linked with formulas across to the Analysis Sheets then you will only need to delete the transactions recorded in the Journal and Expenditure from Other offices columns (the other amounts would have been zeroed when you deleted the transactions in the Cash books). e) Save the file again, plus a further backup copy. Remember the golden rules: Store weekly backup copies of these files in another folder. Print out paper versions of these files at the end of each month. File these safely. 6. Preparing the accounts codes 6.1 Setting up a list of accounts codes You need to enter some basic information before Mango s Financial System spreadsheets will work. This should be fairly simple. The first step is to make a list of each type of receipt and payment that your NGO may receive or spend. These are called accounts codes. For example, receipts might include: donations, grants and sales. Payments might include: salaries, travel expenses, and office costs. You should enter this list onto the Accounts List worksheet.

9 Mango s Financial System Setting up a list of accounts codes (contd) Planning a coding structure The codes should be planned so that similar types of income or expenditure are grouped together. For example, different types of expenditure might be grouped together as administration costs or personnel costs or project costs. Each individual type of income or expenditure is then given a code. For instance telephone costs might be 200, photocopying might be 210 and stationery might be 220. Using letters If you want to, you can also use letters in the codes. This can be useful for sub accounts. For example, if you are running various projects, the photocopying for first project might be 210W (for a Water project); photocopying for the second 210H (for a Health project) and so on. You can use whatever codes you want whatever will be most useful for you and your NGO, as well as for your donors and for any legal requirements. Being consistent Please be very careful when you are designing and entering account codes: they have to be written in a consistent format, matching the format that you use next to each transaction in the cash book. If they are not written in exactly the same format, then the computer will not be able to analyse your cash book automatically. For instance, the computer will not recognise ABC123 as the same code as ABC-123 or as abc 123 or as ABC 123. It does not matter which format you choose. But you must pick one, and follow it. Design accounts codes so that they are logical and easy to remember, with space to create new accounts later on. Sample list A sample list of accounts codes is provided. You can copy some of the accounts and account codes from the sample to your own list if this is helpful. In some countries there is an official chart of accounts (often in French speaking countries). It probably will not fit your needs as it is designed for commercial organisations, but you may wish to adapt and follow it as closely as possible. You will see that accounts for cash and bank transfers, float and loan payments and reimbursements, have been entered already on your list of accounts codes. These accounts are critical for the operation of the system. If you introduce additional cash or bank accounts then they will also have to be added to the list of accounts codes. When you have finished preparing your own list of accounts codes save your file again! TIP: It is a good idea to print out a copy of your List of Accounts Codes in a large font so that everyone who is involved with handling budgets or finances knows the name and code for each account.

10 Mango s Financial System Copying the accounts codes into other worksheets The next step is to copy your list of accounts codes into the Consolidation Form; then onto the Analysis Sheets and finally into the Management Report. These sheets are explained in more detail later. Make sure that every analysis sheet form that you use has exactly the same list of codes on it (whether you use all of the codes in each account or not). This is very important because it makes it much easier to consolidate the accounts. It may be easiest to copy your list of accounts codes using the Excel functions Copy and Paste (see section 0). You may also need to Insert new rows if there is not room on the various worksheets for your accounts. Do check that there are enough rows before you copy rows of accounts over from your list of accounts codes to another sheet, or you may copy them over existing data. That could give you some problems! If you do make a mistake, remember that you can click on the Excel Undo button to get back to where you were. If you insert new rows for accounts you will need to copy down the formulas that are entered on the previous rows. This is very easy and the technique is explained in Excel Tips and Hints section Creating more cash books for cash and bank accounts If your NGO runs several cash or bank accounts, either in your office or elsewhere, this is a good moment to create new worksheets for each separate cash and/or bank accounts. The format of the worksheets is the same for both cash and bank. In accounting terms, there is no difference between a cash account and a bank account the transactions for both are recorded in a cash book. You will see that each cash book has its own analysis sheet, and that there are formulas that link these two spreadsheets together. The easiest way to create a new cash book, together with its analysis sheet, is to copy one of the pairs of worksheets ( Cash or Bank ) that has already been provided. This is done by highlighting the Tab for the CSBOOK1 worksheet; then, by holding down the Control key on your keyboard, highlighting the CB1ANALYSIS worksheet. Then select Edit from the main window; then Move or Copy Sheet. Then tick the Create a copy box and indicate where you wish to position the two new sheets in your workbook. Then press OK. CONGRATULATIONS! You can now start making entries in the cash books.

11 Mango s Financial System Entering your budget on to the Management Report Mango s Guide to Financial Management of NGOs ( includes notes on how to prepare a budget for an NGO. This section describes how to enter your NGO s budget information onto the Management Report. You must use the same list of accounts codes in your budget as you use in your financial system otherwise you will not be able to compare the financial reports to the budget, which is a crucial control. When you have prepared your budget, select the Management Report worksheet (the Tab is labelled Report ). Enter the period that the Budget covers at the top of the page. You will see a column near the right-hand side, headed Budget. Enter your budget figures into the rows in this column, taking care not to accidentally delete the formulas in the adjacent columns. When the Management Reports are prepared, Mango s Financial System will automatically make some comparisons between your budget figures and the actual results. The columns to the right of the budget will show you the amount of the budget that has not yet been spent, or has been overspent, and also will show you what percentage of the budget has been received or spent. Do not be concerned about the cells marked #DIV/0! These are cells where there is a formula which needs figures in the actual, or budget, columns before it can work. 8. Entering transactions in the Cash book(s) 8.1 Introducing the cash book All cash or bank transactions must be recorded in a cash book. (A cash book is simply a list of these transactions.) It is very important that it is always accurate and complete, and it should be updated every day. A separate cash book must be kept for each account that an office uses. So, there must be separate cash books for each currency used, and for cash as opposed to bank accounts. For example, an office in Rwanda might have four accounts, and four cash books: Rwandan Franc Cash Account, Rwandan Franc Bank Account, US Dollar Cash Account and US Dollar Bank Account. The procedure for creating new cash books is explained in Section 0. You should enter the name of the office, the account name, the month and year at the top of the cash book. In Mango s Financial System a new file is opened each month, starting with the previous month s balance.

12 Mango s Financial System Entering transactions A separate row of the cash book must be filled in for each transaction. Each entry must include: The date that the receipt was received or the payment made; A reference number, which should be the Payment Voucher number, if possible. If for some reason no Payment Voucher is available, then a receipt or invoice number can be used instead; The name of the supplier (or person from whom cash has been received) together with a brief description of the receipt or goods/services bought (always made as precise as possible); The relevant accounts code (keep your list of account codes next to your desk); The amount received in the receipts column or spent in the payments column. 8.3 The opening cash or bank balance Enter the opening balance at the beginning of the month in the top row of the summary box. If it is a negative balance enter the balance as a negative figure. Do not make entries in any of the Blue Cells as these contain formulas and are calculated by the spreadsheet, automatically giving you the closing balance up to the date where you have entered transactions. The spreadsheet has been formatted so that the top few lines (including the titles) always remain on the screen. (This was done using the Freeze Panes tool.) It will also do the same thing when printing: it will repeat the titles at the top of each page printed (see section 0.) 8.4 Transfers between cash and bank accounts You have to be very careful entering these transfers as entries have to be made in two cash books. For example, if $5000 is transferred from Bank to Cash an entry has to be made in the bank Cash book paying out the $5000, with the account code reference of the cash book (CB). A further entry has to be made in the Cash book showing the receipt of $5000, referenced to the bank cash book (BK). If this involves currency exchange please refer to section Entering account codes You also have to be very careful entering the accounts codes as already mention in section 0. If you enter an account code that does not match one that is listed on the Cash book Analysis Sheet, or forget to enter one, a warning CHECK CODE will appear in red in the summary at the top of the page! This will disappear once a correct code has been entered. (This is created by an Excel IF formula see 0). 8.6 Adding new accounts and account codes If you have a receipt or payment for which there is no account you will need to set up a new account and account code. Be sure that this is really necessary, and obtain management authorisation before proceeding. If you decide to go ahead, first, save your file! The next step is to go to your list of accounts codes. You may need to insert a new row so that you can enter the new account in the right place on the list. When you have done this you will need to change the list on the Consolidation Form, the Management Report and on each Cash book Analysis Sheet. Remember that you will need to copy down the formulas from the previous rows for totals

13 Mango s Financial System 12 and for calculations. (If you have linked amounts between worksheets you will also need to enter new links for the new account). 8.7 Deleting accounts and account codes Care is needed before deleting account codes that are no longer used. It is best not to delete accounts during the financial year, but to wait until after the year is completed. In this way you can avoid deleting an account that has been used in the financial period. Save your file before you make any addition or deletion. Any changes in the accounts and accounts codes should be authorised by management. 8.8 Physical Records Each cash book should be backed up with folders of documents supporting each transaction. Receipts should be supported by: duplicate receipts, donor correspondence, etc. Payments should be supported by a payment voucher, and attached to this would be payment requisition forms, quotes, suppliers receipts, invoices, and any other relevant documentation. Payments and receipts should be filed separately in separate folders for each cash book. File these documents in date order, the most recent on top. This filing system should make it easy to find the records for any transaction listed in the cash book. 9. The Analysis Sheet 9.1 Introduction Each cash book is linked to an Analysis Sheet. The analysis sheet lists all the accounts that an office uses. For each account all the cash book transactions must be added together and the total spent or received entered next to the account on the analysis sheet. This is the bit of work that your computer will do for you. It can save a great deal of time. The analysis sheet is also the place where transactions in foreign currency are converted to your NGO s reporting currency at the rates of exchange set by your organisation each month. Section 10 gives full details on how Mango s Financial System handles foreign currency transactions. Two cash books with analysis sheets are provided in Mango s Financial System spreadsheet. If more are required you can copy one of these but copy both the cash book and its analysis at the same time! This is important in order to keep the formulas on the two pages that are linked to each other. The way to copy these two together is explained in section Setting up the Analysis Sheet The analysis sheet must be set up with your basic information before it will work. This should be fairly simple. You have probably already copied your list of accounts codes from the Consolidation Form onto the Analysis Sheets. See section 0 for details as to how this is done. Take care when entering the Account Codes you must use EXACTLY the same list every other time! The analysis sheet is set up with columns for Account Code, Account Name, Receipts, Payments, This Month Exchange Rate and Total Reporting Currency. These last two columns

14 Mango s Financial System 13 are explained in section 10. The amounts in the final column are eventually transferred (manually or by linking) to the Consolidation Form (see section 0). The Spreadsheet uses a SUMIF formula for the analysis work (see section 0 for more details). This means that it looks down the list of transactions on the cash book, and picks out all of the transactions that have the same code, and then sums them together. The formulas are already on the analysis sheets. If you enter any new rows in the analysis cash book the following step should be taken: select the cells containing the formulas in the existing row above the new one, and then copy them down (but not across) to any new rows where you have entered your codes and descriptions. 10. Dealing with different currencies 10.1 Currency conversion and exchange rates If you run accounts in different currencies, then you will have to convert all transactions into one, standard, reporting currency. This allows you to monitor the overall office expenditure, and compare it to the budget. Branch offices may also be required to submit monthly financial returns to a head office in a reporting currency (for instance, in GB Pounds for UK based NGOs). The currency conversion takes place on the analysis sheet. If transactions in a particular cash book have to be converted into a reporting currency for consolidation, then monthly exchange rates for last month and this month should be entered in the boxes indicated at the top of the analysis spreadsheet Choosing and entering exchange rates You will need to be careful about the exchange rate that you choose. It is generally acceptable to pick an average of the exchange rates used over the month. Some organisations (and donors) prefer you to use the exchange rate of the last working day of the month instead. You may also find that for some projects, a different exchange rate altogether should be used. This will only be the case when it is explicitly set out in an agency s financial procedures. The exchange rate difference is calculated on the analysis sheet. It is done in the box underneath the page heading. It is a simple calculation, working out the difference between the opening balance at last month s exchange rate and the closing balance at this month s exchange rate. The opening and closing balances in reporting currency will be automatically calculated, and also the exchange rate difference. The balances and the exchange differences are entered on the consolidation form at the end of the month Currency exchange a) Editing rates of exchange Some special entries may be needed when one currency is exchanged for another. For example, if you exchange 1000 Euros (the reporting currency) for local currency LC at the rate of 20 LC= 1. This gives your NGO 20,000 LC. The bank cash book and analysis sheet will show 1,00 as paid out. The cash book receiving the money will record 20,000 LC that is then converted back into Euro using the monthly rate of exchange. If

15 Mango s Financial System 14 this is set at 25 LC= 1 it will be converted back to 800 Euro. This would create a problem, because the two sides of the transaction do not balance. In these circumstances you can change the rate of exchange used in respect of this particular account, as it is important that both ends of the transfer are the same amount ( 1,000) on the Consolidation Form. The Consolidation Form will not balance if they are not! This is done on the analysis sheet, next to the cash book account. If there is more than one transaction during the month you will have to work out the appropriate average rate of exchange so that the two sides agree. If you do change any currency exchange rates, then you are replacing the formula for This month exchange rate next to the cash book account. When you set up the cash book for the following month, copy this formula back into the cells that you changed. b) Exchange Rate Differences Changes in the exchange rate can lead to a change in the value of assets. For instance, an office might hold RWF100,000 in cash in January and February. In January, the exchange rate may be 450RWF = 1, so the RWF100,000 would be equivalent to 222. In February, it could fall to 500RWF = 1, so the same RWF100,000 would now be equivalent to 200.

16 Mango s Financial System The Consolidation Form 11.1 What the Consolidation Form does The consolidation form brings together information from all the different cash books for all the different accounts, and consolidates this information in one reporting currency. It allows you to monitor the total cash amount spent or received on each accounts code over the whole month. It is likely that this is the most appropriate statement to submit to a head office as part of the monthly accounting returns. The Consolidation Form does not produce figures ready to compare to the budget, because it does not include future committed expenditure. These transactions appear in the Monthly Report (see section 12 for further details.) The consolidation form is made up of columns of data from each analysis sheet. These show the amount received/spent on each code, in each account. There are two additional columns at the right hand side of the form: Journal vouchers and Expenditure made in other offices. The journal vouchers column is used to record any adjustments made to the accounts (for instance, rectifying mistakes that creep into the accounting, like a mis-coding). See section 0. The expenditure made in other offices column is used to record expenditure that has been made on your behalf by another office. See section 0. The final output of the consolidation form is the last column of figures on the right. This shows the total cash movements on all of your NGO s accounts lines over the month. They make up the main element of the management report, which is described in section 12 below Setting up the Consolidation Form Enter the name of your organisation and month and year at the top of the form. You have probably already copied your list of accounts codes to the Consolidation Form. See section 0 for details as to how this is done. Take care when entering the Account Codes! Enter the name of each Cash book account in the titles of the Details of Accounts columns. You may have to insert more columns, if you have more than six accounts. Make sure that you copy over the formulas in the blue total and control cells at the bottom of the page.

17 Mango s Financial System Completing the Consolidation Form at the end of the month The first step in using this form is to make sure that the previous forms have done their job properly. You should check that all transactions have been entered onto the right cash books, and that the cash books have been properly analysed. You should print out and file all the cash books and their respective analysis sheets. The figures on the cash book analysis sheets have to be entered on their respective columns in the Consolidation Form. The consolidation form must only contain figures in the reporting currency. So you will use the figures from the reporting currency columns of the analysis sheets to complete it. The figures may either be entered manually, or, if you are confident with Excel, you may copy the information across from the cash book analysis sheets using Paste-Special-Values, or by linking. Do make sure that the totals of the columns on the Consolidation Form equal the closing balances on the individual cash book analysis sheets. There is a control at the bottom of the page where you can either enter in these balances manually, or link them in, in order to check that these equal the totals on the Consolidation Form. Check that transfers between cash and other cash or bank accounts zero out. There is a control that indicates this at the bottom of the Consolidation Form. Very small rounding differences can arise on cash books kept in a currency other than the reporting currency. Enter these differences in the Roundings row at the bottom of the page. The control will then confirm that the column is mathematically correct Journals The journal vouchers column is used to record any adjustments made to the accounts (for instance, rectifying mistakes that creep into the accounting, like a mis-coding. Another example is the recording of expenditure accounted for against floats. Explanations should be given on supporting journal vouchers. These must be authorised at a high level within the organisation, as they allow major changes to the accounts. A journal entry always affects two accounts (see section Error! Reference source not found. for more information about double entry bookkeeping). Journals that increase income accounts, or decrease expenditure accounts, should be entered as positive figures. Journals that decrease income accounts, or increase expenditure accounts, should be entered as negative figures. For example, if an employee has accounted for $82.50 expenditure from a float, and it was all used for local travel, the journal entry would be in the row recording local travel and in the row recording floats (paid)/reimbursed.

18 Mango s Financial System Expenditure made in other offices The expenditure made in other offices column is used to record expenditure that has been made on your behalf by another office. For instance, a vehicle might be bought on your behalf by your head office in the UK. This money will never come through any of your cash or bank accounts. However, it will be recorded as expenditure against your budget. So, it must be recorded on the consolidation form as well. This gives rise to two critical issues. The first is where the documentation for such expenditure will be held. If you have external donors, this may well be affected by their requirements. The second concerns information flow. You have to make sure that all expenditure made in other offices is monitored in a timely, accurate way. There are likely to be specific procedures for each international NGO that govern this information flow. You will have to work with the finance staff of other offices to make sure that they know what information you need, and when you need it. If another office carries out many transactions for your NGO each month you may find it easiest to record and analyse this through a separate cash book and cash book analysis sheet. 12. Preparing the Management Report 12.1 Introduction The Management Report is a summary of cash income and cash and non-cash expenditure compared with budget figures. It should be submitted to management at the end of each month. The funding grid (see section 14.6) should also be prepared and submitted to managers at the end of each month. This completes the financial picture for them, allowing them to see what funds they can reasonably expect in the future. The goal of the management report and the funding grid is to provide managers with a complete understanding of: how much money has been spent so far, on what? how much money is there in the bank? how much money can be expected to arrive in the future? will my future income cover my current and future liabilities? These are all crucial aspects of financial management. Along with an up to date budget, they allow a manager to ensure that he/she has the financial resources necessary to complete a project s objectives. Further detailed information will be found in Mango s Guide to Financial Management for NGO s The structure of the Management Report This report is split into three sections: income, and expenditure and working assets. At the bottom of the report are important arithmetical controls that make sure everything balances. a) Income The income section describes the income that the office has actually received. This may include transfers from head office, income received directly from external funders and local

19 Mango s Financial System 18 income. Exchange rate differences are disclosed at the bottom of this section. Provided this is a small amount it is not important for managers, but a large difference surplus or (deficit) may indicate that the system for determining the monthly exchange rates need to be reviewed. b) Expenditure The expenditure section describes the expenditure made on the normal budget codes and includes committed expenditure (see section 0). c) Working assets The main working assets are the cash and bank balances that are available to fund on-going expenditure. This section also summarises floats or loans that are outstanding and carried forward to the next month. d) Arithmetical controls At the bottom of each monthly column there is an arithmetic control. This adds up the individual figures you have entered on the Management Report, plus the Opening balance for Float and Loans, and compares this total with the Total Working Assets. If it agrees then this gives you comfort that nothing has been missed out however it does not of course check that figures have been entered in the right account. So you should always double check your work Setting up the Management Report in Excel The name of your organisation and month and year should already appear at the top of the form as these cells are linked with the Consolidation Form. You have probably already copied your list of accounts codes to the Management Report. See section 0 for details as to how this is done. Take care when entering the Account Codes! The report is designed with 12 columns for the year. You may have to change the dates or alter the width of these columns as necessary. If you insert new rows remember to copy across the formulas in the total cells (shaded blue), and control cells (white or red). It does not matter if the spreadsheet shows a series of #VALUE! and #DIV/0 messages when you first set it up. These happen because the computer is trying to make calculations without having any data. When the data is entered (ie the exchange rate, and transactions in the cash book) then they should disappear Preparing and reviewing the Management Report a) Transferring figures from the Consolidation Sheet First, copy the figures for the month from the consolidation form onto the management report. Most of the accounts on the Consolidation Form are in the same order on the management report. Note that any exchange rate difference, and any rounding, is entered in the Income section. Provided this is a small amount it is not important for managers, but a large difference surplus or (deficit) may indicate that the system for determining the monthly exchange rates need to be reviewed. Rounding arising from exchange conversion is also entered here. The opening and closing balances for cash and bank balances at the end of the month should be entered in the Working Assets section. (Cash counts and bank reconciliations should have been carried out).

20 Mango s Financial System 19 b) Movements on floats and loans The monthly payments or repayments of floats and loans must be entered in the Working Assets section of the Management Report. Payments out (entered as negative figures on the Consolidation Sheet) must be entered as positive figures and repayments received by the NGO as negative figures. You also need to enter the opening balance of float and loans outstanding in the Working Assets section. This is simple it is the closing balance as recorded in this section for the previous month. After completing the monthly column complete the committed expenditure column. This should be completed from the committed expenditure register (see section 0 for details). It may need to be analysed before it can be entered on to this form. You can use a copy of the analysis sheet form to do this. Be careful about exchange rates, as the committed expenditure register is likely to contain transactions in different currencies. Adding the monthly figures together for the year to date and the committed expenditure gives an up to date, complete total expenditure figure. This can be usefully compared against budget to monitor the overall situation Checking the accuracy of the spreadsheet entries All of these spreadsheets must be checked to make sure that they really are doing what you want them to do. It is very easy for a formula to slip by a line when you copy from one cell or one sheet to another one. You should regularly check the formulas, and all of the total figures. There are visual checks at the bottom of the Management Report to ensure that all the account balances on the consolidation form have been entered on the management report. If all amounts have been correctly entered (including any roundings) the checks will say YES. If there is a mistake it will indicate NO- CHECK. In this case check that all the balances on the Consolidation Form have been accurately transferred to the Management Report. (Did you also check that cash/bank transfers zeroed out on the Consolidation Form? See section 0). The checks at the bottom of each monthly column are not printed out but there is one box above the signatures of those who are to sign off the report. This looks at a cell that in turn checks that all the months are correct Other month end procedures The procedures for saving the spreadsheet file after you have completed the report, and how to prepare a new file for the next month, are explained in section 0. (If you link the Consolidation Form to the Management Report be very careful that, at the end of the month, the figures are copied and pasted in as values on the Management Report, to replace the formulas). 13. Recording Non Cash information in the Registers 13.1 Registers The procedures described above for the cash book, analysis sheet and consolidation form explain how to account for all cash transactions. They are basically a single entry system.

21 Mango s Financial System 20 However, it is important to capture information about non-cash transactions. This is done using a series of registers. The registers record: a) committed expenditure b) floats c) loans d) salary advances e) assets and f) committed & received funding All of this information is necessary for the accounts to give a true picture of the field office s financial position. The information in these registers is needed when the Management Report is being prepared (normally at the end of the month). It is critically important that these areas are all recognised as being the accountant s responsibility. The accountant must make sure that this information is collected and entered on to the accounts, even if he/she has to get the information from outside the finance office. The chief difficulty with running the registers always lies in ensuring that the information on them is complete and up to date Committed Expenditure Register All expenditure that has been incurred but not yet paid must be recorded on the committed expenditure register. Examples of committed expenditure include: a vehicle that has been ordered but has not yet arrived, emergency relief equipment that has arrived, but has not yet been paid for, the freight costs of transporting emergency equipment around the world, to be paid 30 days in arrears, a quarterly phone bill paid in arrears. These are all non-cash transactions that have a significant impact on your accounts. The information required on the committed expenditure register is not complicated. It includes the following items: the date that the expenditure was incurred (e.g. when the vehicle was ordered); a brief description of what the expenditure is; the relevant accounts code for the expenditure; a reference number for the expenditure. There will not be a payment voucher at this stage (as they are only completed when payment is made). Often the most useful reference number to use if the Purchase Order number; the place from where the goods/services will be supplied; the account from which the goods/service will be paid. This is particularly important for monitoring expenditure that will be made on your behalf by other offices, including head office; the amount of expenditure incurred; the currency; finally, whether the item has registered in the accounts. This box should be ticked when the goods/services have been paid for, and the payment has come through on the accounts. At this point, the item should no longer be included as committed

22 Mango s Financial System 21 expenditure: it will be accounted for as cash expenditure through the cash books or as expenditure made on your behalf by another office. All expenditure incurred but not yet paid for must be included on the committed expenditure register. Every entry on the register should be re-examined every month. You must check that it is still committed expenditure, and has not yet been paid for. You must also check that all committed expenditure for every possible accounts code has been entered on to the register. TIP: Use the blank column on the right to list and total in pencil the amounts outstanding at the end of the month. The accountant must work closely with the project manager and the logistician to make sure that the committed expenditure register is up to date. You might arrange for a copy of every Purchase Order used by logistics to be sent to you. You might also review the entire expenditure of the month, and the committed expenditure register with the project manager BEFORE you produce the final monthly management report. Information from the committed expenditure register is transferred on to the management report (see section 12.4). You may have to analyse it, using an analysis sheet if you have a large number of items on the register. If you do, then be careful to use the right exchange rate for each individual item Float Register A float is a temporary advance of cash to staff members who require a balance of cash in hand in order to make authorised purchases. The staff member must account for the use of the cash float within the time limits agreed with management. Many development organisations experience difficulty in managing their floats. For instance, there may be a large demand for flexible expenditure procedures at the beginning of an emergency relief project. These can be arranged using floats. As a result a large amount of cash may be given out to project staff. Staff should be given clear guidelines as to how they must account for these floats. Suggested procedures are explained in section 14.4 below. The accountant can monitor all outstanding floats by using the float register. Proper use of the float register significantly reduces risk. When a staff member takes out a float, complete the left hand side of the register (from date up to signature ). In the balance b/f column include the amount of outstanding floats that the member of staff has not yet accounted for. Make sure that the staff member signs the register: this can be important if the amount taken is disputed. Fill in the right hand side of the register when the staff member accounts for the float. This includes columns for any cash and any receipts returned. Try to avoid leaving any outstanding balance c/f here: if the staff member cannot account satisfactorily for some expenditure, then discuss it with them and their manager, and resolve the issue as soon as possible. Remember to make a journal entry in the Consolidation Form in respect of all expenditure accounted for! This will reduce the floats carried forward and increase the expenditure on the accounts for which receipts have been paid. An example is given in section 0.

23 Mango s Financial System 22 The float register should be reviewed by a senior manager every month, and action taken in respect of any outstanding floats. If old balances and problems are not dealt with quickly they will just get worse Salary Advance Register Some NGOs arrange for staff to receive mid month advances on their salaries, and in certain cases may agree to make other advances that are deducted from the salary payment at the end of the month. The accountant should discuss standard policies on allowing staff to take salary advances or loans with managers. For instance, a maximum amount of salary advance, or number of advances per year could be set. All salary advances must be authorised by managers. The simplest way of recording these is to charge the advances directly to the appropriate salary code. In this case, the register acts to remind the accountant to deduct the amount of the advance from the monthly salary payment. It is not a register of assets or liabilities Loan Register (Monthly Control Sheet) In the majority of cases NGOs do not allow staff to take loans from the organisation. From the accountant s point of view such a practice increases risk and ties up NGO funds without increasing the NGOs ability to carry out its work. So, it is not something to be encouraged: NGOs are not banks. However, there may be exceptions in certain circumstances, and these should be clearly explained in your NGO s procedural manuals and each case authorised by senior management. Always consider the long-term risks when thinking about these policies. Loans are first recorded on the Loan Request Form/ Loan Record. This gives details of the name of the person receiving the loan, the amount and terms of repayment. Repayment instalments are recorded on this record as they are made and a running balance is kept f the amount outstanding. Loans issued and loans repayments are also recorded at the time they are made or received in the Loan Register. This is a monthly control account. The total monthly payments, less repayments, should be the same as the net amount paid out/received on the Consolidation Form. The balance on the Register should equal the balance on the Management Report. It is essential to add up the outstanding balances on the individual Loan Records each month and to check that the total agrees with the balance on the Monthly Control. Loans and repayments should be charged to an "outstanding loan" code. Any balance on this code is an asset, like the outstanding floats code. It will be recorded separately on the management report (see below). You will also have to think about any interest that you charge on the loan, and whether you will account for it within the outstanding loan code, or an a separate interest code Asset Register An asset is defined as an item owned by your organisation which keeps its monetary value for over a year. This includes motor vehicles, equipment, buildings etc. Their value must be significant in other words, worth more than a small, or trivial, amount. Your organisation should decide what is regarded as a trivial amount! Due to the nature of their work, NGOs account for assets in two different ways: as expenditure, or as long-term assets where the reducing value of the asset is carried forward from one year to the next.