ACCOUNTING POLICIES AND PROCEDURES

Transcription

1 ACCOUNTING POLICIES AND PROCEDURES Manual OCTOBER 10, 2016 CHILDREN IN FREEDOM (CIF) CIF P.O.Bx USA, Kenya, Africa (c) 2016

2 TABLE OF CONTENTS ACKNOWLEDGEMENT ACCOUNTING POLICIES AND PROCEDURES General Accunting Plicies... 1 GP 1 Cnsistency f Accunting Methds... 1 GP 2 Matching Principle... 1 GP 3 Accrual Basis... 1 GP 4 Simplicity and Accuracy... 1 GP 5 Transparency... 1 GP 6 Materiality... 1 GP 7 Disclsure... 1 GP 8 Cmmunicatin... 2 GP 9 Separate recrding f Prject Transactins... 2 GP 11 Budgetary Cntrl... 2 GP 12 Accunting in Lcal Currency... 2 GP 13 Capital Expenditures (Depreciatin plicy)... 2 GP 14 Apprval f all payments... 3 GP 15 Timeliness ACCOUNTING PROCEDURES Transparency in all payments... 3 AP 1 Prcedures ver Cash... 4 AP 1.1 petty cash... 4 AP 2 Prcedures ver Bank Accunts... 4 AP 2.1 Accunt pening/clsure... 4 AP 2.2 Signatries and Bank Mandate... 4 AP 2.3 Bank Recnciliatin... 5 AP 3 Prcedures ver Payments... 5 AP3.1 Prcedures ver Internal Cntrls... 5 AP 4.0 Transactin apprval... 6 AP 4.1 Recnciliatin Cntrl... 6 AP 4.2 Use f Pre-numbered Accuntable Dcuments... 6

3 AP 4.3 Calculatins Check... 6 AP 4.4 Cntrl ver Physical Access... 6 AP 4.5 Insurance... 7 AP 4.6 Dcumentatin and recrd retentin... 7 AP 5 Prcedures ver Financial Planning... 7 AP 6 Prcedures ver Financial Reprting... 7 AP 7 Prcedures ver Freign Currency Cnversins... 7 AP 8 Prcedures ver Staff Accunts... 8 APPENDIX 1 : INDIVIDUAL STATEMENT OF COMMITMENT... 0

4 ACKNOWLEDGEMENT We take this pprtunity t give gratitude t all CIF staff, wh have cntributed t the develpment f this Accunting Plicies And Prcedures. Special appreciatins g t the Executive Directrs Engr. & Dr. Kanay and the team at the Kenya Office fr their technical inputs and supprt. Their cmments were highly valued. We als thank thse wh shared with us infrmatin n their Accunting Plicies And Prcedures and their practical experiences. We thank yu all fr yur cntributins. Executive Directr Children in Freedm New Yrk, Nairbi

5 1.1 ACCOUNTING POLICIES AND PROCEDURES This plicy manual is intended t serve as an verall guideline fr accunting plicies and prcedures practiced by Children in Freedm t ensure that its financial reprting system has integrity. Thrugh the laid dwn prcedures, Children in Freedm seeks t ensure its accunting system can be relied upn t prduce accurate and reliable infrmatin n a timely basis. The prductin f the manual is an nging exercise and prvisins have been allwed fr the systematic review f prcedures n an annual basis. This will ensure that new situatins which are encuntered are addressed and incrprated int the manual.

6 1.2 General Accunting Plicies The financial statements fr Children in Freedm shall be prepared n the basis f the fllwing accunting plicies. GP 1 GP 2 GP 3 GP 4 GP 5 GP 6 GP 7 Cnsistency f Accunting Methds The accunting methd and reprting shall in general remain the same frm perid t perid t allw fr cmparability f infrmatin fr different perids. Any exceptins frm the standard accunting methd shall be disclsed within the explanatry ntes t the financial statements. Matching Principle The timing f reprting revenue and expenses shuld match with the timing f the ccurrence f the incme and expenses. Transactins are recrded when incurred and nt just when cash is received r paid. Accrual Basis As part f the matching principle, expenses and revenues are accrued within the perid in which services r gds are prvided. Simplicity and Accuracy The accunting system is based n the need fr infrmatin that is crrect and easily understd by the users f that infrmatin. Transparency The accunting system is based n the need t prvide a clear flw f funds frm the receipt f funds t the related expenditures. Jurnal entries shuld include supprting dcuments and descriptins s that the financial data can be explained r justified. Materiality All financial data r transactins that will affect the financial statements have t be recrded and/r disclsed. Disclsure All imprtant infrmatin abut the rganizatin s financial psitin and peratins has t be reprted in the financial statement in a full and fair manner.

7 GP 8 GP 9 Cmmunicatin Financial infrmatin and activities shuld be reprted and accunted fr accurately and n a timely basis. Any planning f activities with financial implicatin shuld be submitted t the defined apprpriate level f management fr apprval befre implementatin. Separate recrding f Prject Transactins Each prject shall maintain its recrds separately: Accunting recrds are maintained t recrd transactins fr different prjects with clear separatin within the system. Expenses fr a prject are clearly classified by the prject name(s) t enable the separatin. Financial reprts are prepared fr each individual prject and shall be included in the verall reprt prepared fr the entire rganizatin. GP 10 Cst allcatin Where csts are shared fr a cmmn purpse between prjects r prgrams, allcatins will be dne using an equitable and cnsistent methd. The basis f allcatin is justifiable and clearly dcumented. GP 11 Budgetary Cntrl Primary respnsibility fr budgetary discipline and disbursement f funds within a budget rests with the Prject Managers under the guidance f Senir Management. Prject activities must be cnfined within apprved budgets. Mnthly reprts submitted t the Senir Management Team frm Finance Department shuld highlight budget lines requiring reallcatin r amendment. The decisin t request fr budgetary amendments shall be made thrugh cnsultatin between the prject Manager, Head f Finance and Senir Management Team. GP 12 Accunting in Lcal Currency In general, accunting at the Kenyan ffice is dne in Kenyan Shilling (KES). Depending n budgetary and dnr demands, additinal currencies may be instated. GP 13 Capital Expenditures (Depreciatin plicy) Assets prcured with Children in Freedm wn funds are depreciated in accrdance with accunting standards within the Balance Sheet and Prfit and Lss statement. A specific written statement has t be created fr any asset where deviatin frm these rules is sensible, e.g. due t cnsiderably shrter utilizatin life expectancy.

8 Assets prcured with dnr funds are fully charged and reprted t the dnrs and are expensed in the prfit and Lss accunt. GP 14 Apprval f all payments All expenses require the signatures f tw peple (signatries) befre the payment is being made. The signatries are respnsible fr the crrectness f the expense, its allcatin t the dnr and budget line as well as fr the regulatin referring t the type f expense. GP 15 Timeliness Accunts shall be kept n a current basis, with shrt time lapses between transactin and recrding in the bks. Year-end recnciliatin shall be cmpleted as sn as pssible after perid end. 1.3 ACCOUNTING PROCEDURES The fllwing accunting prcedures shall apply in the financial peratins f Children in Freedm Transparency in all payments All payments made fr invices presented r advances requested (expenses) shall be authrized by tw pre-determined and respnsible individuals (herein afterwards apprpriate Signatries) befre the expense is being paid. In general, Signatries are t sign nly thse expenses which fall int their respective line f duty and expertise. In additin, at least ne f tw Signatries must be a member f CIF senir management. By signing ff n an expense, bth signatries cnfirm that the expense was/is: Necessary fr the purpses f Children in freedm. Crrect in all material aspects (e.g. additin f line items, name/address f vendr nted, lcal regulatins regarding invices adhered t, amunt paid is the same as stated) In receipt f the gds/services purchased r clearly stated if delivery f gds/services is still pending If dnr funded allcated t the crrect dnr and budget line If charged directly t CIF that n dnr culd be charged with the csts If dnr funded necessary fr the purpse f the prject in questin, cvered and allwed under the budget and general dnr regulatin, and still within the budget allcatin f the prject In adherence t all internal regulatin gverning the specific type f expense, e.g. prcurement guidelines. In adherence t all external regulatin, especially lcal and state law. The Finance Department has t reject all requests fr payment where the allcatin t the dnr and budget line is nt clear as well as thse where internal rules are vilated.

9 The Managing Directr reserves the right t be an additinal signatry t all payments abve a certain threshld. AP 1 Prcedures ver Cash AP 1.1 petty cash Petty cash is maintained fr payment f rutine and minr expenses such as ffice running expenses. The amunt f petty cash fr ffice shall nt exceed Kshs 20,000 at any ne time. Petty cash is kept at all times in strnghlds, t which nly ne individual determined by the Head f Finance has access. The request fr Petty cash is made using the Petty cash request frm The frm is t be clearly marked as t whether an advance (flat) r a payment fr an expense already incurred is being requested. In case f advances, a specific date is t be stated by which the advance is expected t be repaid r accunted fr. Fr all requests a summary f expected r already incurred expenses is t be prvided; in the latter case supprting receipts are t be attached. Where dcuments are smaller than A5, they are t be affixed (glued r stapled) t A4 sheets. Dcuments which may fade ver time (e.g. heatsensitive paper) are t be cpied and bth riginal and cpy attached. Multiple dcuments attached t a request frm shall be numbered and the numbers repeated in the detailed listing. All expenses are apprved by the apprpriate signatries befre the payment is being made. Expenditure n taxi travel and mileage claim requires where practicable prir apprval frm respective departmental heads. Petty cash shall be used fr payments f Kshs 5,000 and belw nly. Other payments shall be made by cheque. AP 2 Prcedures ver Bank Accunts AP 2.1 Accunt pening/clsure The Managing Directr in cnsultatin with the Head f Finance shall apprve all requests fr the pening and clsing f accunts by signing the letter t the bank. AP 2.2 Signatries and Bank Mandate Bank signatries will be limited t the Management Team. The accunt-perating mandate shall be a minimum f tw signatries fr any transactin. It is the duty f thse signing cheques /authrizing electrnic transactins t ensure that supprting dcumentatin cmplete with the infrmatin and signatures is available. If the supprting dcumentatin is incmplete r bvius incnstancies exist, the cheque signatries have t return the

10 dcumentatin and any prepared cheques unsigned t the Finance department fr rectificatin. The Managing Directr reserves the right t designate a threshld belw which nly ne signature is needed. The Managing Directr reserves the right t designate a threshld abve which his signature is required. AP 2.3 Bank Recnciliatin Cashbk and bank statements are t be recnciled at a date nt later than the 20th day f the fllwing mnth. Printed recnciliatin reprts are apprved by the Head f Finance. The Managing Directr reserves the right t review these recnciliatins. Recnciliatin items shuld be psted t the accunting system. Payments that remain utstanding fr 6 mnths r mre shall be fllwed up t establish the need fr reversal f the riginal entry. AP 3 Prcedures ver Payments Payments t suppliers and service prviders require the use f a payment vucher. Petty cash request frm may be used t apprve petty cash. Infrmatin n the payment vucher shall include prject cde, dnr cde, and budget line infrmatin and carry the prescribed tw signatures. Where nt easily determined frm the dcumentatin, the expense type shall als be nted. Reasns fr the payment shall be clearly stated t assist the reviewer understand the purpse f the expenditure and t verify if it was prperly incurred fr prject purpses. Dcumentatin t supprt the payment request shall be attached t the payment vucher. The supprting dcuments such as invices, purchase rders, delivery dcuments, travel vuchers etc. must where necessary be signed by the apprpriate signatries and be in agreement with internal regulatin such as prcurement guidelines and travel cst reimbursement prcedures. Supprting dcumentatin shall be in riginal frm and nt duplicates. In cases where riginal dcumentatin in supprt f a payment is nt available, the duplicates shall be marked accrdingly and reasns stated fr the nn-availability f the riginal n the face f the duplicate. The Head f Finance shall certify n the face f the duplicate that it has nt previusly been paid. N expense may be paid that des nt cnfirm with the prescribed infrmatin and signatures. The Finance Department will return such dcuments t the respnsible Prject Manager fr cmpletin. Upn payment, the supprting dcuments shall be stamped PAID t prevent duplicate payments. AP3.1 Prcedures ver Internal Cntrls Internal cntrls are prcedures put in place t ensure that assets are prtected and financial affairs are prperly managed in accrdance with established plicies, prcedures and bjectives.

11 The prcedures in place are generally based n the principles f: Separatin f duties whereby several persns are invlved in any transactin cycle and n particular individual is in cntrl f the entire prcess Supervisin and review f transactins at key pints t ensure their accuracy and apprpriateness. AP 4.0 Transactin apprval Apprval must be btained fr all transactins at their key pints by the designated managers befre payment is made. AP 4.1 Recnciliatin Cntrl Recnciliatin f key areas within the accunting system prvides reasnable assurance f the accuracy f the financial data: Bank accunts are recnciled t the Bank statements Accunts payable are recnciled t supplier statements Payrll recnciliatin t highlight changes frm the nrmal payment levels. Recnciliatin f subsidiary ledgers t the cntrl accunts in the General ledger. AP 4.2 Use f Pre-numbered Accuntable Dcuments Recrds are maintained by listing the number series f available stck f the fllwing dcuments. Internal rder request vuchers Purchase rder vuchers Petty Cash vuchers Petty Cash summary Cheque Bks Payment Vuchers The Managing Directr in agreement with the Head f Finance reserves the right t apprve systems by which thrugh electrnic r ther means nly sequentially numbered bks and/r dcuments are created. AP 4.3 Calculatins Check Arithmetical accuracy f dcuments such as invices, purchase rders, expense summaries, and payrll is verified and evidenced by a signature f the respnsible staff member. AP 4.4 Cntrl ver Physical Access Organizatin and prject assets are safeguarded by ensuring physical access is restricted t designated persns.

12 AP 4.5 Insurance In Kenya, prject assets and thse wned by the rganizatin are insured against lsses that may arise due t a variety f risks such as burglary, fire, r theft. AP 4.6 Dcumentatin and recrd retentin All dcuments supprting accunting transactins shall be filed in lckable cabinets. Files will be retained in the rganizatin fr a minimum perid f 10 years. Cmputer files with finance data will be backed up n a regular, at least n a frtnightly basis and stred bth in the ffice and ff site. AP 5 Prcedures ver Financial Planning Cash flw prjectins (frecast) shall be used as the primary tl fr financial planning. The frecast shall be prepared n a quarterly basis by the Head f Finance. Cnsideratin shall als be made fr special cash requirements arising. As a general guideline, the frecast shall be based n the fllwing prcedures: 1. All anticipated expenditure fr the quarter shall be listed mnthly 2. All supplier payments falling due in the particular quarter shall be listed 3. The targeted minimum cash balance fr the quarter shall be set 4. All anticipated receipts frm dnrs r ther surces shall be listed 5. Estimated cash balance at the beginning f the perid shall be factred int the cmputatin. 6. Any deficit r surplus in cash shall be cmputed frm the abve infrmatin. AP 6 Prcedures ver Financial Reprting The Finance department shall clse its bks n a mnthly basis, by the 21 st f the subsequent mnth. Year-end accunting and clsure f bks shall be cmpleted by the 15th f February f the fllwing year. The fllwing reprts shall be prduced by the Finance department and submitted t the Managing Directr fr review and apprval: 1. Prject expense reprts against budget prepared by the Head f Finance n a mnthly basis. 2. Bank recnciliatin statements prepared n a mnthly basis and reviewed by the Head f Finance 3. Frecasts shall be prepared quarterly n a mnthly basis. 4. Prject statement f fund balances prepared quarterly n a mnthly basis. 5. Ageing analysis f prject payables and receivables prepared n a mnthly basis. AP 7 Prcedures ver Freign Currency Cnversins

13 The fficial exchange rates f the Eurpean Unin (Inf Eur rates) shall be used t cnvert transactin incurred in the different currencies. Expenses and incme incurred in ther currencies are recrded in these currencies, with their KES equivalent being calculated by the accunting system using the inf Eur rate. Exchange gains and lsses which arise due t use f the inf Eur rate t translate financial data t the required reprting currency and due t the revaluatin f Balance sheet items at the end f the reprting perid based n the clsing exchange rate shall be recrded in the incme statement f the rganizatin. AP 8 Prcedures ver Staff Accunts It is nt the plicy f Children in Freedm t prvide lans r advances t staff Receivables arise frm staff members in the fllwing circumstances: When petty cash flats are nt fully accunted fr. Other recveries are effected thrugh the payrll fr the subsequent mnth.

14 APPENDIX 1 : INDIVIDUAL STATEMENT OF COMMITMENT I (name), have read and understd the standards and guidelines utlined in this Accunting Plicies And Prcedures. I agree with the principles cntained therein and accept the imprtance f implementing the Accunting Plicies And Prcedures and practices while wrking with r assciated with CIF Name Jb title/psitin/rle Signature Date Sign Executive Directr