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Role of Finance & Accounts in an NGO

Objective of the course

  • Educate non finance/program staff on financial matters to deliver work efficiently within the framework of
    (a) internal controls and
    (b) external statutory and regulatory compliances

  • Wear the finance hat for taking operational decisions while discharging duty

  • Facilitate smooth interface between finance and non-finance/program staff for achievement of organization goals.

Curriculum content

Session plan:

  1. Role of Accounting & Finance function in a not-for-profit organization.

  2. Grant Management.

  3. Concept of Fund based accounting, cost types, cost principles, Budgeting & Budgetary Controls in NGOs

  4. Overview of financial statements of an organization

  5. Procurement of goods & services, Contracts, Inventory and Assets

  6. Overview of Regulatory framework and Statutory Laws for NPOs-brief details of Income Tax, FCRA, CSR, GST, Labor Codes which program staff should know-Pt I

  7. Overview of Regulatory framework and Statutory Laws for NPOs-brief details of Income Tax, FCRA, CSR, GST, Labor Codes which program staff should know-Pt II

  8. Finance & HR Policy-need and contents

  9. Audit & Assurance

  10. Risks, internal controls, Efficiency, Effectiveness & Ethics.

Objectives of an NPO

  • Primary objective - Maximise benefits to beneficiaries

  • Secondary objective:

    • Economy - control costs

    • Efficiency - achieve objective in minimum costs

    • Effectiveness - measure of achievement with reference to objectives

Change - The New Norm for NPOs

  • Change

    • Donor expectation

    • Statutory and regulatory landscape

    • Govt orientation towards charity

    • Technological developments

  • Change offers: Risks and opportunities

  • Impacts organisation in terms of future growth, even existence.

Main functions of an NPO

  • Program

  • Finance & Accounts

  • Admin

  • Communications

  • Research

  • New Business

  • Training & Capacity Building
    Every staff in every of above function performs a finance role

Types of resources an NPO uses

  • Material - capital goods, program goods, supplies

  • Money - cash, bank

  • Labour - Human resources of organisation

Role of Non Finance Staff on Financial Matters

  • Non finance staff handle resources which have value

  • Non finance staff authorise various types of expenditure - travel, procurement, office exp, statutory dues

  • Non finance staff own and operate project budgets

  • Project decisions of Non finance staff in field have financial implications - allowance/disallowance

  • Decisions in field of Non finance staff have compliance implications with laws of land

  • Non Finance staff actions affect reputation and even our very existence

Finance Function

  • Finance function looks after the financial resources of an organization

  • Difference between Accounting & Finance though used interchangeably.

    • Accounting looks Back while Finance looks Forward

  • The finance function’s role is:

    • manage financial resources of the organization

    • provide information to various stakeholders to help economic decision-making

    • ensure statutory and regulatory compliance

    • Manage risks through appropriate internal controls

Financial Management

  • Financial Management is the business function that deals with investing the available financial resources in a way that greater business success and return-on-investment (ROI) is achieved.

  • Why financial management:

    • Accountability to donors

    • Accountability to communities we serve

    • Statutory/regulatory compliance reporting

    • Futuristic planning - Financial security

    • Minimise fraud, theft and resource misuse

    • Better decision by people relating to finances

    • Enhance credibility and trust thereby giving a competitive edge

    • Managing risk

Role of Finance Function in NPO

Enables Value Creation through

  • Planning - budgeting - organisation, donor projects

  • Contracting - draw, review and sign off donor agreements

  • Fund/grant receipts, disbursements

  • Policies & Procedures (P&Ps) - Finance policy, Travel policy, Conflict of interest, Risk policy

  • Recording

    • Book keeping i.e. recording transactions

    • Accounting i.e. summarisation, analysis and interpretation of financial data

    • Closing and reconciling - bank, vendor, employee, grant etc

Role of Finance Function in NPO

  1. Forecasting - long term and short term
    • Budgets
    • Fund flows
    • Operating Cash
  2. Resource Allocation - labour, material, money
    • Banking
    • Treasury & cash management
    • Procurement of goods and services as per policy and prevalent laws
    • Inventory management - slow moving, waste, loss
    • Asset management - depreciation, obsolescence, loss etc

Role of Finance Function in NPO

SHAPES value creation through

  1. Performance Management

    • Budget monitoring (budget variance analysis) - organisation, projects

    • Value for money (VFM) - ratios

    • Return (social return) on investment (SROI), Social audit for social impact

  2. Controls

    • Budgetary (realignment, reallocation)

    • Internal control procedures

    • Audits and assurances - statutory, internal, donor, Govt

    • Monthly MIS

  3. Facilitator - support on finance to all other functions

Role of finance function in NPO
NARRATES the value creation through

  1. Financial reporting

    • Donors - periodic FR, annual audited UC, supporting financial data

    • Govt bodies - IT, FCRA, Registering agency, EPF, ESI, TDS, GST

    • Board/top management - financial health

  2. Focal point with external stakeholders on institutional matters

    • obtaining statutory approvals

    • financial assessment by donors, govt etc.

Identify how many of the finance functions are performed both by finance and non finance staff.

Please note: Information is for reference only. Read our disclaimer here.

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