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Role of Finance & Accounts in an NGO

Objective of the course

    1. 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.

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

    Overview of financial statements of an organizationNPO

    Procurement of goods & services, Contracts, Inventory and Assets

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

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

    Finance & HR Policy-Policy need and contents

    Audit & Assurance

    Risks, internal controls, Efficiency, Effectiveness & Ethics.

    Objectives of an NPO

    • Primary objective -objective: Maximise benefitssocial tobenefits/services/impact for beneficiaries it serves

    • Secondary objective:

      • Economy - control costs

      • Efficiency - achieve objective in minimum costs (Process, doing things right)

      • Effectiveness - measure of achievement with reference to objectives (Result, doing the right thing)

    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.

    Types of Resources an NPO uses

      Material - capital goods, program goods, supplies, technology

      Money - financial resources

      Manpower - Human resources of organisation

      Main Functions of an NPO

      • Program

      • Finance & Accounts

      • Admin

      • CommunicationsCommunications, Advocacy and Public Relations

      • Research

      • New Business (fund raising)

      • 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 investingplanning, theorganizing, availablemonitoring and controlling financial resources inof aan wayorganization.

                  that

                It focuses on spending financial resources to deliver greater businesssocial success and return-on-investment (ROI) is achieved.impact

                Why financial management:

                • Accountability and Transparency to donors

                Accountability toand communities we serve

                Allocation of financial resources for organisation activities

                Investment decision for resources

                Statutory/regulatory compliance

                reporting

                Financial Reporting to stakeholders

                Futuristic planning - planning-Financial securitysecurity, Sustainability and long term growth

                MinimiseInternal fraud,Controls theftframework

                and

                Custody of financial resources to minimise resource misuse and embezzlement

                Better decision bymaking peopleon relatingFinance to financesfulfil the Mission based o data and analysis

                EnhanceEnhanced credibility and trust thereby giving a competitive edge

                ManagingManging risk through Internal Controls

                Meeting organisation goals

                Finance Function in an NPO

                  Finance function ensures organization's financial health and sustainability

                  The finance function’s role in an NGO is:

                    Manage financial resources of the organization

                    Make strategic finance decisions for sustainability

                    Operational support-uphold internal controls and support other functions including fundraising

                    Report to stakeholders to help decision-making

                    Statutory and regulatory compliance

                    Manage risks through suitable internal controls

                    Difference between Accounting & Finance though used interchangeably: Accounting looks Back while Finance looks Forward!

                    3 key roles of Finance function in an NPO

                      Enable Value Creation Shape Value Creation Narrate Value Creation
                        These are in chronological order Role is performed by CFO and team he/she leads in Finance function duly supervised by Chief Functionary and Governing Board Value creation for an NPO means maximising social outputs/outcomes using the various resources

                        Role of Finance Function in NPO

                        Enables Value Creation through

                          Planning:

                          • PlanningFinancial Resources for operations

                          Financial sustainability

                          For Controls (Framework)-Polici

                          budgeting - organisation, donor

                          Forecasting-long term and short term

                            Budgets-organisation and programs/projects

                            ContractingFund - draw, review and sign off donor agreementsflows

                            Fund/grantOperating receipts,Cash

                            disbursements

                            Resource Allocation: manpower, material, money

                              Banking

                              PoliciesTreasury & Procedurescash (P&Ps) - Finance policy, Travel policy, Conflict of interest, Risk policymanagement

                              RecordingHR, Goods and services procurement as per policy and prevalent laws

                              Inventory management-slow moving, waste, loss

                              Asset management-depreciation, obsolescence, loss etc

                              Recording:

                              • a. Book keeping i.e. recording transactions

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

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

                              Role of Finance Function in NPO

                                Forecasting - long term and short term
                                  Budgets Fund flows Operating Cash 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 Measurement and Management

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

                                      • Measuring Value for money (VFM) - ratios

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

                                    2. Monitoring Controls

                                      • Budgetary (realignment, reallocation)

                                      • Adherence to policies and procedures for Internal control procedures

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

                                      • Monthly MISMIS-Financial, Program

                                    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 fundraiser with 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

                                    Role of theNon Finance Staff in Financial Matters

                                      Non finance functionsstaff arehandle performedresources bothwhich byhave value

                                      Non finance andstaff nonauthorise various types of expenditure - travel, procurement, office exp, statutory dues

                                      Non finance staff.

                                      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

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

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