Managing Finances – Develop a Financial Procedures Policy

Managing Finances

Guidance on how to develop a financial procedures policy.

Applying such a policy will ensure the good financialmanagement and accounting practice that are essential for theorganisation’s success.The guidance falls under seven main headings (see diagram) which canalso serve as the section headings for the policy document. Samples ofthe forms to be used under the policy are given in the appendices.

Purpose of Financial Procedures Policy

Through rigorous adherence to the financial procedures outlinedin the policy document the organisation will be able to ensurethe following:

• The governing body will be able to show both funders andbeneficiaries that the organisation’s assets are safe, because it willbe able to show that checks and controls have been implemented.

• The organisation and its reputation will be protected againstfinancial mismanagement by staff or governing body members.

• The interests of the beneficiaries of the organisation, its employeesand the governing body will be protected.

• The relationship between the members of the governing body andthe staff in financial matters and their respective roles andresponsibilities will be clarified.

• There will be an appropriate segregation of responsibilities for theapproval and execution of expenditure.

• Financial decisions will be given appropriate consideration beforethey are taken.

• The relevant accounting regulations, standards and legalrequirements will be complied with.

Finances - Roles and Responsibilities

One of the most important principles of sound accountingmanagement is that all financial transactions should be preparedby one person and reviewed by another.

The first thing to do when setting up an accounting system is to decidewho is responsible for what in terms of financial management. It is veryimportant that financial responsibilities are shared and clearlydemarcated.

The purpose of segregating responsibility in this way is to ensure thatchecks and balances are built into the system regardless of how few ormany staff an organisation employs.

The next question to consider is the role of the governing body andtrustees in financial management, because the governing body hasultimate responsibility for ensuring that all the assets and finances of theorganisation are properly managed and that staff, including the ExecutiveDirector, are fully accountable to it. The basic accounting principlesshould be outlined in the governing document (see Chapter 2:Organisational governance). In addition, some governing bodiesnominate or select a trustee to act on their behalf as Treasurer.

Finances - Policy on Fraud

All governing body members and staff employed by the organisation have aduty to ensure that they safeguard its financial assets. For this reason it isimportant to have a clear policy spelling out what action will be taken in thecase of suspected fraud and the lines of authority that have beenestablished for dealing with such cases.As soon as a staff member has any suspicion of fraud in any area of theorganisation’s work, he or she needs to know to whom to report it. Usuallythe policy will specify that such concerns should be taken, in the firstinstance, to the Executive Director who in turn will report to the governingbody, including the Chair and/or Treasurer. However, concerns relating tothe financial conduct of the Executive Director or that of a trustee areusually taken directly and explicitly to the Chair of the governing body.

Finances - Staff Expenses and Entitlement

Staff may incur expenses when undertaking official work for theorganisation, especially when this requires travel away from theoffice. Normally staff who are authorised to travel for theorganisation will be given a cash travel float for which they must sign.However, clear limits need to be set on how much can belegitimately claimed from the organisation and staff shouldunderstand that if they exceed these limits they will have to reimbursethe organisation from their salary. In addition, most organisationshave some rules to govern the p

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