1.0 Main Objectives
– Obtaining goods and services of the required quantity and quality.
– Obtaining goods and services at the lowest total system cost without sacrificing quality, on time delivery, etc
– Ensuring best possible service and prompt delivery by the suppliers.
– Developing and maintaining good supplier relations and developing potential suppliers.
– Locate and suggest new sources, new materials, new products, alternative sources,
materials and products.
2.0 Responsibility
(a) All purchase functions are to be carried out by the Administration Department with purchase committee.
To satisfy these objectives the Administration Department needs to perform the following functions:
– Determine purchase specification- Right product, right quality, right quantity and right delivery (time and place).
– Select Supplier.
– Negotiate terms and conditions of purchase.
– Issue and administer purchase orders.
– Follow-up pending orders and all kinds of post order contacts with supplier (quantity, quality, delivery schedule, etc.).
(b) The Administration Department in its central buying role (purchase function), is responsible for carrying out all purchase decisions involving all items and of all type (including capital, stock able, non- stock able, etc).
(c) In the case of purchases, large cash purchase should be avoided and efforts must always be made to purchase on credit. In case of purchases exceeding Taka 9,999.00 per transaction where this is not possible, payment shall be made by A/C payee Cheque/DD on delivery or pay order.
(d) Irrespective of all purchases, suppliers should be placed into competition with one another and should be made aware of this fact.
(e) As a general rule- except where conditions of supply dictate otherwise- not less than 3 (three) competitive quotations must be sought.
(d) It is expressly forbidden to divulge to any supplier, details of another supplier’s quotation.
3.0 The Procurement Process
The different projects/departments of ESHO JATI GORHI will put demand to the Administrative Department according to their needs. Financial concurrence must be obtained from the Management Accounting Section before initiating any purchase. The Management Accounting Section will ensure that budget provision exists regarding the items sought to be purchased. The Demanding Department also provides information along-with their demand about the sources of fund of their demand. The Administration Department will clarify both demand and sources of fund and will take decision on procurement in consultation with the Purchase Committee.
The Administration Department will form a Purchase Committee consisting of at-least 3 (three) members. The membership would be selected from the following representatives:
– one from User/Inventing Department
– one from Admin Department and
– one from finance and Accounts Department.
| Method of procurement
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| Sl No. |
Amount to be |
Procurement
Process/source |
Method of procurement |
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Procured |
Of Procurement |
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| 1. |
Up to
9,999/ |
Need not quotation |
Open market. Payment may be made by cast or cash cheque |
| 2. |
Taka 10,000/- to 499,000 |
Quotations from at least 3 vendors/suppliers who may be contacted by the Purchase Committee. |
Open market purchase. Purchase committee will collect quotations and will scrutinize as well as analyze the quotations, make comparative statement and recommend supplier(s) and issue work/supply order. The payment shall be made by account payee cheque/DD. Treasury Section will verify bills along with challan, work order and respective committee decision before making payment to the supplier. |
| 3. |
Above Taka
500,000 |
For normal /Dev. programs, Press tender at least one in the regional newspaper or selected vendor.
For carrying out emergency programs, relief and rehabilitation and any other programs related disaster, single quote up to TK 30,00,000 can be accepted by the P. Committee
For both Dev. and
Emergency program implementation, donor guideline, if any, can be incorporated with the approval of the Chairman |
Sealed bid purchase. Quotation should spell out the quantity, detail specification, amount or percentage of earnest money, delivery spot and time frame etc. The supplier will bid on the Tender Notice (published in the printing media) of the purchase committee. On a specific date, the tender will be opened in presence of the bidder. The committee will scrutinize as well as analyze the received quotation, make comparative statement and recommend supplier(s) and issuing to work/supply order, The goods supplied must be officially received and performance certified by the respective committee and/or ultimate user before making payment. The payment shall be made by account payee cheque/DD. Treasury Section will verify bills along with challan, work order and respective committee decision before making payment to the supplier.
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4.0 Purchase of proprietary items
Items which are produced or dealt with only one firm/company, the provision of 3 (three) quotations will not be applicable.
1.0 Introduction
Due to the wide ranging set of management and operational circumstances which are faced by organizations and the various constraints i.e., human resources, logistics etc. it is not possible to prescribe, a set of guidelines for the internal control system which could be applied to each component.
What the manual sets out to achieve is to promote an understanding of what constitutes good practice in respect of nurturing a robust control environment. It highlights the role of management in ensuring adequate systems of internal control are in place at strategic and operational levels.
The organization and the systems within it are susceptible to a wide variety of weaknesses and risks. These include poor design, human fallibility and changing circumstances. From these arise the possibility of poor performance, error or abuse. Management therefore introduces and maintains control procedures and techniques to ensure that objectives are achieved and standards are met.
2.0 Internal control- Definition
An Internal Control System is defined as the whole network of systems:
Administrative, operational and financial, at each level of activity of the organization, to provide reasonable assurance those objectives will be achieved, with particular reference to:
– The effectiveness of operations,
– The economical and efficient use of resources,
– Compliance with applicable policies, procedures, laws and regulations,
– The safeguarding of assets and interests from losses of all kinds, including those arising from fraud, irregularity and corruption, and
– The integrity and reliability of information, accounts and data
The definition embraces concepts of effectiveness, value for money, compliance, fraud and financial controls.
3.0 Internal controls- a management function
Internal Control is regarded as the management function of acting to ensure that objectives are achieved. It starts with the definition of aims and objectives and continues through an organization’s plans, structure and activities. It can be identified in policies, procedures, regulations, directions, supervising, monitoring and reporting in all operations, functions and activities.
4.0 Categories of Control- SOAP MAPS
There are broadly eight categories of internal controls. In order to achieve accountability and transparency at all levels of the ESHO JATI GORHI’s internal control system the acronym of SOAP MAPS, shown below; shall be applied:
– Segregation of duties
– Organizational structures
– Authorization and approval
– Physical safeguards
– Management review and monitoring
– Accounting and Arithmetical
– Personnel arrangements
– Supervision
4.1 Segregation of duties
Roles and responsibilities shall be defined so as to ensure:
- Areas of activity involving risk of error, fraud or irregularities are separated, for example the person responsible for authorizing a payment should not be the person recording the data, making the payment, checking the transaction. Clearly defined lines of authority.
These measures will:
(a) have higher chances of detecting unintentional errors,
(b) reduce the chances of collusion and intentional errors leading to fraud,
(c) ensure every area of work is independently supervised, validated or reconciled, and
(d) promote competence and accountability promoted.
4.2 Organization structures
Appropriate organizational structures shall exist to ensure:
– Work is organized to maximum efficiency in the use of resources, duplication of effort to eliminated, objectives and plans are achieved and a disciplined control environment maintained.
– Adequate resources are deployed at all levels to meet objectives and plans.
– Appropriate communication takes place: and
– An operational ethic which fosters commitment to the organization, its objectives and plans, and its control environment.
4.3 Authorization and approval
Appropriate authorization and approval procedures shall be introduced to ensure:
– Project policies, objectives and plans are adhered to
– Only legitimate activities are performed
– Integrity of systems through validation of data
– The use of systems and assets are controlled; and
– The operation of authority is documented and a clear management and audit trail is maintained
4.4 Physical Safeguards
Appropriate physical safeguards shall be established to:
– Limit access to assets, systems and records
– Establish clear control of the use of assets and custodial responsibility for them
4.5 Management Review and Monitoring
Financial and other performance shall be closely monitored to ensure:
– Personnel understand the systems, processes, procedures and activities established by the management
– Records and systems are maintained and reconciliation performed accurately and efficiently
– Policies, timetable and objectives are met
– Areas of weakness and vulnerability are identified for management attention
– Errors, abuse and fraud are deterred and detected; and
– Appropriate anticipatory and remedial actions are taken promptly
4.6 Accounting and Arithmetical
Appropriate accounting and arithmetical procedures shall be operated to ensure:
– Statutory and other professional requirements, as appropriate, to maintain proper books of accounts are observed
– Books of account, ledger balances and reconciliation procedures are carried out at regular intervals to ensure transactions are correctly recorded and processed
– Carried forward totals are correct
– Accounting records are properly preserved.
4.7 Personnel Arrangements
Appropriate personnel arrangements shall exist to ensure that:
– Employees are of the requisite standard to meet the needs of the work and its control, as defined by the organization’s objectives and plans
– Personnel employed have the integrity, history and competence to meet the needs of the work and its controls, statutory requirements and the project’s values
– Appropriate training is provided to maintain the competence of the personnel
– Personnel are treated fairly
4.8 Supervision
Appropriate procedures shall exist to ensure:
-. Internal checks are performed effectively
– Procedural errors are detected through systematic checks and corrected
– Weaknesses in controls are identified and reported to management
5.0 Classification of Control Procedures
There are a number of different ways of classifying control procedures but in the context of ESHO JATI GORHI’s accounting they can be described broadly as:
- Management controls– these encompass the high level supervision and review by management. They are generally detective in nature and will include, for example, management review or reports, performance against budgets.
- Organization controls– these controls derive from the way in which the organization is structured and can both be detective and preventive. They will normally include well-defined responsibilities and the segregation of functions such as transaction initiation, processing and recording.
- Authorization controls– these will normally operate at the individual transaction level and will be preventive in nature. Their purpose will be to stop a transaction being processed if it has not been approved at an appropriate level. Good authorization controls will be specific about who can approve what, the extent of checking required before approval and how the check should be evidence.
- Operational controls– these are concerned with the completeness and accuracy of processing and may be either preventive or detective. They may include sequence checking to provide assurance on the completeness of numbered documents, comparison of one set of documents to another (e.g., purchase order to invoices) and the use of control totals and reconciliations (e.g., bank reconciliation, month end ledger reconciliations).
- Access controls– these are usually designed to be preventive and include controls over access to asses and accounting records through simple physical measures such as locks and safes but also procedural controls such controls over stock issue, petty cash issue.
6.0. Inter-Relationship of Controls within the System
Controls should not be viewed singly as they inter-relate, either in a hierarchy or on the consecutive flow of operations, A hierarchy may be presented by controls at various levels within a system, or be imposed by higher level system (for example, budgetary control). Weakness in one control may therefore be compensated for by another.
7.0. The Purchasing and Payment Control Cycle
The initial rung in the purchasing control cycle is the raising of a purchase order (or requisition) in accordance with the organization procurement policies. Upon approval, the supplier is notified of the order. The goods are received by the organization, physically checked or damages and quantity received checked against the purchase order. The purchase order and invoice are matched and this initiates the payment cycle.
When the payment of the invoice is made the following must have been carried out prior to raising of a cheque:
– Physical goods received matched to purchase order and invoice
– Invoice unit price is checked to agreed price per purchase order
– Arithmetical checks carried out on invoice total.
It should be noted that ideally there should be segregation of duties at all levels of the purchases and payment cycle. Due to constraints on resources face by projects it may not be possible to fully segregate the functions as per the suggested system of controls. In this instance greater emphasis should be placed on compensatory controls, in particular supervision, authorization and approval, management review and monitoring.
It should be noted that ideally there should be segregation of duties at all levels of the purchases and payment cycle. Due to constraints or resources face by projects it may not be possible to fully segregate the functions as per the suggested system of controls. In this instance greater emphasis should be placed on compensatory controls, in particular supervision, authorization and approval, management review and monitoring.
8.0 Development of the internal control system
The internal control system develops over time. It is strengthened by management initiative and its response to regular activity (e.g., internal audit). It may be weakened by accident or design by management or staff, or by failure to response to changing circumstances.
Control needs may change over time to meet changes in external circumstances, methods of processing, and priorities of other factors. Environmental factors such as changes in external operational conditions may affect the performance of the system. Management should review controls to ensure they remain relevant and adequate to meet changing control requirements.
9.0 Level of control
The nature, extent and strength of controls will vary between organizations and within different parts of the same organization. The controls used will depend on the nature of operations, the importance of the system, the degree of risk, the geographical distribution, personnel and many other factors.
10.0 Cost of controls
Management should consider the cost of controls in relation to the risk and exposure they cover. Control cost money and the wrong balance of controls may make an organization inefficiency and lethargic. The need for and costs of individual controls should be balanced against the wider needs for control over economy, efficiency and effectiveness. The choice of control methods should be based on a comparison of coasts and expected benefits or reduction of risk.
1.0 Introduction
ESHO JATI GORHI should use budgets are the main tool of controlling the finance and operations of the organization. While there will be separate budget for the donor and own financed projects, it is also imperative that budgets for short term and longer term for the organization as a whole also be prepared and regular monitoring should be in place to ensure that the operations of the organization are moving according to plans.
2.0 Types of Budgets
- a) Donor Budgets
These shall be prepared in consultation with the respective donors.
- b) Budgets for own financed projects
These shall be prepared for projects, which will be funded from ESHO JATI GORHI’s own resources,
- c) Operational Budget
- d) Master Budget/Consolidated Budget/Master plan (Including Activity)
Short term budget
A yearly (short-term budget) budget by combining all the segmental (project) budgets shall be prepared by ESHO JATI GORHI (for the Total Organization) every year. This budget shall be broken into monthly plans. At the end each of month this budget shall be compared with the actual performance (financial and physical). This shall also act as the tool for the accordance of financial concurrence of all major expenditure plans during the month/year.
Long term budget
This plan should be prepared for 2 years, 3 years, 4 years or 5 years incorporating future visions and action plans of the organization. Such budgets will help in mobilizing financial and logistic support from the donors. This will also give the organization a longer term vision and probable sources of finance for the longer term sustenance of the organization.
3.0 Monitoring
Any budget whether short term and long term will not be effective unless close monitoring of the same is done. Therefore ESHO JATI GORHI should monitor all projects based on the budgets and take corrective measures/actions if there are deviations between budget and actual. Formats of the various reports have been shown in Chapter-VI.
4.0 Monthly report
A monthly report shall be generated by the Finance and Accounts Coordinator highlighting the financial and operational status of the various projects and the organization. Operational data shall be collected from the relevant program heads on preparation of the monthly report.
Miscellaneous Issues
1.0 Travel
1.1 Travel within the operational areas
Travel for discourse of official business within the operational areas may be made by the employees with the consent of the supervisors. Record of the movement must be recorded in the Movement Register.
1.2 Travel outside operational areas
Such travel can only be undertaken with the prior consent obtained in the travel authorization form from the supervisor.
1.3 International travel
All international travel must be authorized by the Executive Committee. The daily allowance, class entitlement etc shall also be decided by the Executive Committee.
2.0 Loan to employees
– No loans to employees shall be allowed as there no such provision in the project budgets agreed with the donors.
– However in extreme cases confirmed employees having completed 3 years of continuous service with organization may be allowed interest free loan from ESHO JATI GORHI’s own sources. The quantum of loan shall be equivalent to 3 Basic pay adjustable in maximum 24 equal installments. Loans must be approved by the Executive Committee.
3.0 Investment of fund
Donor funds
Bank interests earned on foreign grants are returnable to the donors in most cases. Where no such restrictions exist. ESHO JATI GORHI may invest the funds not immediately required in interest bearing fixed deposit accounts and the income earned there from is to be transferred to ESHO JATI GORHI ’s own fund.
Own funds
ESHO JATI GORHI should have absolute discretion to invest its own fund in approved securities, fixed deposit etc. The decision for such investment shall be with the Executive Committee only.
4.0 Information Technology
ESHO JATI GORHI has opted to take advantage of Information Technology and has introduced a number of personal computers at the Head Offices and the introduction of the computers and accounting software’s has greatly contributed to the fastening of the word processions and accounting functions. With a view to take maximum advantage underlying the use of information technology a separate section to deal with information technology and other related issues/problems be introduced. The section which will be responsible for:
– ensuring maintenance and upgrading of the computers as and when needed
– networking and related issues
– introduce protective measures against viruses
– introduce and implement accounting software’s in consultation with the accounts personnel
5.0 Vehicle Management
Each use of vehicle/motor cycle including purchase of fuel and lubricant shall be recorded in Log Book. Log Book shall be signed by the user. Moreover, vehicle Requisition Form shall be raised for official/personal use of vehicle.
6.0 Compliance with legal requirements
ESHO JATI GORHI shall be compliant with legal requirements that have implication on the operations of organization. The following issues are pertinent in this connection:
– deduction of tax at source from salary at the time of payment and deposit of tax deducted within the stipulated time as per law.
– submission of all returns/reports/accounts with the NGO Affairs Bureau within the prescribed time limit.
– regular holding of all meetings as required by the constitution of the organization and submission of audited accounts and reports as per requirement of the respective law/ordinance under which the organization is registered.
Deduction of tax from suppliers bills exceeding the tax free limit and deposit of the same with the govt. treasury.
6.1 Flow Chart of Accounting System
AT HEAD OFFICE AT CENTRE OFFICE
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| Preparation of Debit and Credit one year for all receipts and payments/Expenditure
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| Preparation of Debit and Credit voucher for all receipts and payments. |
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| Recording in the Cash Book at the end of each day,
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| Recording in the Cash Book at the end of each day. |
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| PREPARATION OF Receipt/Payment Summary Statement at the end of every month. |
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| Preparation of Receipt/Payment Summary Statement at the end of every month. |
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| Preparing Journal voucher based on Receipt and payment Summary Statement at the end of every month for each project |
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| Preparing R/P Summary along with vouchers. bank statement to Head Office within 7th of following month. |
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| Posting in the General Ledger maintained separately for each project. |
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| Preparation of Trail Balance (Project wise). |
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| Preparation of Monthly Accounts (Project wise after consolidation accounts from centers). |
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