MANUAL OF NONPROFIT FINANCE: Local NGO Finance Guide
1. Overview
The Manual’s Goal:
This handbook offers guidelines and practices to guarantee responsible, transparent, and efficient financial administration.
Scope:
pertains to all employees, volunteers, and board members who handle money or provide oversight.
2. Financial Obligations
Role-related Duties
Director of ExecutiveFinancial reporting to the board, oversight, and budget approval Finance OfficerDaily bank reconciliations, payroll, and accounting
Managers of ProgramsMonitoring the budget and reporting on program expenses
The Board of DirectorsPolicy review, financial supervision, and governance
3. Making a budget
Every year, budgets are created and approved by the Board.
Every year, department heads submit their budget requests by November 30.
An yearly consolidated budget is created by the finance officer.
4. Accounting Procedures: Accrual basis accounting is used by NGOs.
Programs, grants, and donor criteria are all met by the chart of accounts.
Accounting software (such as QuickBooks or a handwritten ledger in the event that software is not accessible) is used to maintain all financial records.
5. Internal Regulations
Separation of duties: No one person should be in charge of a transaction from beginning to end.
Cash handling: Within 48 hours, all cash receipts are recorded and deposited.
Monthly bank reconciliations are carried out by a person who is not involved in handling cash.
Asset register: Contains all items valued at more than $100.
6. Reporting on Finances
The Executive Director reviews monthly reports that are generated by the Finance Officer.
The Board of Directors receives quarterly reports.
An independent auditor prepares and audits the annual financial accounts.
7. Management of Grant and Donor Funds
Every restricted fund is tracked independently.
recurring reporting of donors in accordance with grant agreements.
Unused money can only be reimbursed or redistributed with
8. Policy for Procurement
For orders over $500, three estimates are needed.
When quality and price are equal, local vendors are chosen.
A system for purchase orders and purchase requisitions is in place.
9. Employee Benefits and Payroll
Monthly salary payments are made by bank transfer.
Payroll deductions and taxes in compliance with Somali labor regulations.
Benefits consist of training allowance, health stipend (if applicable), and paid leave.
10. Auditing and Record Keeping: Financial records must be kept for a minimum of seven years.
Every year, an external audit is carried out.
The finance officer is the auditors’ point of contact.
11. Policy Evaluation and Updates
Every two years or whenever there are significant modifications to laws or procedures, this handbook is reviewed.
The Board must approve any changes.
Author: Mohamed Yasin
