accounting and internal control procedures manual revised november 21

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Gaza Community Mental Health Programme

ACCOUNTING AND INTERNAL CONTROL POLICIES AND

PROCEDURES MANUAL

Draft for Discussion Only

Table of Contents

SECTION 1 ...................................................................................................................................... 8

ACCOUNTING POLICIES.............................................................................................................. 8

1. PURPOSE ............................................................................................................................ 9

2. SCOPE.................................................................................................................................. 9

3. ACCOUNTING POLICIES .................................................................................................. 9

3.1. REVENUES AND EXPENSES ................................................................................................. 93.2. CASH,BANK ANDADVANCES............................................................................................. 103.3. PROPERTY AND EQUIPMENT.............................................................................................. 103.4. ACCOUNTS RECEIVABLES ................................................................................................. 113.5. INVESTMENT INASSOCIATES ............................................................................................. 113.6. ACCOUNTS PAYABLE &ACCRUALS.................................................................................... 123.7. BASIC FUNCTIONAL CURRENCY AND FOREIGN CURRENCIES ............................................. 12

SECTION 2 .................................................................................................................................... 13

ACCOUNTING AND FINANCIAL REPORTING ........................................................................ 13

1. PURPOSE .......................................................................................................................... 14

2. SCOPE................................................................................................................................ 14

3. CHART OF ACCOUNTS................................................................................................... 14

4. STRUCTURE OF THE GCMHPS ACCOUNTING SYSTEM ....................................... 15

5. ACCOUNTING RECORDS AND VOUCHERS ............................................................... 16

5.1. ACCOUNTING RECORDS.................................................................................................... 165.2. MAINTAININGACCOUNTING RECORDS............................................................................... 19

5.3. ACCOUNTING FORMS AND VOUCHERS .............................................................................. 20

6. RECORDING OF ACCOUNTING TRANSACTIONS ..................................................... 22

6.1. DATA ENTRY ..................................................................................................................... 226.2. RECORDING DEPARTMENTSACTIVITIES ........................................................................... 236.3. POSTING TO THE GENERAL LEDGER.................................................................................. 246.4. RECONCILIATIONS ............................................................................................................. 246.5. ADJUSTING JOURNAL ENTRIES.......................................................................................... 256.6. COST CENTERS ................................................................................................................ 266.7. AUTHORIZED SOFTWARE USERS....................................................................................... 26

7. FINANCIAL REPORTING................................................................................................. 28

7.1. FINANCIAL REPORTING PROCESS...................................................................................... 287.2. PERIODICAL FINANCIAL REPORTS ..................................................................................... 29


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7.3. YEAR-END REPORTING ..................................................................................................... 297.4. ANNUAL FINANCIAL STATEMENTS...................................................................................... 30

8. CLOSING OF ACCOUNTS .............................................................................................. 31

8.1. GENERAL LEDGER CLOSING.............................................................................................. 318.2. YEAR ENDADJUSTMENTS ................................................................................................. 31

9. BACKUP OF ACCOUNTING DATA ................................................................................ 32

SECTION 3 .................................................................................................................................... 33

BUDGETING PROCESS.............................................................................................................. 33

1. PURPOSE .......................................................................................................................... 34

2. BUDGETING PREPARATION ......................................................................................... 34

2.1. BUDGET PREPARATION PROCEDURES .............................................................................. 362.2. BUDGET REVISION PROCEDURES...................................................................................... 372.3. QUARTERLY BUDGETADVANCES ...................................................................................... 38

SECTION 4 .................................................................................................................................... 39

CASH AND BANKS ...................................................................................................................... 39

1. PURPOSE .......................................................................................................................... 40

2. SCOPE................................................................................................................................ 40

3. GENERAL POLICIES ....................................................................................................... 40

3.1. OPENING NEW BANKACCOUNTS ...................................................................................... 403.2. CLOSING BANKACCOUNTS ............................................................................................... 413.3. BANK TRANSFERS............................................................................................................. 413.4. CHECK STOP ORDER ........................................................................................................ 413.5. AUTHORIZED BANK SIGNATORIES ..................................................................................... 42

4. CASH RECEIPTS .............................................................................................................. 43

5. CASH DISBURSEMENTS ................................................................................................ 43

5.1. PETTY CASH IMPREST FUND ............................................................................................. 435.2. CHECKS DISBURSEMENT................................................................................................... 445.3. MAINTENANCE OF CHECK LOG .......................................................................................... 45

6. ADVANCES ........................................................................................................................ 46

7. BANK RECONCILIATIONS.............................................................................................. 47

8. PETTY CASH DISBURSEMENT PROCEDURES ......................................................... 50

8.1. REQUIRED FORMS AND DOCUMENTS: ............................................................................... 50

8.2. PROCEDURES ................................................................................................................... 50


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9. DISBURSEMENTS FUNCTION ....................................................................................... 52

9.1. REQUIRED FORMS AND DOCUMENTS: ............................................................................... 529.2. PROCEDURES ................................................................................................................... 52

10. CASH RECEIPT PROCEDURES..................................................................................... 54

10.1. REQUIRED FORMS AND DOCUMENTS............................................................................. 5410.2. PROCEDURES................................................................................................................ 54

11. BANK RECONCILIATIONS PROCEDURES.................................................................. 56

11.1. REQUIRED FORMS AND DOCUMENTS............................................................................. 5611.2. PROCEDURES................................................................................................................ 56

SECTION 5 .................................................................................................................................... 57

PROCUREMENT AND CONTRACTING .................................................................................... 57

12. PURPOSE .......................................................................................................................... 58

13. SCOPE................................................................................................................................ 58

14. PROCUREMENT AND CONTRACTING POLICIES...................................................... 58

14.1. GENERAL POLICY .......................................................................................................... 5814.2. PURCHASING AND CONTRACTING ETHICS...................................................................... 61

14.3. PURCHASE REQUISITION ............................................................................................... 6114.4. QUOTATIONS................................................................................................................. 6214.5. PROCUREMENT COMMITTEES........................................................................................ 6414.6. PROCUREMENT AND CONTRACTINGAUTHORITY LIMITS................................................. 6514.7. APPROVED VENDORS LIST ............................................................................................ 6614.8. PURCHASE ORDERS...................................................................................................... 6614.9. VENDOR /CONTRACTOR SELECTION............................................................................. 6714.10. DOCUMENTATION OF LARGE PURCHASES...................................................................... 67

15. PROCUREMENT PROCEDURES ................................................................................... 72

15.1. PURCHASING PROCEDURES .......................................................................................... 7215.2. RECEIVING PROCEDURES.............................................................................................. 74

15.3. RECORDING OF PURCHASES ......................................................................................... 7515.4. PAYMENT PROCEDURES................................................................................................ 7615.5. CONSTRUCTION CONTRACTING PROCEDURES .............................................................. 7715.6. ADVANCE PAYMENTS TO CONTRACTORS....................................................................... 7815.7. INTERIM BILLING PROCEDURES ..................................................................................... 7915.8. PAYMENTS TO CONTRACTORS....................................................................................... 8015.9. PROJECT HANDING OVER PROCEDURES ....................................................................... 81

SECTION 6 .................................................................................................................................... 83

ACCOUNTS PAYABLE................................................................................................................ 83

1. PURPOSE .......................................................................................................................... 84

2. SCOPE................................................................................................................................ 84


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3. ACCOUNTS PAYABLE POLICIES ................................................................................. 84

3.1. ACCOUNTABILITY............................................................................................................... 843.2. PROCESSING AND RECORDING.......................................................................................... 853.3. MONITORING ..................................................................................................................... 85

SECTION 7 .................................................................................................................................... 87

PAYROLL PROCESSING............................................................................................................ 87

1. PURPOSE .......................................................................................................................... 88

2. SCOPE................................................................................................................................ 88

3. TIME REPORTING ............................................................................................................ 88

4. PAYROLL PREPARATION .............................................................................................. 88

5. PAYROLL PAYMENTS..................................................................................................... 89

6. PAYROLL PROCESSING AND PAYMENT PROCEDURES ....................................... 90

7. EMPLOYEES BENEFITS ................................................................................................ 91

7.1. TRAVEL EXPENSES............................................................................................................ 92

7.2. FOREIGNASSISTANTS/CONSULTANTS............................................................................... 93

8. HUMAN RESOURCES...................................................................................................... 95

8.1. PURPOSE .......................................................................................................................... 958.2. SCOPE .............................................................................................................................. 958.3. DESCRIPTION .................................................................................................................... 958.3.1. RECRUITMENT ............................................................................................................... 958.3.2. RECRUITING CHANNELS ................................................................................................ 958.4. EMPLOYEES PERSONAL FILES........................................................................................... 978.5. CONSISTENCY AND FAIRNESS INAPPLYING POLICIES AND PROCEDURES .......................... 978.6. EMPLOYMENT CONTRACTS ............................................................................................... 978.7. PROBATIONARY PERIOD.................................................................................................... 98

SECTION 8 .................................................................................................................................... 99

FIXED ASSETS............................................................................................................................. 99

1. PURPOSE ........................................................................................................................ 100

2. SCOPE.............................................................................................................................. 100

3. PURCHASE OF FIXED ASSETS................................................................................... 100

4. CAPITALIZATION POLICY............................................................................................ 100

5. ACCOUNTABILITY ......................................................................................................... 101


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5.1. FIXEDASSETS RECORDING AND PROCESSING ................................................................ 1015.2. FIXEDASSETS DISPOSAL ................................................................................................ 1035.2.1. DESCRIPTION OF TASK ................................................................................................ 1035.2.2. REQUIRED FORMS AND DOCUMENTS........................................................................... 1035.2.3. PROCEDURES.............................................................................................................. 104

6. FIXED ASSETS INSURANCE POLICY ........................................................................ 104

SECTION 9 .................................................................................................................................. 105

REVENUES ................................................................................................................................. 105

1. PURPOSE ........................................................................................................................ 106

2. SCOPE.............................................................................................................................. 106

3. GRANT REVENUES ....................................................................................................... 106

4. LOCAL OPERATING REVENUES SOURCES ............................................................ 106

5. ACCOUNTABILITY ......................................................................................................... 106

6. LOCAL OPERATING REVENUES AND COLLECTION PROCEDURES ................. 107

SECTION 10 ................................................................................................................................ 109

ALLOCATION OF GENERAL COSTS ..................................................................................... 109

1. PURPOSE ........................................................................................................................ 110

2. SCOPE.............................................................................................................................. 110

3. GENERAL COSTS ......................................................................................................... 110

APPENDIX I: CHART OF ACCOUNTS .................................................................................... 112


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Accoun t ing and Internal Contro l Pol ic ies and

Procedures Manual


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Introduction

This manual presents the accounting and internal control policies and procedures ofGaza Community Mental Health Programme (GCMHP). GCMHP was established in1990 in Gaza as a not-for-profit organization under registration number 563110451with the Ministry of Justice. During 2000, GCMHP changed its form of organizationby registering with the Ministry of Interior in accordance with the NGO Law of 2000under registration number 7025.

GCMHPs mission is to develop GCMHP as knowledge based institution with the

purpose of enhancing the capacity of the community in dealing with mental healthproblems based on the principle of justice, humanity and respect for human rights.

GCMHPs organizational chart is presented below:


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Strategic Goals

Strategic Goals

Community Centers

Strategic Goals

Community Centers

Community Centers

Personnel

Public Relation Unit

Director's

Assistants

Video Unit

Women Empowerment

Department

Finance

Academic Board

Project Management and Fund

Raising

IT Unit

Director General

(DG)

Internal AuditorBoard of Directors

Deputy Director

General

Strategic Goals

Strategic Goals

Education, Training &

Research Department


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Section 1

Accounting Policies


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1. PURPOSE

The overall purpose of this section is to provide guidance for the accounting

policies that shall be followed by GCMHP and the maintaining of accounting

records, recording transactions, and preparation of financial reports.

2. SCOPE

This document is applicable to all GCMHPs accounting transactions and the

preparation of its financial reports whether performed by central management

or by departments.

3. ACCOUNTING POLICIES

GCMHP shall follow the International Financial Reporting Standards (IFRS) in

recording and processing its accounting transactions and preparing its

periodical financial reports and its annual financial statements.

Following are the main categories of accounts used in GSMHP:

3.1. Revenues and Expen ses

3.1.-1 GCMHPs accounting records shall be maintained in accordance with the

accrual basis of accounting, where revenues are recognized when earned

and expenses are recorded when incurred.

3.1.-2 Expenses are to be reported in the accounting records by natural

classifications based on the approved budget(s) categories, which are

grouped according to strategic goal being used as costs centers.

Strategic Goals Expenses These expenses that are the result of

activities related directly to services provided by GCMHPs in fulfilling

its strategic goals.


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3.2. Cash, Bank and Advan ces

GCMHP shall maintain among its records the following accounts:

Cash on hand

Banks (deposits with maturity of three months or less)

Advances

3.3. Property and Equipm ent

3.3.-1 Property and equipment are stated at cost on the date of acquisition or at

fair value of donated assets. Property and equipment are depreciated

over their estimated useful lives using the straight-line method at the

following annual rates:

%Furniture and fixtures 20

Computers and printers 50Medical equipment 20-33Training equipment 50Motor vehicle 14-20Office equipment 20Library books 20Therapy toys 50Training hall 2

3.3.-2 The recorded value of property and equipment comprises of its purchaseprice, or the fair value in case of donated assets, and any directly

attributable costs of bringing the assets to the working condition for its

intended use.

3.3.-3 The carrying values of property and equipment are reviewed for

impairment when events or changes in circumstances indicate that the

carrying value may not be recoverable. If any such indication exists and


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where the carrying values exceed the estimated recoverable amount, the

assets are written down to their recoverable amount.

3.4. Acc oun ts Receivables

Accounts receivable are stated at original amount less a provision for any

uncollectible amounts. An estimate for uncollectible receivables shall be made

when collection of the full amount is no longer probable.

3.5. Investm ent in Ass ociates

Investment in associates is described in details in IFRS 28 and is accounted

for using one of the following two methods:

3.5.-1 Cost Method: The investor records its investment in the investee at cost.

The investor recognizes income only to the extent that it receives

distributions from the accumulated net profits of the investee arising

subsequent to the date of acquisition by the investor. Distributions

received in excess of such profits are considered a recovery of investment

and are recorded as a reduction of the cost of the investment.

3.5.-2 Equity Method:When GCMHP exercise significant influence (the power

to participate in the financial and operating policy decisions of the

investee) the equity method shall be followed whether or not GCMHP also

has investments in subsidiaries and prepares consolidated financial

statements.

The equity method shall not be applied when an associate is acquired and

held with a view to its disposal within twelve months of acquisition.

Under the equity method, the investment is initially recorded at cost and

the carrying amount is increased or decreased to recognise the investor's

share of the profits or losses of the investee after the date of acquisition.

Distributions received from an investee reduce the carrying amount of the


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investment.

3.6. Acc oun ts Payable & Acc ruals

GCMHP shall recognize accounts payable upon receiving invoices and

accruals as part of its accounting records.

3.7. Basic Funct ion al Currency and Foreign Currencies

3.7.-1 The United States Dollar (U.S. $) is GCMHPs basic functional and

reporting currency. Certain donations reporting currency may differ from

the functional currency depending on the financing agreements with

donors. (Reporting currency is the currency used in presenting the

financial statements of GCMHP).

3.7.-2 Transactions in foreign currencies (foreign currencies are currencies other

than the functional currency) shall be translated into U.S. $ using the

exchange rate prevailing at the date of each transaction.

3.7.-3 Gains or losses arising from exchange differences shall be reflected in the

statement of activities.


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Section 2

Accounting and FinancialReporting


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1. PURPOSE

The purpose of this section is to ensure that accounting records are properly

maintained and financial reports are properly prepared in accordance with the

International Financial Reporting Standards and managements needs. This

document will ensure that:

GCMHP maintains adequate accounting records. The accounting

transactions shall be recorded on timely basis, and in accordance withthe approved accounting policies in a manner that facilitates thegeneration of the required financial statements and reports.

Financial reports are properly prepared to serve management and otherparties needs for reliable, relevant and timely information.

Financial reports are properly reviewed and approved in accordance withmanagements criteria.

Documents pertaining to financial reports are physically safeguarded.

2. SCOPE

This section is applicable to all periodic financial reports that shall be prepared

by GCMHP as well as the annual financial statements.

3. CHART OF ACCOUNTS

GCMHP and its departments shall use the standard chart of accountspresented in appendix I. The Financial Manager shall approve anyupdates or amendments to the chart of accounts.

The accounting transactions shall be properly classified, and recorded in

the accounting records, in accordance with the approved standard chartof accounts.

All accounting transactions shall be classified according to this chart ofaccounts.


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4. STRUCTURE OF THE GCMHPS ACCOUNTING SYSTEM

The structure of the GCMHPS accounting system is as follows:

Chart of Accounts

Accounting

Vouchers

General Ledger Accounting

Reports

enuesPayablesAdvancesCash

Children General

Activities

Organizational

Development

Human

Rights

Cost Centers

Women

Empowermen

ReceivablesInvestments

Departments

Property and

Equipment

Expenses


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5. ACCOUNTING RECORDS AND VOUCHERS

5.1. Acc oun t ing Records

The following main accounting records shall be maintained by the accounting

department:

General Ledger

Includes all accounting entries that are processed into the accountingsoftware to record all accounting transactions.

General Ledger and Main Classifications

Include the following main categories:

Cash.

Advances.

Receivables. Property and equipment.

Payables.

Revenues.

Expenses.

Petty Cash Record

It represents a register that shall be updated on daily basis andincludes the following:

Cash beginning balance.

Cash received.

Cash payments and petty cash payment voucher number.

Balance per cash register.

Balance per actual physical count at the date of performingcash counts.


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Donations Register

This is a separate register from the accounting records, it shall beupdated on a monthly basis and include the following:

Donation amount and any subsequent additions.

Total cash received.

Cash paid from the donation amount.

Cash balance, end of period.

Unpaid balance of the donation.

Expenses charged to the donation.

Any additional information (i.e. restrictions).

Fixed Assets (Property and equipment) Register

Includes the following for each fixed asset item:

Item number

Type

Model

Description

Donor

Location

Date of purchase and receipt

Cost

Additions

Disposals

Estimated useful life

Depreciation rate

Accumulated depreciation

Net book value


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Accounts Payable Record

It represents a register that shall be updated on daily basis andincludes the following (this record can be generated systematically ifthe accounting software provides such details):

Supplier name

Purchase order number and date

Date of delivery

Terms of payment

Payment due date

Previous payments

Amount due to supplier

Employees Record (name and summary of personal information)

Payroll Register

Prepared monthly till year-end and shall include:

Employees name and employment number.

Date of employment.

Basic salary.

Allowances (item by item).

Gross salary.

Income tax.

Any other deductions.

Net pay amount.

End-of-service benefits record, per employee, including:

Employees name and employment number.

Date of employment.

Last basic salary.

Provision for end of service beginning balance.

Payments (final settlement).

Additions during the period.

End-of-service provision, ending balance.


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Contract under Progress Report

Which shall be updated on a monthly basis and shall contain thefollowing information:

Location, code and name.

Original contract price and approved change orders.

Work performed to date.

Contractor billings and requests.

Amount of paid invoices.

Retention balance.

Balance of advance payment.

Cost of completed work.

Type and amount of contractor guarantees.

5.2. Maintain ing Acc oun t ing Records

5.2.-1 Segregation of duties shall be assured by separating record keeping,

authorization and custody.

5.2.-2 Custody and access to records shall be limited to authorized persons.

5.2.-3 At the end of each month, the Financial Manager shall ensure the

accuracy of the serial numbers of all accounting vouchers, sign a

document that shows the proper sequence of serial numbers and file a

report on exceptions.

5.2.-4 The Financial Manager is responsible for reviewing all accounting journals

to ensure that:

All accounting transactions have been initiated according to the

GCMHPs policies and procedures manual.

Accounting vouchers are supported by proper documents.


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Accounting vouchers are filed on a timely basis according to their serial

number or to the nature of the account and according to the chart of

accounts.

5.2.-5 All accounting vouchers shall be signed by the Financial Manager after

being entered into the accounting system and prior to posting them to the

general ledger.

5.3. Acc oun t ing Forms and Vouch ers

5.3.-1 Defined and standard accounting forms and vouchers shall be used by

the GCMHP as the basis for documenting and recording accounting

transactions in the accounting system.

5.3.-2 The original voucher used in the accounting software is the journal

voucher. A clear reference shall be documented between these vouchers

and the relevant vouchers and supporting documents.

5.3.-3 The accounting vouchers shall be properly arranged and filed to ensure

accountability and facilitate subsequent review and audit of the

accounting transactions and documents.

5.3.-4 Following is a list of the accounting vouchers and documents that shall be

used by GCMHP in documenting its accounting transactions:

Form # Voucher Use

1 Receipt voucher Records all receipts of cash, checks andbank transfers.

2 Payment voucher Records all payments bychecks/transfers.

3 Petty cash paymentvoucher

Records all cash payments from pettycash.

4 Journal voucher Records all non cash transactions.


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5.3.-5 All of the above mentioned documents may be directly generated from the

accounting software, if such software supports the functions to which they

relate. In case of using pre-printed vouchers to be filled manually, they

shall be pre-numbered and comprise of at least two copies.

5.3.-6 The accounting vouchers shall be serially pre-numbered and only

authorized users are allowed to use and fill them out.

5.3.-7 The accounting vouchers shall be free of errors, omissions and

alterations. In case of modification, a new form shall be used, while the

previous shall be void and retained with its copies.

5.3.-8 All copies of cancelled vouchers shall be maintained and filed in a way to

prevent any reuse.


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6. Recording of Accounting Transactions

6.1. Data Ent ry

i. The Department Financial and Administrative Assistant (Administrator) of

each department shall maintain separate set of books to record this

departments accounting transactions. Following are GCMHP departments

and the number of administrator working within each department:

Administrator Department

1 Head Office / Administration Department1 Women Empowerment Department3 Community Centers (3 Locations)1 Education, Training and Research

6.1.-1 At the end of each month, the Financial Manager shall consolidate

accounting records from the various departments to produce the financial

records of GCMHP as a whole.

6.1.-2 Journal vouchers in different departments shall be properly authorized,

accurately and completely recorded on a timely basis and reliably

processed and reported.

6.1.-3 All Journal entries shall be reviewed by the Financial Manager before

posting them into the accounting records and before being consolidated

with the Head Office accounts. Such review shall include verification to

ensure that the transaction is valid and is supported by proper

documentation.

6.1.-4 All journal entries (vouchers) and related documents shall be f iled

sequentially by form type. Cancelled vouchers shall be stamped with

VOID and filed as well.


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6.2. Recording Departments Act iv i t ies

6.2.-1 In addition to the above procedures, the Administrator of each department

and the Heads of Department are responsible for the financial

management, budget control, accounting transactions recording and

transferring all related accounting data to the Finance Department to be

consolidated at the end of each month.

6.2.-2 All departments participating in recording accounting transactions must

follow the applicable GCMHP policies and procedures in carrying out their

activities.

6.2.-3 At the end of each month, each department must submit the following

reports to the Financial Manager after being approved by the head of

each department:

A trial balance.

Bank reconciliation.

Budget versus actual statement of expenses showing all line items

included in the budget form for each strategic goal (cost center).

Clarifications for all variances from the budget.

6.2.-4 The Financial Manager must review the monthly reports to ensure

accuracy.

6.2.-5 Significant variance and non-compliances shall be reported to the Director

General.


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6.2.-6 The Director General or his designee shall approve the statement and the

related reports.

6.2.-7 At the end of each month, the Financial Manager shall incorporate the

departments accounts balances in the accounting records according to

the account number and the cost centers.

6.2.-8 The Administrator in each department along with the Head Office shall

use the same accounting software to provide the required reports.

6.2.-9 The Administrator in each department along with the Head Office shall

use the same chart of accounts when preparing the required reports.

6.3. Postin g to the General Ledg er

6.3.-1 Posting of journal entries to the general ledger in the accounting software

is the responsibility of the Administrator of each department after getting

the approval of the Financial Manager.

6.3.-2 A trial balance shall be prepared by each Administrator in each

department and shall be reviewed by the Financial Manager on a monthly

basis.

6.4. Reconcil iat ions

6.4.-1 The Administrator in each department is responsible for financial reportingat the end of each month. Efficient and on-time completeness of this

process is necessary to prepare reliable financial reports.

6.4.-2 The Administrator shall ensure recording all invoices and financial

transactions related to each month.

6.4.-3 A comprehensive review of accounts in the trial balance and cost centers

is required while making the reconciliations by the Financial Manager.

6.4.-4 Prompt treatment of reconciling items is required.


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6.4.-5 All reconciliations shall be prepared within 5 days after the end of each

month.

6.4.-6 A report of all errors in recording and posting entries during the period

shall be prepared in order to include details of the nature of the errors,

reasons and correcting procedures taken to avoid such errors in the

future.

6.4.-7 The following main reconciliations shall be accurately prepared before the

monthly closing of the accounting records.

Reconciliation Prepared/Approved by Daily Monthly

Bank Reconciliations Administrator/

Financial Manager

Receivables/Payablesreconciliation

Administrator/

Financial Manager

Cost centers reconciliation FinancialManager/DirectorGeneral

Petty cash reconciliation Administrator/

Financial Manager

6.5. Adju st ing Journal Entr ies

6.5.-1 All adjusting journal entries shall be signed before posting them to the

general ledger by the Financial Manager.

6.5.-2 Journal vouchers shall be prepared by the Administrator.

6.5.-3 Data previously entered into the computer system, reviewed and

approved by the Financial Manager shall not be altered, to prevent

unauthorized modifications.


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6.5.-4 All Journal vouchers shall be supported by proper, valid and adequate

documents.

6.6. Cost Centers

Cost centers are a group of accounts that aims to combine all accounts

related to a specified strategic goal in order to prepare separate financial data

related to each strategic goal. Each group shall include accounts of cash,

bank, receivables, payables, revenues and expenses.

6.6.-1 The Financial Manager is responsible for organizing the cost centers in a

systematic manner.

6.6.-2 Administrator is responsible for recording all accounting transactions

under relevant cost centers.

6.7. Au tho rized Softw are Users

6.7.-1 The following users should have access to the accounting software.

However, the accessibility should be restricted to the information

necessary to help each user accomplish his duties (modify/view).

Director General or his designee, view.

Financial Manager, view and modify.

Administrator in his/her respective department, view and modify.

Internal Auditor, view.

Programs Coordinator, view.

Additional users might be permitted access based on the discretion of the

Director General.


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6.7.-2 Each authorized person shall have a confidential access password.

6.7.-3 Each authorized user of the accounting software shall have certain duties

and shall not be allowed to perform any other duties or access to any data

that are not related to his/her work.


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7. Financial Reporting

7.1. Financial Report ing Process

7.1.-1 In general, GCMHPs overall main reports shall include the following:

Quarterly Financial Performance Report (QFPR Budget vs. actual)

Annual audited financial statements.

7.1.-2 The yearly financial reporting package for the GCMHP shall be prepared

no later than the 15th of February of the following year.

7.1.-3 Preparation of the reporting package for GCMHP as a whole is the

responsibility of the Financial Manager under the supervision of the

Director General.

7.1.-4 The Financial Manager shall ensure that the following steps are

performed before preparing the reporting package:

The departments monthly reports and the supporting documents are

reviewed and entered in the accounting records properly.

Bank accounts are reconciled with the accounting records.

Translation of foreign currencies monetary assets to U.S. Dollar.

Account for the un-used balance of the fund received.

Other month-end closing steps, as deemed necessary.

7.1.-5 The reporting package shall be prepared by the Financial Manager,

reviewed by the Director General.


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7.2. Periodic al Financ ial Report s

7.2.-1 Following are the periodical financial reports that shall be prepared and

reviewed within GCMHP:

Report TimingPrepared

byReviewed &Approved by

Department trial balances Monthly AdministratorHead of Department,Financial Manager

Consolidated adjusted trial balance MonthlyFinancialManager

Director General (DG) orhis designee

Consolidated statement of f inancialposition and statement of activities

QuarterlyAnnually

FinancialManager

Director General or hisdesignee

QFPR - Budget versus actualexpenditures (Department Level)

MonthlyQuarterly

AdministratorHead of Department,Financial Manager,Budget Committee

Consolidated budget versus actualexpenditures

MonthlyFinancialManager

DG or his designee

Bank reconciliations - Departments Monthly AdministratorHead of Department,Financial Manager

Bank reconciliations Head Office Monthly AdministratorFinancial Manager, DGor his designee

Cash custody reconciliation Daily AdministratorHead of Department,Financial Manager

Receivables/Payables reports(Department level)

Monthly Administrator Head of Department,Financial Manager

Receivables/Payables reports(Head office level)

Monthly AdministratorFinancial Manager, DGor his designee

Cash Flows budget (Departmentlevel)

MonthlyQuarterly

AdministratorHead of Department,Financial Manager

Cash Flows budget (Head officelevel)

MonthlyQuarterly

AdministratorFinancial Manager, DGor his designee

7.2.-2 Administrator shall deliver their monthly reports to the Finance

Department no later than the 5th of the following month.

7.3. Year-end Report ing

7.3.-1 The following additional steps shall be performed by the Financial

Manager for the purposes of preparing the year-end reporting package:

Fixed assets physical count and adjustments resulting from the count.

Each department shall perform its own physical count and the

Financial Manager shall combine the information.


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Obtain confirmation/statement of cash received from donors.

Obtain bank confirmations/statements of accounts.

Complete set of financial statements.

7.4. Annu al Financ ial Statements

7.4.-1 The annual financial statements shall include.

Statement of financial position.

Statement of activities.

Cash flow statement.

Notes and disclosures.

7.4.-2 The annual financial statements shall be prepared in accordance with the

International Financial Reporting Standards.

7.4.-3 The annual financial statements are to be audited by a reputable Certified

Public Accountants firm. The audit shall be conducted in accordance with

International Standards on Auditing.

7.4.-4 The year-end financial reporting package shall be ready no later than the

15th of February of the following year.

7.4.-5 The audited financial statements shall be issued within three months after

year end.

7.4.-6 The annual audited financial statements shall be reviewed and approved

by the Director General and the Board of Directors before issuing.


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9. Backup of Accounting Data

9.1.-1 Accounting data shall be backed up daily from the computer system hard

drive. All backups are to be safe-kept in a location away from the

accounting computers and supporting documents.

9.1.-2 After the issuance of the final audited financial statements for the year, a

complete set of accounting records and reports (hard copy) shall be

printed and filed in a special file.


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Section 3: Budgeting Process Draft for Discussion OnlyPage 33 of 116




Procedures Manual

Section 3

Budgeting Process


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1. Purpose

The purpose of this document is to set policies and procedures for GCMHPs

budgeting process. These policies and procedures aim at ensuring that

GCMHP budget are prepared based on departments activities, strategic goals

and availability of funds. The budget shall be properly monitored and

controlled by all departments and GCMHP budget committee (defined below).

2. Budgeting Preparation

The budget report are prepared annually based on a budget model that

systematically takes into account all sources of income and the categories of

expense to which those sources can be applied. A central item in any budget

report is thus the sources and applications table. The sources and

applications together define the margin in which virtually all annual and many

multi-year budgetary decisions are made.

One of the budget process main purposes is to guide budget planning towards

those areas where truly strategic decisions are possible and necessary.

Budgets will be prepared depending on strategic goals identifiable to CGMHP.

A Budget Committee consisting of the Directors General or his designee, the

Financial Manager, the Programs Coordinator and the Director General

Deputy for Professional Affair shall compile and prepare the budget

depending on budgets on action plan contributing to strategic goals planned tobe achieved within each department using a standard budget format prepared

by the Budget Committee).

The Budget Committee shall allocate costs on departments budget based on

the level of activities contributed by each department to achieve goals.

The annual budget shall be divided into monthly and quarterly budget.

Quarterly Budgets shall be approved by the Director General upon

presentation of previous quarter results of each department acceptable to theBudget Committee. In order to avoid disrupting operations, feedback to


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2.1. Budg et Preparation Procedures

The following procedures provide guidelines for GCMHP Budgeting Process

Responsible Person Procedures

Programs Coordinator 1. Prepare action plan according to strategic plan.

Head of Department 2. Review and comment on action plan.

Budget Committee 3. Prepare budget according to action plan

Director General 4. Approve budget

Budget Committee 5. Divides the budget into monthly/quarterly/annually departmental budget

6. Submits the budget to Director General forapproval

Director General 7. Approves and submits budget for Board anddonor approval.


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2.2. Bud get Revision Procedures

The following procedures provide guidelines for GCMHP Budget revision

procedures


Head of Department 1. Request for budget amendment

Programs Coordinator 2. Revise action plan according to the budgetamendment

3. Ensures amended plan fulfil the strategic goals

Administrator 4. Prepares the revised budget submits to head of

departmentHead of Department 5. Approves the department budget amendment

Programs Coordinator 6. Reviews the amended budget and ensuresagreement with the new level of activities andsubmit to the Budget Committee

Budget Committee 7. Reviews the amended budget and ensurecompliance with GCMHP overall budget for theeach quarter and for the whole year

8. Submits the amended budget to Director

General for approval

Director General 9. Approves the amendment and submits revisedbudget for donor and Board approval, asrequired.


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2.3. Quarterly Bud get Adv ances

The following procedures provide guidelines for GCMHP quarterly budget

advance procedures


Administrator 1. Prepares Quarterly Financial Performance Report(budget vs. Actual)

Head of Department 2. Review and approve the Quarterly FinancialPerformance Report and forward to the ProgramsCoordinator

Programs Coordinator 3. Review and comment on financial report and compareit with planned activities

Financial Manager 4. Review, comment and/or clear matters and forward to

the Budget Committee.Budget Committee 5. Review and comment on the Quarterly Financial

Perform ance Report (within two weeks of submission)

Director General 6. Make final approval on the Quarterly FinancialPerformance Report and authorize next periodadvance.

Financial Manager 7. Prepare quarterly budget advance transfer

Authorized Signatories 8. Sign the quarterly budget advance transfer


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Section 4: Cash and Banks Draft for Discussion OnlyPage 39 of 116




Procedures Manual

Section 4

Cash and Banks


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1. Purpose

The purpose of this document is to set policies and procedures for GCMHPs

cash and bank accounts. These policies and procedures aim at ensuring that

cash and banks transactions are made based on proper authorization to fulfill

GCMHPs goals, as well as to assure that they are properly controlled and

classified in the accounting records.

2. Scope

The following cash and banks policies and procedures provide guidelines for

opening new bank accounts, closing bank accounts, bank transfers, cash

receipts, advances, cash and checks disbursement policies and bank

reconciliations.

3. General Policies

3.1. Opening New Bank Acc oun ts

3.1.-1 Two master bank accounts in the name of GCMHP shall be opened to

receive the all funds and donations from donors, one for unrestricted

donations and the other for restricted donations.

3.1.-2 4 other sub-bank accounts shall be opened for each department/center to

which budget advances shall be transferred.

3.1.-3 All new bank accounts shall be opened by instruction from the Director

General to the bank with Board approval.

3.1.-4 Authorized signatories on the new bank account shall be according to the

approved authorization policy and limits.


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3.2. Closing Bank Acc oun ts

3.2.-1 A bank account that is inactive or with a zero balance for more than six

months shall be closed, unless there is a justification to keep it open.

3.2.-2 The closure of a bank account is to be recommended by the Financial

Manager and/or the Directors Assistant for Administration and Finance

(the departments may recommend this step initially) and approved by the

Director General.

3.2.-3 Unused checks related to the closed bank account shall be returned to

the bank upon closing the account. This process shall be properly

documented.

3.3. Bank Transfers

3.3.-1 Major transfers to departments bank accounts will be authorized and

issued from the master bank accounts maintained by the Head Office inaccordance with GCMHP policies.

3.3.-2 Transfers shall be accounted for promptly to ensure that funds drawn

were entered to the other bank.

3.3.-3 Bank transfer is subject to the authority limit set in the manual.

3.4. Check Stop Order

Check stop order shall be issued to the bank upon receiving a written request

from the beneficiary claiming loss or error in the issued check(s). A new check

shall be issued after receiving a confirmation from the bank that the check is

stopped.


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3.5. Auth orized Bank Signatories

3.5.-1 Following are the authorized signatories for GCMHPs Head Office bank

accounts:

The Chairman of the Board of Directors

The Deputy Chairman of the Board of Director

The Board Treasurer

Director General

Personnel Manager

3.5.-2 In addition to GCMHPs authorized signatories shown above, the following

are the authorized signatories for all departments bank accounts (both

must sign):

Head of Department

Administrator

The Following is the authority limit on bank transactions:

Threshold inU.S. $

Authorized Signatories

1 1,999 Administrator and Head of Department.2,000-4,999 Administrator and Head of Department and

Director General.5,000 and above Head of Department and Director General and

authorized Board members.

3.5.-3 All authorized signatories shall be approved by the Board.

3.5.-4 The Board shall promptly notify the bank of any changes in authorized

signatories or their authorization limits.


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4. Cash Receipts

4.1.-1 Each receipt transaction shall be recorded by an official receipt voucher.

4.1.-2 Receipt vouchers shall be generated serially from the accounting

software. If the accounting software does not support generating receipts

vouchers, then it shall be serially pre-numbered.

5. Cash Disbursements

5.1. Petty Cash Imp rest Fund

5.1.-1 Cash disbursements shall be made through a petty cash imprest fund

only.

5.1.-2 The petty cash imprest fund shall be used to pay recurring and small

expenses up to NIS 250 (the equivalent of U.S $ 50). All expenses above

this amount shall be paid by checks.

5.1.-3 The petty cash fund limit is NIS 2,000. The petty cash fund shall be in the

custody of an employee who has no role in approving payments or book

keeping.

5.1.-4 All disbursements shall be made by check if the amount exceeds NIS 250

(the equivalent of U.S $ 50) and shall be payable to the party from which

purchases and services were obtained.

5.1.-5 Prior to the disbursement of any fund, a petty cash payment voucher shall

be prepared by the fund custodian and approved by the Head of

Department.

5.1.-6 The petty cash custodian shall maintain a petty cash book to document all

petty cash transactions and a petty cash expenses summary of all

disbursements.

5.1.-7 When the cash on hand is reduced to 25-30% of the fund balance, thepetty cash imprest fund shall be replenished in order to bring the balance


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up to the imprest amount. The amount replenished shall equal the sum of

all disbursements since the previous replenishment. Any difference shall

be promptly reconciled and cleared.

5.1.-8 The petty cash replenishment check shall be payable to the petty cash

custodian after the approval of the Head of Department.

5.1.-9 After replenishment, petty cash vouchers and the supporting documents

(i.e. invoices) must be stamped "PAID".

5.1.-10 Any shortage or surplus in the fund shall be investigated, and any

unexplained shortage shall be charged to the custodians personal

account.

5.1.-11 The petty cash custodian shall not have access to the accounting records

and shall not perform any bookkeeping duties.

5.1.-12 Prior to the custodians vacation or termination, the petty cash fund shallbe counted, in the presence of the Financial Manager and the

Administrator, and turned over to the new assigned custodian.

5.1.-13 Any loss arising from negligence or theft must be immediately reported to

the Director General office.

5.1.-14 Surprise cash counts by an independent employee shall be performed at

least once every quarterly.

5.2. Checks Disburs ement

5.2.-1 The Administrator shall initiate the check payment voucher.

5.2.-2 When processing an invoice for payment, related supporting documents

shall be attached to the voucher.

5.2.-3 Check signatories shall review the original supporting documents of the

payment.


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5.2.-4 Payment vouchers shall be prepared by the Administrator and approved

by the Head of Department or the Financial Manager (for Head Office

transactions).

5.2.-5 Checks shall be prepared by the Administrator and signed by the

authorized signatories only after their review of the approved payment

vouchers and all required supporting documents.

5.2.-6 A receipt of payment must be obtained from the payee when a payment is

made. This receipt shall be attached to the check payment voucher.

5.2.-7 The supporting documents shall be stamped PAID to prevent duplicate

payments.

5.2.-8 Checks shall not be payable to the bearer nor signed blank.

5.3. Maintenance of Check Log

5.3.-1 Ordering new checks for all departments shall be handled by the Director

General office.

5.3.-2 Distributing check books to department shall be handled by the Director

Assistant for Administration and Finance

5.3.-3 Used check books shall be returned when receiving new check books.

5.3.-4 A check book log shall be established by the Director Assistant for

Administration and Finance

5.3.-5 A check control log shall be established and maintained through the

accounting software to follow-up on outstanding checks. The control log

shall contain:

The sequence of checks issued.

The name of the beneficiary.

Check date.


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Clearance date or the return and/or voidance date.

5.3.-6 Unclaimed checks shall be accounted for and shall be considered as

reconciling items when preparing monthly bank reconciliations. If,

however, the check was outstanding for more than 6 months, the check

will be invalid and shall be accounted for separately from valid checks.

5.3.-7 Cancelled checks shall be retained for control purposes and accounted

for properly.

6. Advances

6.1.-1 An advance may be paid to employees, contractors and suppliers as

needed.

6.1.-2 The amount of the advance shall be determined based on business

needs or the contract with the contractor or supplier.

6.1.-3 Advances to suppliers and contractors shall be approved in accordance

with GCMHPs authority limits.

6.1.-4 Advances to suppliers shall be recovered based on the contract terms.

6.1.-5 Advances to employees shall be approved by the Director General

6.1.-6 Related employees, supplier or contractor shall sign the advance payment

voucher. The advance shall be recorded in a separate account as a

receivable until the advance is recovered or reconciled with actual

expenses.


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7. Bank Reconciliations

7.1.-1 The department bank reconciliations shall be prepared by the

Administrator using a standard bank reconciliation statement. This

standard form provides the following benefits:

Ensuring that all necessary information is included on each bank

reconciliation prepared.

Reducing the time required to prepare and review the reconciliation.

Providing documentation of relevant supervisor approval.


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7.1.-2 Bank reconciliations must be prepared on a monthly basis for all bank

accounts. And on a weekly basis if the number of bank accounts

transactions is relatively high.

7.1.-3 The bank reconciliations must be prepared even if the balance per books

agrees with the balance per bank statement.

7.1.-4 The reconciliation shall be prepared in the original currency of the

account.

7.1.-5 The reconciliation shall be prepared within four days from the end of the

month.

7.1.-6 Whenever possible, the person preparing the bank reconciliations shall

have no cash receipt and disbursement (handling) functions.

7.1.-7 Reconciling items (i.e., outstanding checks and deposits in transit) shall

be clearly identified. Items outstanding for a long time shall beinvestigated and necessary action shall be taken.

7.1.-8 The Administrator shall prepare a journal voucher for any unrecorded

items identified in the bank reconciliation statement such as cash

transfers, bank charges and errors in recording.


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7.1.-9 Checks outstanding in the reconciliation for more than six months shall be

cancelled and the Administrator shall notify the payee and follow up the

alternative payment.

7.1.-10 At the end of the year, a review shall be made of the checks that were

cancelled and reverted back to the bank account.

7.1.-11 The weekly and monthly bank reconciliations shall be reviewed and

approved by the Head of Department.

7.1.-12 The Financial Manager shall review bank reconciliation as part of the

monthly reporting process.

7.1.-13 Reconciliations of the the central bank accounts shall be prepared by the

Financial Manager and approved by the Director General of his designee.


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8. Petty Cash Disbursement Procedures

8.1. Required Forms and Documents :

Petty Cash Payment Voucher (PCPV).

Petty Cash Book.

Petty Cash Replenishment Request (PCRR).

8.2. Procedures

The following procedures provide guidelines for GCMHP petty cash

disbursement function (up to NIS 250 (the equivalent of U.S $ 50) shall be

disbursed from the petty cash):

Responsible Employee Procedures

Cash Custodian 1. Receives the request for payment and its related

supporting documents (e.g. supplier invoices).

2. Ensures that supporting documents are complete

and arithmetically accurate.

3. Fills out and signs a Petty Cash Payment Voucher

(PCPV), then passes the PCPV together with

supporting documents to the Head of Department.

Head of

Department/Financial

Manager (for Head Office)

4. Reviews and signs the PCPV and supporting

documents.

Cash Custodian 5. Pays the amount specified on the PCPV.

6. Stamps the PCPV and the supporting documents

as PAID.

7. Updates the petty cash book.


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8. Keeps the PCPV and the supporting documents in

a locked place.

9. When petty cash runs below 25-30% of the fund

balance, the custodian prepares and signs a Petty

Cash Replenishment Request (PCRR). Attaches

the PCRR with its related PCPVs and supporting

documents and submits them to the Administrator.

Administrator 10. Reviews the PCRR, the related PCPV and

prepares a payment voucher in the amount of the

PCRR for reimbursement.

11. Prepares a check with the replenishment amount.

Head of



12. Reviews the PCRR, the related PCPV and the

supporting documents and signs the PCRR and

the PCPV.


(Sec 4. para 3.5.2)

13. Reviews the PCRR, PCPV and other supporting

documents and sign the check.

Administrator 14. Record transaction according to Strategic Goal.


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9. Disbursements Function

9.1. Required Forms and Documents :

Payment vouchers.

Checks.

9.2. Procedures

If disbursement does not go through the procurement process, theadministrator shall ensure budget allowability prior to disbursement. Thefollowing procedures provide guidelines for GCMHP check disbursementsfunction (all payments exceeding NIS 250 (the equivalent of U.S $ 50)shall be paid by checks).


Administrator 1. Verifies the invoices presented by suppliers and

contractors for payment to ensure accuracy of

amounts and that invoices are official and

signed/stamped by the supplier(s).

2. Matches the supplier invoice with the related

contract, if any.

3. Ensure the supplier is meeting all conditions that

are required to make the payment.

4. Obtain a deduction at source certificate from thesupplier if the payment is more than NIS 1,000.

5. Prepares a payment voucher and a check for

the supplier.

6. Signs the payment voucher and forwards it with

the check and the supporting documents to the

Head of Department for review and approval.

7. Ensure supplier compliance with all contractual


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responsibilities by reviewing the supplier file and

correspondents between the supplier and

GCMHP.

Head of



8. Reviews the above documents and signs the

payment voucher and the check after matching

the check amount with the amount of the

payment voucher and the supplier invoice(s) and

other supporting documents.

9. Returns all documents back to the Administrator.


(Sec 4. para 3.5.2)

10. Review the payment voucher, check and

supporting documents then sign the check.

Administrator 11. Obtain a receipt from the supplier in the amount

paid or

12. Stamps the invoice PAID, hands over the

check to the supplier and obtains the suppliers

signature on the payment voucher to

acknowledge receipt.

13. Records the payment voucher transaction into

the accounting system according to strategic

goals.

Custody of Check Books

Administrator 1. Responsible for the safe custody of check books

and restricts access to them.

Cancelled Checks

Administrator 2. Defaces the payment voucher and the check

with a CANCELLED stamp. If the entry is

already posted, prepares a newjournal voucher

reversing the original entry and record the new


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entry into the accounting system.

10. Cash Receipt Procedures

10.1. Required Form s and Docum ents

Receipt voucher. Bank deposit slip.

10.2. Procedu res

The following procedures provide guideline for all GCMHP cash receipttransactions.


Cash Custodian 1. Collects cash based on managementapproved rate for the services provided.

2. Issues a receipt voucher and hand in originalto payer (Receipt vouchers shall be signed bythe Financial Manager if cash is received asdonation).

3. Keeps cash and checks collected during theday are in a secured place until handed to theAdministrator to be deposited into theGCMHP main bank account used forunrestricted revenues.

4. Prepares summary at the end of the day for

all cash collected, cash submits to theAdministrator (deposited to the bank) andremaining cash balance at the end of the day.

5. Send summary with copy of receipt vouchersto the Administrator.


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Administrator 6. On daily basis, receives cash from the cashcustodian after being counted.

7. Ensure that collection is in accordance withmanagement approved rate of charge.

8. Ensures that cash and checks collectedduring the day are kept in a secured placeuntil deposited into the bank, if applicable.

9. Deposits cash/checks into the relevant bankaccount.

Financial Manager 10. Matches the deposit slips with the receiptvoucher to ensure the total cash and checkscollected were deposited subsequently in thebank. If the amount received through a fundtransfer, agree the bank notice to the receiptvoucher.

11. Review summary with receipt vouchersissued and deposit slips.

12. Ensures that there are no missing orunaccounted receipts by ensuring serialnumbering sequence.

Administrator 13. Record transactions into the accountingsoftware.


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11. Bank Reconciliations Procedures

11.1. Required Form s and Docum ents

Bank Reconciliation Form.

11.2. Procedu res

The following procedures provide the guideline to the preparation of bank

reconciliations.


Administrator 1. Obtains a copy of the previous month bankstatement from the bank.

2. Prepares a bank reconciliation statement for eachbank account using a standard format within fourdays of the end of the month.

3. Signs the bank reconciliation.

4. Prepares a journal voucher for any unrecordeditems i