best practice in finance and governance

Best Practice in Finance and Governancein the Voluntary and Community Sector

SETTING STANDARDS, IMPROVING PERFORMANCE...

Developed in partnership between Northern Ireland Government Departments and representatives of the Voluntary and Community Sector

Setting Standards, Improving Performance

1 Introduction

2 Planning

3 Risk Management

4 Governance and Accountability

5 Financial Management

6 Fraud and Irregularity

7 Audit

8 Monitoring and Evaluation

9 Embedding Best Practice

Contents

Issue 1 July 2005


Welcome to Setting Standards,Improving Performance; theBest Practice Manual to Financeand Governance in the Voluntaryand Community Sector, adirectional and support aid toimproving the effectiveness of thesector and highlighting theGovernment’s requirements of thesector particularly when providinggrant aid.

It is recognised that running avoluntary or communityorganisation, regardless of its sizeor nature, is not an easy task.

Difficulties in running a voluntaryor community organisation are notrestricted to small inexperiencedgroups. Many large organisationsalso come up against significantproblems or need support.

This Manual has been developedjointly between key officials in theDepartment for SocialDevelopment and the Departmentof Finance and Personnel andrepresentatives from voluntary andcommunity sector organisationswhich actively provide guidanceacross a range of financial andmanagement functions to groupsin the sector.

It is not a step by step manual butseeks to highlight and illustratebest practice principles whichGovernment would expect to findin a well run organisation whenconsidering funding. The absenceof such standards of best practiceand systems would potentiallyhave a bearing on the decision byGovernment to award support.The necessary practical advice orsupport to underpin the bestpractice is signposted to those

organisations and Governmentbodies best equipped to provide it.

Each chapter deals with a key areaof organisational management;outlines best practice principles;provides appropriate examples;includes a checklist andimportantly, lists a number ofcontacts for support.

The guidance is not exhaustive, itis not intended to be, but ithighlights best practice principles.Many organisations will havesophisticated systems in placeand could be in a position toprovide advice and support toothers. This is where thesignposting will be key.

The Manual will be a ‘living’document in that it will be regularlyreviewed and updated to reflectnew developments or change inpractice. It will also seek andwelcome comment from the sector.

Importantly it is recognised thatguidance alone is not sufficient toensure improvement in practice. Itmust be underpinned byappropriate training anddevelopment. The last chapter inthe manual addresses the issue ofembedding best practice. Wherepossible, existing trainingresources either available withinthe sector or within Governmentwill be utilised. Where gaps areidentified then training will bedeveloped by Government inpartnership with the sector.

It is intended that the use andapplicability of the manual and thebest practice principles containedwithin will be adopted acrossgovernment departments although

1 INTRODUCTION


1. Positive Steps, Government’s response to Investing Together the report of the independent Taskforce on resourcing the Voluntary andCommunity Sector available at www.dsdni.gov.uk

it should be recognised differentdepartments may applyprogramme specific criteria. Therewill however be a consistency ofapproach and understanding ofwhat makes for a well governedvoluntary or community sectororganisation.

Government is committed tostreamlining the delivery of fundingto the voluntary and communitysector. Positive Steps1 outlines aseries of actions to improve thefunding relationship betweenGovernment and the sector.

This Manual takes forward someof the actions concerning effectivegovernance, management andaccountability which Governmentdepartments would expect to findin well run, properly managedorganisations. As more detail onthe out workings of actions are

developed, this Best PracticeManual will be updated.

Your comments and feedback onthe manual and its usefulness toyour organisation are very muchappreciated and will assist inimproving it. You can submit theseto the Voluntary and CommunityUnit either in writing or by e mailto the address below.

Voluntary & Community UnitLevel 3, Lighthouse BuildingGasworks Business ParkOrmeau Road, Belfast, BT7 2JBEmail: [email protected]: www.dsdni.gov.ukTel: 028 9082 9(38)432Fax: 028 9082 9431

Finally sincere thanks to the BestPractice Working Group for theirsignificant contribution in thedevelopment of this Manual.

Working Group Seamus Murray Voluntary & Community Unit (Chair)Alison Wightman Community ChangeGerry Cappa Community ChangeJan Keenan Rural Community NetworkYvonne Dolan Volunteer Development AgencyFancea O Neill NICVAJack Nelson Belfast Regeneration OfficeMary McCartan QAU, Belfast Regeneration OfficeDonald Heaney DSD Internal AuditPeter McGinn DSD Internal AuditBrendan McCann Finance DirectorateGeorgie Devine Corporate Investigations UnitMartin Gribbon Voluntary & Community UnitLawrence Stanford Urban Regeneration Strategy DirectorateOonagh McFlynn Belfast Regeneration OfficeCiaran Doran Department of Finance and PersonnelStephen Rusk Department of Finance and PersonnelDamien Mulholland Regional Development OfficeMandy Morrison Department of Finance and Personnel


2.1 Purpose of this Section

This section aims to provide anunderstanding of planning aheadfor your organisation, and sometools you might use. It also aimsto provide a framework forpreparing a strategic or forwardlooking plan.

Increasingly funders, particularlyGovernment, will want to seeevidence that an organisation hasgiven proper consideration to itsfuture development. It will look forevidence as to how anorganisation will manage itsresources, develop and train itsstaff, generate and secure itsfinances and fulfil its aims andobjectives both in the short andlong term. The extent and natureof this ‘plan’ will depend on thenature and size of the organisationbut it will demonstrate that thereis effective control andmanagement of the organisation.Critically the plan should establishhow the organisation will attemptto achieve agreed objectives andtargets.

2.2 What is Planning?

Planning is perhaps bestdescribed as a process designedto ensure that an organisation:-

• Knows why it exists and what itsprinciple objectives are;

• Knows its own strengths andweaknesses;

• Knows that opportunities andthreats are posed by theexternal environment; and

• Can identify and establishappropriate standards ofperformance.

There are different types of plans.A strategic plan is normally set fora number of years and is broaderin focus than a business or as issometimes referred to anoperational plan which normallycovers a shorter period and for ashorter project.

2.3 The Steps of a Strategic Plan

There are 4 steps to creating aStrategic Plan

1. Agreeing a vision; the dream you have for your organisation

2. Creating a Mission Statement; the purpose of the organisation

3. Setting objectives; and

4. Incorporating the annual Business Plan. A strategic or corporate plan normally covers as a minimum a three year period, being updated and reviewed each year when the business plan is being produced.

2.4 Producing a Business Plan

Once the objectives have beenestablished and agreed by themanagement committee the nextstep is to produce the businessplan. This plan identifies how theorganisation is going to meet theagreed objectives and will usuallycontain the following:

2 PLANNING


• Objectives.

• Activities/Services to beprovided.

• Timescales

• Targets

• Review and Assessment ofcurrent programmes.

• Resource requirements

• Organisational Structure andstaffing.

• Assessment of the factors in theexternal environment whichmight affect the organisation’sfuture which may have changedsince the strategic plan wasproduced.

The Business Plan will beproduced annually and show clearlinkage to the organisation’sbudget.

2.5 Planning Tools

There are a number of planningtools which an organisation canuse to improve their operationsand performance. These includethe Business Excellence Model;the Balanced Scorecard; StrengthsWeaknesses Opportunities Threats(S.W.O.T); Physical EconomicSocial Technological (P.E.S.T.)analysis. The use of these willdepend on the size, nature andexperience or preference of yourorganisation. The organisations inthe Useful Contacts list canprovide guidance on these,however the key is to have an

agreed method by which you canplan ahead to ensure you fulfilyour agreed objectives and delivergood services.

2.6 Conclusion

Once the Strategic Plan andBusiness Plan is written andagreed by the ManagementCommittee it is vital that it isregularly monitored and revised asnecessary. A key aspect of this isthe setting of targets which areclear, realistic and can bemeasured.

If revisions are made the Plan mayneed to be rolled forward as aconsequence, lengthening theoriginal timescales established. Itis also critical that theorganisation implements atimetable and process formonitoring performance againstthe plan including regular reportingto the management committee.

2.7 Planning Checklist

1. Agree who will be involved in developing the strategic plan:

• Board members.

• Managers.

• Staff.

• Volunteers.

• Service Users.

2. Clarify the organisation’s purpose and mission:

• What is the overall purpose of the organisation?

• What needs are we meeting?

• What are the broad aims of the organisation?

• What are the organisation’s goals?

• What is the organisation’s ethos?

• Is there a shared understanding of these?

3. Gather information – what’s happening inside and outside the organisation:

• Do our services meet the needs of people using them?

• Have their needs changed or are they changing?

• What are we doing well, what could be improved, and how?

• What other services are needed?

• Are other organisations offering similar services?

• How does our service link with other organisations?

• What are the relevant funding programmes?

• Are there any relevant Government policy developments that mayaffect our work?

• Are there any legislative changes that may affect our work?

4. Decide the strategic direction:

• What services will we continue to provide?

• Should we develop any new services?

• What are our priorities?

• What work should we stop doing?


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5. Develop plans to achieve the strategy:

• Are there clear objectives and targets for each element of the servicebeing offered?

• What resources do we need to deliver the service?

• What information do we need to gather to show that targets are being met?

• How will we ensure a high quality service is offered?

6. Make sure the plan is achievable:

• How much will it all cost?

• How will it be paid for?

• What additional funds are needed and how will they be secured?

• What is the timescale?

• What training do people need to ensure that the work can be delivered?

7. Agree the programme of work:

• What are the key tasks?

• Who will do the work?

• What are the deadlines?

• What are the targets?

• What resources do we need?

8. Use the plan:

• To prepare progress report to the management committee comparing

activity and progress to targets.

• As a fundraising tool.

• Check that the work is going according to plan.

• Identify any issues that need to be dealt with.

• Carry out regular monitoring and evaluation.

• Agree any changes needed.


Useful Contacts/Sources of Information:

NICVA, 61 Duncairn Gardens, Belfast BT15 2GB,Tel 028 9087 7777www.nicva.org; www.grant-tracker.orgwww.communityni.org

NICVA Management Development Programme

Enterprise Northern Ireland, Aghanloo Industrial Estate, Aghanloo Road,Limavady BT49 0HE,Tel 7776 3555www.enterpriseni.com

Local Banks www.cobwebinfo.com(have templates for business plans)

Social Economy Agency, Units 15 & 16, Rath Mor Centre, Blighs Lane,Londonderry, BT48 0LZ,Tel 028 7137 1733www.socialeconomynetwork.org

Rural Community Network, 38A Old Town Street, Cookstown, BT80 8EFTel 028 8676 6670www.ruralcommunitynetwork.org

Invest NI Invest NI, Community Business Unit, Upper Galwally, Belfast, BT8 6TB, Tel 9023 9090www.investni.com/sab-businessplan.pdfwww.investni.com(Guidance on business planning)

Volunteer Development Agency “Signposting Directory for managementcommittees” – an on-line guide to over 75organisations across NI that provide a range ofsupport, information and training for voluntarymanagement committees. Contact the on tel: 028 9023 6100 or search on-line at www.volunteering-ni.org/signposting

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3 RISK MANAGEMENT

3.1 Introduction

This chapter is linked closely tothe planning process. The use ofrisk management helps identifyand manage issues which mayhinder you achieving the targetsset in your business plan. Allorganisations including voluntaryand community sector bodies mustdecide on how they wish tomanage the risks which they mayface in order to ensure that theyachieve their objectives andimprove governance arrangements,whilst maintaining organisationaleffectiveness.

3.2 What is Risk?

Risk can be defined as the chanceof something adverse happeningthat will have an effect on theachievement of objectives. It ismeasured in terms of impact andlikelihood.

Risk in itself is not a bad thing butthe possible negativeconsequences of risk must bebalanced against the need for aparticular activity, programme,service and the organisation’sability to deal effectively andproportionately with the risk.

Any form of innovation requiresrisk taking and Governmentsupports innovation. This isreflected in The Pathways forChange Publication which states:‘We need to ensure a culture of riskmanagement and innovation thatsupports organisations willing totake risks and innovate in newareas of work or with hard to reachgroups’.

3.3 What is Risk Management?

Risk management is a way ofexamining all manner of riskswhich may impact negatively on anorganisation’s day to dayactivities. Used effectively as atool, risk management should helpan organisation identify potentialrisks and decide whethersatisfactory controls orprecautions are in place or needto be developed in order tominimise the effects of these riskson the organisation.

Risk management is an integraland vital part of projectmanagement and provides aframework which allows aManagement Committee to:

• Identify the actual and potentialrisks (‘the what if’s’) that applyto their organisation;

• Assess these risks in terms oflikelihood and impact (how dothe consequences of aparticular risk affect theorganisation, the individuals whowork for it and the delivery ofprogrammes and services);

• Make decisions about how torespond to the risks they face, (what is the strength of existingcontrols, are resources properlymanaged, are the controlsproportional to the risk and offerreasonable assurance and valuefor money);

• Regularly monitor and reviewidentified risks and the controlsin place, (consider risksassociated with organisationaland/or operational changes).


3.4 How it works

Risk management is not a “one-offevent”, but rather it involvescontinuous monitoring andassessment particularly if there isany significant change which mayintroduce additional risk. Regularreports should be prepared andpresented to the managementcommittee, who should takeappropriate action wherenecessary to manage anyemerging risks. It is good practiceto coordinate reporting on risk withplanning reports.

There needs to be communicationwith staff at all levels to obtaintheir views and ensureresponsibilities are understoodand accepted and action is takenas required.

Risk assessment must be suitableand sufficient and provideassurance that all reasonablecontrols/precautions have beentaken so that the risk to theorganisation is minimised. It isaccepted that the system of riskmanagement cannot be expectedto fully eliminate risk, this wouldbe too expensive, but rathershould show that risks areadequately controlled and areregularly reviewed and revised.

3.5 Assessing risk

A straightforward method ofassessing risk is as follows:

Step 1 – consider if the chance ofthe risk (number of incidents)occurring is high, medium or low.

Step 2 – consider if the impact (interms of exposure/loss to theorganisation’s objectives) of therisk occurring is high, medium orlow.

Step 3 – determine the overallrating for a particular risk usingthe Risk Template attached at theend of this section. Use theexample below as a guide.

Example:

An organisation has receivedfunding for the provision of childcare facilities to enable singleparents to return to work. A shortage of adequately screenedor qualified staff was identified as aresult of a benchmarking exercise,against statutory requirements,which could mean the projecthaving to close. The loss of theservice would have a severe impacton the people depending on it. It would also have a significantimpact on the organisation’sfinances, on its service to thecommunity and on its reputation. It would also impact on itsreputation with other funders. The likelihood of the project closingis high and the impact of theclosure is also high. Therefore theoverall rating is high and highlightsthe need for urgent action.

3.6 Risk Management Checklist

The checklist below sets out the key components in the process:

Identify the key functions and activities of the organisation

Has the management committee identified all of the key activities, processesand programmes which it operates or delivers?

Identify Risks

Has the management committee determined which of the organisation’sactivities are at risk and from what source? Some risks include:

• Financial Risks – has the organisation sufficient resources, has it goodsystems of financial control and are its systems vulnerable to fraud andabuse. (See checklists under Chapters 5 and 6).

• People or Human Risks – does the organisation have sufficient people withthe right skills to do what it wants to do.

• Reputation Risks – would the organisation lose standing in its community if itfailed to deliver key services/activities.

• External Risks – would a change in Government, the political and economicenvironment affect the organisation?

• Information Risks – does the organisation have enough information onactivities to enable the Management Committee to manage and control theorganisation’s operation?

• Information Technology – is the organisation aware of the risks to itshardware and software e.g. theft of information, hacking, viruses, security,and insurance.

Assess Risks

Has the management committee considered the likelihood and impact of anidentified risk occurring?

• Assigned a rating of high, medium or low to each of the identified risks tokey areas. In some projects risks are assessed only once during initialproject planning, others require continuous risk assessment in all phases ofa project.

• Recorded the findings on some form of risk table/chart (Risk Profile) todisplay the results of the exercise. Generally priority is given to riskswhich have been allocated a high rating, however, the organisation willneed to balance and weigh all of the risks against statutory andorganisational constraints.


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RISK MANAGEMENT TEMPLATE

High Medium Risk High Risk High Risk

Medium Impact Low Risk Medium Risk High Risk

Low Low Risk Low Risk Medium Risk

Likelihood

Low Medium High


At the end of this section is a straightforward example of how to apply a high,medium or low rating to a risk. There is also an example of a risk profile whichyou may find helpful to refer to, alternatively you may prefer to make up your own.

Evaluate controls

Has the management committee taken steps to avoid, contain or reduce themajor risks which have been identified:

• Examined adequacy of existing controls, e.g. supervisory or managementchecks/ planning schedules/ provision of staff training/securingadequate funding.

• Assessed if the cost of reducing the risk is proportionate to the impact of therisk on the organisation

• Introduced appropriate controls where necessary

• Allocated responsibility for particular actions to a specific individual.

Monitoring and Effectiveness

Has the management committee agreed to review and if necessary revise the RiskAssessment Profile at least annually to make sure that the controls/precautionsare still working effectively and to take account of changes to current practice orthe introduction of new activities/programmes.


N.B The entries in the risk register are for illustration only.

PROFORMA RISK REGISTER

Risk Likelihood/ Control Action By whom Action by NextImpact required date review

date

Inadequate High/high Planning/ Training Project immediatestaff cover scheduling needs manager

/rotas analysis/Appropriatetraining

Theft of High/high Segregationpetty cash of duties

regularreconciliation/petty cashbox keptsecure



Charity Commission www.charity-commission.gov.uk/publications

NCVO Publication: Regents Wharf, 8 All Saints Street, London N1 9RL Tel 02077136161www.ncvo-vol.org.uk

Managing Risk – Guidelines for Medium-sized organisations

HM Treasury January 2001Management of RiskA Strategic Overview – Includes supplementfor smaller bodieswww.hm-treasury.gov.uk


NICVA advice note on Risk Assessment

Rural Community Network, 38A Oldtown Street, Cookstown, BT80 8EFTel 028 8676 6670www.ruralcommunitynetwork.org

Community Change, Philips House, York Street, Belfast, BT15 1ABTel 028 9023 2587www.communitychange-ni.org

DHSSPS www.dhsspsni.gov.uk/childcare/child-protection/povca.asp(Protection of Children and Vulnerable Adults)

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4.1 Introduction

Governance is the process bywhich a governing body (thetrustees, board,management/executivecommittee, council of management– most commonly used term is‘management committee’ – andwill be used for the purposes ofthis publication) ensures that anorganisation is effectively andproperly run.

The management committee ismade up of a group of peopleultimately accountable for theactivities of a charity or voluntaryand community organisation; formaking the decisions about theoverall purpose and direction of

the organisation; for ensuring thatthe money and property areproperly used (and managed) tomeet the aims and objectives ofthe organisation; for ensuring thatthe organisation does everythingwithin the law and abides by itsgoverning instrument orconstitution and its agreedprocedures; is accountable to itsstakeholders and finally to managestaff and volunteers to best carryout the organisation’s services.

This Chapter provides someguidance on good practice andpresents details of organisationsthat provide training, informationand support on all aspects ofgood governance.

4 GOVERNANCE & ACCOUNTABILITY

2. Based on Nolan Committee’s 7 Principles of Public Life

7 Principles of Good Governance2

SelflessnessDecisions should be taken in the interests of the organisation, not to the benefitof the person or their family, friends, other organisation etc

OpennessInformation should be shared, and reasons for decisions made clear (whilehandling confidential information with due care)

IntegrityManagement committee members should never put themselves under anyobligation to outside individuals or organisations which might influence their role

ObjectivityIn carrying out their role, management committee should make decisionscompletely on merit, regarding awarding contracts, appointing staff,recommending benefits and other areas of decision making

AccountabilityManagement committees have a duty to comply with the law, and areaccountable for decisions and actions to the funders, public and service users

HonestyManagement committee members have a duty to disclose any private orpersonal interests which may present a conflict of interest, and take steps toresolve conflict to the benefit of the organisation

LeadershipAll principles should be supported through leadership, while respecting the roleof senior staff.


4.2 Roles & Responsibilities ofManagement Committeemembers

This document does not detail allthe responsibilities that you willundertake as a ManagementCommittee member. You will notbe expected to know everything -the ideal committee shouldconsist of people whose expertiseand knowledge complements eachother. However to be as effectiveas possible on the committee, youwill need to be familiar with manyareas of responsibility:

• Determining the organisation’smission and vision. Only theManagementCommittee/associationmembers have the power tocreate and change theorganisation’s mission andvision.

• Ensuring the organisation hasclear strategic objectives andpriorities for its work and clearpolicies and procedures for thecarrying out of and monitoring ofthe work;

• Ensuring that the organisationhas adequate resources(people, expertise, money, time,equipment etc) to carry out itswork;

• Ensuring the organisation’smoney, equipment, property andother assets are safeguarded;

• Ensuring that staff/volunteersare properly recruited, managedand supported;

• Ensuring that the organisationdevelops and maintainsappropriate relationshipsinternally and externally; and

• Ensuring that the organisationcomplies with the law, with theconditions of contracts,agreements, and with therequirements of its governingdocument (constitution,memorandum and articles ofassociation etc).

• Ensure that the organisationreports regularly to its membersthrough an AGM, its annualreport and other publications.

Governance is not about doing: itis about ensuring things are done.

In a small organisation, it isalmost inevitable thatmanagement committee memberswill be involved not only in makingdecisions and monitoring work, butin doing some or all of that work.

In order to achieve goodgovernance, the managementcommittee must be concernedwith the systems by which theirorganisation is directed andcontrolled, i.e. structures;processes for decision making;accountability; policies and codesof conduct. The structure andprocesses used to governvoluntary and communityorganisations have a strongimpact on the services that areprovided.


For example:

Where the management committeefails to discharge its duty ofleadership, this role is left to themanager. A manager may be tooclosely focused on operationalissues or unable to distancehimself/herself from staff interests.As a result, they may not providethe management committee withthe strategic analysis and theinformation they require in order todecide priorities for theorganisation. This can lead to theorganisation drifting away from itsoriginal purpose with consequentlack of understanding of its keyfunctions both internally andexternally.

4.3 Structures

The structure of an organisationrefers to both the legal structureand Committee structure within anorganisation. All organisationshave a legal structure and themost common types for voluntaryorganisations are anUnincorporated Association; aCompany Limited by Guarantee; aTrust and an Industrial andProvident Society.

4.4 Decision-making

Processes for decision-makingmust be in place, recorded, andfollowed. These will relate to: 1)quorum at a meeting (number ofcommittee members required to bepresent before business can betransacted); 2) majority decisions;and 3) sub-committees havingdelegated authority,establishing/maintaining reporting

mechanisms to full committee, orseeking ratification from the fullcommittee. A structure of standingorders may help in this regard.

4.5 Accountability

The management committee isaccountable to a number ofgroups: their membership,stakeholders, customers andfunding agencies. In order to beaccountable, suitable systemsmust be in place and kept up todate. Any staff/sub-committeesmust report to the managementcommittee, who are ultimatelyaccountable for the entireorganisation.

For example:

Where resources are not properlyplanned or managed, there can bea range of negative impacts.Where staff is not properlymanaged, their work will not bemonitored for quality or output.This can lead to the wholeorganisation under-performing andhave consequences for futurefunding. It can also lead to poorstaff/volunteer morale.

Where financial resources are notproperly managed this places theorganisation at increased risk oflosing funding or potential fraud.

Where other resources are notmanaged effectively, theorganisation may find that it doesnot have enough resources toimplement its programme of work,to which it has committed.


4.6 Code of Conduct

All business must be conductedethically and in the interests of theorganisation. A Code of Conductfor the Management Committeeensures high standards andmakes it clear how potentialconflicting interests are to beraised and dealt with. Thisrequires the managementcommittee to adhere to theprinciples of good governance.

For Example:

An organisation may have one ormore management committeemembers who are also on othermanagement committee or who areemployed by other organisations.There may be an overlap in someof the activities or fundingapplications. This may present aconflict of interest to that person.He/she should either declare aconflict of interest, or agree not toshare the information from oneorganisation with the other, orshould leave the meeting for thatdiscussion/decision.

4.7 Staff

Staff can be both anorganisation’s greatest resourcesand greatest expenditure item.

• Recruitment and employment ofstaff should follow normalHuman Resource principles.

• Management committee shouldreview salaries on an annualbasis.

• Salaries should be based on arecognised scale for the jobrelative to the available budgetof the organisation. The use ofNJC scales is widely used as astandard within the voluntary &community sector.


4.8 Good Governance & Accountability Checklist

Organisational Structures and Processes

ACCOUNTABILITY

Statutory Accountability

Has the management committee established effective arrangements to ensurecompliance with all applicable statutes and regulations, and other relevantstatements of best practice e.g. health & safety, fair employment, child protection(if applicable) etc?

Accountability for Public Money

Has the management committee established appropriate arrangements to ensurethat all funds are:

• Properly safeguarded?

• Used economically, efficiently and effectively?

• Used in accordance with the statutory or other authorities that governs their use?

Communication with Stakeholders (those with an interest in the organisation'sactivity, processes e.g. funders, service users etc)

Has the management committee established:

• Clear channels of communication with the organisation’s stakeholders?

• Appropriate processes to ensure that such channels operate effectively inpractice?

STRUCTURES

Does the management committee:

• Report publicly the processes for making appointments to the managementcommittee?

• Make publicly available the names of all management committee members.together with their relevant other interests?

Where the organisation is responsible for making appointments to themanagement committee, has it established a process to ensure that suchappointments/elections are made:

• In accordance with specified criteria?

• On the basis of merit and the individual's ability to carry out a defined rolewithin the organisation?

Are the key roles of the committee formally defined in writing? Have committeemembers been given any induction on becoming members?

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Are management committee members:

• Free from any other relationships which may materially interfere withexercising an independent judgement?

Are the duties, terms of office, remuneration for expenses incurred and itsreview, of the management committee defined clearly?

Are processes in place and followed in relation to:

• Quorum (agreed minimum number of committee members required to conductbusiness) at a meeting?

• Majority decisions?

• Sub-committees having delegated authority, written terms of reference,reporting mechanisms or seeking ratification from full committee?

• Monitoring potential conflicts of interest?

ROLES AND RESPONSIBILITIES

Does the management committee:

• Meet regularly?

• Retain full and effective control over the organisation? Monitor the senior staff?

Has the management committee clearly understood management processes for:

• Policy development, implementation and review?

• Decision-making, monitoring, control and reporting?

Has the management committee established formal procedural and financialregulations to govern the conduct of its business?

Has the management committee established appropriate arrangements to ensurethat it has access to all such relevant information, advice and resources as isnecessary to enable it to carry out its role effectively?

CODE OF CONDUCT

Has the management committee developed a formal code of conduct defining thestandards of personal behaviour, to which individual management committeemembers and all employees of the body are required to subscribe?

Has the management committee established appropriate mechanisms to ensurethat any prejudice, bias or conflicts of interest among decision makers is dealt with?

WATCHDOG

Consideration may need to be given to assigning responsibility to an individualwithin the organisation for overseeing adherence to the principles above.

FINANCIAL REPORTING AND INTERNAL CONTROLS

See checklist under Chapter Five – Financial Management


Sources of Useful contacts/Information

Legal, Committee structures, trustee duties


Committee roles and responsibilities


Volunteer Development Agency, 4th Floor, 58 Howard Street, Belfast BT1 6PGTel 028 9023 6100;www.volunteering-ni.org

The Workers Educational 1 Fitzwilliam Street, Belfast BT9 1AW Association Tel: 028 90 329718

Other Useful Contacts/Sources of Information

DSD Charities Branch, Voluntary and Community Unit, DSD, Lighthouse Building, Gasworks Business Park, Ormeau Road, Belfast, BT7 2JBTel 028 9082 9412www.dsdni.gov.uk

Voluntary and Community Unit, as above


Rural Community Network, 38A Oldtown Street, Cookstown, BT80 8EFTel 028 8676 6670www.ruralcommunitynetwork.org

NCVO, Regents Wharf, 8 All Saints Street,London N1 9RLTel 02077136161; www.ncvo-vol.org.uk

Charity Commission, www.charitycommission.gov.uk

Co-operatives UK, Tel: 0161 246 2920 www.gandp.org.ukemail: g&[email protected]

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5.1 Responsibilities of theManagement Committee

While staff may be employed tocarry out day-to-day operationalfinancial duties, the responsibilityfor managing the organisation’sfinances is retained by theManagement Committee. Themanagement committee mustensure all financial and otherresources are properly used tomeet the aims and objectives ofthe organisation. Whereverpossible it is considered goodpractice to clearly define individualresponsibility for financial andaccounting systems.

Management of the organisation’sfinances includes:

• Securing the necessary incometo allow the organisation toperform its planned activitiesand compliance with anyconditions attached to theincome derived;

• Establishing and operating abudget and monitoring system ofreporting;

• Obtaining value for money in alltransactions;

• Ensuring all expenditure is in theinterests of the organisation andall monies owed are received.

• Ensuring annual accounts areprepared in line with appropriateguidelines.

5.2 Financial Procedures

In order to manage effectively thefinancial environment of anorganisation or group, it is goodpractice for an organisation to

produce a detailed set of financialprocedures. Financial proceduresare a set of instructions that anystakeholder, including newmembers of the committee orstaff, can use to find out exactly:

• What tasks need to be done;

• Who will do these tasks;

• How these tasks will be done;and

• Who will ensure the tasks aredone properly.

It is important that the agreedfinancial procedures be writtendown so that there is clarity aboutwhat is required. The managementcommittee should ensure that allstaff and committee members areaware from the outset of what isexpected of them in this regard.

The financial tasks to beperformed include:

• Budgeting;

• Recording of financialtransactions;

• Reporting of budgetary/financialperformance;

• Planning & decision-making.

• Forecasting

5.3 Income

An organisation may obtain incomefrom a number of sources, thesecan include;

• Government Department/localauthority grants for projects orprogramme activity;

5 FINANCIAL MANAGEMENT


• European Union grants;

• Funding from independenttrusts;

• Delivery of services under acontract;

• Self generated through fundraising activity;

• Donations or membership fees

• Commercial activities

It is important that these areproperly managed in accordancewith the requirements of thefunder. Some may specify that aseparate bank account is openedto hold the money, but this is notalways a requirement ofGovernment. What is important isthat the money can be clearly andeasily identified from receipt toexpenditure. This can be donethrough a system of cost codingagreed with the relevant part ofGovernment providing the grant.Advice on how to set this up canbe found from the organisations inthe Useful Contacts list at the endof this chapter. It is only wherethis system is not in place thatGovernment or other funders willinsist on separate bank accountsfor each grant.

It is important to ensure that allincome is recorded, particularlycash, which can be a high riskarea. As a general rule it isconsidered good practice todeposit any cash raised into therelevant bank account at theearliest opportunity followingreceipt.

5.4 Budgeting

The budget is like a financial mapand is an integral part of bothbusiness planning and financialmanagement processes. In thebudget, the planned activities ofthe group are translated intofinancial terms. When consideringfinances, it is easy to concentrateon what has already happened.However, the important task ofplanning and making decisions forthe future must not be overlooked.It is at this stage that Committeemembers have most opportunity tocontribute to achieving theirdesired outcomes for theorganisation.

The budgeting process involvesseveral key steps:

• As part of the Planning process,decide what the organisationintends to do during the period(usually 1-3 years);

• Work out what resources arerequired to achieve this (e.g.staff, premises, equipment etc.);

• Determine how much theresources will cost;

• Balance these costs againstexisting funding to find out howmuch extra funding would needto be raised;

• Set a realistic budget for theperiod concerned.

There are two basic areas ofspend by organisations in thesector: project/programmeexpenditure and overhead/runningcosts expenditure. These areobviously interrelated, but itshould be noted that some


Government funders will only coverthose costs which directly relate tothe project they are interested in.In these situations the letter ofoffer will stipulate that the grantmust not be used for overheads.These factors should also informthe budget process so as not tounderestimate running costs.Government acknowledges thatvoluntary and communityorganisations must be able toinclude full overhead costs relatingto delivery of a service. It is theresponsibility of the organisationhowever to ensure that fulloverhead costs are included in anybid to deliver these services.

The benefits of the budget processare that the ManagementCommittee will have:

• A clear financial route forachieving the organisation’saims and targets

• Control of the organisation’sexpenditure

• The ability to monitor incomeand expenditure throughout thebudget period

The essence of effective budgetingis to establish individualresponsibility for budgets, adefined and timetabled system ofreporting against budget andvariance analysis to establishaction arising.

5.5 The budget as a financialmanagement tool

Having developed the budget, thegroup can incorporate it into theirfinancial recording & reportingsystem to produce useful

management information for thecommittee. This will help the groupto work out how much they shouldbe spending, how much they havealready spent and how much theyhave left to spend, for any projectand cost category.

By keeping this under review, thegroup will become aware if anycategory of spend will be underspent or overspent and consideroptions for either reducing spendor increasing income.

5.6 Recording Financial Information

It is important that information isrecorded in order to monitorexpenditure over the course of theyear. The basis of any financialsystem is the recording system.Whether it is a manual,spreadsheet or an accountingsoftware system, the intention isto record all transactions and tobe able to understand what theymean. For many groups, a manualcash book system is adequate.For larger organisations morecomplex systems may beappropriate. Whatever system isused, all groups should be able tocarry out bank reconciliations,record assets they have acquired(computers, photocopiers etc.) andensure that the payroll or salarypayments are properly managed.

Accounting records are essentialbecause the group needs to:

• Show and explain financialtransactions;

• Show day to day entries for allmonies received or spent,showing source or destination offunds;


• Keep records of assets &liabilities;

• Show group’s financial positionon any particular date in thepast;

• Keep records for six years afterthe end of the financial year towhich they relate (or for EUfunded programmes, six yearsafter the funded project hasbeen completed).

The recording system mustproduce a record that is bothcomplete and accurate – i.e. alltransactions are included and arearithmetically correct. Auditrequirements will, to a largeextent, rely on the effectiveness ofthese records.

As well as showing how much waspaid and to whom it was paid, theorganisation’s records shouldshow what the money has beenspent on. This is easy to do if thegroup uses a cash book/chequejournal with columns across thepage. It is important that thebudget headings agreed for eachgrant are used as the columnheadings.

By using columns with appropriateheadings, the group can show:

• How much was spent;

• Who was paid;

• When it was paid;

• What the cheque number was;

• What it was spent on.

If the system can do this, thenusers of the records will haveconfidence that an adequate audit

trail is being produced so thatanyone can trace any moniesentering or leaving the system andcan understand the reasons whymoney was received or spent.

As well as maintaining clearaccounting records, the group willneed a clear and efficient filingsystem. A simple filing system thatworks for many groups includesthe following:

• All invoices received are filed inan unpaid invoices file;

• Once a month these unpaidinvoices are processed forpayment;

• Invoices that have been paid aretransferred from the unpaid fileto a paid file.

The paid invoices may be filed incheque number order (the chequenumbers used to pay the invoicesare recorded on the invoice). Thismakes it easier for auditors andother interested parties to traceinvoices from your records.

5.7 Types of record typically used bysmall groups

For many smaller groups, theirrecording system may becomposed of the following:

• Cash book for each bankaccount.

• File for paid invoices, marking onthem the number of the chequeused to pay invoice, date paid,by whom approved and filed inorder of the cheque numberused to pay the invoice.

• File for unpaid invoices.


• File for payment advice notes(e.g. received from funder) orincome related correspondence.

• Filing system for correspondencerelating to grants and donationsreceived from regular funders.

• Petty cash book – file for pettycash vouchers.

5.8 Monitoring & Reporting

Budgeting does not end when theinitial budget is set. Throughoutthe year, planned expendituremust be compared against actualspend. Information gatheredthrough the recording proceduresshould be used to preparefinancial reports that give insightinto the activity of theorganisation.

The Management Committeeshould receive regular financialreports. For small budgets, andwhere risks are lower, thesereports should be presented tothe Management Committee on atleast a quarterly basis. With largerbudgets, or where risks have beenassessed as being high, a monthlyreport may be more prudent.

The Committee should not merely‘rubber stamp’ expenditure. Theyneed to be clear about how anyexpenditure relates to desirableoutcomes and activities. It isimportant that the committeeunderstand why any significantdeviation from the budget occurredand are able to implement anyrequired remedial action.

On a practical note, financialreports are easier to understand ifthey are presented with a simple

set of notes which highlight andanalyse significant matters, ratherthan just a set of figures with noaid to interpretation. Theinformation presented should beaccurate, relevant and timely.

The financial reports that anorganisation may produce include:

• Original budgets for each projectand for the overall organisation

• Comparisons between thebudgeted and actual income andexpenditure for the period inquestion

• The current financial positionrelating to any particular projector activity (e.g. the amount ofgrant awarded, the amountreceived so far, the amountspent, the amount still to spend,projected over- or under-spend)

• The current overall financialposition of the organisation (e.g. amounts held in each bankaccount, amounts owed by theorganisation, amounts owed tothe organisation).

• The projected future financialposition at, for example, theyear end (how much and whenmonies are expected to bereceived in the period, howmuch will be spent, how muchwill be owed by or owed to theorganisation at the year end,how much cash the organisationwill have in each bank accounton an accruals basis).

• Monthly bank reconciliation.


5.9 Value for Money

Ensuring best value for money is akey factor when making anyspending decisions whether that iswithin government or within thesector. It is essential to make surethat the organisation is notspending more money than isnecessary to achieve its aims. The process of analysing spendingproposals to assess value formoney and justify expenditure isknown as economic appraisal.

The principles of appraisal arestraightforward and there arethree basic elements:

• Identifying other possibleapproaches which may achievesimilar results

• Wherever feasible, givingmonetary values to all impactsof proposals

• Assessing the costs andbenefits of the different options

For voluntary and communityorganisations, this process isoften linked to a grant applicationto fund, in part or in full, acommunity project. Applicationforms for grant funding willnormally gather enoughinformation for the funderconcerned be they Government orindependent to make a judgementon the value for money (VFM) ofthe proposal. Whether anorganisation is seeking to attractfunding or not, these principlesshould be borne in mind whendeciding whether to pursue aparticular option.

It is important to make it clearthat the amount of effortexpended in assessing the valuefor money of spending proposalsshould be proportionate to theoverall cost of the proposal.Proposals of £250,000 do notrequire the same effort andcontent as those of £2,000,000.

Specific guidance on the appraisalof proposals up to £250,000 canbe obtained from GovernmentDepartments as required. In thecase of very small expenditure(£10,000 or less), the appraisal ofoptions should be a relativelysimple procedure that, takingaccount of the above principles,notes the costs and benefits of 2or 3 options and gives a reasonfor the preferred option. Thisrationale should be placed on file.

5.10 Annual Accounts

Whilst acknowledging that themanagement of the organisation’sfinances is the responsibility ofthe committee, it is also generallyaccepted good practice for thegroup to produce an Annual Reportthat includes Audited orIndependently Examined AnnualAccounts. Bodies which are legallyestablished as charities or LimitedCompanies are required toproduce certified Annual Accounts.Indeed, the Inland Revenue, whenassessing a group’s suitability togain recognition as a charity fortax benefit purposes, will requirethe group’s governing document tostate that Audited orIndependently Examined AnnualAccounts will be produced.


The Statement of RecommendedPractice (SORP II), issued by theCharity Commission for England &Wales, provides a format for thepresentation of Annual Accountsthat promotes accountability andtransparency. Grants received asrestricted income, and the relatedexpenditure, are clearly identifiedin Annual Accounts prepared in theSORP II format. Although SORP IIis not, at present, a statutoryrequirement for organisations in NIreland, many local groups arealready receiving grant awards thatdo, as a condition of the grant,require the group to apply theSORP II format to their AnnualAccounts. Where a group appliesSORP II, it is important that theyensure their Auditor/IndependentExaminer is familiar with itsrequirements.

Having appointed anAuditor/Independent Examiner, themanagement committee shouldensure that they receive anengagement letter from theappointed person which will detailthe work to be undertaken andclarify the respectiveresponsibilities of both parties.This could include any work whichis beyond the standard workinvolved in the Audit/IndependentExamination (e.g. reporting onspecific aspects of grant fundedactivity).

It is important that allmanagement committees areaware of, and comply with, whattheir own governing documentrequires in terms of producingAnnual Accounts. For example,where the group’s constitution

states that an Auditor will beappointed at the AGM, it isimportant to ensure that theperson appointed is, in fact, aRegistered Auditor. Where theconstitution states that anIndependent Examiner will beappointed, it is important that thecommittee ensure any personappointed has the necessaryability, qualifications and practicalexperience to carry out acompetent examination. TheCharity Commission has producedguidelines for the selection ofIndependent Examiners (seeCharity Commission website).

5.11 Procurement

Voluntary and Community Sectororganisations that are funded forthe most part from the publicsector are usually subject to thelaws and principles governingpublic procurement and as suchshould seek to adopt publicprocurement policy as determinedby the Northern Ireland Executive.organisations in receipt of grantsfrom the public sector for specificpurposes must adhere to theterms and conditions under whichthe grant is awarded which mayinclude conditions relating toprocurement.

• Best Value for Money

Procurement by the organisationof works, supplies and servicesneed to be based on best valuefor money, i.e. the optimumcombination of whole life costand quality (or fitness forpurpose) to meet theorganisations requirements. In


line with value for moneyguidance, the principle ofappraisal should be employedbefore procurement decisionsare taken (see 5.9).

• Competition

As a general rule, contracts forsupply of goods or servicesshould be placed on acompetitive basis and tendersaccepted from suppliers whoprovide best value for moneyoverall and this will be assessedthrough the monitoringarrangements agreed at theaward of grant aid stage. Beforeengaging in single-tendercontracts advice should besought from the fundingDepartment or body and theorganisation should as part ofits monitoring report to thefunding Department at the endof financial year detail anycontracts in which competitivetendering was not employed.

5.12 Summary

Financial procedures clarify:

• Tasks that need to be done;

• Who will do these tasks;

• Who will ensure the tasks aredone properly.

Budgeting, the group needs toknow

• How much their activities willcost;

• What funds will pay for theseactivities;

• How their actual spendcompares to the budgetedspend.

Financial record keeping;

• Show day to day entries for allmonies received or spent,showing source or destination offunds;

• Records should be complete andaccurate, producing clear audittrail.

Financial reports should;

• Show any variations betweenactual and budgeted income &expenditure;

• Include a narrative to explainsignificant variations.

Planning & decision-making;

• Ensure the committee’sattention is properly balancedbetween future and pastperformance;

• Requires the financial system toproduce good quality informationfor the committee.


5.13 Financial Checklist

Management Committee

The management committee should take an active part in financial management.

Do they

• Understand their financial responsibilities?

• Maintain a clear distinction between the financial responsibilities and duties of the Committee and of the staff?

• Have a 3 or 5 year strategic plan for the group? Is there a financial plan tocomplement this strategic plan – e.g. proposed sources of income, projectedIncome & Expenditure a/c’s, projected Balance Sheets and cash flow estimates?

• Have the skills, experience and resources to effectively carry out theirfinancial responsibilities?

• Have a finance sub-committee?

• Rely on the treasurer and/or worker to do all the financial work?

• Have a useful working relationship with their auditors/independent examiners?

• Understand the financial structure of the group – sources of income, restricted & unrestricted funds?

• Review, discuss, understand and approve all organisational budgets beforeany contracts are entered into on the basis of these budgets?

• Receive regular reports of actual income and expenditure for each project andcompare these to the relevant approved budgets?

• Consider the cash flow – e.g. implications of delayed grant installments?

• Understand how overheads are apportioned – e.g. how is the cost of items likerent, insurance, phone, stationery & postage split between different projects?

• Have a recognised procedure for remedial action where the received reportsindicate that such action is required?

Transparency & Accountability

Can the group show:

• How much money has been received in any given period.

• Who this money was received from.

• How much has been spent and what has it been spent on.

• That grant monies have only been spent on items agreed by the relevant funder.

Is the group confident that their financial recording system is:

• Complete, so that all transactions are recorded.

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• Accurate, so that information gathered from the system will be reliable.

• Able to produce relevant and timely reports.

• Are financial records easily understood, so that any interested bodies cantrace transactions and calculate cash, balances and other assets andliabilities?

Is there an effective audit trail?

For example, can payments to suppliers be traced through the system from:

• An initial purchase order to the supplier.

• The receipt of the supplies – delivery note.

• The receipt of the purchase invoice.

• Authorisation and payment of the invoice.

• A bank statement showing the relevant cheque.

Can the group match all expenditure to the appropriate source of income?

For example,

• Is there a separate bank account for each significant source of income?

• Is there a separate ledger/cheque journal for each grant with headings forexpenditure which match the budget for the grant as agreed by the funder?

• Is there a system that ensures that all expenditure on project activity can berelated to these agreed budget headings?

• Is there a system for recording how much has been spent on each budgetheading and how much remains to be spent?

Segregation of Duties

Has the group considered whether the current system could be manipulated by acommittee member or employee to:

• Collude with others to provide invoices for goods or services that have notbeen received by the organisation.

• Prepare payment dishonestly, for example by completing a cheque stub as ifpaying an apparently legitimate expense whilst completing the actual chequewith their name.

• Conceal mail which might alert the committee to fraudulent practice.

• Prepare misleading financial reports which distort the actual position. For example, the employee might falsify the book-keeping records to hide the theft of monies.

Has the committee identified which tasks need to be completed and who willdo them?

For example, is there a sensible segregation of the following tasks?


• Placing orders for goods and services.

• Physical receipt of goods.

• Receipt of invoices.

• Processing of invoices.

• Preparation of payment for invoices.

• Authorisation of payment.

• Signing cheques.

• Receipt of mail (including bank statements).

• Recording financial transactions.

• Preparing bank reconciliations.

• Witnessing bank reconciliations.

• Preparing monitoring reports for funders.

• Preparing financial reports to the committee.

Financial Procedures

Does the group have a set of written financial procedures?

Are the procedures adequate (consider accountability, audit trail, segregation ofduties and recording, reporting and decision making tasks)

Do they ensure:

• Only legitimate expenses are incurred.

• Each expense is scrutinised for accuracy and matched to the relevant sourceof income.

• Expenditure is properly approved and authorised for payment.

• Payment is only made to the appropriate people.

• A consistent and transparent audit trail is produced and available for eachpayment.

• A full bank reconciliation is completed on an at least a monthly basis for each bank account.

Does the day to day operation of the finance function follow these procedures?

Are all committee members and relevant staff aware of what these procedures are?

Are procedures reviewed on at least an annual basis?

When was the most recent review?


Useful contacts

Community Change: 028 9023 [email protected].

Invest NI www.investni.com/sub-bookkeeping.pdf

NICVA: 028 9087 7777www.nicva.org

Cash On-line: www.cash-online.org.uk

Community Accountancy Network: www.coammunityaccountancynetwork.org.uk

Charity Finance Director’s Group: www.cfdg.org.uk

Charity Commission forEngland & Wales: www.charitycommission.gov.uk

Policy Unit,Central Procurement Directorate Level 3, Causeway Exchange,

1-7, Bedford Street,BelfastBT2 7EGTel: (028) 90823187www.cpdni.gov.uk


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6.1 Introduction

Government expects organisationsreceiving and administering publicfunds to have in place safeguardsto minimise the risk of fraud orfinancial irregularity. Fraud isanother risk to the organisation,and community organisations willdeal with it in the same way asthey plan for and manage otherrisks3.

6.2 What is Fraud?

Fraud can be defined as the use ofdeception with the intention ofgaining an advantage, avoiding anobligation, or causing loss toanother party.

Fraud covers a variety of activitiesranging from minor offences, suchas misappropriation of stationery,to more serious crimes such asfalse accounting, misuse of fundsor resources, supply of falseinformation and collusion. Theseare all considered in law to becriminal offences. Attempted fraudis also a serious crime, and issubject to the same legalpenalties as actual fraud.

6.3 How and Why Fraud Occurs

Fraud is made possible by poorinternal systems and controls andwhere a person has motive andopportunity. Some of these, e.g.segregation of duties have beencovered in Chapter 5.

6.4 Fraud Risk Management

A comprehensive approach tomanaging the risk of fraudincludes knowing where the risk offraud can occur, ensuringadequate internal controls are inplace and actively encouraging ananti – fraud culture within theorganisation.

Assessing fraud risk is a vitalelement in the prevention anddetection of fraud. It enablesmanagement to understand thecircumstances and factors underwhich fraud may occur, such asthe lack of verification, lack ofsegregation of duties, failure tocomply with internal controls andinadequate supervision. Theprocess which is adopted shouldtherefore be appropriate to andreflect the particular requirementsof the organisation. The riskassessment process is covered inmore detail in Chapter 3.

An organisation should be awarethat the promotion of an anti-fraudculture is one of the mostimportant ways to prevent andreduce fraud. Methods ofcommunicating the organisation’sattitude to fraud and promotingfraud awareness include theintroduction of a Code of Ethics, aFraud Policy Statement and aFraud Response Plan:

6 FRAUD AND IRREGULARITY

3. See Chapter 3. – Risk Management


Code of Ethics – will inform themanagement committee,employees and volunteers onaspects such as declaring conflictsof interest, compliance with theorganisation’s rules and reportingsuspicions of fraud or wrongdoing.

Fraud Policy Statement – willcommunicate to personnel withinthe organisation as well as externalbodies who provide services to theorganisation that fraud will not betolerated and include the principlesand processes which exist withinthe organisation to reduce the riskof fraud.

Fraud Response Plan – will outlinethe steps to be taken in the eventof a fraud and provide guidance onhow the fraud will be investigated,how to secure evidence, who tocontact for advice and how to dealwith staff under suspicion.

It is accepted that smaller bodieswith a less complicatedorganisational/managementstructure and limited resourcesmay wish to consider an approachwhich best reflects its particularcircumstances. An acceptablealternative to the more detailedFraud Response Plan or FraudPolicy Statement, often adopted bylarger bodies, is a simplestatement of intent of commitmentto an anti-fraud culture and to thereporting of all actual andattempted frauds.

It is important that theorganisation fully supports thosestaff who report suspicions offraud or dangerous or illegalactivity, connected with theworkplace. Written guidance onwhere and how to reportsuspicions of fraud or wrongdoinge.g. fraud liaison officer, linemanager, funding body or thePolice, should be provided. Theguidance should also explain thatunder the Public InterestDisclosure (NI) Order 1998 staff(employees) is protected fromdismissal or victimisation formaking disclosures which theybelieve, in good faith to be true. It applies where a malpractice isdisclosed involving: -

A crime or breach of regulatory,administrative or common law;

A miscarriage of justice;

Danger to health and safety;

Damage to the environment;

Unauthorised use of public funds;

Possible fraud and corruption.

While the Order providesprotection for almost all workers,this may not extend to Volunteersand the self employed. Furtheradvice can be obtained from PublicConcern at Work, an independentcharity, which provides free advicefor employees who wish to expressconcerns about fraud or otherserious malpractice.www.pcaw.co.ukTel: 020 7404 6609


6.5 Fraud Risks - Examples

Risks arise from a number ofsources. These include:

Internal Fraud

This is perpetrated by staff orvolunteers within the organisationand is most commonly associatedwith cash and cheque handling,payroll, purchasing role, travel andsubsistence claims and thestealing of assets belonging to theorganisation. The opportunity toconceal an irregularity is increasedif a member of staff also hasaccess to accounting records.

For example:

A community organisation heldregular fund raising eventsthroughout the year. Tickets weresold and monies collected by oneindividual. The money collected wasthen handed over at the end ofeach event, however noreconciliation against tickets wascarried out, and the money was notreceipted or recorded in theincome/expenditure ledger. Thisactivity continued for a period ofone year before a discrepancybetween the sales and the moneycollected was identified. Over aperiod of time it was estimated thatof the total amount of funds raisedin this way only half could beaccounted for. This amounted to aloss of around £1,000.00 to theorganisation.

External Fraud

Individuals and companiesexternal to the organisationperpetrate this type of fraud. Themost common forms are burglary,theft, false invoicing, anddeception and contractor fraud.

For example:

A voluntary community group failedto provide proper purchasingcontrols when it submitted quotesfor funding. Subsequent enquiriesby the funding body discovered thatonly one of the quotes waslegitimate and that the mostexpensive of the quotes had beenfalsely created by a contractor, whohad agreed to assist the group, inorder that his quote would beaccepted. As a result theapplication for funding failed.

Collusion

This type of fraud involves two ormore parties, either internally orexternally, working together. Themost common forms of collusionare related to obtaining quotes forwork, and false invoicing.

For example:

A member of staff had arranged fora contact within a local IT firm tosubmit a fictitious invoice for itemswhich had not actually beenpurchased by the organisation.There was no effective budgetarycontrol over purchases and failureto introduce separation of duties inrespect of authorisation andcounter checking of invoices andpurchases resulted in payments


being sent to accommodationaddresses arranged by the staffmember, who then banked thecheques. The fraud came to lightwhen another member of staffundertook to update the assetsregister and discovered that someof the alleged purchases could notbe located on the premises.

6.6 Indicators/common types ofFraud

An organisation should be awareof any warning signs that mightindicate fraud. Detailed below aresome examples of fraud indicatorsand common types of fraud.

Indicators of Fraud

• Unusual employee behaviour (e.g. a supervisor who opens all incoming mail,refusal to comply with normal rules and practices, fails to take leave,managers by-passing normal procedures, living beyond means).

• Key documents missing(e.g. invoices, contracts).

• Requests to authorise blank cheques.

• Inadequate or no segregation of duties.

• Absence of controls and audit trails.

• Inadequate monitoring to ensure that controls work as intended (periodictesting and evaluation).

• Documentation that is photocopied or lacking essential information.

• Excessive variations to budgets or contracts.

• Bank and ledger reconciliation's are not maintained or cannot be balanced.

• Lack of rotation of duties.

• Large sums held in Petty Cash.


6.7 What To Do When Fraud IsSuspected

Consult the Fraud Response Planwhich should provide clearguidelines on how to deal withsuspected or actual fraud and onthe appropriate action to be takenin relation to: –

Detecting fraud - reportingsuspected fraud, contacting therelevant funding body for guidanceon action to be taken.

Preventing further loss–suspending personnel, denyingaccess to property or premises.

Securing evidence – discreetenquiries, preventing thedestructions or removal ofevidence, securing records.

Recovery of loss – civil action,legal action.

Disciplinary action - avoiding actionwhich could interfere with acriminal investigation, applyingrelevant employment legislationand codes of practice4.

Investigation of fraud is aspecialist function and should onlybe undertaken by individuals withthe necessary skills and training(normally the Police or specialistinvestigative units). In the absenceof a Fraud Response Plan or in thecase of smaller bodies theorganisation should consult in thefirst instance with the relevantfunding body or the Police.

4. All disciplinary action must be conducted in line with Employment Legislation, which can be obtained from Labour RelationAgency and Department for Education and Learning.

Common types of fraud

• Payment for work not performed.

• Altering amounts and details on documents.

• Overcharging.

• Unauthorised transactions.

• Altering stock records.

• Cheques made out to false persons.

• Theft of official order books.

• Cash stolen.

• Damaging or destroying documents.

• Using imaging and desktop publishing technology to produce apparentoriginal invoices.

• Over claiming expenses.

• Running a private business with the organisation's assets.

• Transferring amounts between accounts frequently.

• False persons on payroll.

5. Refer to VCU Website for a sample Fraud Policy Statement.6. Refer to VCU Website for a sample Fraud Response Plan.

Promoting an anti-fraud culture

Has the management committee considered the following measures to ensure thatclear principles and rules of conduct are promoted throughout the organisation:

• Staff knows that they are expected to follow the rules and apply all appropriatecontrols and that they should avoid or declare any conflicts of interest.

• The organisation is aware of the need to maintain good staff morale in orderto avoid an employee attempting to harm the organisation through fraud.

• staff are encouraged to report suspicions of fraud and are aware that they areprotected from dismissal or victimisation by the Public Interest Disclosure (NI)Order 1998. Suitable channels for reporting fraud can include linemanagement, management committee, chairperson, relevant funding bodyand/or the police.

• Developed a *Fraud Policy Statement5 to communicate their approach tofraud. Such a statement may include some or all of the following areas:

- procedures which staff should follow if fraud in discovered;

- guidance on training for the prevention and detection of fraud;

- who is responsible for the overall management of fraud;

- Reference to the Fraud Response Plan.

• Developed a *Fraud Response Plan6 to ensure that appropriate and timelyaction will be taken, and to ensure that everyone within the organisation isaware of the procedures to be followed should fraud occur.

• Communicated the organisation's values and approach to fraud tocontractors and other third parties who provide or deliver services on behalfof the organisation.

Control and Governance

Has the management committee undertaken a fraud risk assessment which is suitable and sufficient to its needs and ensures that it has taken all reasonable and necessary controls/precautions to reduce the risk of the fraud occurring.

• Identified the day to day activities/programmes/projects such as - cashhandling, payroll, purchasing, assets and use of contractors most at risk tofraud (internal and external).

• Considered what impact or harm the risk is likely to have in each area. Decidewhether the risk is high, medium or low.


6.8 Fraud Management Checklist

The process for measuring, controlling and reporting fraud risk.

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• Established a fraud risk profile (a register that identifies the risks, includes anassessment both of the impact and likelihood of each risk and identifies theinternal controls/precautions which should be in place).

• Examined existing controls to ensure that they are adequate and decidewhether more should be done to reduce the risk. Your aim is to get rid of therisk altogether or make all risks small. Internal controls can include some orall of the following:

- segregation of duties: roles and functions should be divided at key stagesof processes (authorisations and verification);

- rotation of duties: sensitive posts/functions;

- physical controls: assets register;

- Authorisation: approved and separately countersigned by authorisedsignatories.

- Supervision and periodic reconciliation: employees work should be subjectto appropriate monitoring performance checks.

- Effective recruitment procedures to reduce the risk of employing potentialfraudsters.



Charities Branch, Voluntary and Community Unit,DSD, Churchill House, Victoria Square,Belfast BT1 4SD,Tel 90569100



NCVO, Regents Wharf, 8 All Saints Street,London N1 9RLTel 02077136161; www.ncvo-vol.org.uk

DSD Corporate Investigations Unit, Lighthouse Building, Gasworks Business Park,Belfast BT1; Tel 028 9082 9207;www.dsdni.gov.uk/urb-reg/urban.asp

Charity Commission, www.charity-commission.gov.uk/publications

Managing the Risk of Fraud, A Guide for Managerswww.hm-treasury.gov.uk/pub/html/docs/main.html

Management of Risk, A Strategic Overview – HM Treasury, January 2001:www.hm-treasury.gov.uk/media//EC612/orange-book.pdf

Public Interest Disclosure (NI) Order 1998 www.pcaw.co.uk (Public Concern at Work)

www.legislation.hmso.gov.uk

www.delni.gov.uk

www.lra.org.uk

i


7.1 Introduction

This chapter aims to give a betterunderstanding of the role andpurpose of both internal andexternal audits. It also aims toexamine what is expected from thevoluntary and community sector.

7.2 External Audit

External Audit is concerned withthe independent verification ofthe statements included within aset of Financial Accounts. In thePublic Sector this role is normallyundertaken by the NI Audit Office.In the Private Sector, commercialorganisations are normallyemployed to undertake this task.In the Voluntary and CommunitySector, arrangements foremploying a set of independentaccountants to certify annualaccounts is a critical element ofgood governance arrangements.The recent Taskforce report makesspecific reference to the guidancesuch as SORP which, whereapplicable, should be relevant tothe type of certificationundertaken by external audit.Reference has also been made tothe ICAEW technical release onPublic Sector Special ReportingEngagements as a way of givingassurances about the use offunding received. Increasingly theannual accounts will need toinclude signed statements byOrganisational official/committeemembers which include referenceto the accuracy of the figurespresented but also assurances onthe type of general and financialcontrols in place.

7.3 Internal Audit

It is acknowledged that the term“internal audit” may not have thesame universal understanding inthe current arrangements operatedby Government within the sector.Nevertheless, well managedorganisations will be able todemonstrate that they have as aminimum considering theconducting of independent reviewsof financial control, building on theguidance already in place inrelation to good practice forinternal control / segregation ofduties etc. For manyorganisations they will alreadyhave audit process in place.

“Internal Audit” is about providingan organisation’s management orcommittee with an independentand unbiased opinion on theorganisation’s effectiveness inachieving its agreed objectives inrelation to risk management,financial control and governance.

For each of the organisation’sobjectives, there will normally be anumber of policies, proceduresand operations in place. In relationto these, an “internal audit”function will:

• measure and evaluate thearrangements in place toachieve agreed objectives

• report findings, conclusions and,where appropriate, makerecommendations forimprovement

7 AUDIT


Where there is an effective“internal audit” function within anorganisation, this can provideadditional assurances to, andpotentially reduce the reviewarrangements of, CentralGovernment funders and externalaudit bodies.

In order to achieve this, manylarger organisations will employtheir own internal audit staffreporting directly to theManagement Committee. It isacknowledged that, for smallerbodies, this may not be feasible;however the principles andbenefits of an internal auditfunction should still be consideredand may be carried out on a moreproportionate basis.

7.4 Government Perspective

Each Government Department hasa Departmental Accounting Officer(AO) who is personally responsiblefor all public monies under his orher control.

There is an Internal Audit Unit foreach Government Departmentwhich provides the AO with anindependent and objective opinionon:

• Risk management.

• Control.

• Governance.

In respect of the voluntary andcommunity sector, this involvesensuring that public moniesrequested and granted to thesector are bona fide, can be fullyaccounted for, and are in line withdepartmental objectives.

7.5 Community Perspective

Each year the voluntary andcommunity sector in NorthernIreland receives grant aid fromgovernment of around £200million. The Northern IrelandCompact defines accountability as“...being answerable to all relevantstakeholders in relation to thepropriety of policies, actions anduse of resources”. This is closelyrelated to good governance (seechapter 2), and is critical tosecuring and maintaining publicconfidence in the voluntary andcommunity sector.

Each community organisation hasa responsibility for theappointment of their independentauditors. These auditors shouldprovide an indication as to whetherthe controls that have beenestablished within the organisationare working (or not). This however,does not abdicate theresponsibility of the funding bodyfrom ensuring that allgrants/funding paid is correctlyspent in a bona fide manner.

7.6 Department for SocialDevelopment Auditors

In order to provide assurance tothe AO, Internal Audit will reviewthe Systems established to deliverfunds to the voluntary andcommunity sector in theDepartments. Part of that reviewmay necessitate visiting selectedGroups.


7.7 Northern Ireland Audit Office

The Northern Ireland Audit Office(NIAO) is completely independentof government. The Comptrollerand Auditor General for NorthernIreland (C&AG) is appointed by theCrown and is the head of NIAO.

The C&AG certifies the accountsand reports to Parliament and theAssembly on the economy,efficiency and effectiveness withwhich departments and otherbodies have used their resources.

With regard to grant funding paidto the voluntary and communitysector, NIAO examines thefinancial controls and monitoringprocedures operated by allGovernment Departments, by IFBsand by the grant aidedorganisations. NIAO selects asample of projects each year andreviews:

• Grant application processes.

• Monitoring arrangement.

This is to ensure the effectivenessand robustness of the systems,and to assure the Assembly thatgrant funding paid by theDepartment has been used asintended.

7.8 Approaches to Audit Visit

If a visit is required the leadauditor will meet with themanagement committee of thecommunity group, and explain theprocedure, including:

• How long the audit is likely totake.

• The staff involved in the auditvisit.

• Start date.

• Establishing a contact point withthe community group.

• The records/details to beaudited will be advised tomanagement.

The audit will conclude with areport being produced for theDepartment outlining the mainfindings and highlighting areas ofweakness.

7.9 Audit Visit Checklist

The documents which are normally required for an audit will depend on thesize of the community group, but will usually include:

• Constitution or Memorandum and Articles of Association of the CommunityGroup.

• List of office bearers.

• Risk register and associated mitigation plans.

• Copy of the most recent Annual Accounts (audited).

• Copy of the most recent Annual report / activity report.

• Details of any independent reports that may have been performed.

• Business plan / strategy document (if applicable).

• Organisational chart.

• Details of management checking / control systems.

• In-house procedures for staff to follow.

• List of all current funders, amount and purpose of funding (including all Lettersof Offer / Contracts for Funding).

• Details of all applications made for funding whether successful, rejected orcurrent.

• Financial Records including -

- Claim forms submitted to funders for payment.

- Bank account details.

- Bank statements.

- Cheque books/cheque stubs.

- Original invoices.

- Tender documentation.

- Petty cash books/receipts.

Please note this is not an exhaustive list


�



Northern Ireland Audit Office, 106 University Street, Belfast BT7 1EU, Tel 90251000www.niauditoffice.gov.uk

NIAO Publication: Investing in Partnership: Government Grants to Voluntary and Community Bodies May 2002

DSD Internal Audit, Londonderry House, Chichester Street, Belfast, BT14HT, Tel 028 9025 2644

Community Change, Tel 028 9023 [email protected]

Invest NI www.investni.com/sub-bookkeeping.pdf


Cash On-line: www.cash-online.org.uk

Community Accountancy Network: www.communityaccountancynetwork.org.uk

Charity Finance Director’s Group: www.cfdg.org.uk

Charity Commission for Eng & Wales www.charity-commission.gov.uk

Policy Unit,Central Procurement Directorate Level 3, Causeway Exchange,

1-7, Bedford Street,BelfastBT2 7EGTel: (028) 90823187www.cpdni.gov.uk

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8.1 Introduction

Monitoring and evaluation is vital ifgovernment and voluntary andcommunity organisations are tojudge whether development effortshave succeeded or failed. Thefunctions of monitoring andevaluating include:

• Guiding the progress of theproject;

• Assuring that monies areproperly spent, and that projectsare carried out according toplan;

• Ensuring that goals/outcomeswere achieved;

• Revisiting the appropriateness ofgoals/outcomes and plans inlight of experience;

• Informing future developmentwork; and

• Informing future funding.

Monitoring can be both a tool toassess the success of a particularprogramme or project, and act asa tool for organisational learning.Some people think all this gets inthe way of getting on and doingthe work, which can be true, butyou want to be sure you areactually doing useful workeffectively, and getting the mostout of your limited resources. Themain benefit of evaluation canoften bring in a wider view andfeed in stakeholders experiences,which helps you take a step backfrom the daily grind and reflect ondevelopments.

This Chapter provides someguidance on good practice and inthe Useful Contacts page detailsorganisations that provide training,information and support onmonitoring and evaluation.

8.2 Responsibilities of Government& the voluntary and communitysector

Funding decisions should involve ajudgement about the capability ofthe organisation to be funded.Whilst it may be appropriate toseek ways to enhance thatcapability, an assessment isrequired about the minimumcompetence required.

The Home Offices’ “Funding: ACode of Good Practice”7, jointlyprepared with the voluntary andcommunity sector, includessignificant undertakings by thesector. These support a culture ofaccountability in the use andadministration of public funds.

These commit the sector to:

• Clear and effective employmentpolicies, managementarrangements and procedures.

• Effective and proportionatesystems for the managementcontrol, accountability, proprietyand audit of finances.

• Compliance, by organisationsthat hold charitable status, withthe Accounting Framework forCharities, and appropriateguidance from the CharityCommission, including onpolitical activities andcampaigning.

8 MONITORING & EVALUATION

7. Home Office: A Code of Good Practice – www.homeoffice.gov.uk


8. Appraisal and Evaluation in Central Government, Treasury Guidance, 1997. NI Practical Guide to Economic Appraisal and Evaluation.

• Systems for planning andimplementing work programmes.

• Systems for monitoring andevaluating activities againstagreed objectives.

All of the systems and checksabove are proportionate to thesize and nature of theorganisation.

Before funding commences thefunder and organisation shouldagree what is to be measured,what forms of monitoring arerequired and an agreedunderstanding of reportingprocedures. This will provide theorganisation with an agreedmonitoring and evaluationframework.

8.3 Monitoring

Many voluntary and communitysector organisations are familiarwith describing what they do andidentifying who they work with.You also need to identify thechanges that come about from thework you do. There is no agreedterminology when it comes tomonitoring and evaluating and forthe purposes of this guidance weare referring to ‘outcomes’. Anoutcome is the long term effect ofyour actions. (see 8.5).

Monitoring a project meansgathering and recording allrelevant data and informationthroughout the life of a project.Plan monitoring into theproject/organisation from thestart. You should take intoconsideration outcomes when you

are planning your work, identifyingthe outcomes you want to bringabout will help you decide whatwork you should do and whatservices and activities you needfunding for. It will also help youplan, develop and improve yourwork.

It should also help you report backto the funder more effectively onhow well your project is doing.

8.4 Evaluation

Evaluation of a project is broaderin scope than monitoring. Theresults of an evaluation shouldsummarise8:

• how effective the activity was inachieving its objectives, and why.

• its cost effectiveness; and

• what the results imply for futuremanagement or policy decisions.

Evaluations use monitoring dataand information to measureoutputs of the project. Theevaluation is concerned withboth:

• quantitative outputs, and

• qualitative outputs.

Where objectives are quantifiedthe measurement should be easilyachieved. However, qualitativeoutput measurement requiresbaseline data to be available.This often reflects changes inbehaviour, attitude, and beliefs etcwhich are often considered to be‘softer outcomes’.


Funders often evaluate projects atthe end of the project’s fundingperiod. However, many fundingbodies and community groups nowseek to have ‘interim’ evaluationscarried out. These may be carriedout by an external resource, orself-evaluation mechanisms in theorganisation.

It can be useful in identifying gapsthus making the organisation moreresponsive to need and providingrecommendations that can beimplemented to help with theprocess of change. Interimevaluations (external source orself evaluation) can also be veryuseful in identifying examples ofgood practice that can be builtupon within the lifespan of theproject, and shared with otherprojects.

When it works well, evaluation thatis widely owned within anorganisation can provide areflective framework as well asdetailed monitoring mechanisms.

For Example:

A training programme, which waspart of a larger funded initiative,had implemented an innovativedelivery mechanism, which was very flexible and effective. Whenreported in an external interimevaluation, other programmes were able to replicate the model.The entire programme and theorganisation’s clients benefitedfrom this.

In another case, a project hadconcentrated all its efforts in a

limited geographical area. Oncethis was identified in an interimself-evaluation report, a strategicapproach was adopted by themanagement committee to spreadthe programme, and therebyachieve the objectives by the end ofthe funding period.

8.5 What are outcomes?

Outcomes are all the changes andeffects that happen as part ofyour work.

Inputs are the resources you putinto your project to deliver itsoutputs. Inputs include time,funding etc.

Outputs are the services andfacilities you deliver. Outputsinclude training courses, adviceand publications.

Long-term change refers to thebroader impact and relates to youroverall aim. It can be difficult toassess long-term change in thelifetime of a short project.

For Example:

A Training organisation aims todevelop the skills of managementcommittee members by offeringtraining and advice.

Input: Staff, Budget, Promotion,Venue & Catering

Output: Training Session, One toOne advice/support and InformationBriefings

Outcome: That the committeemembers be more knowledgeable:


9. Dear Accounting Officer letter (DFP) 15/93 on ‘Govt’s Strategy for the Support of the Voluntary Sector and for CommunityDevelopment in Northern Ireland.

10. HM Treasury Spending Review (Guidance to Funders) September 2003

their responsibilities; financialunderstanding; and processes foreffective meetings.

Long-term change: There is moreeffective governance of theorganisations.

While you can look at one of theseareas at a time, you must then seewhat effect any changes ordevelopments in one will have onthe others and revisit your originalideas/plans if problems or issuesoccur.

8.6 Accountability

Monitoring, evaluation andfinancial control are “essentialcomponents of the Departments’relationship with all grant receivingbodies”.9 Thevoluntary/community alsorecognises the need foraccountability. Government want toshow that their grants are makinga difference and bringing aboutchanges in people’s lives.Government also have aresponsibility to show that they putin place appropriate controls toensure that the principles ofregularity, propriety and value formoney are met. Appropriate riskassessment provides a useful toolto determine the capacity oforganisations to manageresources effectively.

It is recommended that monitoringshould be proportionate to thesums involved and the perceivedrisk10. This may mean that moreattention would be paid to largergrants (although less,

proportionately, to their size, anddependent on other risk factors)and small grants may receive aless onerous monitoring regime.Where an organisation has aproven track record of reliability,delivery and financial probity, thenthe lighter-touch monitoring regimemay be more appropriate than thetighter regimes usually associatedwith grants10.

Useful Contacts/Sources of Information

Community Evaluation 295 Ormeau Road, Belfast, BT7 3GGNorthern Ireland (CENI), Tel 028 9064 6355

www.ceni.org


Community Work Education & Philips House, York Street, Belfast, BT15 1ABTraining Network (CWETN), Tel 028 9023 2618

[email protected]

Workers Educational 1-3 Fitzwilliam Street, Belfast BT9 1AW Association (WEA) Tel: 028 9032 9718

[email protected]


NISRA, McAuley House, 2-14 Castle Street, Belfast, BT1 1SATel 028 9034 8100 www.nisra.gov.uk

Home Office ‘Funding: A Code of Good Practice’www.homeoffice.gov.uk



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9.1 The Way Forward

Each chapter in this Best Practicemanual has focused on a differentpart of the jig–saw whichcollectively represents goodgovernance and financialmanagement. With reduction inGovernment budgets and in theoverall funding environment therewill be increasing competitionbetween projects seeking support.Those organisations that candemonstrate that they have goodgovernance at the core of theirbusiness will be better placed toapply for that funding. It is vitalthat the principles and directionprovided in this manual aretranslated into effective actionwithin organisations. This chapteris about how Government can workwith and assist the voluntary andcommunity sector to develop bestpractice systems throughguidance, advice and training.

‘Investing Together’ the report ofthe Taskforce on Resourcing theVoluntary and Community Sectorjustifiably raised concerns aroundthe auditing and accountability ofpublic funding by Government andthe burden that requirementsplace on the voluntary andcommunity sector. Government inits response ‘Positive Steps’commits itself to introducing auditrequirements that areproportionate. Further it commitsto putting in place a frameworkthat identifies issues andsolutions before expenditure isincurred therefore reducing therisk of possible misuse or wasteof public funds.

Essentially what Governmentadvocates is a move towards asystems based approach toensuring effective accountability ofpublic money provided to thevoluntary and community sector.

This by nature will entail a‘proactive approach to ensuringaccountability through checkingfinancial control and governancesystems and, where necessary,providing help to improve them atthe start of the funding cycle.’

The best practice advocated in thismanual is the systems andcontrols that Government will wishto see and check in organisationseither in receipt or applying forsupport. The systems willproportionate to the size andnature of the organisation.Through the assessment ofaccounting and governancesystems within organisations it willbe possible to implement a lessbureaucratic approach.

This approach may lead to thedevelopment of a quality standardor ‘kite marking’ for organisationswhich operate best practice.Government would recognise thisin its consideration of grantawards and subsequent level ofmonitoring.

9.2 Current Action

This manual is one important partof providing key advice anddirection in terms of the standardsexpected by Government. Themanual will be regularly updated inlight of changing circumstances inthe sector, changes in accounting

9 EMBEDDING GOOD PRACTICE


practice, new policy developmentsor requirements withinGovernment. It has beenproduced in web format and in ringbinder to facilitate updates. TheSteering Group which includesrepresentatives from the Sector,DFP, Internal Audit and DSD willcontinue to meet to review themanual and take forward furtherdevelopments around embeddingthe best practice detailed.

The Steering Group will also play arole in the actioning of some ofthe agreed recommendations inPositive Steps around InternalGovernance, Management andAccountability. It will seek toassess what is currently providedin terms of training and identifyany gaps in that provision. It willwork with DFP in taking forwardthe concept of ‘Lead Funder’across Government.

A joint training and developmentprogramme, ‘Involving People’designed to meet the needs ofmanagers working in partnershipacross the public and voluntaryand community sectors waspiloted in 2004/05. This waspositively evaluated and it ishoped to build upon this

DFP Central Procurement Divisionis currently developing guidancefor the voluntary and communitysector on best practice in relationto purchasing, tendering andprocurement.

DSD Corporate Investigations Unithas already provided a number ofFraud Awareness seminars for the

sector. Consideration will be givenas to how this is best developedwithin the context of a structuredframework of training provision.

DSD has already ran a number ofinformation seminars for voluntaryand community organisations onapproaches to verification andmonitoring of grant expenditureoutlining the financial controlswhich will be checked on any visit.Sample policies of best practicerelating to various matters havebeen provided at these seminars.Further seminars on either specifictopics or general governance willbe organised as required.

A joint certified pilot trainingprogramme involving staff from thesector and governmentdepartments has been delivered.This covered a range of aspectsconcerning effective managementand partnership working. InvolvingPeople is currently being evaluatedand consideration is being given torepeating the programme for awider group with a strongeremphasis on internal financialmanagement.

9.3 The Sector’s Role

There is a considerable amount ofexcellent support and advicewithin the Sector itself. Details ofa number of organisations havebeen provided throughout themanual. The Sector is also alreadydelivering a number of trainingprogrammes and workshops whichspecifically address issues ofgovernance, financial managementand organisational development.


NICVA offers a range of trainingand advice in these areas throughvarious mechanisms including itsgood Practice Guides, numerousadvice notes and web accessiblematerials. NICVA’s OutreachProgramme offers free advice andtraining on funding and governanceissues. This programme issupported by the Big Lottery Fund.NICVA seek to work with otherproviders and networks to ensurecomplementarity and avoidduplication of provision. NICVAalso runs the ManagementDevelopment Programme whichhelps managers, co-ordinators,directors to develop their skillsand competencies and so benefittheir organisation and the sector.The programme offers a variety ofcourses at different levels; firstline, supervisory, seniormanagement and a Master’sprogramme.

Community Change provides agood governance developmentservice to community groups andmanagement committees. Thesupport enables communityorganisations to address theirstrategic, planning andsustainability issues and toimprove their governance,management and accountability.This support is offered to thesector at group’s own premisesthroughout Northern Irelandfocused on individual group’sneeds.

Community Change also providesa financial management trainingand support service for groups,helping them to set up and

understand financial systems inorder to meet best practicestandards expected byGovernment and other funders.They will carry out a financialhealth check to assistmanagement committees in thegovernance of their organisation.

It would be intended to build uponthese and where necessary eitherenhance or seek to developtailored training to meet particulargaps in provision. The SteeringGroup will take this aspectforward.

Government would also want theSector to take the lead in thedevelopment of accreditationstandards in line with the bestpractice advocated here andaccounting/audit rules.

9.4 Final Thoughts

The voluntary and communitysector in Northern Ireland ishugely significant in terms of thesize of the population. It employsover almost 30,000 people, itsincome is approximately £650million per annum with assetsaround £750 million. Governmentsupport is almost £150 million peryear. It is obviously a key player inthe Northern Ireland economy andas with any key sector it isimportant that it is properlyregulated.

Evidence would suggest that themajority of organisations are wellmanaged with effective controls.What may be required is greaterconsistency and governance at all


levels both within individualorganisations and across theSector. This manual, the bestpractice espoused within it and theintent to embed that best practiceis Government’s response toensuring that collectively the levelof governance is improved for alland that, in turn, Government canrecognise good systems wherethey exist.


Useful Contacts/Sources of Information



If you feel you have a service which could be of benefit to the voluntary and community sector in addressing issues of governance and financial management and would like those details to be included in this manual please send details to the e mail address below for consideration by the Steering Group.

Email: [email protected]

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NOTES

best practice in finance and governance

Documents