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Social Development Foundation (SDF)
FINANCIAL MANAGEMENT MANUAL
July 2015
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TABLE OF CONTENTS
Chapter/ Clause
Particulars Page
Number
Chapter 1: Introduction
1.1 Background 07
1.2 Purpose of the Manual 07
1.3 Objectives of the Manual 08
1.4 Guidelines in Developing this Manual 08
1.5 Use of the Manual 09
1.6 Authority for Manual 09
1.7 Custodian and Distribution 09
1.8 Amendments 09
Chapter 2: Accounting and Recording System
2.1 Accounting System 10
2.2 Basis of Accounting & Reporting 10
2.2.1 Accrual Basis 10
2.2.2 Going Concern 11
2.2.3 Historical Cost Convention 11
2.3 The Significant Accounting Principle 11
2.3.1 Consistency 11
2.3.2 Matching 11
2.4 Recognition Criteria of the Elements of Financial Statements 11
2.4.1 Recognition of Assets 11
2.4.2 Recognition of Liabilities 11
2.4.3 Recognition of Income 11
2.4.4 Recognition of Expenses 11
2.5 Record Keeping and Accounting at SDF 12
2.6 Recordkeeping and Accounting at the Community level 13
2.7 Financial Reporting at SDF 13
2.8 Project Components and Category(s) under IDA credit # 4757-BD
15
2.9 List and Timing of Reports 16
2.10 Category wise Reporting relationship 17
2.11 Flow Chart of Accounting Transaction 18
2.11.1 Statutory Report 18
2.11.2 World Bank Report 18
Chapter 3: Internal Control
3.1 Internal Control 19
3.1.1 Component of Internal Control 19
3.1.2 Control environment 19
3.1.3 Risk Assessment 20
3.1.4 Control Activities 20
3.1.5 Control usage 20
3.1.6 Physical control 20
3.1.7 Information processing 20
2
Chapter/ Clause
Particulars Page
Number
3.1.8 Performance reviews 20
3.1.9 Information and Communication 21
3.2 Essential characteristics of Internal control 21
3.3 The Internal control system in SDF would ensure 22
3.4 Delegation of Financial and Administrative power 23
3.5 Financial & Administrative review checklist for SDF Region, District and Cluster office Visit
29
3.5.1 What is the purpose of the review (Internal control) checklist 29
3.5.2 When is the recipient (Region, District and Cluster office) review checklist to be used
29
3.5.2.1 Checklist used and review 29
3.5.3 Who is responsible for initiating and completing the recipient review checklist
29
3.5.4 Who is responsible for recipient (Region, District and Cluster office) review checklist follow-up
30
3.6 Accounting records 31
3.7 Supporting documentation for expenditures 32
3.8 Compliance records 32
3.9 Other Information 33
Chapter 4: Planning, Budgeting & Forecasting
4.1 Budgetary control system 34
4.2 Objectives of budgetary control system 34
4.3 Advantage and disadvantage of budgetary control system 34
4.3.1 Advantage 34
4.3.2 Disadvantage 35
4.4 Budget preparation guideline 35
4.5 Steps of preparation of budget 37
4.6 Budget variance report 38
Chapter 5: Fund Management
5.1 Flow of Funds 39
5.2 Guiding principle and disbursement mechanism 39
5.3 Withdrawal /Disbursement of funds 39
5.3.1 Withdrawal of funds from IDA 39
5.3.2 Withdrawal of funds from GoB 40
5.3.3 Fund disbursement from SDF to communities 40
5.3.4 Flow of funds from SDF to Region, District, Cluster and GS to Communities
41
5.3.5 Disbursement of fund to Village level 41
5.4 Decentralized fund flow management from SDF to Region, District, Cluster and Gram Samities
42
5.5 Accounting flow and reconciliation 42
5.6 Fund Flow Chart 43
5.7 Fund Management Reporting Flow Corporate Finance
3
Chapter/ Clause
Particulars Page
Number
Chapter 6: Payment Procedure
6.1 Budget provision and approval 45
6.2 Supporting documents for payment 45
6.3 Cheque writing procedure 45
6.4 Cheque dispatch 46
6.5 Loss and cancellation of cheque 46
Chapter 7: Monitoring
7.1 The objectives of the expenditure monitoring in SDF 47
7.2 Audit trail /Transaction trail 48
7.3 Steps of Audit trail 48
7.4 Regulation criteria for audit observation 48
7.5 Roles of audit committee 48
7.6 Procedures for controlling financial transaction 49
7.6.1 Controlling receipts 49
7.6.2 Controlling Assets 49
7.6.3 Controlling Expenditures 49
7.6.4 Controlling Liabilities 50
Chapter 8: Bank Accounts Operation Management
8.1 Procedure of operating Bank Account 51
8.1.1 Region / district Office Bank Accounts 51
8.2 Operations of bank Accounts 52
8.3 Signatories details 52
8.4 Counterfoil of cheque 52
8.5 Cancellation of cheques 52
8.6 Canceled cheque 53
8.7 Cheque Issue and Receive Register 53
8.8 Payment from Bank 53
8.9 Withdrawal of Cash from Bank 53
8.10 Bank Statement and bank certificate 53
8.11 Bank reconciliation statement 53
8.12 Ordering of new cheque book 54
8.13 Safety to cheque book 54
8.14 Receipts of cheque /drafts 54
8.15 Dishonor of cheques 55
8.16 Payment for lost cheque 55
Chapter 9: Petty Cash Imprest Fund
Petty Cash Imprest Fund 56
Chapter 10: Compliance of Government, Tax, VAT &
Other Laws
10.1 Overview 57
10.2 Compliance reporting 57
Chapter 11: Receipts Procedure
Receipts Procedure 58
4
Chapter/ Clause
Particulars Page
Number
Chapter 12: Inter Office Transaction
12.1 Introduction 60
12.2 Recording & Accounting between Offices 60
12.3 Reconciliation is a must between offices 60
12.4 Rules and restrictions for Inter-office transaction 61
Chapter 13: Chart of Accounts
13.1 Computerization of financial management System 62
13.2 List and Flow of Cost Centers 63
13.3 Chart of Accounts 64
13.3.1 Preparing Chart of Accounts 64
13.3.2 Accounts Code Allocation 64
13.3.3 Complete Chart of Accounts 65
Chapter 14: Accounts Description
14.1 Assets 73
14.1.1 Recognition of Assets in SDF 73
14.1.2 De-recognition (retirement and disposal) 73
14.1.3 Classification of Assets 73
14.2 Investment in FDR 74
14.2.1 FDR account opening policy 74
14.2.2 Accounting Treatment of Investment in FDR 76
14.2.3 Control Mechanism 76
14.3 Inventories 77
14.3.1 Cost of Inventories 77
14.3.2 Valuation of Inventories in SDF 77
14.3.3 Control Mechanism of Inventories in SDF 77
14.3.4 Accounting Treatment of Inventories 77
14.3.5 Inventory Register 78
14.4 Accounts /Other Receivables 78
14.4.1 Due from Officers/employees 78
14.4.2 Interest receivable 78
14.4.3 Due from third parties/other receivables 79
14.4.4 Grants receivable 79
14.5 Advances, Deposits and Prepayments 79
14.5.1 Advance 79
14.5.1.1 Advances dealt in SDF 79
14.5.1.2 Type of advances 79
14.5.1.3 Advance Management 79
14.5.1.4 Liquidation of Advance 80
14.5.1.5 IOU / Temporary Advance 81
14.5.2 Deposits 81
14.5.3 Prepaid Expenses 81
14.6 Cash and cash equivalent 81
14.6.1 Cash management 81
14.6.2 Objectives 81
5
Chapter/ Clause
Particulars Page
Number
14.6.3 Forecasting 82
14.6.4 Bank book & Vouchers 83
14.6.5 Cash withdrawal from bank 83
14.6.6 Cash & Vouchers 83
14.6.7 Approval of Expenses 84
14.6.8 Other current assets 86
14.7 Fixed Assets 86
14.7.1 Property, Plant and equipment 86
14.7.2 Recording of property, plant and equipment 87
14.7.3 Classification of Property, Plant & Equipment 88
14.7.4 Depreciation of Fixed Assets 88
14.7.5 Rate of Depreciation 88
14.7.6 Physical verification of Property, plant and equipment 89
14.7.7 Process and documents for the purchase of fixed assets from local source
90
14.7.8 Capital work-in progress/assets under construction 92
14.7.9 Write off Fixed Assets 92
14.7.10 Sale/Disposal procedure of property, plant and equipment 92
14.7.11 Property, Plant and Equipment at completion of implementation
93
14.8 Liability part 93
14.9 Revenues 93
14.10 Expenses 93
14.10.1 Functional Classification of Expenses 94
14.10.2 Administrative and General Operations 95
14.10.3 Natural Classification of Expenses 95
14.10.3.1 Personnel Cost 95
14.11 Payroll preparation and disbursement 95
14.12 Contributory Provident Fund 96
14.13 Gratuity 97
14.14 Materials Consumed/consumables 97
14.14.1 Supplies and Services 97
14.15 Operational Travel 97
14.16 Indirect Expenses & Overhead 97
Chapter 15: Audits 93
Annexure : List of Forms and Reports 96-115
6
ACRONYMS USED IN THIS MANUAL
AGM Annual General Meeting
AMT Appraisal and Monitoring Team
ARF Advance Requisition Form
BAS Bangladesh Accounting Standards
BFID Bank and Financial Institutions Division
BFRS Bangladesh Financial Reporting Standards
BoD Board of Directors of SDF
CAG Comptroller and Auditor General (CAG)
CAMELs
Capital adequacy, Asset quality, Management quality, Earnings,
Liquidity and Sensitivity to market risks
CAO Chief Accounts Officer
CBO Community Based Organization
COM Community Operational Manual
CONTASA Convertible Taka Special Account
CO Cluster Officer
CP Community Professional
CRAB Credit Rating Agency of Bangladesh
DO Director of Operations
FA Financing Agreement
DCT Deputy Commissioner of Taxes
DD Demand Draft
DM District Manager
ERD Economic Relations Division
FAPAD Foreign Aided Project Audit Directorate
FMR Financial Monitoring Report
7
GoB Government of Bangladesh
GRN Goods receiving Note
GS Gram Samiti
IAS International Accounting Standard
IDA International Development Association
IFRS International Financial Reporting Framework
IOU I Owe to You
MoF Ministry of Finance
MoU Memorandum of Understanding
MRR Material Receiving Reports
PAD Project Appraisal Document
PCT Procurement Core Team
PO Participating Organization
RD Regional Director
SDF Social Development Foundation
SFA Sub-project Financing Agreement
SIPP Social Investment Program Project
SO Support Organization
SR Store Requisition
VCO Village Credit Organization
WB World Bank
8
Chapter 01: Introduction
1.1 BACKGROUND
Over the past decade, Bangladesh has made an impressive gain in reducing poverty
through implementation of different social development program projects and been able
to graduate to a low middle income country. Despite these advancements Bangladesh still
needs to put a lot of efforts to elevate to a middle income country. A Social Investment
Program Project (SIPP) is designed to reduce poverty through programs and projects,
which directly assists the poor. In addition, the project would promote the core
institutional development goal by helping build public institutions that are critically
needed to support community and development programs.
With the lapse of time SDF has decided to review and recast its Financial Management
Manual in the beginning of 2015, in the context of changes in international financial
reporting and World Bank’s reporting requirement.Modifications have been made
thoroughly to organizethe manual in a more systematic manner to enable all stakeholders
to understand and practice well.
1.2 PURPOSE OF THE MANUAL
This manual intends to provide with the following purposes:
To set out the financial and accounting policies and procedures necessary to control
and account for all funds, properties, assets, liabilities of SDF.
To ensure transparency, accountability and good governance in the management of
SDF operations and programs.
To record and control all payments and revenue of SDF.
To safeguard the funds, properties and other assets and identify the financial
obligations and commitments of SDF.
To standardize the accounting treatment and the financial administration of all
transactions at all levels of SDF and to maintain a high degree of consistency of
accounting treatment of the financial transactions.
To ensure that every financial transaction has been transected under authorized
manner and automatically get checked at various stages of transaction.
To use as a monitoring tool by SDF management.
To use as a training tool for accounting personnel.
9
To establish accounting policies and procedures that contributes to preparation of
effective, efficient, clear and transparent accounts.
To standardize and codify the accounting system, rules, procedures and forms to be
used for financial recording and reporting.
To describe the systems and procedures that will obligate the finance personnel and
help them to fulfill their accountability.
1.3 OBJECTIVES OF THE MANUAL
To maintain a uniform recording, reporting and financial control system at all levels
as well as delineate that the Financial Management Manual is indispensible.
To have a uniform accounting and financial system, rules and procedures.
To assist management with the necessary financial information required to ensure
efficient program monitoring and implementation.
To achieve accurate and timely financial reporting to the management of SDF as well
as to the development partners.
To aid understanding and utilization of the accounting systems and processing of
accounting transactions.
To develop consistency within the SDF systems in the application of accounting
system and procedure under approved Chart of Accounts.
These objectives can only be achieved by stringent compliance of approved policies and
procedures and maintenance of accounts in a professional manner. The revised Financial
Management Manual sets forth the accounting policies, procedures, classification of
costs, receipt of funds, budget and budgetary control system, reporting procedure,
financial authority, documentation system, fund management, payment procedure, chart
of accounts, etc. as a guideline to attain the above mentioned objectives.
1.4 GUIDELINES IN DEVELOPMENT OF THIS MANUAL
This manual is mostly related to the accounting information system and financial
reporting system of SDF. Each point of the manual, related to the accounting treatment,
has been prescribed in accordance with the basic requirements of Ministry of Finance,
Government of Bangladesh, World Bank and the Bangladesh Accounting Standards
(BAS)/Bangladesh Financial Reporting Standards (BFRS).If any accounting
transaction cannot be covered by the guidelines of this manual, such transaction should
be dealt with as per the requirements of the applicable BAS/BFRS.
10
1.5 USE OF THE MANUAL
This manual has to be used for one or more of the following purposes:
As a guideline of financial reporting.
As a guideline to accounting personnel.
As a method of establishing and maintaining systematic recording and control of
accounting process.
As an effective tool of internal control
1.6 AUTHORITY FOR MANUAL
This manual has to be issued under the authority of the Board of Directors of SDF.
1.7 CUSTODIAN AND DISTRIBUTION
SDF management is the custodian of this manual. On requirement basis, the manual will
be distributed inpart or full to all relevant departments & offices so that they can comply
with all the procedures and policies as applicable.
1.8 AMENDMENTS
The BoD of SDF has the right to modify, amend, replace revise and /or add any of the
provision of this Manual in such manner and to such extent, as may be deemed
suitable.
Any change or modification/amendment, as approved by Board of Directors shall be
circulated through inter office memo/circular under the signature of the Managing
Director.
All changes/amendments that have taken place since the date of last revision with the
approval from the Board of Directors shall be incorporated in the revised version of
the accounting manual.
11
CHAPTER 2: ACCOUNTING AND RECORDING SYSTEMS
2.1 ACCOUNTING SYSTEM
Accounting System is a series of tasks in an entity by which transactions are processed
as a means of maintaining financial records. Such a system should recognize, calculate,
classify, post, summarize and report transactions. An accounting system supplemented by
effective internal controls can provide management with reasonable assurance that assets
are safeguarded from unauthorized use or disposition and those financial records are
reliable to permit the preparation of financial information. The accounting system gathers
processes and organizes accounting data in order to produce useful financial information.
It should reflect organizational needs and be designed to provide the financial
information required by all interested parties and fulfill all the legal and regulatory
requirements. The accounting system is a critical part of the project’s financial
management system and its design and operation are therefore of paramount importance.
The Accounting System should:
provide information compatible with the agreed accounting standards;
be simple and user friendly;
be capable of adoption and maintenance by SDF staff and be easily
understandable by users;
provide adequate documentation and audit trails;
provide reliable, adequate, accurate and timely information, including
financial management and other reports; and
maintain integrity and transparency.
2.2 BASIS OF ACCOUNTING& REPORTING:
The Financial Statements of SDF are prepared on a going concern basis under the
historical cost convention using the accrual basis of accounting in accordance with the
International Accounting Standards (IASs) and International Financial Reporting
Standards (IFRS) as adopted in Bangladesh as Bangladesh Accounting Standards (BASs)
and Bangladesh Financial Reporting Standards (BFRS) and in compliance with the
applicable laws and regulations of Bangladesh.
2.2.1 Accrual Basis:
Under the accrual basis of accounting, the effects of transactions and other events are
recognized when they occur, whether cash or its equivalent is not received or paid and
they are recorded in the accounting records and reported in the financial statements of the
period to which they relate.
12
2.2.2 Going Concern:
The Financial Statements are prepared on an assumption that the entity is going a concern
and will continue in operation for the foreseeable future. Hence it is assumed that the
entity has neither the intention nor the need to liquidate or curtail materially the scale of
its operation.
2.2.3 Historical Cost Convention:
Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the
consideration given to acquire them at the time of their acquisition.
Liabilities are recorded at the amount of proceeds received in exchange for the obligation,
or in some circumstances at the amount of cash or cash equivalents expected to be paid to
satisfy the liability in the normal course of business.
2.3 THE SIGNIFICANT ACCOUNTING PRINCIPLE:
2.3.1 Consistency- Accounting treatments of similar items should be consistently applied,
either within a particular accounting period, or between one accounting period and the
next.
2.3.2 Matching - It refers to the matching of costs and revenues as distinct from cash receipts
and payments and that the revenue reported in the period be matched with the costs or
expenses incurred in earning that revenue for the operating results. Financial statements
of the foundation are presented using the accrual basis of accounting.
2.4 RECOGNITION CRITERIA OF THE ELEMENTS OF FINANCIAL
STATEMENTS:
Recognition is the process of incorporating in the financial statement an item that meets
the definition of an element and satisfies the criteria for recognition.
2.4.1 Recognition of Assets: An asset is recognized in the Statement of Financial Position
when it is probable that the future economic benefits will flow to the enterprise and the
asset has a cost or value that can be measured reliably.
2.4.2 Recognition of Liabilities: A liability is recognized in the Statement of Financial
Position when it is probable that an outflow of resources embodying economic benefits
will result from the settlement of a present obligation and the amount at which the
settlement will take place can be measured reliably.
13
2.4.3 Recognition of Income: Income is recognized in the income statement when an increase
in future economic benefit related to an increase in an asset or a decrease of a liability
has arisen that can be measured reliably.
2.4.4 Recognition of Expenses: Expenses are recognized in the income statement when a
decrease in future economic benefit related to a decrease in an asset or an increase of a
liability has arisen that can be measured reliably. Revenues are recognized when they
are realized or realizable, and are earned (usually when goods are transferred or services
rendered), no matter when cash is received.
2.5 RECORD KEEPING AND ACCOUNTING AT SDF LEVEL
The financial management system would cover all project related transactions i.e. all
sources (Government, IDA and Community Contributions) and the use of funds would
be accounted for and reflected in the financial statements of SDF. Any other sources of
income should be accounted for.
A chart of Accounts has been developed. The Chart of Accounts enables expenditure to
be captured and classified by project activities, components and disbursement
categories.
Computerized accounting system has been installed and operated at all level of SDF;
the system provides information on the receipts and uses of funds and is able to produce
financial reports comparing budget with actual expenditure at any given time. The
system generates financial data to measure performance that are linked to the outputs of
the project.
A register for fixed assets acquired under the project would be maintained using the
computerized system.
The calendar month shall be considered as “Month” for financial transactions and for
this purpose the Financial Management team shall take into account the followings.
I. Accounting year is the financial year started from July 01 to June 30 of each
year.
II. Cash book shall be closed every day and ledgers should be closed on the last
working day of the month.
III. Cash receipts should be recorded immediately and deposited to the designated
bank account of the organization on the same day.
IV. All fixed expenses like office rent, utilities, salary, etc. should be paid within
the month.
14
V. Income tax and Value Added Tax (VAT) shall be deducted at source as per
prevailing rule of the Government of Bangladesh. Deducted tax shall be
deposited in the Govt. treasury within the stipulated time.
VI. The provisions of the Stamp Act must be complied with for settlement of
payment where applicable. Invoices are duly stamped “Paid” to insure they
are not paid again.
VII. Staff salary should be paid through bank transfer or account payee cheque
within the month.
VIII. Cheque books should be kept under safe custody of Director, Finance at HO
level, Regional Finance Manager (Corporate) /Accountant at Regional Office
and District Accountant at District Office.
IX. Festival allowances shall be paid 15 days before the festival day of employees
of respective faith.
X. A chart of accounts is in position along with full automation features focusing
on the entire cost center to be captured which is being used and classified by
project activities, disbursement categories and components.
XI. Necessary reports like Cash / Bank Book, Ledgers, Trial Balances etc. shall be
printed on monthly basis and the printed hard copies shall be preserved in
good condition and with safe custody.
XII. Withdrawal Applications shall be submitted using prescribed form on periodic
intervals.
XIII. Financial Monitoring Reports (FMRs) / Interim Unaudited Financial
Statement (IUFR) shall be submitted using prescribed form on quarterly basis.
XIV. Fund disbursement report and Trial Balance along with bank reconciliation
statement (supported by bank statement in original) shall be submitted using
prescribed form on monthly basis.
XV. Submit Annual Financial Statement of each year within 31 July immediate
after closing of the financial year.
XVI. Books of accounts relating to a period of not less than 12-years immediately
preceding the current year together with vouchers relevant to any entry in such
books of accounts shall be preserved in good order.
XVII. The administrative and financial rules issued from time to time by the SDF
authority shall be regarded as part of this comprehensive Administrative and
Financial Management Manual.
15
2.6 RECORD KEEPING AND ACCOUNTING AT THE COMMUNITY LEVEL
As required by the SDF, every sub-project should maintain an appropriate record and
accounting of its activities in accordance with format provided by SDF. These records
must be kept simple, complete, and accurate. At the community level it is important to
keep simplicity as a primary objective.
Each community should be required to report only on its own activities. Communities
will send reports to the SDF. It is required that communities send quarterly reports
indicated in the financial agreement. It is also important that there should a uniform
format of financial reports for all the Communities. Booklet # 07 contains the details
guideline regarding the recording and accounting at the SDF community level.
2.7 FINANCIAL REPORTINGAT SDF LEVEL
Financial reporting is critical for all kinds of accountability discussed above. Reports
should be clear, accurate, complete, and timely and fit for their intended purposes.
The Corporate Finance shall be responsible for consolidating of financial transactions
at SDF and preparing timely consolidated Financial Statements (Statement of
Financial Position, Statement of Comprehensive Income, Receipts and Payments
Account etc) on a monthly basis;
The Finance and Administrative Unit would also be responsible for preparing
Financial Monitoring Reports (FMR) on a quarterly basis, monitoring actual
expenditure against forecast and coordinating with other units of SDF to reconcile
timely financial information;
Quarterly FMR showing IDA, Government, Community expenditure would be
submitted to IDA. In particular, the FMR would include: (a) sources of funds and
application of funds (classified by components, sub-components and summarized
expenditure categories); (b) output monitoring reports (comparing budgeted and
actual expenditures or analysis of major variances on key physical parameters and
unit rates for elected key items; (c) information on procurement management for all
prior review contracts.
16
2.8 PROJECT COMPONENTS AND CATEGORY (S) UNDER
IDA CREDIT # 4757-BD
*Category_1 Category_2 Category_3
Components
Sub-grants for
Sub-Projects under
parts A.2 and
B.2(a) of the
project
Sub-grants for Sub-
projects under part
B.1(d) of the Project
Goods, works, non-consulting
services, consultant's services,
training and incremental
operating costs under parts A
and B of the Project and Goods,
non-consulting services and
Training under Part C of the
Project
Percentage of Financing IDA-100% IDA-100%
IDA-100%
A
Community
Institutions and
Livelihood
Development
A.1
a.Cluster Field
Facilitation&Mobilizat
ion
b. Community
Institution Support
A.1:
a. Cluster Field
Facilitation&Mobilization
b. Community Institution Support
A.2 Financing of
Community Plans
A.2: Financing of
Community Plans
A.3 Nutrition Awareness
and Support
A. Nutrition Awareness and
Support
B
Business
Development and
Institutional
Strengthening
B1
Business Partnerships
Development and
Market Linkages
a. Market Linkage
& Partnership
Building
b. Product
Promotion &
Communication
c. Producer
Group/NJCS
Productive
Investm. Fund
d. Private &
Outsourced
Support Services
B.1 (d): Private & Outsourced
Support Services
B.1:
a. Market Linkage &
Partnership Building
b. Product Promotion &
Communication
c. Producer Group/NJCS
Productive Investm. Fund
17
B2
Second-tier
Institutional
Development Support
a. Mobilization and
Support - Setting
up of Societies
b. NJCS Fund
(SIPP II)
c. NJCS Fund
(SIPP III)
d. TA for VCO
Capacity
Building
B.2:
a.Mobilization and
Support - Setting up
of Societies
B.2:
b. NJCS Fund (SIPP II)
c. NJCS Fund (SIPP III)
d. TA for VCO Capacity
Building
B3 Employment
Generation Support B.3:
Employment Generation Support
C
Project Management,
Monitoring and
Learning
C1
Capacity Building of
SDF and partner
organizations
C.1: Capacity Building
of SDF Staff and partner
organizations
C2 Supporting
innovations
C.2: Supporting
Innovations
D
Project Management,
Monitoring and
Coordination
D.1 Project Management
D.1: Project Management
D.2 Monitoring and
Learning
D.2: Monitoring and Learning
18
2.9 LIST AND TIMING OF REPORTS
SDF shall maintain following periodic reports –
S.N. Name of the report Timeline Frequency Responsible
Person
01 Budget Variance Report (For SDF
Management)
By 5th
of the
following month Monthly Per job allocation
02 Disbursement Report (For CAO
Office)
By 5th
of the
following month Monthly Per job allocation
03 Statement of VAT (Deducted at
source) deposited to VAT Office
By 10th
of the
following month Monthly Per job allocation
04 Trail Balance By 5
th of the
following month Monthly Per job allocation
05 Receipt and Payment Account By 5
th of the
following month Monthly Per job allocation
06 Bank Reconciliation By 5
th of the
following month Monthly Per job allocation
07 Interim Unaudited Financial
Report (For WB)
Within 45 days of
quarter Quarterly Per job allocation
08 Withdrawal application processing Quarterly upon
acceptance of WB Quarterly Per job allocation
09 Procurement Disbursement Report Within 45 days of
quarter Quarterly Per job allocation
10 Statement of AIT-DCT office By 10
th of the
following month Quarterly Per job allocation
11 Disbursement Report (BFID) As required by
MoF Quarterly Per job allocation
12 Budget Implementation Report
(BFID)
As required by
MoF Quarterly Per job allocation
13 WB Mission Twice in a Year Half Yearly Per job allocation
14 Revised Budgeting Jan-Feb Half Yearly
15 Financial Statement (FAPAD,
Statutory Audit, Internal Audit) By July Annually Per job allocation
16 Annual Budgeting-MoF, WB &
for SDF
By the end of
previous FY Annually Per job allocation
17 Budget authorization-MoF By July Annually Per job allocation
18 Expenditure certification-CAO By July Annually Per job allocation
19 Expenditure reconciliation with
CAG Office By July Annually Per job allocation
20 Annual Salary information (For
DCT Office) By September Annually Per job allocation
19
2.10 CATEGORY WISE REPORTING RELATIONSHIP
Ex
pen
dit
ure
Category 1
Component A 2
Component B 2 (a)
Category 2
Component A 1
Component B 1
Component B 3
Component C 1
Component C 2
Component D 1
Component D 2
Default Category Default
Component
Reports 7,9,5,6, 1,4,10,
Reports 7, 9, 5, 6, 14,10,12,13,15,16,
17
Reports 7,9,5,6, 1,4,10 12,13, 15,16
20
2.11 FLOW CHART OF ACCOUNTING TRANSACTION
2.11.1 Statutory Report
2.11.2 World Bank Report
Consolidated Statement of Project
Fund
Withdrawal Application Processing
Summary Statement of Expenditure-Component/ Cost Centre
wise
Source & Application of Fund Statement
Statement of
FundDisbursment
Uses of Fund by Category
and Expenditure
Comprehensive Income
Trial Balance
Receipt & Payment
Cash Flow (Indirect Method)
Cash Book (petty Cash)
Balance Sheet
Changes in Equity
Bank Book
Ledger
Voucher Entry
Payment Voucher
Contra (transfer) Voucher Journal Voucher
Receive Voucher
Ledger
21
Chapter 3: Internal Control
3.1 INTERNAL CONTROL
Internal controls encompass a set of rules, policies, and procedures of an organization
designed and implemented by the management of an organization which help to maintain
environments that encourage incorruptibility and deter fraudulent activities by
management and employees. A sound internal control system provides reasonable
assurance that:
its financial reports are reliable,
its operations are effective and efficient, and
its activities comply with applicable laws and regulations.
3.1.1 Component of Internal Control: The organization's Board of Directors, management,
and other personnel are responsible for the internal control system. There are five
components of internal control
1. The Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
3.1.2 Control Environment: Control environment sets the tone of the organization, which
influences the control consciousness of its people. This foundation provides discipline
and structure upon which all other components of internal control are built. The control
environment includes the following areas:
Integrity and ethical behavior
Commitment to competence
Board of Directors and audit committee participation
Management philosophy and operating style
Organization structure
Assignment of authority and responsibility
Human resource policies and practices
22
3.1.3 Risk Assessment: Risk assessment identifies and analyzes the relevant risks associated
with the organization achieving its objectives. Risk assessment forms the basis for
determining what risks need to be controlled and the controls required to manage them.
3.1.4 Control Activities: Control activities are the policies and procedures the organization
uses to ensure that necessary actions are taken to minimize risks associated with
achieving its objectives. Controls have various objectives and may be applied at various
organizational and functional levels.
3.1.5 Control Usage - Prevent, Detect, and Correct
Preventive controls focus on preventing an error or irregularity.
Detective controls focus on identifying when an error or irregularity has occurred.
Corrective controls focus on recovering from, repairing the damage from, or
minimizing the cost of an error or irregularity.
3.1.6 Physical controls: include security over the assets themselves, limiting access to the
assets to only authorized people and periodically reconciling the authorized people, and
periodically reconciling the quantities on hand with the quantities recorded in the
organization’s records.
3.1.7 Information processing:controls are used to check accuracy, completeness, and
authorization of transactions.
General controls cover data center operations, systems software acquisition and
maintenance, access security, and application systems development and maintenance.
Application controls apply to the processing of a specific application, like running a
computer program to prepare employee's payroll checks each month.
3.1.8 Performance Reviews
Performance reviews are any reviews of an entity’s performance.
Some of the more common reviews:
- compare actual data to budgeted data or prior period data,
- operating data to financial data, and
- Data within and across various units, subdivisions, or functional areas of the
organization.
3.1.9 Information and Communication
The information system consists of the methods and records used to record, maintain, and
report the events of an entity, as to maintain accountability for the related assets,
liabilities, and equity.
23
Requirements:
Identify and record all business events on a timely basis.
Describe each event in sufficient detail.
Measure the proper monetary value of each event.
Determine the time period in which events occurred.
Present properly the events and related disclosures in the financial statements.
The communication aspect of this component deals with providing an understanding of
individual roles and responsibilities pertaining to internal controls. People should
understand how their activities relate to the work of others and how exceptions should be
reported to higher levels of management. Open communications channels help insure that
exceptions are reported and acted upon. Communication also includes the policy
manuals, accounting manuals, and financial reporting manuals.
3.2 ESSENTIAL CHARACTERISTICS OF INTERNAL CONTROL:
no individual in SDF would be able to initiate, authorize, execute and record a transaction
without the intervention of someone else (SOD);
the risks of loss, leakage, fraud, inaccuracy or mistake should be identified at all levels,
carefully assessed and corrective measures is to be placed to eliminate or minimize them;
the measures should not cost more than the possible loss that could result from their
absence;
the measures should not unduly slow down the flow of funds, or project implementation;
financial management supervision at the community level should be integrated with the
monitoring and evaluation to ensure a close link between the technical/progress reporting
and the financial reports as a way to support the validity of the expenditures (i.e., that
funds are used for the intended purpose);
accountability should be built within the SDF financial management system, at the SOs
and communities' level using the accountability mechanisms i.e. approval mechanism of
all transactions in SDF including approval of sub projects, written policy and procedures
on personnel and operational management and financial reporting on funds received and
spent by SDF, SOs and communities.
24
3.3 THE INTERNAL CONTROL SYSTEM IN SDF WOULD ENSURE THAT:
Single person shall not handle all aspects of a transaction from beginning to end.
Although a complete segregation of duties may not be feasible all the time, some
measures of effective control may be obtained by planning and assignment of duties
in a manner that every person’s activity shall be automatically checked by another.
It provides safeguards for all property, whether cash or other assets, and assure that it
is to be used solely for intended purposes.
Transparency and Accountability should be in-built within the financial management
of SDF.
Computerized accounting system would be operated to record the financial
management which will be enough to generate all financial reports comparing budget
with actual expenditures at any given time. The system would be able to provide
financial data to measure performance that are linked to the outputs of the system.
Books of accounts for the project would be maintained using double entry book-
keeping principles. Standard books/records would be maintained using integrated
computerized accounting system.
SDF shall maintain a financial management system and prepare financial statements
in accordance with consistently applied accounting standards, both in a manner
adequate to reflect the operations and financial conditions of SDF, including the
operations, resources and expenditures related to the project.
Physical assets should have proper identification mark, inventory register and annual
verification system. The person who is responsible for the physical custody of the
assets should not have the responsibility for keeping the records related to the assets.
Cash receipts should be recorded immediately and deposited to the bank account on a
daily basis. Cash Book should be closed on a monthly basis.
Bank statements should be reconciled monthly by a person other than the person who
signs the checks.
The Managing Director of SDF will have the approval authority of procurement as
per procurement plan. The Procurement Core Team (PCT)consists of Director,
Finance and Procurement, Director, HR, One senior officer from MEL Dept. and
Procurement Manager of SDF being responsible to the Managing Director will be
responsiblefor evaluating and recommending procurement proposal. PCT with
permission from the Managing Director can co-opt any member of specific field in
the evaluation and recommendation process. There may be more than one sub-
procurement committee to deal with (a) large and (b) small procurement.
The Managing Directorwill be the approval authority of financial transactions.
In addition to the above, the following powers and functions are specifically delegated to
the following personnel of SDF by the Board of Directors.
25
3.4 DELEGATION OF FINANCIAL AND ADMINISTRATIVE POWER
S.N Item Authority Extent Remarks
1 Pay & Allowances:
i) Sanction of Salary
Scale/ Upgradation of
Salary Scale and Grade
Board of Director Full
Subject to the recommendation
of Fixation Committee headed
by Managing Director and
comprised of Director (HR),
Director (Finance & Proc.) and
RD concerned (for field staff).
ii) Sanction of Annual
Increment MD, for all positions Full
Subject to budget provision and
entitlement based on
performance. Proposals for
annual increment will be
provided by the concerned
supervisors as per HR Policy
and Manual.
Director (HR) for the
positions from L4 to
L15 at HQ and Region
Subject to approval from MD
iii) Special Increment/
Performance Bonus Managing Director Full
Subject to provision in the HR
Policy and Manual and
Performance Appraisal
iv) Sanction of Gratuity Managing Director Full Subject to fulfilling conditions
as outlined in gratuity policy
v) Encashment of Leave
(after leaving SDF) Managing Director Full
Subject to provision in the HR
Policy and Manual
vi) Sanction of Charge
allowance Managing Director Full As per rules
vii) Payment of Salary
and Allowances
Managing Director /
Director (Finance),
H.Q.
Full
Regional Director
for Regional Office Full
DM for District and
Cluster Office Full Subject to approval of RDs.
2
Loans and Advances:
i) Loan from
Contributory Provident
Fund (CPF).
Managing Director Full
Subject to recommendation of
Board of Trustees under CPF
Rule
ii) Advance against
Training/Workshop/Pur
chase
Managing Director Full
Director of Operations 2,00,000
/-
For Training and Workshop at
the field level and adjustment
of all previous advances
26
S.N Item Authority Extent Remarks
Director (HR) 1,00,000
/-
Subject to adjustment of all
previous advances
Regional Director 1,00,000
/-
Subject to adjustment of all
previous advances
District Manager 20,000/- Subject to administrative
approval of Regional Director
3
a) Printing and
Stationeries
Director (HR &
Admin.) Full
Regional Program
Director 50,000/-
District Program
Manager 10,000/-
Subject to Approval of the
respective RDs
b) Advertisement &
Publicity
(Tender notice,
Employment notice)
Director (HR) Full Subject to administrative
approval of MD, SDF
Regional Director 50,000/- Subject to administrative
approval of MD, SDF
District Manager 10,000/- Subject to administrative
approval of Regional Director
d) Gift, Entertainment
items, publicity related
banner/festoon etc.
Managing Director Full
Director (HR)/ RD 20,000/-
e) Foreign
Tour/Training Managing Director Full
With approval of the Board of
Directors of SDF
f) Bank Charges
Director (Finance) Full
Regional Director Full
District Manager Full
g) Exhibition and
Seminar Managing Director Full
With approval of the Chairman
of SDF Board of Directors
h) Hiring of casual staff Director (HR) Full Subject to approval of MD,
SDF
4 Consulting Services Managing Director Full
Subject to recommendation
from Director of Operations /
respective Directors
5
Repair and maintenance
of office & eclectic
equipment,
machineries, furniture
and fixtures
Director (HR) Full
Regional Director 25,000/-
District Manager 5,000/-
6
Repair and maintenance
of Vehicles and
insurance
Managing Director Full
Director (HR) 50,000/-
Regional Director 50,000/-
District Manager 10,000/-
27
S.N Item Authority Extent Remarks
7 Purchase of
Uniforms/Dress Director (HR) Full
8 Legal Expenses Managing Director Full
9 Audit Fees Director (Finance) Full Subject to approval of MD and
Board of Directors of SDF
10
Subscription of Foreign
Journal, Magazine,
Newspaper and
Periodicals
Managing Director Full
11
Procurement of
Vehicles, Motor Cycle,
Bi-Cycle, Photo Copier,
Micro-Computer,
Furniture & Fixture,
Partition & Paneling,
Air Cooler, Intercom,
PABX, Calculator &
electronic equipment
etc.
Managing Director Full
Subject to provision in the
Procurement Plan and no
objection received as required
from World Bank
Director (HR) 2,00,000
/-
Subject to approval of MD,
SDF and provision in
Procurement Plan
Regional Director 1,00,000
/-
Subject to approval of MD,
SDF
12 Hiring of Vehicle (total
value in a contract)
Managing Director Full
Director (HR) 2,00,000
/-
Subject to approval of MD,
SDF
Regional Director 1,00,000
/-
Subject to administrative
approval of MD, SDF
13
Carrying cost (furniture,
equipment &
stationery) /
transportation cost
Managing Director Full
Director (HR) 2,00,000
/-
Subject to approval of MD,
SDF
RegionalDirector 50,000/-
District Manager 10,000/- Subject to approval of RD
14
Procurement of
Crockeries, Electric
Fan, Curtains, Brief
Case, Books, Clocks &
Other assets
Managing Director Full
Director (HR) 20,000/-
RegionalDirector 20,000/-
District Manager 2,000/- Subject to approval of RD
15 Telephone Installation Director (HR) / RD Full Subject to Approval of MD
16 Refund of Security
Money Director (Finance) Full Approval of MD
17 Opening of new STD
Bank Accounts Managing Director Full
18 Transfer of Fund from
one A/C to other A/C Managing Director Full
28
S.N Item Authority Extent Remarks
19 Signature of Cheque
(H.Q.) Managing Director Full
20 Signature of Cheque
(Regional Office)
Regional Program
Director / Regional
Finance Manager
(Corporate)/ Accounts
Officer
Full Regional Director and any one
from other two
21 Signature of Cheque
(District Office)
District
Manager/District
Officer (Village Fund)
/ District Accountant
Full District Manager and any one
from other two
22 Income Tax deduction
from employees
Director (Finance) Full As per Income Tax Rules
Regional Director Full As per Income Tax Rules
District Manager Full As per Income Tax Rules
23 Leave Salary &
Provident Fund
Contribution
Director (Finance) Full Subject to approval of MD.
Regional Director Full Subject to approval of MD.
24 Group Insurance for
Employees
Director (Finance)/
Director (HR &
Admin)
Full Subject to approval of MD.
Regional Program
Director Full Subject to approval of MD.
25
Organizing Sports,
Drama, Welfare,
Recreation and
MiladMahfiel etc.
Managing Director Full
26 Rental Rates and Taxes Director (Finance) Full
Regional Director Full
District Manager Full Subject to approval of MD.
27 Postage, Telegraph &
Telephone Bill, IT &
Other Utilities and
internet etc.
Director (HR) Full
Regional Director Full
District Manager Full Subject to approval of RD
28 Village Fund to Gram
Samiti/ Institutional
Federation/ Cluster CP
Centers
Managing Director Full
Approval of GS, IF & CP
Centre fund and disbursement
of funds to Regional Office.
RD (shall disburse
fund directly to GS, IF
& CP Centres within 3
working days of
receiving fund
approval letter from
MD, SDF)
Full Subject to approval by MD,
SDF
29
S.N Item Authority Extent Remarks
29 TA & DA Bill
MD (SDP, Directors,
Consultants & AMT
teams)
Full Subject to revised TA & DA
Rules-2011
Managing Director
(for staff working at
HQ)
Full Subject to revised TA & DA
Rules-2011
RDs (for staff working
under regionand DM
for District level staff
except AMT team)
Full Subject to revised TA & DA
Rules-2011
DPM (All Cluster
Team Leaders and
staff working in the
Cluster and in the
Field)
Full Subject to revised TA & DA
Rules-2011
Note:
1. All financial powers are subject to budget provision and following of relevant
procurement rules including Public Procurement Rules, 2008 and World Bank
Guidelines.
2. Any item not mentioned here shall require approval of MD, SDF
30
3.5 FINANCIAL & ADMINISTRATIVE REVIEW CHECKLIST FOR SDF REGION,
DISTRICT AND CLUSTER OFFICE VISIT
3.5.1 What is the purpose of the Review (Internal Control) Checklist?
The purpose of this checklist is to document financial and compliance purposes a site
visit to a District, Region& Cluster Office. If any problems are found during the site
visit, it is expected that the Region, District and Cluster Office and/or SDF takes
appropriate corrective action. Appropriate corrective action depends on the nature of the
problem and could include hiring an accounts personnel if one is not present; suspending
activities until corrective action taken; continuing activities for limited period of time
until corrective action taken; requiring expenditure documentation be attached to monthly
financial reports, etc. Any appropriate corrective action affecting changes to the
agreement must be performed in accordance with set forth SDF policy and procedure.
3.5.2 When is the Recipient (Region, District and Cluster Office) Review Checklist to be used?
3.5.2.1 Checklist used and review:
This Checklist should be administered as often, as necessary between the beginning and
ending date of the project. Apparently, that will vary according to how much time that
period is, but should generally occurtwice in a year. As a general rule, the following
schedule is the minimum recommended:
Agreement Period Number of times
to Administer Checklist
0-6 months 1
7-12 months 2
13-18 months 2 or 3
19-24 months 4
Over 24 months 2 plus 1 for every whole 12 months period
Additionally, checklists should be administered if recipient (Region, District and
Cluster Office) monthly financial reports are overdue for more than three months or if
other financial matters come to our attention.
3.5.3 Who is responsible for initiating and completing the Recipient Review Checklist?
The Checklist should be initiated and completed by the following:
For Region, District and Cluster Office.
- The SDF HQ Finance and Accounts personnel
31
The above information means if SDF has a recipient in Bangladesh where SDF has an
officein that case the SDF office finance staff should administer the checklist.
While regional and district level staff members undertake visits to a unit office, they
should administer a checklist, if possible. However, administering the checklist should
not be the sole purpose of their trip except under extreme circumstances.
If the SDF staff members are tasked with administering the checklist they should perform
to the best of their ability. That will still benefit SDF and the recipient. In some
circumstances SDF may need to hire an outside representative to administer the checklist.
This can only occur through SDF’s Manager Finance (Corporate Financing).
3.5.4 Who is responsible for Recipient (Region, District and Cluster Office) Review Checklist
follow-up?
The SDF,HQ is responsible for initiating and completing the checklist along with
ensuring follow up to make sure that recommendations are implemented properly. This
should primarily be the responsibility of the SDF staff members.
Upon receipt of a completed checklist SDF Finance Dept. will follow-up to track
significant changes and initiate actions as deemed necessary.
3.5.5 Who gets copies of the completed Recipient Review Checklist?
Copies of completed checklists should be distributed as follows:
Original distributed to Manager/DGM- Finance (Corporate Financing)
One copy for regional office is reporting to
One copy retained by SDF National office (M.D.)
One copy to the program staff person primarily responsible for project.
Attach to the completed checklist documentation or explanation of action taken on any
findings. If no action taken, then so state.
32
3.6 ACCOUNTING RECORDS
Accounting Records are the books and records the organization uses to record project receipts
and expenditures. Please ask the FM team the following questions. A “no” answer should be
explained on the back of this checklist or on a separate page. (For example, if a recipient is not
using a general ledger or cash receipts and disbursements journal or anything similar to that,
explain how they are accumulating receipts and expenditures to go on our monthly financial
reports).
YES NO
1. Is a separate bank account used for SDF funds? If not, whose name
is on the account and for what other purpose is it used?
1.......... 1..........
2. If the bank account is interest bearing, has interest earned been
reported to SDF? If no, request they do so on the next monthly
financial report.
2.......... 2..........
3. Is a cash &bank book used to record all receipts and expenditures
for the bank account? If no, how are receipts and expenditures
recorded?
3.......... 3..........
4. Has the latest bank statement been reconciled to the book balance?
If no, why? Please indicate latest month and year
reconciled........................ Provide assistance if they need help.
4......... 4 .........
5. Does the cash book balance agree to the monthly financial report
ending cash balance? Please indicate what month and year was
reviewed .................... If no, what is the difference?
5.......... 5..........
6. Is a general ledger (or cash receipts and disbursements journal)
used to accumulate project receipts and expenditures from the bank
book? If no, how are receipts and expenditures accumulated to
record on the monthly financial report?
6.......... 6..........
7.
8.
Are expenditures recorded and accumulated in the general ledger by
sub agreement budget category / component? If no, how
recorded?
Is there have any budget variance? If yes, Why?
7..........
8………
7..........
8……
9. Is the general ledger up to date? If no, why and how current? 9.......... 9..........
10. Is the person who maintains the general ledger different than the
person who signs checks? If no, who is this?
10.......... 10..........
11. Are the SDF Recipient’s Monthly Financial Reports prepared
from the general ledger each month? If no, how are the monthly
financial reports prepared?
11.......... 11..........
33
12. Is petty cash secured with lock and key? Determine when petty
cash was last counted or count yourself in presence of petty cash
custodian if not done within past 30 days.
12.......... 12..........
34
3.7 SUPPORTING DOCUMENTATION FOR EXPENDITURES
Supporting documentation should be obtained to support expenditures in the accounting records.
Supporting documentation is an original record that provides any or all of the following: purpose
of expenditure; description of expenditure; when was the expenditure incurred; who was paid;
authorization for project; that the item or service was received. Specifically, we want to see
invoices, delivery receipts, cash receipts, timesheets, contracts, agreements, vouchers, and travel
expense reports, itinerary etc. These items will stand up to an audit in the event there is one.
YES NO
13. Is supporting documentation obtained for each expenditure?
If no, list what expenditures where documentation is not
required.
13.......... 13..........
14. Are paid invoices stamped “Paid” to insure they are not paid
again? If no, what steps do they take to prevent duplicate
payment?
14.......... 14..........
15. Is the supporting documentation field in a manner that can be
easily retrieved to support expenditures, if audited? If no, how
filed?
15.......... 15..........
16. Are expenditures approved by the person in charge of project?
If no, who approves? Name/Title.............................................
16.......... 16..........
17. Are cheques issued for all expenditures? If no, what
expenditures are paid in cash? If payment made by cash, do
they maintain cash payment ceiling?
17.......... 17..........
18. If the funding agreement supports salaries, do employees have
signed written employment contracts or approved pay rates and
duties documented in personnel files? If no, what do they have
or do instead? If not supporting salaries put N/A under the
“YES” column.
18.......... 18..........
19. If the funding agreement supports salaries, does each employee
complete a timesheet or other records to support the amount of
time charged to SDF projects. If no, how is the time spent on
projects supported? If salaries are not supported by the
agreement, put N/A under the “YES” column.
19.......... 19..........
20. Do they maintain PJP (Personal Journey Plan) and travel
expenditure SDF’s guideline at the time billing?
20.......... 20..........
35
3.8 COMPLIANCE RECORDS
Compliance records document compliance with the terms and conditions of the funding
agreement. They include memos, notes, proposals, SDF approval letters or memos, and
inventory listings.
Sometimes there are no documents, such as observing the use of equipment purchased for
the intended purpose.
YES NO
21. Whether periodic withdrawal claims are performed time
bound?
21.......... 21..........
22. Are three competitive bids obtained and retained for individual
expenditures not exceeding BDT 500,000? If no, how are these
items purchased?
22.......... 22..........
23.
24.
Is an inventory list maintained of equipment and furnishings
purchased under the funding agreement that include a
description, serial number, model number, purchase date, cost,
supplier, and physical location of equipment or furnishing? If
no, why. Instruct them to prepare one.
Is a register and inventory list maintained for office stationery?
If no, why. Instruct them to do the same.
23..........
24……..
23..........
24……
25. Are funding agreement equipment and furnishings labeled and
located at the recipient’s location? If no, where are equipment
and furnishings?
25.......... 25..........
26. Are equipment and furnishings purchased with project funds
used for the intended purpose, properly maintained and
safeguarded from theft or damages? If no, describe problems
fund.
26.......... 26..........
36
3.9 OTHER INFORMATION
“YES” answers require additional information, “NO” answers require no additional information
YES NO
27. Has the recipient had an audit performed within the last 18
months? If yes, please obtain a copy of the audit report and the
name, address telephone and fax number of the audit firm.
28.......... 28..........
28. Have there been any changes in the recipient personnel that are
responsible for the financial and administrative affairs /
authority since the project began or completion of the last
checklist? If yes, please obtain name, financial background and
qualifications of the new person. Of the position is vacant, how
are these responsibilities being performed and what is the
timetable for a replacement. Provide assistance if project
financial administration will be affected.
29.......... 29..........
29. Are the books of accounts relating to a period of not less than
12-years immediately preceding the current year together with
vouchers relevant to any entry in such books of accounts shall
be preserved in good order? If no, please specify the reasons.
30.......... 30..........
37
Chapter 4: PLANNING BUDGETING & FORECASTING
4.1 Budgetary Control System
Budgetary control is a system of planning and controlling cost which starts with the
establishment of budgeted goals of activities to be carried out in order to achieve the
Organizational objectives and regular comparison between budget and actual
results/costs, analysis of variances and corrective measures.
4.2 Objectives of Budgetary Control System
From the functional point of view, a system of Budgetary Control serves the purpose of
Planning, Co-ordination and Control. The objectives of the System are as detailed below:
Combining the ideas of all level of management in the preparation of different
functional budget,
Co-ordinate all the activities of each cost center,
Assist in the centralization of control and responsibilities,
Planning and controlling income and expenditure to determine Organization need,
Acting as a guide for management decision,
Provide a yardstick against which actual results are compared,
A tool pointing out the areas where management action is required.
4.3 Advantages and Disadvantages of Budgetary Control System
4.3.1 Advantages
The major strength of budgeting is that it coordinates activities across departments
Budgets translate strategic plans into action. They specify the resources, revenues,
and activities required to carry out the strategic plan for the coming year
Budgets provide an excellent record of organizational activities
Budgets facilitate communications throughout the organization. Budgets are the blue
prints for the organization’s plans of operations and can only be coordinated through
proper communication at all levels and these budgets are especially helpful to lower-
level managers who are responsible for implementing the budgets and the plans. They
let these managers know how their operations relate to other units or departments
38
within the organization. This improved communication reduces the risk of failure due
to any misunderstanding.
Budgets improve resources allocation, because all requests are clarified and justified
Budgets act as controlling devices to correct any deviations. If the expenditures for a
given activity exceed the allotted budget at any point of time, this will signal a
deviation from the prescribed course, requiring attention and action by the
management.
Budgets help in the just measurement of performance. Due to quantification of
budgets, the measurement of performance becomes more objective in nature thus
eliminating biases that might be introduced due to subjective evaluations.
The budgeting process helps management learn from past experience. The
management can critically look at the success or failure of the past budgets and
isolate errors and analyze their causes and establish steps to be taken to avoid
repetition of such errors.
Budgets require those involved to be aware of the internal and external factors
affecting the organization.
4.3.2 Disadvantages
The major problem occurs when budgets are applied mechanically and rigidly may
require the use of confidential information.
Budgets can demotivate employees because of lack of participation. If the budgets are
arbitrarily imposed top down, employees will not understand the reason for budgeted
expenditures, and will not be committed to them
The longer the time horizon budgeted the greater chance for forecasting error.
A rigid budget structure reduces initiative and innovation at lower levels, making it
impossible to obtain money for new ideas
there could be a tendency to "spend to the budget"
4.4 Budget Preparation Guild line
Annual budget preparation techniques may include the things like Project documents as a
whole
Project Appraisal Document (PAD) is a very initial document of NutonJibon
project which describes the rationale of the project, project design, implementation
arrangement, scope, opportunities, resources and limitations, outcomes / output etc.
39
Financing Agreement (FA) & Project Agreement (PA) is the prime legal
document for the WB, Govt. of Bangladesh and SDF.
Project Implementation Plan (PIP) is the detailed working document which shows
the overall aspects of NutonJibon project.
Project Cost Table as agreed by the WB and SDF at the preliminary stage of project.
Annual Implementation Plan showing
Detailed Activity
Frequency of Activity (s), size of activity etc.
Input (s) – Qty, estimated unit rate etc. in specific and measurable form.
Fund disbursement Projection for MoF focusing the project period and fund
disbursement, yearly projection and targets to be sent to the MoF. Moreover in every
year SDF have the chance to revisit the yearly budget considering the present
scenario and reality of the project.
Fund Allocation and Authorization by the MoF based on the sanction of fiscal
budget.
Human Resource Policy and Manual & Delegation of Powers: Considering the
relevant clause of pay and benefits in consultation with the management. The
Regional offices do not have authority to buy any capital goods.
Immediate past year’s disbursement trend and Inflations: Keep in mind the
disbursement trends of immediate past year’s and the field reality. Moreover money
inflations also be consider from year to year for arriving at the cost for goods
(including capital items), office rent and other operational cost except employee cost.
Contracts, MoU and Agreements: Consider the value of contracts awarded and
potential contracts cost which is supposed to settle during the year under review.
Procurement Plan: As updated from time to time.
Recommendations and Agreed Actions of the WB Mission, if any.
The SDF is responsible for drawing up the yearly budget of the project in line with the
GoB and other donors’ funding patterns and commitment. The yearly budget should be
approved by SDF Board of Directors and General Body in the month of June each year.
The annual budget (July – June) of the following year and its implementation plan should
be submitted to IDA (if required).
The yearly budget shall be drawn up taking into consideration the annual work plan of
the SIPP. In preparing the budget due emphasis should be given to what can realistically
be achieved within the coming year as per procurement plan. The detailed budget shall be
drawn up indicating budgetary provision for each of the components of the SIPP
including categories of expenditures in accordance with Development Credit Agreement.
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Actual expenditure should be closely monitored against budget provisions on a monthly
basis and appropriate remedial actions taken promptly for significant variances.
Based on the actual trend of expenditure, at least half yearly forecast of expenditure to be
prepared to facilitate in preparing the Project Cash Forecast.
Finance and Administration Unit of SDF in consultation with each functional Unit would
plan and budget all administrative and program expenditures including sub-projects. The
forms of the plan and budget would be quite simple and would include:
SDF’s estimated annual expenditure against each chart of accounts/operational
activities and the funding source;
a well-thought-out list of program activities, their approximate timing, and estimated
costs, financing sources (including community contribution) and benefits;
a record of the actual costs, financing and benefits, comparing them with the
estimates.
4.5 STEPS OF PREPERATION OF BUDGET
Steps Budget Preparation Time Limit Responsible Person
Step-1: Function wise estimation of cost and
send it to accounts department through
departmental head.
10 days Functional Manager (s)
Step-2: Evaluation and Assembling of
expenditure estimates.
03 days Responsible Officer in
consultation with
Functional Manager (s)
Step-3: Accounts & Finance department will
submit to Budget Committee (BC). BC
will finalize it after required discussion,
analysis, modification or addition if
any.
2 days Convener – Budget
Committee
Step-4: Submit to the Meeting of Board of
Directors and General Body for
approval.
21 days Director F&P
Step-4: Budget Implementation (Continuous
Process)
Finance Section-Functional
Manager
Step-5: Budget Monitoring/Tracking (Continuous
Process)
Finance Section-Functional
Manager
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Steps Budget Preparation Time Limit Responsible Person
Step-6: Variance analysis between Actual and
estimated expenditure
Quarterly/
Yearly
Finance Section-Functional
Manager
Step-7: Audit and evaluation of Financial
Performance
(Continuous
Process /At
the end of the
financial year)
Budget Committee
4.6 Budget Variance Report
At the end of each quarter a Budget variance report shall be prepared to know and to
analyze the category wise variance between estimated or budgeted expenditure and actual
expenditure. Proper steps should be taken if any variance arises. Besides, if any
modification or amendment of budget is required that should be addressed to the budget
variance report and should be reflected with next quarter budget.
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Chapter 5: FUND MANAGEMENT
5.1 FLOW OF FUNDS
The general rule is that funds should be channeled to the level where the activities are
actually carried out. For these reasons, funds should be transferred to the bank account of
the entity in charge of the implementation (communities or SOs) only when the payment
is due in accordance with contractual agreement.
Funds would be channeled through the following mechanism:
From IDA to GoB through the Financing Agreement (FA);
From GoB to SDF through Subsidiary Grant Agreement;
From SDF to Communities in accordance with Sub-project Financing Agreement
(SFA);
5.2 GUIDING PRINCIPLE AND DISBURSEMENT MECHANISM
The financing agreement between SDF and communities would specify the terms and
conditions of disbursement of funds and its management;
Payment would be made against specific deliverables and the disbursement of given
tranches would be made against the attainment of a specified milestone, progress
report and certificates in accordance with financing agreement;
Financing agreement should include remedial measures in case of failures of the POs
or communities to comply with the terms and conditions of the Sub-project Financing
Agreement (SFA).
5.3 WITHDRAWAL/DISBURSEMENT OF FUNDS
5.3.1 Withdrawal of Funds from IDA
The Foundation shall maintain Convertible Taka Special Account (CONTASA) with a
commercial bank on terms and conditions acceptable to IDA with prior approval of MoF.
The spacemen signature of the Managing Director/Project Director responsible for
operating the account shall have to be attested by the Head of Department/ Agency and
the Administrative Ministry/Division in the spaceman signature card of the bank.
Withdrawal applications for initial deposit to the Designated Account, the proceeds of the
IDA credit shall be utilized exclusively in accordance with Financing Agreement.
Moreover, withdrawal from IDA credit will be on reimbursable basis against the actual
expenditure from the Designated Account, on a monthly basis.
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5.3.2 Withdrawal of Funds from GOB
The Foundation shall maintain Taka Account with a commercial bank for the funds
received from GoB. The funds shall be utilized solely for the purpose for which the fund
is provided. SDF can invest unutilized balance of fund received from GOB.
5.3.3 Fund Disbursement from SDF to Communities
Village Development Funds (VDF) are mainly categorized into three sub funds like:
Institution Development Fund (IDF)
Shabalombi Fund (SF)
Community Infrastructure and Social Services Fund (CISF)
All the sub funds of Village Development Fund (VDF) will be paid in installments. The details
of installments are as follows:
Institution Development Fund (IDF)
i. Institution Development Fund (IDF)
Installment - I 60%
Installment - II 30%
Installment - III 10%
ii. Shabalombi Fund (SF)
Installment- I 60%
Installment - II 40%
iii. Community Infrastructure and Social Services Fund (CISF)
Installment- I 40%
Installment - II 40%
Installment - III 20%
Financing Agreement
The Gram Samiti will sign an agreement with SDF known as Financing Agreement.
The Financing Agreement contains the following:
- The activities we have completed before signing the agreement,
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- The activities we will complete after signing the agreement,
- The total amount of the approved VDF application,
- Responsibilities of SDF and Gram Samitis,
- A checklist of key important project principles we have to follow,
- Amount of installments,
- A list of activities we have to complete before receiving each installment-these are called
Milestones.
- The form of Financing Agreement is referred to COM BOOKLET-7.
There will be bank accounts in the name of Gram Samiti to transact Village Development
Funds. President, Secretary and Cashier will be the signatories of the bank account and any
2 of them will jointly operate the account.
5.3.4 Flow of Funds from SDF to Region, District, Cluster and GS to communities
SDF will disburse funds to meet all expenditure at the Regional level on the basis of
approved budget. The disbursement will be in two instalments, one at the beginning of the
fiscal year and the other one three months before year end. The Regional office will be
responsible for disbursement of funds to District offices. The district office will be
responsible for disbursement of funds to cluster offices. The Regional Office will
consolidate budgetary requirement for all districts and cluster offices. The Regional office
will submit a consolidated budget request to SDF together with districts and clusters budget.
The requested budget amount shall be disbursed to the Regional office and Regional office
will submit actual expenditure statement along with district and clusters on monthly basis.
5.3.5 Disbursement of fund to Village level
Region shall disburse fund directly to village account under intimation to DM and CO based on
sanction followed by the appraisal upon fulfilling eligible criteria.
5.4 DECENTRALIZED FUND FLOW MANAGEMENT FROM SDF TO REGION,
DISTRICT, CLUSTER AND GRAM SAMITIES
To facilitate speedy fund flow in the program, overall fund flow from SDF to Region,
District, Cluster and Gram Samiti has been decentralized. Accordingly, Gram Samiti,
Institutional Federation and Cluster Society’s fund shall be approved by the Managing
Director, SDF. The Director (Finance), SDF will directly release the approved village
funds to Regional offices who shall maintain accounts and records thereof. Upon
receiving the Village fund from the Managing Director, Regional offices shall disburse
funds within 3 workisng days to Gram Samiti, District and Cluster societies.
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In case of Operating and Administrative Cost, Director (Finance) will transfer funds to
Regional and District offices on the basis of approved budget. The disbursement will be
in monthly installments. The district offices will be responsible for disbursement of
funds to cluster offices and therefore, will consolidate budgetary requirement for all
cluster offices. The district office will submit a consolidated budget request to SDF
together with its budget through the Regional Directors. The amount disbursed by SDF
will be shown as advance in its book and will be adjusted monthly with the submission
of actual expenditure statement by Regional and District offices.
5.5 ACCOUNTING FLOW AND RECONCILIATION
In SDF Books of Accounts, Payment of first installments to GS will be treated as actual
expenditure and payment of subsequent installments would be recorded as actual
expenditure only when physical milestones as per Financing Agreement reported by GS
and certified by the authorized official of program department.
The Finance department of SDF will be responsible to reconcile all financial data with
the books of accounts maintained at Regional and District levels, Bank Accounts and
Account for all transaction within 15 days from the end of each month. For the part of
fund directly disbursed by Regional offices to GSs, Regional Finance department will
reconcile fund disbursement information and data with the financial progress report of
the program department.
46
5.6 Fund Flow Chart
47
5.7 Fund Management Reporting Flow Corporate Finance
Cluster Accountant
ClusterOfficer (CO)
REGIONAL FINANCE
MANAGER (Corporate)
FINANCE MANAGER
(Corporate)
DIRECTOR (FINANCE)
MANAGING DIRECTOR
District Accountant
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Chapter-6:PAYMENT PROCEDURE
6.1 Budget Provision and Approval
As a general rule no expenditure shall be incurred or liability involving expenditure
entered into, unless the expenditure has been sanctioned by a general or special order of
the appropriate authority and the expenditure has been provided for in the budget
estimate for the year. Provision in the budget does in no way dispense with the necessity
of obtaining the approval of the expenditure from the competent authority. Payments in
an individual case must be supported by bills/invoices which should be completed in all
respects.
6.2 Supporting documents for payment
Bills /Invoices accepted for payment should bear payment orders signed and dated by the
approving authority. The pay order should specify the amount payable both in words and
in figures.
6.3 Cheque writing procedure
The following special precautions shall be taken in writing and signing cheque to
eliminate scope for interpolation or other malpractice.
(a) Cheque should be written and signed in indelible ink.
(b) Amount of cheque should be written continuously and very close to the printed works
“Taka” leaving no space for interpolation. The amount written in words should end
with the words “only”.
(c) Amounts written in figures should also be written very close to the printed “Taka”
with a point fixed closed to the last figure making insertion of any figure impossible.
(d) Figures and the words should be written neatly and clearly and in such a way that no
figure or word can be changed.
(e) In signing cheques and in attesting correction attention should be given to compare
the amount of the cheque with the amount in the pay order on the body of the invoice
/ bill.
(f) When cheques are required to be crossed it should always be crossed with the words
“Accounts Payee Only”.
(g) Overwriting and erasing in the cheques are strictly prohibited. Correction should be
attested and initiated. Cheques containing more than one correction should not be
issued. Such cheques may be canceled over the full signature of the officer signing
them and state “canceled”.
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NOTE : (i) All payments above Tk.15,000/= to contractor / suppliers and other parties
should be made by cross cheque marked “Accounts payee only”.
(ii) Cheques should be made out in the name of the firm or party with whom the
contract is made. If no written contract is in existence the cheques should be drawn in
the name of the party in whose name the work or supply orders were issued.
6.4 Cheque dispatch
Cheques should either be sent by registered post with acknowledgement due from the
party to whose name they are made out or delivered at the counter in exchange for a
formal stamped receipt signed by the party.
6.5 Loss and Cancellation of Cheque
If cheque is reported lost, contact should at once be made with the bank on which the
cheque was drawn. The bank should be instructed to stop payment on that cheque.
Fresh cheque may be issued only after obtaining non-payment certificate from the
bank.
When it is necessary to cancel a cheque, the cancellation should be recorded on the
counterfoil and the cheque, if in the possession of the drawer. If the cheque is not in
his possession, he should promptly request the bank to stop payment of the cheque
and on ascertaining that payment has been stopped, make necessary correcting entry
in cash book.
A cheque, the currency (validity) of which has expired due to its not being presented
to the bank within six months after the month of issue, may be received back by the
drawer for revalidation or destruction. The fact of destruction and the number and
date of fresh cheques issued, if any, should be recorded on the counterfoil of the new
cheque issued. Cross references should also be recorded in the cash book both for the
cancellation of the old cheque and the issue of fresh cheque in the narration portion of
the cash book.
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Chapter – 7: MONITORING
7.1 The objectives of the Expenditure Monitoring in SDF are as follows:
(a) To provide a systematic means for formulating budgetary goals to be used as basis for
evaluating operating performance.
(b) To serve as an instrument for obtaining participation of the various levels of
management in all the phases of the budget process namely setting up of targets and
evaluating the performance and to improve communication between different levels.
(c) To enable SDF to prepare a realistic operational plan from the grass-root level upwards
and work out its financial implications thereby ensuring achievement of targets.
(d) To enable the Program Managers to gain competence in planning and monitoring the
performance of operations.
(e) To enable the regional management to exercise effective control on the performances of
regional offices for identifying the strengths and weaknesses, and initiating corrective
action.
(f) To serve as an effective means of disseminating the operating plans of SDF to its lower
levels of management.
(g) To reorient budget usage and focus of attention from control of expenditure to results of
operations and achievement of goals.
(h) To guide top management in assessing the impact of changes in conditions against
planned operations so that immediate corrective action can be taken.
For developing an effective reporting system, it is essential that information needs of the
various levels or management are identified. It must be clear as to what information is
required by which management level and at what time. The information is requirements
of various levels of management would need to be determined. At lower levels, the
concern is more for information regarding volume of work done in relation to assigned
task. For higher management levels, it is the trends, highlighted in the information
supplied, which are more important that the exact accounting / figure. It is also necessary
to determine the periodicity or frequency with which information should be supplied to
these levels.
A multi-year Program budget is divided into convenient periods within the yearly time
frame i.e. quarterly, half-yearly, etc. For each of these period a budget plan for the tasks
or targets to be achieved should be available. The monitoring of expenditure and
accomplishment needs to be done in terms of these periods and compared with the budget
plan for the same period. The purpose is to enable the management to make ‘on course
corrections’ in the event of deviations between actual accomplishments and the budget
plan.
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Variances between the actual attainment and the budget targets should be regularly
analysed in terms of their underlying causes so that the various constraints hindering the
achievement can be eliminated to the extent of their controllability through timely
remedial action.
Variance shall be analyzed and corrective steps decided through the participation of both
the controlling and performing unit managers in all the stages of the evaluation process.
Depending upon the causes of variances corrective action shall be decided upon to
change strategies, revise policies or redeploy resources.
Expenditure Monitoring reports are prepared for each program at Regional level and
consolidated at Head Office.
7.2 Audit Trail / Transaction Trail
A step-by-step record by which accounting data can be traced to their source. It enables
an examiner to trace the financial data from general ledger to the source document
(invoice, receipt, voucher, etc.).
7.3 Steps of Audit Trail
Step 1 - Transaction Processing: (File noting and approval before making vouchers)
Step 2 - Recording transaction: Make sure that the vouchers are recorded in the cash
book using the system.
Step 3 - Classification: Make sure that the system has processed all the transactions
into the appropriate ledger accounts.
Step 4 - Balancing: Make sure that all the periodic balances have been shown in the
Trail Balance accurately.
Step 5 - Reporting: Make sure that all the statutory and World Bank reports have
been generated accurately by the system.
7.4 Regulation Criteria for audit observation:
Appointment of auditor:
Facilitation of audit team while conducting the audit
Produce necessary document and information to the audit team
Attend formal exit meeting
Audit discussion
Submission of audit report to the BoD meeting and in Annual General Meeting
7.5 Roles of the Audit Committee
Oversee the financial reporting process.
Monitor choice of accounting policies and principles.
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Monitor Internal Control Risk management process.
Oversee hiring and performance of external auditors.
Review along with the management, the annual financial statements before
submission to the board for approval.
Review along with the management, the quarterly and half yearly financial statements
before submission to the board for approval.
Review the adequacy of internal audit function.
Review statement of significant related party transactions submitted by the
management.
Review Management Letters/ Letter of Internal Control weakness issued by statutory
auditors.
7.6 Procedures for controlling financial transactions
7.6.1 Controlling Receipts
Issue pre-numbered receipts for cash received;
Preserve all cancelled receipts,
Keep control over all receipt books that are bought and used;
Bank all money promptly and intact [Careful about any money received by SDF from
sales or other sources before the entire sum received has been deposited in the bank];
Perform monthly bank reconciliation;
Use a register to record cheques received;
Do not cash personal cheques from petty cash;
Lock up all unused receipt books;
Use a register to record all pledges and donations to SDF
7.6.2 Controlling Assets
Maintain fixed assets register;
Maintain up-to- maintenance and inspection records;
Provide permanent identification marks on fixed assets;
Protect against loss or theft with appropriate security and insurance;
Keep usage records (log book, work token);
Monitor advances and get them reimbursed within a short period of time (not more
than two weeks after the completion of activity);
Invest GoB cash reserves to generate most income possible;
Monitor account receivable to ensure that cash is received on time, and institute
special procedures for overdue amounts
7.6.3 Controlling Expenditures
Obtain written bids or quotes for the cost of all purchase and file them with the
purchase contract. For purchase of more than Tk. 25,000 worth value three
53
competitive bids are required, and less than the value mentioned above 1 or 2
quotations are required to make the purchase;
Use a local purchase order for all local purchases;
Check that goods and services which has been reported as delivered have actually
been received fulfilling the required specifications and recorded in the stock register
Checked that quality, quantity and price of the goods or services received corresponds
to what was purchased;
Make all payments by cheque [a/c payee only]. In case of availability of bank account
of the service provider the upper limit of cash cheque Tk. 15,000;
Require supporting document for all purchases;
Make sure that all expenditures are genuine, reasonable and for the benefit of SDF or
project;
Monitor the budget against expenditures;
Review each expenditure and ask, “Why are we spending this money on this item”;
Check that funds are available with the bank to make payments.
7.6.4 Controlling Liabilities
Keep accounts payable to a minimum level;
Maintain control of suppliers invoice; know what supplies the organization has paid
for and when they will be delivered.
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Chapter 8: BANK ACCOUNTS OPERATION MANAGEMENT
General:
All receipts of money through cheque / draft / pay order / transfer advice bank account
shall be debited and relevant source / income account is credited. Cheque / draft / pay
order shall be deposited into bank through deposit slip of the bank. General principle of
SDF is that to encourage all concern to make / receive payments through banks.
8.1 Procedure of Opening Bank Account:
(A) Bank Account of SDF:
Fund and grant received from any authority shall be deposited into organization’s
bank account immediately. Bank Account shall be operated in accordance with the
resolution of Board of Directors (BoD) of the organization.
(B) Project Bank Account:
The organization, as envisaged in the constitution, shall open project bank accounts
in any bank in the project area for each project separately by taking resolution in the
BoD. Fund transfer will be made only after receiving the fund requisition request
and its approval by the official as per the delegated authority. Bank account may be
opened for each fund / project / which shall be interest bearing unless otherwise
specified in the letter of agreement.
8.1.1 Region / District Office Bank Accounts:
SDF, as envisaged in the constitution, shall open regionional / district office bank
accounts in any scheduled bank in region / district area for each region / district
separately as to be decided by Board of Director of SDF. Such transfer will be made only
after receiving the fund requisition request and quarterly budget statement form by head
office and its approval by the official as per the delegated authority. Bank account may be
opened which shall be interest bearing unless otherwise specified in the letter of
agreement.
8.2 Operations of Bank Accounts:
For operating the bank accounts of SDF at head office, region and district offices, the
signatories for the said bank accounts will be nominated by the Board of Directors. Such
intimation to the bank is to be issued from the head office centrally.
For every BoD member, Director, officer, authorized to sign cheque on behalf of the SDF
Head Office and Region / District Offices, a set of two / three specimen signatures should
be sent to the concerned bank where bank accounts will be opened, duly attested by the
55
person authorized by the BoD for the purpose, if his specimen signatures are not with the
bank.
When the BoD members, Director and other officer makes over charges of his office or
the power of signing cheques withdrawn from him, a set of specimen signatures of the
reliving person should be sent to the bank and necessary intimation issued to the bank
along with instructions to cancel the specimen signatures of the relived person clearly
indicating the effective date of the change.
8.3 Signatories Details:
Details of cheque signatories for operating the bank accounts will be kept confidentially
in Finance and Accounts Department. It includes name, designation, specimen signature
and initials, validity date. When signatories are included /deleted, list should be placed to
substitute previous one.
8.4 Counterfoil of Cheque:
While issuing cheques, it is remembered that counterfoil of cheque shall also be filled in
& put the date of issue, name of payees, initials of the cheque signature, amount in brief.
8.5 Cancellation of Cheques:
If any cheque is issued but not presented for collection by the payee within six months
from the date of issue, the bank shall be intimated in writing to cancel the cheque.
Accordingly, the accounts department shall give reversal entry in the Bank Book and
keep a note in the Bank reconciliation statement. Any loss or theft of the cheque / cheque
book must be informed to the management of SDF and concerned bank management at
the earliest possible time.
8.6 Canceled Cheques:
The word “CANCELED” shall be written in the counterfoil as well as on the face of the
cheque when a cheque is required to be cancelled.
8.7 Cheque Issure and Receive Register:
Cheque Issue and Receive Register shall be maintained for each bank account separately
in a book in the prescribed manner.
8.8 Payment from Bank:
Any payment exceeding Taka 15,000 (Fifteen thousand) must be made through an
account payee cheque and payment less than Taka 15,000 (Fifteen thousand) may be
made by bearer cheque.
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8.9 Withdrawal of Cash from Bank:
For withdrawal of money (Liquid Cash) from the bank account for working cash of for
any operational expenses, a requisition for fund must be prepared for approval in
accordance with the delegated authority. Accounts personnel shall always keep in mind
that the maximum ceiling of cash balance in hand should not exceed Taka 50,000 after
the day transaction in SDF Head Office, Taka 20000 in Region Offices, Taka 10,000 in
District Offices, and Taka 5,000 in Cluster Offices.
8.10 Bank Statement and Bank Certificate:
Collection of monthly bank statements along with Bank Certificates confirming bank
balances on yearly basis and relevant advice from bank shall be the responsibility of
Finance & Accounts Department.
8.11 Bank Reconciliation Statement:
After receiving the monthly bank statement (as per format), the bank balance shown in
that statement as of last day of the month must be reconciled with the balance shown in
the cash book on the same day by preparing a bank reconciliation statement.
The bank reconciliation statement will be prepared by the accountant and should be
submitted for approval of the Director-Finance.
The bank charge or interest detected to be not incorporated earlier in the cash book
should be entered in the cash book by preparing a voucher to this effect.
Any deposit / interest, payment or cheques not recorded in the bank accounts or Bank
statement shall be reconciled by adding or deducting from the closing balance as shown
by the Bank Statement.
A reversal entry should be processed for canceling the cheque issue entry if the cheque is
found not presented within its validity period. Any difference should be thoroughly
checked and investigated with the bank.
8.12 Ordering of New Cheque Book :
Respective designated person with the approval of Director-Finance and accounts shall
initiate for ordering new cheque book when the cheque leaf reaches the order shed
attached with the cheque book. While receiving new cheque book respective designated
person shall count the cheque leaf and satisfy himself that the numbers of cheque leaves
are found in order.
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8.13 Safety of Cheque Books:
Finance and Accounts Department shall be the custodian of the cheque book and shall
ensure that cheque books are preserved safely. To be kept under lock and key by the
accounts officers designated for this.
Fraud, defalcation and misappropriation of public money are largely attributed to
inadequate measures taken by the authorized officers for the safety and security of the
bank cheque books and bank pass books etc.
The officers authorized to sign and /or entrusted with the custody of the cheques / pass
books will be held personally liable for losses due to laxity or their parts for the safe-
keeping and security of these books.
8.14 Receipts of Cheque / Drafts:
Cheques / drafts received in payment of dues can not, however be admitted till they are
cleaned from the bank. Final money receipt in printed forms shall not be granted till the
cheques are encashed and proceeds credited to account.
A certificate of receipt quoting the number and the date of cheque tendered or a receipt
with the following remarks may be given:
“ Issued subject to collection of proceeds”
Cheques / drafts / cash received in the cash section must be deposited into the bank
without delay, preferably on the same day, they are received.
Delay in deposit involves question of safety and security and sometimes may result in
non-realization of the amount of the cheque.
8.15 Dishonor of Cheques:
In the event cheques are being dishonored by the bank on presentation the fact
mentioning the causes of dishonor, should be reported at once to the drawer of the cheque
with demand for immediate payment and mean while the entry in the books of accounts
should be reversed.
8.16 Payment for Lost Cheques:
If a cheque is reported lost, contract should at once be made with the bank on which the
cheque was drawn. The bank should be informed / instructed to stop payment on that
cheque. Fresh cheque may be issued only after obtaining non-payment certificate from
the bank.
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CHAPTER 9: PETTY CASH IMPREST FUND
Keep some “petty cash” for expenses that are very minor or that are not paid for by cheque, such
as, bus fares and small amount for office supplies. The Managing Director or Director-Finance
don’t get involved in the affairs of maintaining petty cash, they will be responsible for
supervising a system that adequately controls and safeguards the cash. Following are the
principles to guide an adequate petty cash system:
Keep the cash in a locked metal box before and after using cash;
Establish a set level for petty expenses that is approximately equal to the amount of
petty cash expenses expected in one month. So, the imprest petty cash amount must not
exceeded by the set ceiling:
(i) SDF HQ Tk. 50,000.00
(ii) Regional Office Tk. 20,000.00
(iii) District Office Tk. 10,000.00
(iv) Cluster Office Tk. 5,000.00
Each individual transaction shall be made with prior approval by the responsible
official from this petty cash system not more than Tk. 5,000.00;
Each transaction on and above TK. 200.00 shall affix appropriate revenue stamp;
Every petty cash transaction shall be stamped CANCELLED and be recorded in a
register timely;
Do not cash personal cheques from petty cash;
Before settlement of transaction regulatory compliance, if any must be ensured;
At the end of the day the balance of cash must be counted and ensuring signing of petty
cash register;
At the end of month, the petty cash vouchers should be added up, the total of these
vouchers plus the amount of cash left in the cash float / box should equal the set level
that have decided on. [For example: suppose that you bring your petty cash fund up to
the level of local currency 100 at the beginning of month. If September’s vouchers add
up to local currency 50, one should have local currency 50 left in the box, and you
should add local currency 50 to the box for October. The local currency 50 will be
reimbursed by a cheque drawn on the bank account. The petty cash voucher serves as
the cheque payment voucher.];
All transactions involving petty cash, the monthly deposits, and the amount of each
voucher for the corresponding budget line items should be recorded in the accounting
journals by the finance team; and
At the end of the FY the petty cash balance must be zero by depositing available cash
into the bank account.
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CHAPTER 10: COMPLIANCE OF GOVERNMENT, TAX, VAT &
OTHER LAWS
10.1 Over view:
SDF head office and it’s all branch offices concerned shall have to follow / abide by the
concerned rules, regulations and financial & accounting implementations of the
Government, Tax authority, Value Added Tax (VAT) authority and all other laws that are
prevailing in the country and compliance thereon.
10.2 Compliance Reporting:
SDF head office and it’s all branch offices shall select, adopt, apply and implement all
relevant accounting system, procedures, methods, and maintain all books o accounts
based on the following requirement, guidelines, instructions, rules and regulations:
(a) As per the rules and regulations of NGO Affairs Bureau of the Government of
Bangladesh made, issued, circulated and pronounced in relevant areas of
operations, administration, finance, accounting control, management etc. as the
case may be.
(b) As per the rules and regulations of SDF
(c) As per the requirements of the Income Tax Ordinance 1984
(d) As per the guidelines of the Value Added Tax Act 1991.
(e) As per the requirements of the International Accounting Standard (IAS)
(f) As per the requirements of the International Standards of Auditing (ISA)
(g) And, such other books of accounts as required, circulated and instructed by the
management of SDF from time to time.
60
CHAPTER 11: RECEIPTS PROCEDURE
11.1 When funds/money is received the RAO / District Accountant shall give the payer a
Money receipt in the prescribed form; these forms shall be pre-numbered, bound in
book form, kept in safe custody and properly accounted for.
11.2 Money received shall immediately be recorded in the cash book and each entry in the
cash book shall be verified with the counterfoils of receipts and/or other original
documents and initiated by the RFM/DM. The RAO / District Accountant shall be
responsible for the safety and security of money and for their proper and correct
accounting in the books of the SDF. Cheques in payment of dues shall not be
accepted from contractors or other outside parties unless such cheques are certified
for payment by the bank. The cheques shall be drawn in the name of the SDF.
11.3 Cash or cheques received must be remitted to the bank without delay and preferably
on the same day they are received. Delay in remittance involves question of safety
and security and sometimes may result in non-realization of the amount of the
cheque. Remittance of money to banks should, therefore, receive special attention of
the RAO / District Accountant.
11.4 In the event of a cheque being dishonored by the bank on presentation, the fact should
be reported at once to the tenderer of the cheque with a demand for immediate cash
payment.
11.5 SDF may prescribe money limits for cash in hand in a particular office. When such
limits are prescribed, cash in hand shall not exceed the limits.
11.6 Cash book must be closed daily over the signature of the RFM/DM and the RAO /
District Accountant and the balance as per cash book shall be verified by the
RFM/DM in the presence of the RAO / District Accountant by actual count of cash
(inclusive of Cheques). Discrepancies, if any, in the cash count should immediately
be reported to the DGM-F/RFM for immediate action as may be deemed necessary.
After the monthly closing of cash book a Bank reconciliation Statement shall be
prepared to settle differences, if any.
11.7 Cash in hand shall be physically counted and verified with cash book balance at the
end of each month by the DGM-F/RFM. Certificate of cash count specifying actual
cash balance by denomination shall be recorded in the book with dated signatures.
Note: The term cash shall include coins, notes, cheques, demand drafts, pay order etc.
11.8 There shall be satisfactory arrangement for the safe custody of cash and other
valuables in hand including receipt books, bank pass books, cheque book etc.
61
11.9 The RFM/DM and RAO / District Accountant who are responsible for the safety and
security of money must satisfy themselves that the iron safes are free from defects. If
a defect is detected or if there is even a doubt that the keys or their duplicate are
missing, immediate arrangement should be made for their replacement under
intimation to DGM-F/RFM at Head Office and Head of Regional Office.
Note: Duplication of keys should be treated as valuables and kept in safe custody.
11.10 Receipt books, bank statement, cheque books etc. must be treated as valuables and
kept secured under lock and key in the personal custody of the RFM/DM. Fraud,
defalcation and misappropriation of money are largely attributed to inadequate
measures of precaution taken by the authorized officers for the safety and security of
the recepts / cheques. Such Officers will be held personally liable for losses due to
laxity on their parts for the safe keeping and security of these books.
11.11 Receipt books and cheque books should be counted immediately on the receipt and
the result of the count should be recorded on the inner side of the front cover of the
receipt / cheque book over the signature of the RFM/DM / Officer authorized to sign
them.
11.12 Separate stock registers of receipt books and cheque books should be maintained to
check the receipt, issue and balance of such books in stock. The entries in these
registers should be attested by the RFM/DM in whose custody they are kept. These
registers should also be kept in the safe along with the receipt cheque books. The
counterfoils of used receipt books and cheque books should also be carefully
preserved.
11.13 Duplicate of copies of receipts / invoices and paid vouchers shall not be issued. If
necessary, certificates may be given in which the number and date of the original
receipts / vouchers etc. issued / paid for should be quoted stating that on certain
specified dates certain sums of money on certain accounts were received from / paid
to certain persons.
62
CHAPTER 12: INTER OFFICE TRANSACTIONS
12.1 Introduction:
It is very obvious that there will be too many financial transactions between the offices of
SDF during any periods of the financial year.
To give a clear view of the recording and documentation systems in respect to the inter
office of SDF for better controlling of the financial transactions a systematic and proper
accounting and reconciliation mechanism shall be established and strengthened.
A set guideline shall be instructed to inter offices of SDF in this regard.
12.2 Recoding & Accounting between Offices:
Instances of financial transactions between the offices of SDF are generally of the
following natures:
(a) Fund transfer from head office to regional offices.
(b) Store material transfers from head office to regional offices.
(c) Store material from one regional office to other regional offices.
(d) Payments if any from one office to another office.
(e) Receipts if any from one office to another office etc.
Once the transactions are happened, vouchers and all related documents and evidences
should be sent immediately after the occurrence of transaction to the concerned office to
which transactions are made and happened.
Confirmation statements shall be made and sent to each office. The concerned officer will
be held liable for any inconvenience happened in the context.
12.3 Reconciliation is a must between offices:
After preparing the monthly financial statements of the offices of SDF, each office shall
compulsory prepare the reconciliation statement of the interoffice transactions accounts
showing any balance or not.
12.4 Rules and restrictions for inter-office transactions:
General instructions are that the payments on behalf of one concerned by another should
be avoided as far as possible.
Loans and advances by one office to another are strictly prohibited.
63
All payments that may be made by one office on behalf of another should be debited
by concern office by forwarding bills using the inter-office transaction account. In
this way, each concerned office will settle its outstanding dues against the other.
Head Office employees/ officers going on tour to field offices are paid advances for
traveling expenses by the head office. Except in emergencies, no head office
employees/ officers on tour is to be granted any kind of advances by the field offices.
In the event of any one desiring another advance from a field office, this shall
immediately be reported to the head office.
SDF head office making any payments/ incurring expenditures on behalf of any field
offices, will debit concerned branch office and make deduction while remitting fund
against budget allocation.
64
Chapter 13: Chart Of Accounts
13.1 COMPUTERIZATION OF FINANCIAL MANAGEMENT SYSTEM
Financial Management system of SDF is computerized and integrated with MIS systems for
efficient budget comparison, fund utilization analysis and other MIS reports. Transactions
carried out at various levels of project activity are processed through this computerized
system. The systems have provision of recording of financial information on daily basis and
enabling various financial information generated accurately and promptly under different
cost centres like-SDF HQ Dhaka, Regional Offices, and District Offices.
65
13.2 LIST AND FLOW OF COST CENTERS
National Level
Dhaka Region-1
District Xi
District Xii
District Xiii
District Xiv
District Xv
District Xvi
Region-2
District Yi
District Yii
District Yiii
District Yiv
District Yv
Region-3
District Zi
District Zi
District Ziii
District Ziv
District Zv
66
13.3 CHART OF ACCOUNTS
A chart of accounts represents every possible type of assets, liabilities, revenue and
expense and assigned a unique number to each “line item” on the list. This is one of the
most basic tools of an accounting system. This chart of accounts allows the finance team
and the head of entity to have accurate information on the sources and uses of financial
resources.
13.3.1 Preparing chart of accounts:
Have a separate line item for each type of transaction [asset, liability, income or
expenses] that needs to be tracked separately for donors and for SDF management
decision making;
Use categories and line items that match (in terminology and level of specificity) those in
SDF and project budgets as well as those in the financial reports required by donors (Say,
World Bank) or top management of SDF;
Provides a breakdown of each expenses type according to nature and use.
13.3.2 ACCOUNTS CODE ALLOCATION
This Chart of Accounts includes a nine digit Accounts Code indicating different level:
Level 1: Control Head
Level 2: Sub-head
Level 3: Sub-sub-head
Level 4: Sub-sub- sub-head
Level 5: Could be open (if required)
Level 1: One (0) digit account code in the Main Head/Component (like-Assets or
Liabilities).Example:
Level-1
Main Head/Component Code
Liabilities 1
Assets 2
Expenditure 3
Income/ Revenue 4
67
Level 2 to Level 5: The next Two (00) digits code assigned to the next levels
Examples:
Level wise
Account
Code
Main Head/Component
Sub Head
Sub Sub Head
Sub SubSub Head
2 Assets
201 Non-Current Assets (Fixed Assets)
20101 Property, Plant and Equipment
2010106 Office Equipment
201010601 Air Condition
13.3.3 Complete Chart Of Accounts (CoA)
Account
Type Acc Code
Main Head/Component
Lin
k t
o
Com
pon
ent
Sub Head
Sub Sub Head
Sub Sub Sub Head
1 Liability
Liability 101 Equity / Capital Fund
Liability 10101 Capital/Fund
Liability 10102 Revaluation Surplus
Liability 10103 Retained Surplus / (Shortage)
Liability 102 Non-Current Liabilities
Liability 10201 Long-term Loans
Liability 10202 Deferred Liability-Gratuity payable
Liability 10203 Differed Liability Provident Fund Payable
Liability 10204
Differed Liability Earned Leave Encashment
Payable
Liability 10205 Accumulated Depreciation
Liability 103 Current Liabilities
Liability 10301 Accounts Payable
Liability 1030101 Payable to Suppliers
Liability 103010101 Payable to Otobi
Liability 103010102
Payable for Office
Vehicle
Liability 10302 Withholding Tax VAT
Liability 1030201 Withholding Tax-Tax Payable
Liability 103020101 Tax Payable
Liability 103020102 Tax Payable- Consultant
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Liability 103020103 Tax Payable- Suppliers
Liability 103020104
Tax Payable-
Employees
Liability 103020105
Tax Payable- Office
Rent
Liability 1030202 Withholding VAT-VAT Payable
Liability 103020201 VAT Payable
Liability 103020202
VAT Payable-
Consultant
Liability 103020203 VAT Payable- Suppliers
Liability 103020204
VAT Payable-
Employees
Liability 103020205
VAT Payable- Office
Rent
Liability 10303 Bank Overdraft
Liability 10304 Short Term Loan
Liability 10305 Loan & Advance
Liability 1030501 Loan from GOB
Liability 1030502 Loan from CONTASA
Liability 1030503 Security Fund
Liability 103050301 Security Fund BY-Cycle
Liability 103050302
Security Fund Motor-
Cycle
Liability 103050303 Security Fund Furniture
Liability 1030504 Advance from SDF HQ
Liability 10306
Long-Term Liabilities- Current Portion
(Interest Payable)
Liability 10307 Outstanding Expenses
Liability 1030701 Salaries Payable
Liability 1030702 Audit Fees Payable
Liability 1030703 Office Rent Payable
Liability 1030704 Consultancy Payable
Liability 1030705 Utilities Payable
Liability 1030706 Travelling Allowance Payable
Liability 1030707 Internet Expenses Payable
Liability 1030708 Office Expenses Payable
Liability 10308 Other Payables
Asset 2 Assets
Asset 201
Non-Current Assets (Fixed Assets) A1,C1,
D1
Asset 20101 Property, Plant and Equipment
Asset 2010101
Land and Land
Development
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Asset 2010102 Office Vehicle
Asset 2010103 Motor Cycle
Asset 2010104 Bi-Cycle
Asset 2010105 Computer Equipment
Asset 201010501 Computer
Asset 201010502 Laptop
Asset 201010503 Printer
Asset 201010504 UPS
Asset 2010106 Office Equipment
Asset 201010601 Air Condition
Asset 201010602 DVD Players
Asset 201010603 Generator
Asset 201010604 GPS
Asset 201010605 Hand Mike
Asset 201010606 IPS
Asset 201010607
Multimedia
Projector
Asset 201010608 Photocopy Machine
Asset 201010609 Refrigerator
Asset 201010610 Solar Panel
Asset 201010611 Sound System
Asset 201010612 Server
Asset 201010613 Television
Asset 201010614
Telephone,PABX
& Mobile
Asset 2010107 Office Decoration
Asset 2010108 Furniture and Fittings
Asset 2010109 Books for Library
Asset 20102 Intangible Assets
Asset 20103 Capital Work in Progress
Asset 20104 Long term Investments
Asset 20105 Other Assets
Asset 202 Current Assets
Asset 20201 Inventories
Asset 20202 Prepaid Expenditure
Asset 20203 Accounts/Bills Receivable
Asset 20204 Other Receivable
Asset 2020401
Interest on FDR (Accrued
Income)
Asset 20205 Short-term Investments
Asset 20206
Loan, Advances, Deposit and
Prepayment
70
Asset 2020601 Advances
Asset 202060101
Advance to Staff
Working
Asset 202060102 Advance to GOB
Asset 202060103
Advance to
Clusters
Asset 202060104 Salary Advance
Asset 202060105
Advance to
Landlord
Asset 202060106
Advance to
Regional office
Asset 202060107
Advance to District
Office
Asset 202060108
Advance to
Consultant
Asset
202060109
Advance to
Travelling
Expenses
Asset 202060110 Other Advances
Asset 2020602 Deposits
Asset 20206001
Deposit to GAS
Statement.
Asset 20206002 Deposit to BTTB
Asset 20206003
Deposit to
CONTAST
Asset 2020603 Prepayments
Asset 20207 Cash and Cash Equivalent
Asset 2020701 Cash in Hand
Asset 2020702 Cash at Bank
Asset 202070201 Sonali Bank
Asset 202070202 Agrani Bank
Asset 202070203 Janata Bank
Asset 2020703
Fixed Deposit
Receipt (FDR)
Expenditur
e 3 Expenditure
Expenditure 301 Salary and Allowances
A1,D1
,C1
Expenditure 302 Seminar & Conference
Expenditure 30201 Facilities / Logistics B2, B3
Expenditure 30202
Learning, Monitoring &
Documentation. B2, B3
Expenditure 30203 Monitoring & Evaluation Forum B2, B3
Expenditure 30204 Orientation D 1
71
Expenditure 30205 Training
Expenditure 3020501 Counseling B2
Expenditure 3020502 Manuals A1
Expenditure 3020503 Materials (Implementation) A1
Expenditure 3020504 Materials (Mobilization) B3
Expenditure 3020505 Training B3
Expenditure 3020506 Training for Staffs D2
Expenditure 30206 Exposure visits
Expenditure 3020601 Exposure Visit in Abroad B2, B3
Expenditure 3020602 Exposure Visit in Country B2,
Expenditure 3020603
Exposure Visit in Neighboring
Country B3
Expenditure 30207 Workshop
Expenditure 3020701
Annual Planning & Review
Workshop
B2,
B3, C1
Expenditure 3020702 Inception Workshop
A1,
D2
Expenditure 3020703 Journalist Workshop D1
Expenditure 3020704 Market Scan D1
Expenditure 3020705 Monitoring Workshop D1
Expenditure 3020706 Orientation Workshop
D1,
D2
Expenditure 3020707 Project Planning Workshop
D1,
D2
Expenditure 3020708 Sectoral Study and Market Scan D2
Expenditure 3020709 Seminar B 2
Expenditure 3020710 Thematic Workshop B 3
Expenditure 3020711 Workshop B 3
Expenditure 30208 Meeting
Expenditure 3020801 District Level M&L Meeting A1
Expenditure 3020802
Meeting with Pvt. Sector/
Different Stakeholder B2, B3
Expenditure 3020803
Quarterly Process Review
Meeting
D1,
D2
Expenditure 3020804 Review Meeting D2
Expenditure 30209 Technical Assistance
Expenditure 3020901
Technical Assistance (Capacity
Building) B2, B3
Expenditure 3020902 Technical Assistance (M&L) B2, B3
Expenditure 3020903
Technical Assistance
(Partnership Building) B3
Expenditure 30210 Capacity Buildings
Expenditure 3021001 Business Shelter showroom / A 1
72
store
Expenditure 3021002
Capacity Building at Cluster
Level B 2
Expenditure 3021003
Capacity Building at Village
level B 2
Expenditure 3021004 CP Development B 3
Expenditure 3021005 Field visits B 3
Expenditure 3021006 Livelihood CP Development C 1
Expenditure 3021007 Livelihood Support Assistant C 1
Expenditure 3021008 National CB Agency C 1
Expenditure 3021009 Setting up CB Cell C 1
Expenditure 3021010 Specialized Training C 1
Expenditure 30211 Planning & Implementation
Expenditure 3021101
Basic PRA and Vulnerability
Planning A 1
Expenditure 3021102 CP costs A 1
Expenditure 3021103
Implementation of CAP and
GAAP A 1
Expenditure 3021104
Overall Planning and
Implementation Support A 1
Expenditure 3021105
Participatory Identification of
Poor A 1
Expenditure 3021106 PRA Livelihoods A 1
Expenditure 303 Inter village Institutions A 1
Expenditure 30301 Institution Federation Fund B 1
Expenditure 30302 Producer Federation Fund B 1
Expenditure 30303 Development of CP Centre Fund B 1
Expenditure 304 Consultancies
Expenditure 30401 Consultancies C 1
Expenditure 30402 Process Monitoring Agency- North Zone D 2
Expenditure 30403 Process Monitoring Agency- South Zone D 2
Expenditure 30404 Baseline Survey D 2
Expenditure 30405 Modified MIS Software D 2
Expenditure 30406 IEC Individual Consultant D 2
Expenditure 30407 Hiring of CP (Community) Society A 1
Expenditure 305 Promotion, Communication and Learning
Expenditure 30501 Management fees for NGOs A 1
Expenditure 30502 Producer Group Management B 2
Expenditure 30503 Youth database B 3
Expenditure 30504 Employment B 3
Expenditure 30505 Database B2
Expenditure 30506
Demonstration / Immediate Support (Pilot /
Event) B2
73
Expenditure 30507 IEC Campaign A 1
Expenditure 30508 knowledge and learning fair A 1
Expenditure 30509 Awareness building A 1
Expenditure 30510 IEC material A 1
Expenditure 30511 Trade Fair B 2
Expenditure 30512 Participate in International Trade Fair B 2
Expenditure 30513 Promotional materials /events B2, B3
Expenditure 30514 Cluster festival B 3
Expenditure 30515 Youth Campaign at Cluster level B 3
Expenditure 30516 Job Fair B 3
Expenditure 30517 IEC Material Development D 2
Expenditure 30518 Village Matrix A 1
Expenditure 306 Project Management
Expenditure 30601 Maintenance of Vehicle D1
Expenditure 3060101 Repair & Maintenance - Equipment D 1
Expenditure 3060102 Repair & Maintenance - Bi- Cycle D 1
Expenditure 3060103 Repair & Maintenance - Motor Cycle D 1
Expenditure 3060104 Repair & Maintenance - Vehicle D 1
Expenditure 30602 Office Rental D 1
Expenditure 3060201 Office Rent D 1
Expenditure 30603 Office Utilities D 1
Expenditure 3060301 Gas D 1
Expenditure 3060302 Water D 1
Expenditure 3060303 Electricity D 1
Expenditure 30604 Office Supplies D 1
Expenditure 3060401 Books, Newspapers & Periodicals D 1
Expenditure 3060402 Carrying Cost D 1
Expenditure 3060403 Fees & Renewals D 1
Expenditure 3060404 Repair & Maintenance - Office D 1
Expenditure 3060405 Utensils & Cookeries D 1
Expenditure 3060406 Medical Expenses D 1
Expenditure 3060407 Miscellaneous Expenses D 1
Expenditure 3060408 Office Shifting Expenses D 1
Expenditure 30605 Printing Materials D 1
Expenditure 3060501 Printing and Stationary D 1
Expenditure 30606 Advertisement Expenses D 1
Expenditure 3060601 Advertisement & Publicity D 1
Expenditure 3060602 Recruitment Expenses D 1
Expenditure 30607 Communication Expenses D 1
Expenditure 3060701 Car rental Expenses D 1
Expenditure 3060702 Conveyance D 1
74
Expenditure 3060703 Internet Expenses C1,D 1
Expenditure 3060704
Postage, Stamps &
Courier Expenses D 1
Expenditure 3060705
Telephone, Cell Phone & Fax
Expenses D 1
Expenditure 3060706 Guest House Expenses D 1
Expenditure 3060707 Toll D 1
Expenditure 30608 Bank Charges & Fees
Expenditure 3060801 Bank Charges
Expenditure 30609 Cost of Consumables
Expenditure 3060901 Fuel, Oil and Lubricant
Expenditure 3060902 Insurance Premium
Expenditure 3060903 Legal Expenses
Expenditure 30610 Travelling Allowance
Expenditure 3061001 Transportation Costs
Expenditure 3061002 Travelling Expenses - Foreign
Expenditure 3061003 Travelling Expenses - Local
Expenditure 30611 Meeting & Workshops
Expenditure 3061101 Board Meeting D 1
Expenditure 3061102 Honorarium D 1
Expenditure 30612 Service and Others D 1
Expenditure 3061201 Audit Fees D 1
Expenditure 3061202 Consultancy D 1
Expenditure 3061203 Contingencies D 1
Expenditure 3061204 Entertainment D 1
Expenditure 3061205 Security Services D 1
Expenditure 3061206
Depreciation,
Amortization etc.
Defaul
t
Expenditure
306120601
Amortization
of Intangible
Assets
Expenditure 306120602
Depreciation
of PPE
Expenditure 307 Sub-Grants to Community:
Expenditure 30701
Fund for Community Infrastructure and
Services A 2
Expenditure 30702 Fund for Institutional Development A 2
Expenditure 30703 Shabalombi Fund (Livelihood Support Fund) A 2
Expenditure 308 Supporting Innovations
Expenditure 30801 Funding for E-Upazila ICT Pilot project C 2
Expenditure 30802 Funding for Piper Water Supply project C 2
Income 4 Income / Revenue
Income 401 Grant-IDA
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Income 402 Grant-GoB
Income 403 Sale of Tender Schedule
Income 404 Sale of News Papers
Income 405 Sale of Pass Book
Income 406 Sale of Scrap
Income 407 Interest Income on FDR
Income 408 Interest Income on STD Bank Account
Income 409 Guest House Income
Income 410 Miscellaneous Income
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CHAPTER 14: ACCOUNTS DESCRIPTION
14.1 ASSETS:
International Framework for the Preparation and Presentation of Financial Statements
defines an asset as: a resource controlled by the entity as a result of past events and from
which future economic benefits are expected to flow to the entity.
14.1.1 Recognition of Assets in SDF:
In compliance with Bangladesh Accounting Standard, SDF recognized property, plant,
and equipment as an asset when it is probable that:
it is probable that the future economic benefits associated with the asset will flow
to the entity, and
the cost of the asset can be measured reliably.
This recognition principle is applied to all property, plant, and equipment costs at the
time they are incurred. These costs include costs incurred initially to acquire or construct
an item of property, plant and equipment and costs incurred subsequently to add to,
replace part of, or service it.
Subsequently SDF recognized its asset using cost model or revaluation model as per BAS
14.1.2 De-recognition (retirements and disposals)
SDF should remove an asset from the statement of financial position on disposal or when
it is withdrawn from use and no future economic benefits are expected from its disposal.
The gain or loss on disposal is the difference between the proceeds and the carrying
amount and should be recognized in profit and loss.
14.1.3 Classification of Assets:
SDF classifies its assets into Two (2) major categories:
A. Current Assets: SDF classified those assets as Current assets that represent the
value of all assets that are reasonably expected to be converted into cash within one
year in the normal course of business. Current assets are important to businesses
because they are the assets that are used to fund day-to-day operations and pay
ongoing expenses. Current assets include cash, accounts receivable, inventory,
77
marketable securities, prepaid expenses and other liquid assets that can be readily
converted to cash.
B. Non-Current Assets: SDF classified those assets as Non-Current assetswhich are
long-term investments and are not expected to be turned into cash within one year
during the normal course of business. Noncurrent assets are capitalized rather than
expensed, meaning that SDF allocates the cost of the asset over the number of years
for which the asset will be in use, instead of allocating the entire cost to the
accounting year in which the asset was purchased. Usually SDF classifies Land,
Building, Office equipment, Vehicle, Computer equipment, Furniture & Fixture as
Non-Current Assets.
A. CURRENT ASSETS
14.2 INVESTMENT IN FDR
14.2.1 FDR Account opening policy:
FDR account must be opened and maintained in a scheduled commercial Bank acceptable
to the SDF. The financial institution (commercial bank) selected for this purpose should
generally meet all the following requirements:
- be established under the Banking Companies Act 1991
- it must be a public ltd company and enlisted with the Stock Exchange
- be financially sound: CAMEL rating
- be authorized to maintain the FDR Account in the local currency agreed between the
SDF and the commercial Bank
- be audited regularly and hold AGM on time.
- be able to execute a large amount of transactions promptly
- be able to perform a wide range of banking services satisfactorily
- be part of satisfactory correspondent banking networks
- charges reasonable fees for its services
- competitive interest rate
While investing in FDR, SDF will follow the fundamental strength of the respective
financial institution (Bank and Non-Bank) for safety of the investment. For this purpose
SDF have a study on credit rating of the prospective financial institution prior to
investing thereon. Rating indicators are as follows.
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Long-term – Commercial Banks Entity Rating
AAA (Triple A): Have extremely strong capacity to meet financial commitments,
maintains highest quality, with minimal credit risk.
AA1, AA2, AA3* (Double A): Have very strong capacity to meet financial
commitments, maintains very high quality, with very low credit risk.
A1, A2, A3 (Single A): Have strong capacity to meet financial commitments, maintains
high quality, with low credit risk, but susceptible to adverse changes in circumstances
and economic conditions.
BBB1, BBB2, BBB3 (Triple B): Have adequate capacity to meet financial commitments
but are susceptible to moderate credit risk. Adverse changes in circumstances and
economic conditions are more likely to impact capacity to meet financial commitments.
BB1, BB2, BB3 (Double B): Have inadequate capacity to meet financial commitments
and possess substantial credit risk, with major ongoing uncertainties and exposure to
adverse business, financial, or economic conditions.
B1, B2, B3 (Single B): Have weak capacity to meet financial commitments and are
subject to high credit risk. Currently meeting the financial commitments, but adverse
business, financial, or economic conditions are likely to impair capacity to meet
obligations.
CCC1, CCC2, CCC3 (Triple C): Currently vulnerable, and are dependent upon
favorable business, financial, and economic conditions to meet financial commitments.
Have very weak standing and are subject to very high credit risk.
CC (Double C): Currently highly vulnerable, highly speculative and are very near to
default, with some prospect of recovery.
C (Single C): Currently very highly vulnerable to non-payment, may be subject of
bankruptcy petition or similar action, though have not experienced payment default. C is
typically in default, with little prospect for recovery.
D Default.'D' rating also will be used upon the filing of bankruptcy petition or similar
action if payments on an obligation are jeopardized.
Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating
classification from AA through CCC. The modifier 1 indicates that the obligation ranks
in the higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.
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Rating Definition: Commercial Banks
ST-1: Highest Grade. Highest capacity for timely repayment of obligations.
ST-2: High Grade. Strong capacity for timely repayment of obligations.
ST-3: Average Grade. Average capacity for timely repayment of obligations.
ST-4:Below Average Grade. Below average capacity for timely repayment of obligations.
ST-5: Inadequate Grade. Inadequate capacity for timely repayment of obligations.
ST-6: Lowest Grade. High risk of default or are currently in default.
14.2.2 Accounting Treatment of Investment in FDR:
i) While Purchasing FDR:
Investment in FDR A/C …………….Dr
To, Bank A/C………………………
ii) While Encashment of FDR:
Bank A/C………………………………Dr
To, Investment in FDR (Principal portion)…..
To, Interest on Investment in FDR (Interest portion)…..
14.2.3 FDR Register:
Following manual register is to be maintained to record the details information of FDR.
Sl
FD
R A
/c #
FD
R #
Bank
name
with
branc
h Open
ing D
ate
Maturit
y Date /
(Renew
al date)
Dura
tion
(month
)
FD
R
(at
cost
s)
Interes
t rate
(%)
p.a.
Enca
shme
nt
date
Sourc
e of
Finan
ce
Fair
Value
(value
available
as per
statement) Rem
arks
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14.3 INVENTORIES
Inventory represents materials and supplies not directly expended at the time of their
purchase such as research supplies, technical and automotive parts, building materials
etc., office and other general supplies.
14.3.1 Cost of Inventories:
The acquisition cost of inventories and supplies includes all costs required to bring
inventories to its location and condition. This includes in general:
I. Purchase price plus
II. Cost of freight, import duties and VAT etc.
III. Insurance
IV. Handling, and
V. Any other cost incurred in bringing the inventories to their
present location and condition.
14.3.2 Valuation of Inventories in SDF:
SDF followed weighted average cost method for valuation of inventory. Year-end stocks
of inventory should be documented by annual physical count or a procedure of
continuous physical count during the year and should be stated in the statement of
financial position at cost or net realizable value, whichever is lower. Before such physical
count adequate stocktaking instructions shall be there.
14.3.3 Control Mechanism of Inventories in SDF:
Inventories are kept at separate stores. A Stock Register is maintained by a responsible
official to record the movement of inventories from store. The materials held in the store
should be:
Inaccessible to anyone other than stores personnel
Stored in an orderly manner
Issued only on properly approved requisition.
Any write-off of stores, whether due to obsolescence, damp or pilferage must have the
sanction of the Managing Director. Material Received Report (MRR), Store Requisition
(SR) and Goods Transfer Note will provide the necessary data for acquisition, use and
disposal of inventory. These data will be maintained in quantities only
14.3.4 Accounting Treatment of Inventories:
1. Purchase of Inventories:
Particular Inventories A/C …………………………………………… Dr
To, Bank/Cash/ Accounts Payable A/C
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2. Issue of Inventories:
Particular Expenses Account A/C……………………………………Dr
To, Particular Inventories A/C
3. On the Closing date if there any Inventories in hand :
Particular Inventories A/C …………………………………………… Dr
To, Particular Expenses Account A/C
4. For write off obsolescence, damp or pilferage of inventories:
Particular Expenses Account A/C……………………………………Dr
To, Particular Inventories A/C
14.3.5 Inventory Register
Inventories shall be recorded in a computerized system. However, manual register
namely Stock Ledger Cards could be maintained where inventory items shall be
systematically stored. One or more pages may be allocated in the stock book for one item
and stock account of any particular item has to be balanced at the end of each entry.
Receipt entries will be made from Goods Received Note (GRN) as evidenced by
supplier's invoice while issue entries will be made from Store Requisition (SR) slips.
There shall be proper segregation of duties and GRN/ SRs, being pre-numbered, shall be
checked and approved by the authorized officials independent of the person preparing the
same. Inventory items shall be Quarterly inspected/ verified physically and for the sake of
convenience of physical verification, each item will have bin-tags.
14.4 ACCOUNTS/ OTHER RECEIVABLE
Accounts receivable is short-term amounts due from recipient of goods or services for
supplying goods or services on credit. Accounts receivable is listed as a current asset on
the seller's books of accounts. As SDF has no such activity, No Accounts Receivable
required to be accounted for. However, SDF may have some other receivable may
include the following:
14.4.1 Due from officers/employees: This sort of receivable normally would not be arisen.
However, if it arises under any special circumstances, should be accounted for and shown
separately.
14.4.2 Interest Receivable:Interest on short-term deposits/fixed deposits etc. shall be reflected in
the financial statements, on accrual basis. Proper books and registers shall be maintained
for this.
14.4.3 Due from third parties/other receivables:Amounts (e.g. insurance claims receivable and
scrap/fixed assets sales on credit) should be properly documented and be reflected in the
financial statements.
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14.4.4 Grants Receivable: Grants will be recognized as per accounting policy. Committed grants
receivable from the donors or Government in a year (i.e. unrealized portion against
sanction letter, if any) is to be shown as a disclosure through a footnote in the financial
statements for proper understanding of the users of financial statements.
14.5 ADVANCES, DEPOSITS AND PREPAYMENTS
14.5.1 Advances
Any type of payment that is made ahead of its normal schedule, such as paying for goods
or services which has not been received/incurred yet. Entity should therefore recognize
an asset in respect of expense it has paid in advance until such time as the goods are
received or services that are due in relation to the prepaid expense have been performed
by the supplier/contractor.
14.5.1.1 Advances dealt in SDF are the following:
I. Advance to employees such as advances (travel, benefits, salary, purchase,
loan, etc.) are recognized as they arise and credited when realized.
II. Employees’ outstanding balances should be identified as a separate item on
the statement of financial position.
III. Other advances: This includes advance payment to suppliers, consultants,
and other third parties, including Board Members. These should be
identified as a separate item on the statement of financial position.
14.5.1.2 Type of Advances
Advances may be of following types:
I. Travel Advances - to be incurred by the staff only against traveling which will
be adjusted against the travel expenses.
II. Advance against Project expenses - to be incurred by the staff on behalf of the
Organization/ Project(s).
III. Temporary Advance/IOU- to be adjusted against emergency
purchased/expenses.
IV. Advance against Staff salary - to be adjusted against staff monthly salary/will
be realized in cash.
V. Advance to third party/contractor - Advance is paid against goods or services
received from the third party/ contractor
14.5.1.3 Advance Management
Prescribed Advance Requisition Form (ARF) is prepared by the staff prior to travel
requesting the advance along-with the approved tour schedule/ itinerary. Further advance
will not be given if earlier advance is not settled.
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After the ARF's approved, both copies (ARF and tour schedule) is sent to the
respective Finance and Accounts personnel for payment.
On payment of the advance, voucher will be prepared on the basis of the approved
ARF and recorded in the advance register.
Advance must be adjusted within 15 (fifteen) days for in country travel after
completion of travel along with a tour report. In case of overseas travel, advance is to
be adjusted within 20 (twenty) days after completion of travel.
If advance is not settled within the mentioned time then advance will be adjusted with
his/her salary without taking any consent from the concerned staff.
All advances are entered in the advance registers. All advance balances are cross
checked periodically with generalledger balance.
There should be separate registers to meet the various requirements arising at the
Organization. These are:
1. Advance against Traveling
2. Advance against Project Expenses
3. T-Advance/IOU Register
4. Advance to staff against salary
5. Advance to third party/Contractors
14.5.1.4 Liquidation of Advance
Advance is given to contractors on terms and conditions laid down on the Work
Order / Purchase Order for performing / delivering specific job / task. The terms
and conditions include the payment schedule based on the performance. On that
schedule the contractors submits the bill. The advance will be liquidated at the
time of payment of the bill. In case of non-performance the advance will be
recovered and liquidated as per the terms and conditions specified in the Work
Order / Purchase Order. A monitoring system for liquidation of advance is dealt
with using a form 'Liquidation of Advance'.
14.5.1.5 I O U/ Temporary Advance
IOU (Annex-…) is one kind of temporary advance given to staff for a small amount of
official expenses. Only on emergency purposes IOU is given. Without the signature of
authorized person no IOU can be issued. Managing Director is the authorized official for
issuance of IOU.
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Finance and Accounts personnel preserve IOU with due care. It is treated equivalent to
hard cash. At the close of daily transaction closing cash balance will be the total of hard
cash plus pending IOU. For better control s/he shall maintain a file and a register (Annex-
…) for preservation and recording IOU.
IOU shall be adjusted immediately after completion of the task. In an IOU format there
are two parts. During adjustment right part of IOU will be given to the person as proof of
adjustment. Left part will remain with accounts. Issue and adjustment of IOU will be
recorded in the register date wise chronologically. Same procedures are applicable for
Central and Regional/District offices both for issuance, adjustment and recording of IOU
14.5.2 Deposits:
Deposits for telephone, electricity, gas etc. shall be shown as such and not expensed.
Periodical review shall be undertaken and unrecoverable deposits should be written off.
14.5.3 Prepaid Expenses
Prepaid expense represents an expense for benefits to be received in a future period, such
as insurance, premium, rents and utilities.
Significant prepaid expenses should be deferred and shown in the financial position
statement at the proportionate value of benefits yet to be received up to the year-end.
14.6 CASH AND CASH EQUIVALENT
1.9 14.6.1 Cash Management:
Cash management refers to a broad area of finance involving the collection, handling,
and usage of cash.The necessary policies and procedures to ensure efficient cash
management fallwithin the treasury/finance functions of SDF. Cash management in this
context refers to the planning, monitoring and management of the SDF’s liquid resources.
1.10
1.11 14.6.2 Objectives:
Cash and Cash Equivalent are defined as actual money or monetary instrument, which are
generally accepted as money. SDF has the following objectives with respect to efficient
cash management:
to monitor and manage the liquid resources of the SDF;
to make payment according to the payment schedule
to prevent cash embezzlement
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to maintain good relationship with supplier and other related parties and
1.12 14.6.3 Forecasting
SDF needs to be able to forecast its short term and long term cash flow in order to be
aware of future funding needs or surpluses. Detailed procedures should be in place to
ensure that short term and long term internal cash flow forecasts canbe produced
regularly and accurately. In conjunction with the forecasts, SDF should, where necessary,
monitor levels of committed and uncommitted facilities and their utilization against
future requirements. Approach should be used for cash forecast which is appended
below:
Receipts & Disbursement approach
Adjustment Net income approach
At the time of forecast following item should be considered:
Fund/Accounts receivable collections-World Bank
Fund/Accounts receivable collections-Local Donor
Interest income (FDR)
Principle on maturing investment. (FDR)
Scrap sales
Apart from the above receipts, payment items should also be considered for perfection of
the forecasting.
Some possible types of cash disbursements.
Cash purchase Materials, if necessary
Payroll-Executive
Payroll-Nonexecutive
Taxes-Local
Taxes-State, if any
Maturing Accounts payable
Capital Expenditures
Utility Payments
Payments to provident fund & Pension Fund
14.6.4 Bank Book & Vouchers:
For the item, account wise proper books (receipts & payments books) and records /
vouchers will be maintained and transactions are to be recorded on a daily basis per
accounting system (a specimen of bank book is shown in Appendix - ****). For the
Foundation, major transactions would be through cheques. The books should be properly
columned / narrated/ completed in all respects.
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14.6.5 Cash Withdrawal from bank
A cash withdrawal requisition format (Annex-) is required to withdraw money from
bank. Accounts personnel are responsible for cash handling and to prepare cash
withdrawal requisition. Amount of required money is assumed on the basis of
Advance/temporary advance (IOU/ T-Advance) submitted and pending bills. As per
requisition, s/he prepares cheque and submits it to the Director, Finance and then
forwarded to the Managing Director for approval with the recommendation of Director,
Finance along with the cheque. If the submitted requisition is acceptable, then s/he
approves the requisition and signs on the cheque.
14.6.6 Cash & Vouchers
For every cash transactions, proper books (receipts & payments books) and records/
vouchers along with proper supporting shall be maintained and transactions are to be
recorded on a daily basis as per accounting system. Head Office and all the cost centers
shall maintain Cash Book on imprest cash basis.
Receipts- Cash:Cash receipts arise from sources like sale/disposal of fixed assets,
recoveries against advances, cash withdrawals from banks for daily expenses, discount,
collections from communities/donor/ others, subscriptions, etc.
Payments-Cash: Only insignificant payments/expenses shall be allowed from cash where
payment through cheque is impracticable. Maximum limit of cash payment shall not
exceed Tk. 15,000.
Following expenses shall be paid through cash
Entertainment
Local traveling &conveyance
delivery charges,
Postage
Other small consumable items
14.6.7 Approval of Expenses:
Any expenditure of capital nature, within the budget, will require approval from the
MD of SDF.
All recurring / revenue expenditure shall be approved following the ceiling as
mentioned in section 3.4 [Financial & Administrative Power]
All recurring / revenue expenditure shall be made by the Regional Office / District
office as per approved operational budget. The Regional Director (RD) and District
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Manager (DM) will approve maximum expenditures as outlined in the delegation of
financial power. No expenditure beyond the budget line or exceeding the budget limit
shall be allowed. However, for periodic adjustment in the activity plan, the inter head
adjustment in budget can be made by the Regional offices / District Offices upon
prior approval of the Managing Director- SDF.
14.6.8 CASH BOOK:
There shall be a cash book to be maintained on imprest basis.
The National Level, Regional level, District Level and Cluster Level offices are entitled
to maintain petty cash amounting to Tk. 50,000 (Fifty thousand), 20,000 (Twenty
thousand), Tk. 10,000 (Ten thousand) and Tk. 5,000 (Five thousand) respectively.
Operating Cash Fund
When cash is disbursed from the fund, the cash custodian prepares a cash payment
voucher, which will be signed by the authorized persons. Receiver’s signature should
also be taken in the payment voucher. A cash payment voucher is a document or form
that shows full explanation against the cash disbursement.
Cash vouchers will be prepared in ink and a voucher will be prepared for each
disbursement from the fund. If an invoice for the expenditure is provided the invoice
will be stapled to the cash voucher. The person responsible for cash is at all times
accountable for having cash and cash vouchers equal to the total amount of the fund.
Replenishing Imprest Cash Funds
The amount within the limit of the cashier shall be reimbursed upon verification and
confirmation from Accounts Manager.
An imprestcash fund will be replenished at the end of each month or when the total
expenditure reached to the level of three forth, whichever occur first. The cash
vouchers are presented to the accounting staff or imprest account holder. The
vouchers are examined and if all is in order, a cheque is drawn to restore to its
original amount.
All expenditure of SDF including of other donor-funded projects would be recorded
in the accounting books in their appropriate account.
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Procedures for approval of bill to be paid by cashier:
Cash shall be approval by following bellow process:
Name of expenses Recommended/Prepare
d by……
Checked
by
Approved by Remarks
Fuel
Conveyance
Entertainment
Preparation of cash expenses statement:
The cashier at each level shall be responsible for preparing an expenditure statement on
daily basis which shall be checked by accounts manager and submitted to the reporting
office on weekly basis. The accountant is responsible to entry all the transaction in the
software under the respective heads.
Accounting entries for cash expenses:
i) For fund withdrawal
Cash…………………………Dr
To Bank ……………….Cr
ii) For Expenditure:
Expenditure…………………………Dr
To Cash………………………Cr.
14.6.8 Other Current Assets
Any other items that meet the definition of current assets not specifically covered
above should be classified in the statement of financial position under this heading,
suitably named.
The statement of financial position should show these assets at book value. Provision
should be set up for doubtful balances.
Whenever other current assets are material, their breakdown and valuation should be
provided in a note to the financial statements
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14.7 FIXED ASSETS
14.7.1 Property, Plant and Equipment
SDF acquires property, plant, and equipment in following three ways:
a) Purchased Property, plant and equipment
b) Donated Property, plant and equipment
c) Leasehold Property, plant and equipment
a) Purchased Property, plant and equipment
When property, plant and equipment is purchased by SDF, it is recognized as asset and
capitalized if the following conditions are satisfied:
If expected useful life of the asset exceed one (1) year or more,
The acquisition cost of a fixed asset includes all costs required to bring the asset to its
location and condition. This includes in general:
(i) Purchase price plus
(ii) Cost of freight, import duties, VAT etc.
(iii) Insurance
(iv) Handling, and
(v) Any other directly attributed cost of bringing the asset to working
conditions for its intended use.
Expenses incurred at the time of installation or thereafter that increases the capacity
or operating efficiency of an asset, should be capitalized, if they are material.
However, cost of normal repairs and maintenance of any existing asset should be
treated as a current operating expense.
Point to be noted that crockery & cutleries will not be included under this category and is
to be recognized as revenue expenditure.
b) Donated Property, plant and equipment
Donated or grant funded property, plant and equipment such as building, furniture &
fixtures or other equipment are recognized as deferred income. Donated land is to be
recognized at fair value. At the close off of the projects the donated property, plant and
equipment will be adjusted in book value with the organization’s asset.
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c) Leasehold Property
Property which is held by virtue of a lease agreement is to be classified as leasehold
property. It should be differentiated from the freehold property.
In case of leasehold property SDF will recognize it as assets at the lease value. The
following formula or equation is used to calculate depreciation for leasehold property.
14.7.2 Recording of property, plant and equipment
The ownership of all property, plant and equipment purchased by SDF is to be recorded
in the name of SDF. Fixed asset register is to be maintained. The register should give
details of each asset as follows:
Classification of Assets
Code number
Date of acquisition
Description of assets (including serial number on the assets wherever applicable)
Cost per unit
Unit
Total value (cost) of the asset
Depreciation rate
Payment reference for example: voucher number, etc.
Location of the asset
Transfer History
Signature of transferee and transferor
Condition of asset
Remarks
14.7.3 Classification of Property, Plant & Equipment
Property, plant and equipment of SDF are classified as following main categories:
Land and Land Development - Purchased and donated land.
Books - Books purchased and used for official purpose only
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Building - Purchased building or full constructed building on purchased land
Furniture & fixtures - Chair, table, book-shelf, file cabinet, file rack, almirah,
decoration, partition, counter, sofa, door, fan, etc.
Office Equipment - Photocopier, Generator, fax machine motor, Air Conditioner,
Woven, PABX, IPS etc.
Computer Equipment – Computer, Laptop, printer, UPS, server, scanner etc.
Vehicle – Four wheel car, jeep, pick-up, three wheel scooter, Motorcycle, Bi-cycle,
etc.
Capital Work in Progress: Under construction facilities
14.7.4 Depreciation of Fixed Assets
Depreciation policy
Full year’s depreciation is charged on property, plant and equipment at any point of
time in the year of acquisition.
No depreciation is to be charged in the year of disposal or in the year of writing off of
any property, plant and equipment.
SDF follows Reducing Balance Method in calculating depreciation on its Property,
Plant and Equipment.
The depreciation method should be reviewed at least annually and, if the pattern of
consumption of benefits has changed, the depreciation method should be changed
prospectively as a change in estimate under IAS 8.
Historical cost of major categories of depreciable assets, assumed lives used in
computing depreciation or rates applied, methods used depreciation expenses for the
period and accumulation thereof at the period-end date etc. shall be disclosed in the
financial statements.
Depreciation of depreciable assets should be charged depending on useful lives of
assets. The useful lives of major depreciable assets or classes thereof are subject to
periodical review, with a view to adjusting depreciation rates for the current and
future periods if expected life times are significantly different from previous
estimates. The effect of the change should be disclosed in the accounting period in
which the changes take place.
14.7.5 Rate of Depreciation
92
SDF deprecates property, plant and equipment at following rates:
Land nil
Books 30%
Building 10%
Furniture & fixture 10%
Equipment 20%
Computer & Computer Equipment 30%
Vehicle 20%
Other Assets 20%
14.7.6 Physical verification of Property, plant and equipment
Physical verification of property, plant and equipment is to be done at the end of each
year. However, if required physical verification of property, plant and equipment it could
be done on a need basis.
A team comprising members each from internal audit, administration and finance
personnel shall carry out the physical verification of assets. External auditors may also be
invited to witness the verification of assets, if considered necessary.
Team engaged for physical verification of assets shall submit a report to Managing
Director. The report shall contain the following information:
Asset No
Name / description of the assets
Location of the assets
User of the assets
Quantity of assets as per register
Quantity of assets physically found
Short / Excess of assets as per physical verification
Recommendation for corrections, sale or disposal, if any
Remarks
14.7.7 Process and documents for the purchase of fixed assets from local source:
i) Purchase requisition:
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Purchase requisition shall be sent from the department that need the assets to Admin
department showing the name of assets, quantity and expected date of delivery.
Separate requisition shall be prepared for each type of assets.
ii) Approval to the requisition
………………. shall verify the purchase requisition and recommend the requisition
for approval. ……….. shall approve the recommended purchase requisition.
iii) Fixed assets purchase committee
There shall be a committee having 04 members of …………. level from the
departments of purchase, accounts, audit and admin department to evaluate the fixed
asset requirements and determine the source of fixed assets acquisition. Admin
department shall submit at least three quotations from separate suppliers to the
purchase committee. Purchase committee shall evaluate the quotations and forward it
to ……………… for final approval recommending a supplier.
iv) Approval of Purchase committee’s recommendation:
……….. shall approve the recommendation.
v) Accounting for Fixed Assets :
i) When fixed assets are purchased in cash from local source
Fixed assets/Name of the particular asset A/c………..Dr.
To, Cash/Bank A/c
ii) When fixed assets are purchased on credit from local source
Fixed assets/Name of the particular asset A/c …………..Dr.
To, Accounts payable for fixed assets A/c
iii) For payment
Accounts payable for fixed asset A/c ……………………Dr.
To, Cash / Bank A/c.
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iv) For depreciation of fixed assets
Depreciation A/c ………………………………….……..Dr.
To, accumulated depreciation A/c
v) For disposal of fixed assets (When loss incurred)
Cash / Bank A/c....……………………………………….Dr.
Accumulated depreciation A/c...………………………….Dr.
Loss on sale of Fixed Asset A/c...………………………..Dr.
To, Fixed asset (at cost) A/c
vi) For disposal of fixed assets (When gain arise)
Cash / Bank A/c....……………………………………….Dr.
Accumulated depreciation A/c..………………………….Dr.
To, Profit on sale of Fixed Asset A/c
To, Fixed asset (at cost) A/c
1.13
1.14 14.7.8 Capital work-in-progress/Assets under construction:
Assets under construction comprise payments on account for work-in-progress of capital
projects. All capital projects which require a period of time (i.e. more than a year) for
completion, all expenses incurred for that capital project until it is converted into working
condition should be categorized directly under the group head Capital work-in-
progress/assets under construction. When the asset is completed and become ready to use,
all cost of Capital work in progress will be transferred to the relevant asset account.
Accounting treatment of Capital work in progress:
1. When any expenses are incurred or paid under Capital Work in Progress/ Asset under
construction:
Capital Work in Progress/ Asset under construction A/c …………..Dr.
To, Bank/ Cash/ Accounts Payable A/c
2. When asset is completed and become ready to use:
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Building/ Relevant Asset A/c……………………………….. …………..Dr.
To, Capital Work in Progress/ Asset under construction A/c
14.7.9 Write off Fixed Assets
A report should be prepared for the property, plant and equipment, which are unusable
and uneconomical for repairing. Later these items are to be marked as "unserviceable"
and disposable upon approval of the Managing Director. A sub- committee will inspect
and assign the salvage value for the items to be disposed. If any property, plant and
equipment are found serviceable, in this situation entire amount of asset will not be
charged out as depreciation. A minimum balance of taka 1 (one) will be kept as the
existence of that asset. When the property, plant and equipment is found unserviceable
then such asset will be written off from property, plant and equipment register after
taking proper approval from MD. Then the disposal/ sales procedure will be followed.
However, Managing Director will have the approval authority for writing off an asset if
any loss or damage occurred during handling of the asset up to the book value of
Tk.5,000.
14.7.10 Sale/Disposal procedure of property, plant and equipment
Sale and disposal of property, plant and equipment is to be made only after specific
authorization and routine procedure should provide for prompt reporting of such
sales/disposal to Director-Finance. Property, plant and equipment will be disposed to the
highest bidder after advertisement in the newspaper/ internal circulation and collecting
quotations from bidders.
Procurement personnel with the help of storekeeper will organize the auction at Central
office. At least three quotations should be collected and submitted to the purchase
committee. The property, plant and equipment are to be sold to the party who will offer
highest price. To sell out the property, plant and equipment to the highest bidder,
purchase committee will take decision and Managing Director will be the approval
authority. In case of any written off assets have no sales value then it may be disposed by
following proper disposal procedure.
14.7.11 Property, plant and equipment at completion of implementation
Upon completion of implementation all the property, plant and equipment shall be the
property of SDF and would be derecognized from the project asset and would be
reported in the consolidated schedule of SDF asset.
14.7 Liability part
14.8 LIABILITIES
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14.8.1 LIABILITIES:
A liability is a legal obligation and it is reported on a company's balance sheet.A liability
is defined as the future sacrifices of economic benefits that the entity is presently obliged
to make to other entities as a result of past transactions or other past events, the
settlement of which may result in the transfer or use of assets, provision of services or
other yielding of economic benefits in the future.
There have two kinds of liabilities:
Current liabilities
Non-current liabilities.
14.8.2 Current liabilities
The term current liability is used principally to designate obligations whose liquidation is
reasonably expected to require the use of existing resources properly classified as current
assets, or the criterion of another current asset. Current liabilities are liquidated or
canceled within the operating cycle year, or one year from the Balance Sheet date.
Content of current liabilities are appended below:
1. Accounts payable
2. Withholding VAT & Tax
3. Bank overdraft
4. Short term loan
5. Loan & Advance
6. Long term loan-Current portion (accrued interest)
7. Outstanding/provision for expenses
a. Salary payable
b. Audit fee payable office rent payable
c. Consultancy fee payable
d. Utility bill payable
e. Others
8. Others payables
14.8.3 Accounts Payable:
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Accounts payable is the aggregate amount of an entity's short-term obligations to pay
suppliers for products and services which the entity purchased on credit. Accounts
payable appears within the current liability section of an entity's balance sheet.
When individual accounts payable are recorded, this may be done in a payables sub-
ledger, thereby keeping a large number of individual transactions from cluttering up the
general ledger. Alternatively, if there are few payables, they may be recorded directly in
the general ledger.
The SDF should have a list of supplier from which the goods may be purchased on
flexible condition with extended credit period which will fix up by suppliers and
management of SDF.
14.8.4 WITHHOLDING VAT &TAX:
As per Local tax law, SDF is responsible for deduction of VAT & Tax at source from
payment, in case of purchase and service taken from others. After deducting the VAT &
Tax, SDF shall be responsible to deposit this amount to govt. treasury within stipulated
timeline mentioned in the relevant tax law.
SDF may be penalized, if it does not deduct TDS & VAT and deposit the same to the
Govt. Treasury in time.
14.8.5 SHORT TERM LOAN:
Short term loan is a way of financing working capital of an organization. If the loan
(bank loan or any other loan) is repayable within the 12 month period from the date of
financial position the bank loan shall be shown as short term bank loan under current
liability.
14.8.6 Recognition of interest as expenses:
i) If any loan is taken to support the requirement of working capital interest on this
bank loan shall be charged as “Interest on working capital”
ii) If any loan is availed to finance any capital assets the interest on bank loan shall
be charged on following manner:
a) Interest for the period of construction of the capital assets shall be capitalized
to the respective assets.
b) Interest after the completion of the capital assets shall be charged as financial
expenses.
14.8.7 LOAN & ADVANCE:
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Loan refers to money lent from borrower for Short-Term, Long-Term or for unspecified
period (Working Capital) facility which is renewed every year. Loan carries a specific
rate of interest as agreed between the lender & the borrower and the terms of the
agreement. A loan may be for general purpose (Say working capital) or specific purpose
(Equipment loan, Export Packing Credit, etc.)
On the other hand Advance refers to money paid in advance to anyone to meet a specific
future expense, liability or to tide over some specific requirements. Advances paid by an
employer to employee may be to meet certain expenses like official travel, or to need
some personal needs in the form of salary advance. Advance paid to meet official
expenses will be settled once it's expended for the said purpose, salary advance may be
recovered by deduction form monthly salary as per the policy of the company
14.8.8 OUTSTANDING/PROVISION FOR EXPENSES:
These expenses are related to the current year but remain unpaid. As they are the
expenses of the current year, so they must be debited and charged from the profit and loss
account of the current year. The expenses remained unpaid so far during the current year,
so they are the liability of the SDF.
At the end of the accounting period, there may be expenses which have become due but
have not yet been paid. If the organization is following the mercantile system of
accounting, these expenses are to be brought into account.
Debit » Expenditure a/c
"Expenditure a/c" is a nominal account with a debit balance. The balance in the
"Expenditure a/c" generally indicates the total amount paid on account of the expenditure
during the current accounting period. To bring the expenditure that has not yet been
brought into account into the books, the relevant expenditure account has to be debited.
Credit » Expenses Outstanding a/c
"Expenses Outstanding a/c" is a personal account with a credit balance. The balance in
the "Expenses Outstanding a/c" indicates the amount that is owed by the organization on
account of the expenditure unpaid. The amount of expenditure that has not yet been paid
is a liability for the organization. The person to whom the organization owes is its
creditor. As such, the amount of expenditure outstanding that has not yet been taken into
the books is credited to the "Expenditure Outstanding a/c."
14.8.9 NON-CURRENT LIABILITIES:
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Non-current liability is a liability not due to be paid within 12 months during the normal
course of business. Non-current liabilities are also called long-term liabilities. In accounting,
non-current liabilities are shown on the right wing of the balance sheet representing the
sources of funds, whichare generally bounded in form of capital assets. Non-current
liabilities are very important source of entity's long-term financing (acquisition of fixed and
other non-current assets). Financial statement should contain adequate explanation of long-
term obligation, including disclosure of interest rate, maturity date and nature of asset given
as security. Non-current liabilities are very important source of entity's long-term financing
(acquisition of fixed and other non-current assets).Non-current liabilities include:
a. Deferred Liabilities-Gratuity payable
b. Deferred Liabilities provident fund payable
c. Deferred liability earned leave encashment payable
d. Accumulated depreciation
14.8.10 DEFERRED LIABILITIES-GRATUITY PAYABLE
Gratuity will be paid to the employee on completion three years of service as outlined in
the Gratuity policy of SDF. The amount of Gratuity would be at the rate of two month’s
gross salary of every year of service completed. Gratuity would be paid to employees
while s/he is leaving the organization upon the matter settled by the head office of SDF.
Here gross salary means basic salary, house rent allowance, medical allowance,
entertainment allowance, housekeeping allowance
14.8.11 DEFERRED LIABILITIES PROVIDENT FUND PAYABLE
Any employee in the confirmed service of the Organization including those on
contractual service as per the contractual agreement is eligible to become a member of
the Contributory Provident Fund but casual employees are not eligible to become
members of the Contributory Provident Fund. An eligible employee must apply for
membership through a prescribed standard form available from the Human Resources
Department. Member of Contributory PF shall contribute 10% of their basic pay, which
will be deducted from their monthly salary and SDF contributes an equal amount to the
Contributory PF on behalf of the member. A sum of money equal to the amount of
monthly contribution of the members and SDF authority is transferred to the respective
account of Trustee of the Contributory PF within the month. The Trustees are responsible
for management of the Fund.
SDF makes provision for its liability on account of contribution to employee’s provident
fund on a monthly basis at the time of disbursement of monthly salary. After
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disbursement of salary, employee’s contribution deducted from their salary and SDF’s
contribution to the Provident Fund is transferred to the nominated Employees Provident
Fund Account. Amount so deducted and SDF’s contribution not transferred to the
Employee’s Provident Fund Account is reflected in the Financial Statement as liability of
SDF.
14.8.12 DEFERRED LIABILITY EARNED LEAVE ENCASHMENT PAYABLE:
All confirmed employees shall be entitled to earn leave at the rate of one day for every 11
(eleven) days of service from the date of joining. A maximum earned leave can be
accumulated up to 365 days.
Earned leave accumulated and not used may be encased at the time of leaving the
organization. For the purpose of the calculation, gross salary will be the basis. All other
leave has to be adjusted within the term of the leave or lapsed.
14.8.13 ACCUMULATED DEPRECIATION
Accumulated depreciation is the total depreciation for a fixed asset that has been charged
to expense since that asset was acquired and made available for use. The accumulated
depreciation account is an asset account with a credit balance (also known as a contra
asset account); this means that it appears on the balance sheet as a reduction from the
gross amount of fixed assets reported.
When the asset is eventually retired or sold, the amount in the accumulated depreciation
account relating to that asset is reversed, as is the original cost of the asset, thereby
eliminating all record of the asset from the company's balance sheet. If this de-
recognition were not completed, a company would gradually build up a large amount of
gross fixed asset cost and accumulated depreciation on its balance sheet
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14.9 Revenues
Revenue represents actual or expected cash inflows or equivalent that has occurred or
will eventuate as a result of entity’s on-going operation during the period.
Each source of revenue generally refers to an inflow that is distinct from other.
SDF’s/Project's principal sources of revenues are:
1. Grants: (a) revenues from the donors/agencies/GOB/ institutions/ associations
and (b) capital investment contributions by the communities/ beneficiaries (in
cash or kind) per terms of Projects financing.
2. Gratuitous (voluntary) donations at free of cost (in kind), not related with
project terms.
3. Voluntary (gratuitous) donations in cash, not related with project terms.
4. Service charge
5. Interest on deposit
6. Consultancy fee
7. Training fee
8. Miscellaneous (like other miscellaneous receipts, sales of old newspaper or
scraps or any write-back of liabilities etc.)
9. Others: Earned income and surplus from self-sustained services.
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14.10 Expenses
Expenses are defined as outflow as using up of assets or services concerned by
incurring liabilities or a combination of both to attain the objectives of Foundation.
Expenses represent actual or expected cash outflows or equivalent that have occurred
or will eventuate as a result of entities on going operation during a period.
To help donors, creditors and users of financial statements in assessing an
organization’s service efforts including the cost of its services and how it uses
resources, the statement of activities or notes to the financial statements should
provide information about expenses, reported by:
i) Their functional classifications and
ii) Their natural classifications
14.10.1Functional Classification of Expenses
Program Expenses
Expenses incurred in relation to execution or implementation of the project/sub-
project activities by the Foundation/SIPP or through the private Providers
(NGOs/Private Sector/ SOs etc) shall be classified under Programme expenses. For
Programme expenses, subsidiary accounts relating to components/ cost centres shall
be maintained to determine/ know Unit-wise expenses. Components /cost canters or
sub-projects shall be well defined.
Cost Centers&Components
(i) Component wise cost centers are aggregated or allocated to form programs, which
are then summed up to describe the expenses that are associated with source of
revenue.
(ii) Cost Centers
Cost centers refers to the grouping of expenses that are directly attributed to an
activity or logical grouping of activities, which will reflect the management
structure of the center in terms of accountability and authority. Describe in 5.2
above
(iii) Components are briefly stated according to the following categories:
Strengthening of SDF: It includes the recruitment of SDF staff and support to
implementation- information, communication and institutional development;
monitoring, evaluation and learning; program implementation; financial
management and administration etc.
Social Assistance: Social Assistance services shall be provided by the Private
Providers (Private Sector, NGOs) to hard-core poor & vulnerable groups.
Examples include services on Legal aid, education, health etc.
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Community sub-project: This component would finance small-scale projects
requiring local management and prioritized by community groups, which may
be either:
a. Matching grants to community groups to complement capital investment
contributions (in cash and in kind) provided by the beneficiaries
themselves.
b. Credit financing and/or mobilizing private equity financing on agreed
terms.
Institutional development: This relates to expenses for obtaining training and
institutional development of the Personnel/Consultant & Partner
organizations.
14.10.2 Administrative and General Operations:
i) Administrative Expenses includes the cost of the Foundation’s Board, and SDF.
ii) General Operations is made up of physical facilities, utilities,
telecommunications, office rent, security, insurance etc. not allocated to other
categories.
14.10.3 Natural Classification of Expenses
A. SDF should classify its expenses into four main groups:
(i) Personnel Costs
(ii) Materials consumed/consumables
(iii)Supplies and Services
(iv) Operational Travel and
(v) Depreciation of long-lived assets
(vi) Write-off/ /others/ extra ordinary items
B. The detailed initialization of each group of expenses depends on management’s need
for Control and reporting.
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14.10.3.1 Personnel Cost
Personnel costs include the salaries and benefits of permanent/ regular employees of
SDF/Project. It covers salaries and benefits of international professionals, supervisory
and support positions, including benefits.
14.11 Payroll preparation and disbursement
Salaries shall fall due ordinarily on the first day of the month following that for which the
salary is earned. Persons responsible for payroll preparation should consider the pay
increases, the inclusion of allowance as per regulations or instructions, and deductions
including adjustment of any loans or advance given to the employee. To ensure prompt
preparation of the payroll, attendance register / time sheets are to be closed for the month
on the last day of the month. Payroll sheets are to be prepared by designation for all
locations separately and are recommended for payment by the Director, Finance that ends
in approval by the MD.
Central/Regional/District/Cluster level payroll disbursement is routed through staff
individual bank accounts. Preparation of the payroll have all necessary control aspects
such as the correct amount is paid, that discharged persons are not included, that proper
deductions are made, that calculation and posting are accurate, inclusion of fictitious
persons on the payroll is prevented, unclaimed salaries are properly treated etc.
14.12 Contributory Provident Fund (PF)
Any employee in the confirmed service of the Organization including those on
contractual service as per the contractual agreement is eligible to become a member of
the Contributory Provident Fund but casual employees are not eligible to become
members of the Contributory Provident Fund. An eligible employee must apply for
membership through a prescribed standard form available from the Human Resources
Department. Member of Contributory PF shall contribute 10% of their basic pay, which
will be deducted from their monthly salary and SDF contributes an equal amount to the
Contributory PF on behalf of the member. A sum of money equal to the amount of
monthly contribution of the members and SDF authority is transferred to the respective
account of Trustee of the Contributory PF within the month. The Trustees are responsible
for management of the Fund.
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14.13 Gratuity
All confirmed employees of SDF including the contractual employees as per terms of
service shall be entitled to gratuity. Temporary, Part-timer and casual employees are not
eligible for gratuity. SDF established a Gratuity Fund for its employees which is
approved by the National Board of Revenue (NDR). For entitlement and payment of
gratuity relevant policies shall be applied.
14.14 Materials consumed/consumables
This includes cost of various materials consumed in operating the project/sub projects.
14.14.1Supplies and Services
A. Supplies and services cover a broad range of expenses necessary to carry out the
works of the Foundation.
B. Supplies consist of items consumed in current operations and needed to execute
programs in research and research support, information, administration and general
operations.
C. Items in this category include but not limited to non-consumable items, which are not
capitalized, and supplies for office, computers, field, and library and auxiliary units.
D. Services include general items not included in personnel cost such as casual labor,
consultant, research associates, other professional services etc.
E. The supplies also include items other than the general expenses which do not strictly
fall within the category of supplies and services but could be a combination of both
such as rentals, repairs and maintenance, utilities, telecommunications, vehicles and
general liability insurance.
14.15 Operational Travel
It covers domestic and international travel of SDF staff-members and SDF's beneficiaries
on official duties.
14.16 INDIRECT EXPENSES AND OVERHEAD
14.16.1 Introduction
Indirect expenses refer to the grouping of non-allocable expenses incurred by the cost
centers in the normal course of SDF operations which cannot be allocated directly to
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main program and activities of the SDF. SDF accounting system is set up so as to
differentiate between what constitute direct charges to a project or activity and those
indirect charges, which cannot be reasonably identified with discrete activity of a project
or program.
14.16.2 Applicability
A. Nature of indirect expenses to be charged to project activities or sub-activities
through an appropriate overhead rate is to be determined and which donors should
pay.
B. Overhead should be applied to bear fair share of Foundation’s support activities
through equitable allocation of overheads.
C. Overhead rates should be examined periodically, at least every year-end, in
consultation with Foundation’s external auditors to ensure the adequacy to
recover a fair share of indirect cost associated with support service.
14.16. Methods for Overhead Expense Rate
SDF will follow Percentage Rate method for the charging of indirect expenses or
overhead or on any other suitable basis.
In all cases, the objective is to recover actual indirect cost associated with the attainment
of the Foundation objectives.
Indirect cost may vary from program to program depending on the restriction by the
donor or/ and need and environment of the activities.
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Chapter 15: Audit
15.1 Statutory Audit:
As per company Act-1994 every year the organizational financial report is audited by a audit
firm affiliated by ICAB
15.2 Selection of Audit Firm
Every year offer for conducting external audit is collected from the reputed audit firms following
the rules and procedures of company act. Final selection, appointment and remuneration fixation
of statutory auditor is done by the general body members of SDF at AGM.
15.3 Audit Period
SDF’s annual audit will cover the period 01 July to 30 June a year.
15.4 Terms of Reference
Before starting audit action a Terms of Reference (ToR) is prepared and contract is signed
between SDF and audit firm. Managing Director on behalf of SDF and a partner on behalf of
audit firm will sign on the ToR and contract. This procedure will be applicable for both annual
and project audit. Time schedule, covering area, fees, report submission, etc should be mentioned
in the TOR clearly
15.5 Reporting
External auditors will submit seven copies audit report and seven copies observation for
management report to SDF management. Requirement of audit report should be mentioned in the
TOR. Before submission of final report, a draft report should be submitted. A discussion should
be held in an exit meeting between the auditor and SDF accounts section on draft report. Audit
report will be finalized in that meeting.
15.6 Internal Audit by Donor/ World Bank
In addition of the statutory audit an Internal audit also conducted on yearly basis on the SIPP
financial management as per the agreement with World Bank. Following the PPR-2008 and
world Bank Guideline the appointment of Internal Audit is done.
15.7 Audit Period
Internal audit follow the SDF’s financial period 01 July to 30 June a year.
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15.8 Terms of Reference
Before starting audit a comprehensive ToR is prepared and shared with world bank. Upon
clearance from the World Bank shared with the auditor. Based on the ToR contract is signed
between SDF and audit firm. Managing Director on behalf of SDF and a partner on behalf of
audit firm will sign on the ToR and contract. Time schedule, covering area, fees, report
submission, etc should be mentioned in the TOR clearly
15.9 Reporting
Internal auditors will submit the reports to SDF and World Bank. Observation for management
report to SDF management for annual and project audit. Requirement of audit report should be
mentioned in the TOR. Before submission of final report, a draft report should be submitted. A
discussion should be held in an exit meeting between the auditor and SDF accounts section on
draft report. Audit report will be finalized in that meeting.
15.10 FAPAD Audit
From the government part Foreign Aided Project Audit Department under Comptroller and
Auditor General (CAG) also conduct audit on yearly basis. It is a government department and
assigned by the Government.
15.11 Forensic Audit:
This audit firms are appointed and coordinated by the World Bank on a yearly basis. Usually
they submit reports directly to the world Bank.
15.12 Internal Audit of SDF
SDF has a four member internal audit team. They visit the field offices frequently and submit
report to the Managing Director. Action is also taken immediately after receiving the report from
the internal Audit department.
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Annexure: List of Forms and Reports
Figure 1 : Debit Voucher ......................................................................................................................... 110
Figure 2 : Trial Balance ........................................................................................................................... 111
Figure 3 : Statement of Changes in Equity ............................................................................................. 111
Figure 4 : Statement of Comprehensive Income .................................................................................... 112
Figure 5 : Balance Sheet .......................................................................................................................... 113
Figure 6 : Cash Flow Statement .............................................................................................................. 114
Figure 7 : Receipt Payment Report ......................................................................................................... 115
Figure 8 : Ledger Report ......................................................................................................................... 116
Figure 9 : Village Wise Ledger ............................................................................................................... 117
Figure 10 : Cash Book Report ................................................................................................................. 118
Figure 11 : Bank Book Report ................................................................................................................ 119
Figure 12 : Daily Transaction .................................................................................................................. 120
Figure 13 : Chart of Accounts ................................................................................................................. 121
Figure 14 : Consolidated Statement of Project Fund ............................................................................. 121
Figure 15 : Statement of Fund Disbursement ......................................................................................... 122
Figure 16 : Statement of Cash Balances ................................................................................................. 122
Figure 17 : Withdrawal Report ............................................................................................................... 123
Figure 18 : Balance Information ............................................................................................................. 123
Figure 19 : Cash Requisition Slip ......................................................................................................... 124
Figure 20 : Asset Register ....................................................................................................................... 113
Figure 21 : Cheque Issue Register .......................................................................................................... 114
Figure 22 : Cheque Issue Register .......................................................................................................... 114
Figure 23 : Salary Sheet ........................................................................................................................... 115
110
Figure 1 : Debit Voucher
111
Figure 2 : Trial Balance
Figure 3 : Statement of Changes in Equity
112
Figure 4 : Statement of Comprehensive Income
113
Figure 5 : Balance Sheet
114
Figure 6 : Cash Flow Statement
115
Figure 7 : Receipt Payment Report
116
Figure 8 : Ledger Report
117
Figure 9 : Village Wise Ledger
118
Figure 10 : Cash Book Report
119
Figure 11 : Bank Book Report
120
Figure 12 : Daily Transaction
121
Figure 13 : Chart of Accounts
Figure 14 : Consolidated Statement of Project Fund
122
Project wise WB Reports
Figure 15 : Statement of Fund Disbursement
Figure 16 : Statement of Cash Balances
123
Figure 17 : Withdrawal Report
Figure 18 : Balance Information
124
Figure 19 : CASH REQUISITION SLIP
Name:
Amount (Tk.) :
In word :
Purpose :
as advance
Unadjusted Previous Advance (If any) Tk. :
Date of receipt :
This amount will have to be adjusted with original bill / voucher / documents within 7 (seven)
days of incurring expenditure.
Submitted by:
Name:
Designation:
Recommended by: Sanctioned by:
Name: Name:
Designation : Designation:
0
Figure 20 : ASSET REGISTER
Name of Asset Group: ----------------------------Name of Office: ------------------------------Folio No. ----------------
SL # Date of
acquisit
ion
Asset
ID No.
Descriptio
n of assets
Date of
Acquisiti
on
Name
of
Suppli
er
Acquisiti
on Price
Rate of
Depreciat
ion
Accumul
ated
Depreciat
ion
WD
V
Location
of the
Asset
Conditi
on of
the
Asset
Payme
nt
referen
ce
Rema
rks
1
2
3
4
1
Figure 21 : Cheque Issue Register
Name of Office: --------------------------------------Name of Bank: ---------------------------------- Address of Bank : ----------------------
-------------
SL# Date Particulars of
Payee
Purpose of
payment
Check No. Amount in
Tk.
Maker’s
signature
Checker’s
signature
Signat
ory-1
Signato
ry-2
Remarks
Figure 22 : Cheque Issue Register
Name of Bank : --------------------------------------------------- Address: -----------------------------------------------------------------
SL # FDR # Date of
Purchase
Date of
Maturity
Rate of
Interest
Initial
Investment
Amount
Amount at
last
renewal
date
Addition/
Interst
Accumulated
Value
Reamrks
0
Figure 23 : Salary Sheet
Salary and Allowances for the Month of ---------------------- Report Date:------------------
0