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Have you prepared NGO Annual Budget for Next Year?

ngo annual budget chart

Is it necessary to prepare NGO Annual Budget?

Yes 100% and why not? Every organization, irrespective of size and work pattern, has to prepare its Annual Budget, keeping main object in mind. An annual budget should be prepared, which is mainly activity wise. Have a look at below example.

Current Scenario of NGO Annual Budget

Currently, most of the NGOs prepare Budget to give it to Funding Agencies and only restricted to activities in which funding agency is ready to fund. Instead NGO Annual Budget is given to funding agency and ask to fund accordingly to particular activities. I understand practically one has to adjust with funding agency requirements, however annual budget is to be prepared as part of disciplinary excercise and looking to its benefit given below.

Benefit of preparing NGO Annual Budget

First and foremost benefit is to give clear cut idea about which activity an NGO is going to undertake next year, how much funds already available and how much efforts require to raise remaining funds. It also helps in achieving Long Term Objectives. If NGO is having its 5 years plan or 10 years plan, NGO annual budget becomes an effective tool to convert plans into actions. Look at below chart,  showing Funds already available and  to be raised.

 

Next year NGO Annual Budget in Annual Report

Annual Report of NGO should always contain some of the points. Refer our this post. One of them is to put Next year activity planning along with Annual Budget of next year. This will give readers an opportunity to see organization’s future goals in quantification manner.

Summary

Fund raising activity is one of the tough task in any organization. To make that task easy, it is necessary to prepare 5 years activity plan and prepare Annual Budget etc..

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

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What should be Good NGO Traveling Policy ?

ONE of the main question asked by funding agency before approving any budget is what is your NGO Traveling Policy? In NGO Traveling Expenditure is one of the major component of total budget, whether traveling for Project Implementation, Advocacy, Training, Monitoring, and thus there must be  particular NGO traveling policy for the organization.

IN this article, i would like to focus on which points to be keep in mind while framing traveling policy so that it becomes best.

Good NGO Traveling Policy is one which is in Writing

You may be have one of the best traveling policy and procedures implemented in your NGO, but if it is not on paper, it is useless. Traveling policy must be in writing and must be part of the NGOs Working Manual

Good NGO Traveling Policy is one which is Approved

After framing NGO traveling policy, it is advisable to approve and authorized by trustees or by board members or may be by chairman and secretary.

It should not be rigid

NGO Traveling Policy should not be rigid, in the sense, that one rate or one rule for traveling expenditure can not apply to all types of travelling

It should frame according to Types of Traveling and conveyance

There are different are types of traveling and conveyance we can see in NGO. Sometimes traveling expenditures are reimbursed, sometimes NGO is having own vehicle, sometime staff use own vehicle for project work, sometimes funding agency provide vehicles or provide funds to purchase vehicles. So NGO traveling policy should includes all these possibilities.

Supporting and proof of Traveling

NGO Traveling Policy should includes which type of supporting or proof staff has to give to account and finance department after traveling. It may be Traveling Summery Sheet or Monthly Conveyance Statement or Log Book etc..

Avoid CHARGING of Traveling Expenditure to Project

Some of the NGOs are following practice of charging fixed per kilometer amount and transfer this to some pool or fund and then fuel and maintenance are paid from that pool. It is strongly recommended not to follow this type of practice of “charging” Expenditure to Project.

Summary

Apart from above points, there may be many other points to be consider while framing traveling policy depending upon the nature and work of your NGO. But, one has to keep in mind all the above points to framing good traveling policy.

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subject.

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NGO Travel Policy and Types of Traveling

Every organization, whether small NGO or big NGO, must have their own NGO Travel Policy. You have to keep in mind certain points while framing good NGO travel policy for your organization.

One of the main point is that, a Traveling Policy should not be rigid. In NGO, modes of traveling, purpose of traveling, areas of traveling are different and thus, a traveling policy should accommodate all. Some NGOs may have their own vehicles, some of NGOs ask staff to use their own vehicles for project work, some of NGOs blessed by funding agency and funds provided by them to purchase vehicles or sometime funding agency provides vehicles to NGO for Project work. Let us discuss one by one what should be traveling rules and policy for NGO in the light of different types of traveling and conveyance.

Lodging and Boarding

Here traveling expenditures includes :

  • Conveyance from Home To Station / Airport and back
  • Tickets
  • Food expenses
  • Hotel Stay Expenses

Supporting Documents – For this type of expenditure, generally advance given to staff and later on it is settled when they provide bills along with Travel Summary Sheet.

Conveyance – Staff using their own vehicle

When traveling is done by staff by their own vehicle, then the cost of fuel is to be reimbursed to them at the end of the month or fortnightly.

A Traveling Policy should include charges for per kilometer basis to be reimbursed to staff separately for two-wheelers and four-wheelers. eg. Rate for Two-wheeler Rs. 4 /km and Rate for four-wheeler Rs. 8/km.

Supporting Documents – For such kind of expenditure, a Conveyance Sheet has to be prepared by staff and get it approved from project coordinator.

Conveyance – Staff using NGO’s vehicle

In this situation where  NGO is having their own vehicle and  staff use it for project purpose, actual expenditure of fuel and repairs and maintenance are taken. If vehicle is used for more than two projects, then such expenditure is to be divided in proportion to usage of vehicle taken from log book.

Supporting Documents – For such kind of expenditure, a logbook of vehicle  has to be prepared by staff and get it approved from project coordinator. Avoid – charging fixed amount per km to particular project. Why ? check out our this post. 

Conveyance – Staff using vehicle provided by Funding Agency for Project

When funding agency has provided fund to purchase vehicles for project, i recommended that do not use the same for other projects.  All the  actual expenditure of fuel and repairs and maintenance are taken.

Supporting Documents – For such kind of expenditure, a Log Book of vehicle  has to be prepared by staff and get it approved from project coordinator. Again do not charge fixed per km amount to project. Why ? check out our this post. 

Summary

In short, NGO has to first check the scenario and situations of their own working environment and thereafter decide their own NGO Travel Policy. It is far more better to have different policies for different types of traveling and conveyance, instead of having one single policy like charging per km basis or actual basis.

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

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5 Myths about Advance Requisition Form in NGO

myths-ARF

Advance Requisition Form is one of the important document which is very useful for Internal Control System. However there are many misunderstanding prevailing. Let us today, discuss five main myths regarding Advance Requisition Form in NGO.

Myths about Advance Requisition Form

 

1. Advance Requisition Form has to be prepared on Monthly

Generally, Advance Requisition form is to prepared on monthly basis. However it is not standard rule. NGO having more turnover can prepare it on fortnightly basis. Sometime, amount involved in project expenditure are not higher or geographical location of Field office is far from head office, even quarterly Advance Requisition From can be prepared.

2. Only Filed Staff has to prepare Advance Requisition Form

Anyone who is entitled to receive advance, has to prepare Advance Requisition Form in the NGO. Generally, in NGO, somehow, Management personnel receive advance money for project expenses or administrative expenses, are not preparing Advance Requisition Form. For Good Internal Control System,  even trustee or management is require to ask for advance only through Advance Requisition Form

3. It must be Accurate

Advance Requisition Form is kind of estimation of expenditure for next month. It may not be accurate. However care should be taken that figures of expenditure are purely on the basis of approved budget of projects and near to accurate.

4. Important only for giving Advance

Not at all, it is very good document for internal control system, one can check the track records of expenditures. Even comparison can be easily done for what advances ask and how it is used. So that there are many importance of one document, if prepare and analyze properly.

5. There is fixed format of Advance Requisition Form

Every NGO has to prepare format according to their requirements. Here you can find specimen copy of Advance Requisition Form. You can add or delete some of the information as per your requirements.

ARF

Summary

Once it is a part of the procedure of the NGO internal control system, it gives more transparency and efficiency in Financial and Management Control System

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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Advance Requisition Form and its Importance in NGO

What is Advance Requisition Form?

In NGO world, most of expenditures are generally spent by field workers to complete projects of NGO. And thus Project Advance is playing major role in accounting of NGO. This is the area where it needed more Internal Control and Check. One of the handy tool is Advance Requisition Form. It tells Accountant or Finance person that how much advance require for project expenses and other overheads in next month.

What items to be included in Advance Requisition Form?

As such no thumb rule on standard format of Advance Requisition Form, however following information must be there in good Advance Requisition Form.

  • Heading : Advance Requisition Form for ___________ month
  • Name :  Field Staff / Project Officer
  • Location : Field Office Name
  • Particulars (Showing Project Activities and overheads)
  • Amount (If advance required for both FC and Non-FC project, it should mention separately)
  • Accountant’s Remarks and Signature
  • Approves Remarks and Signature
  • Summary of Advance Account (Showing Last Month Balance + Current Month Advance – Current Month Expenditure = Closing Balance)

Standard Format of Advance Requisition Form

Download from here standard Format of Advance Requisition Form. This is a specimen copy, you can customized according to your organization’s need and internal control system.

ARF

Importance of Advance Requisition Form

  • Get clear cut idea how much fund needs for next month.
  • For which activities funds are needed?
  • To compare last month expenses to last month advance requisition.
  • Cumulative Advance Balance can easily trace out.
  • It is wonderful tool of Control Mechanism
  • It is very useful document for monthly program planning
  • For Accountant, Advance Requisition Form helps for Fund Management Planning

Summary

One of the general myths regarding Advance Requisition Form is that Management personnel, heading any project, need not require to prepare it. Irrespective of size of NGO, this is one of the best instrument to establish and maintain Internal Control System.

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

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Myths and facts about NGO Budget

myths-ARF

Importance of NGO Budget

Now a days, preparing NGO budget requires three dimension knowledge of Financial, Project and Activities and Presentation skills. NGO budget can not be prepared by each and every one. Today, Let us discuss some of the myths regarding NGO Budget.It becomes practice and tradition year after year. But facts are different than these myths.

 1. Budgets cannot be changed

Generally, we all believe that, once Budget is fixed an approved by donor, it can not be changed. But the fact is budgets can be modified to some extent. You can diversify your resources and cut your costs. Of course, take prior permission from your donor agency for this.

2. Budgets can be developed overnight

This is very common myth that budget can be prepared in couple of hours. Take the blank format of Excel Sheet, Put the figures and done. Often in our effort to meet deadlines, we develop budgets overnight. This ends up in poor planning and even rejection of proposals. Always take time to build your budget – your NGO should live with a budget always!

3. Budgets have approximate figures

While preparing budget, we believes that figures contain in the Budget need not be exact. If it is nearby or approximate, than its OK.  But the fact is Budget should be developed on a certain base. They cannot be developed without any basis. In most cases, the basis should be the previous year’s income and expenditure. If applying for a project, look out for the expenses of the project’s previous year.  Donor funding limitation to be also considered.

4. Budget can be developed by a single person

Generally, Budget is prepared by either Project coordinator or Trustee – single person or may be two persons. However Budget work is a joint exercise. It is a team work. Involving the entire team including Administrative and Accounting Staff is important to produce an effective budget.

5. Budgets have same formats

All budgets do not have same formats. Different budgets are developed for different purposes. If you are writing a proposal, it is a different budget format and if you managing an organization, you will have a different budget format. Similarly, different donor agencies have different budget formats.

source : fundsforngos

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5 things you must do at the start of Financial Year in NGO

New Financial Year has just started, and everyone is busy in closing books of accounts of last year. Sometimes, the closing of financial year is done in the month of June or July. If Accounts and Finance running from one financial year to another as it is, without change, sooner or later, it will become absolute. So, this is my advice that at least follow this 5 things at the beginning of the Financial Year.

1. Annual Budget

NGO has establish to fulfill a mission with the vision in mind. And to achieve that, one needs long term plan which breakdown in a yearly column. That is called Annual Budget.  Now a days, its a trend that from big funding agency to CSR companies to small donors, everyone asking whether you have prepared Annual Budget or not. The right time for the preparation of Annual Budget for NGOs is in the Last week of March or first week of April, not later than that. Read this blog on Annual Budget.

 

2. Changes in Multi-Year Projects

If you  have multi year project, most likely budget of such project will change with the change in financial year. Mostly salaries and staff payments have incremental components and increase in the next financial year. Thus, Accountant must have to ascertain such changes in new financial year  in particular budget and should communicate to program team well in advance.

 

3. Update Financial Manual

Financial Manual is a policy document and need to review every year. Every year, there are many changes in laws and regulations which affects the financial transactions of your organization. Generally, accountant used to start following the new laws and regulation but forget to modify Financial Manual Accordingly.

Example

Cash Expenditure limit was decreased from Rs. 20000 to Rs. 10000. But still many NGO has the limit of Rs. 20000 in their Financial Manual. Nobody bothers to read and update it.

 

4. Splitting Tally Database

Mostly, Accountants in NGOs are lazy to split Tally company and whereby separating database according to Financial Years.  I have seen many NGO accounts, where tally database is same since last 8 to 10 years. Obviously, because of this, size of database increase and speed to work in Tally getting slow to worse. So, It is advisable to split the tally company at the end of the Financial Year.

 

5. Chart of Accounts

Chart of Account is the base of accurate accounting and desirable presentations of Income & Expenditure Accounts and Balance Sheet of NGOs. As, compared to corporate, NGO do not have standard format for its Financial Documents, but they can be created as digital documents in PDF format using software as sodapdf online. I observed, that accountant creates and alters ledger accounts as and when required. So, this is one of the important point to follow at the start of the Financial Year to prepare Chart of Accounts or modified according to the need.

 

Did I miss something?

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

 

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Trust Assest use by Trustee

Can Trust Assets used by Trustee?

Trustees can not used Trust Assets for purpose other than official. Mostly Car, mobile phones, Air Conditions other furniture etc.. if used by Trustee or other related party, trust must have collect the hire charges for that.

One of the coolest incident i have read is as follow :

Once upon a time, there was an NGO. One day they bought a refrigerator for Rs.5,445. They kept it at the Managing Trustee’s house. The income tax people wanted to know the reason for this. The NGO said: ‘Our office building was not ready. We wanted to offer cold water to our Swedish donors’.

Result? Tax people rejected the explanation and withdrew the NGO’s income tax exemption. The High Court also confirmed it.

Moral of the story?

Make sure the Trustees or key persons do not use the NGO’s assets. And if they are used, recover hire charges from them.

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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Do you show Disclosure of Related Party Payments ?

Disclosure of Related Party Payments

As per Accounting Standard 18, issued by Institute of Chartered Accountants of India, business entity has to show disclosure of Related Party Payments. This Accounting Standard is applicable from 1st April 2001. You can read full Text of AS 18 here.

NGO and Accounting Standard 18

AS 18 is also apply to NGOs  in some cases. NGO has to show such disclosure when salary, remuneration or any other payments made to Chief Functionary, Trustees or Top management and associated with NGOs.This disclosure will form part of annual audited financial statements.

Some Examples

Remuneration paid to Trustee, Managing Trustee, Chief Functionary
Consultancy paid to Trustee etc…
Consultancy paid to Related NGOs where one of the Trustee
However Reimbursement of Traveling Expenses to attend meeting is not covered by this AS.Where to show such disclosure

Generally, this disclosure is to be made in financial statement of NGO. As per Income Tax Act, even Auditor of NGO has to disclose such kind of payments to his Audit Report under section 10B. In my opinion to reflect greater transparency, one has to show it in Financial Statements, Audit Report and even in Annual Report of organization.

Summary

As public money involved in NGO, it is accepted that each and every transaction must be very very transparent. Such kind of disclosure serve the above purpose and also it works as an internal check system in broader senses.

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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NGO Regulatory Authority in india

In India, Non Government Organization or Non Profit Organization can be registered under any legal entity. Mainly following entities are prevails in India –

  • Proprietary Concern
  • Partnership Firm
  • HUF
  • Company
  • Association of Persons, which includes – Trust, Society, Union, Institute etc…

NGO Regulatory Authority in India

For NGO or NPO, mainly three separate entity status possible, either registered as company, trust or society. These three have their own benefit and disadvantages. Different legal status regulated by different legal acts and laws in India. Lets look at the various NGO regulatory authority in India :

 Legal Status Act Aply Remarks
Company NGO can be registered as company under Section 8 of The Companies Act, 2013 Earlier it was Section 25 of The Companies Act, 1956
Trust NGO can be registered as trust under Indian Trust Act, 1882 However, every state has its own Trust Act. Like in Maharshtra and Gujarat, The Bombay Public Trust Act, 1950
Society NGO can be registered as Society under The Societies Registration  Act, 1860 However, every state has its own Act. Like in Gujarat, The Gujarat Co-operative Societies Act, 1962

Summary

Once NGO is registered under any of the above statute, there are number of other registration has to be taken depending on the need and requirements, e.g Sec 12A exemption, 80G certificate, FCRA registration, 35AC exemption registration and so forth.

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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