Tag Archive for: Control System

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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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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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Have you Change Board Members Since FCRA Registration ???

CHANGE  BOARD MEMBERS MORE THAN 50% UNDER FCRA

After taking FCRA registration, NGO has to take prior permission before making any change Board Members in excess of 50%.  This condition is mentioned in the “Undertaking”  given by the applicant at the time of making Application for Registration or for Prior Permission.

Details are provided below –

Where such provision mentioned?

it is not mentioned in the Act or the Rules, it becomes binding on all the organisations by virtue of the ‘undertaking’ . Look at the below specimen of ‘Undertaking’. It is a part of application form of FCRA registration  or prior permission.

Why this kind of provision?

The primary purpose of this law is to prevent unscrupulous practices where the FC registered associations are taken over by changing the governance structure.

How to compute 50%?

Let us take one example. In an organization there were 7 Board Members at the time of Application made under FCRA. Later on one by one three Board Members were resign. Now fourth Board Member also wants to resign. So as per above undertaking, an organisation has to take prior approval from FCRA Department before change take place with fourth Board Member.

What if Change Board Members happen due to death?

There may be a change of more than 50% in the board as discussed above for reasons such as death or election by voting etc. which are not in the control of the organisations. In such cases, the organisation should inform the Central Government immediately after such change has occurred and get retrospective approval.

What is remedy  If prior approval of such 50% not taken in ignorance of law.

In such cases the organisation should inform the Central Government immediately after becoming aware of such requirement and request for condonation of the lapse. The Central Government may consider the matter if the reasons are justified.

Is it serious offence ? what are consequences ?

The Supreme Court in CIT v. Nagpur Hotel Owners’ Association [2001] 247 ITR 201, held that the additional condition in a Form can be held to be mandatory only if the purpose and the scheme of the pertaining Act is threatened to be defeated. In this case, the Supreme Court held in favour of the Government, but made it very clear that any condition specified in a Form should be within the provisions of the Act and Rules. In our opinion, any change in the Board of Directors in the normal course of activity, does not seem to be a violation of FCR Act or the Rules

Recommendation

However, it is recommended that all organisation should inform the FCRA department and take prior approal wherever it is possible. Further, those organisations who have not taken permission, even after such change has occured, should apply for permission and condonation.

source – FMSF

Have Query ????? Ask Here  Or you can have Live Chat with our expert.

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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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Donation in cash for more than Rs. 10000

Donation in Cash

Can an NGO collect donation in cash? yes. NGO can collect donation in cash. However it is advisable to take donation by cheque and make the system transparent.

Income Tax Act and Cash Donation

From 1/04/2013, the donor will not get any tax benefit for donation in excess of Rs. 10000 unless such sum is paid by any mode other than cash.

As per the new sub section 5(d) to section 80G of the Income Tax Act 1961, any payment exceeding a sum of ten thousand rupees shall only be allowed as a deduction if such sum is paid by any mode other than cash.

Consequences

From the NGO point of view, NGO can accept donation in cash for more than Rs. 10000, but does not issue receipts claiming 80G exemption. From donor point of view, he can not get exemption under section 80G.

Also note that Rs. 10000 limit is per year per donor means a single donor cannot give more than Rs. 10000 in cash in entire year.

Applicability

This amendment will take effect from 1/04/2013 in relation to A.Y. 2014-15 and subsequent Assessment years.

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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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