for NGOs?
In many NGOs financial management is given a low priority. This is often
characterized by poor financial planning and monitoring systems. But NGOs operate
in a rapidly changing and competitive world. If their organizations are to survive in
this challenging environment, managers need to develop the necessary
understanding and confidence to make full use of financial management tools.
Good practice in financial management will:
Managing risk: All organisations face internal and external risks which can
threaten operations and even survival (eg funds being withdrawn, an office
Accountability: The organization must explain how it has used its resources
and what it has achieved as a result to all stakeholders, including
beneficiaries. All stakeholders have the right to know how their funds and
authority have been used. NGOs have an operational, moral and legal duty to
explain their decisions and actions, and submit their financial reports to
scrutiny.
also provide valuable information about how the organization is being managed and
whether it is achieving its objectives.
Financial Monitoring: Providing the organization has set a budget and has
kept and reconciled its accounting records in a clear and timely manner, it is
then a very simple matter to produce financial reports which allow the
managers to assess the progress of the organization.
Budget Basics
The budget is technically the document that includes the NGOs expenditure and
revenue proposals, reflecting its policy priorities and targets. But the budget
document is just one facet or manifestation of an on-going budget decision-making
process, and of a NGOs system for managing and assessing its spending and
policies. Looking at any one aspect of the overall budget system in isolation misses
the important interaction between the various parts. The budget cycle, which
consist of the major events or stages in making decisions about the budget, and
implementing and assessing those decisions.
The budget cycle usually has four stages:
Budget formulation, when the budget plan is put together by the executive branch
of NGO
Enactment, when the budget plan may be debated, altered, and approved by the
legislative branch
Execution, when the policies of the budget are carried out by the NGO
Auditing and assessment, when the actual expenditures of the budget are
accounted for and assessed
for effectiveness