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FINANCIAL AND ACCOUNTING POLICIES ANDPROCEDURES MANUALFORINDEPTH Network Secretariat38 & 40 Mensah Wood Street, East LegonP O Box KD 213, Kanda, Accra, Ghanawww.indepth-network.orgApproved by Executive Director on 1st January 2010Endorsed by the Board of Trustees on 1st March 2010
Table of ContentsPageChapter One:1.11.21.31.41.51.6INDEPTH Network’s Financial SystemPurpose of this ManualAuthority of the ManualScope of the ManualUpdates and RevisionEffective DateChapter eneral Guiding PrinciplesAccounting MethodForeign Currency TranslationsRevenue RecognitionMatching PrinciplePrudence PrincipleAccruals PrincipleHistorical Cost PrincipleGoing Concern PrincipleConsistency PrincipleFair Value PrincipleDisclosure PrincipleAccounting PoliciesChapter ion333334445555Cash and Treasury ManagementSelecting INDEPTH Network’s BanksAuthorized SignatoriesManaging Bank AccountsBank Reconciliation StatementsGuidelines for Preparing Bank ReconciliationsPetty Cash ManagementCash in SafeReceiptsInvestment ManagementPrepaymentsForeign Exchange Exposure Management77899101212131414
3.123.13Cash Flow StatementAccounting EntriesChapter Expenditure Control ManagementGeneral Expenditure Control Policies and ProceduresPayment by ChequePayment by Letter of TransferPayment by Credit CardPayment by CashExpenditure Approval MatrixAccounting EntriesChapter Five:141618191920202021Property, Plant and EquipmentGeneral Policy isposalReportingAccounting Entries2222232324252527Chapter Six: Procurement and Inventory Management6.16.26.36.46.56.66.76.86.9Policy GuidelinesPurchase Requisition FormPurchase CommitteePurchase OrderGoods Received NotePayment for Goods and ServicesControls over Acquired AssetsStores and Inventory Management ProceduresAccounting EntriesChapter Seven:7.17.27.37.4292930303131313132Payroll ManagementPreparation of PayrollPayment of SalariesCategory of StaffSalary Advance33343535
7.57.67.77.8Salary LoansPension FundsStaff ProvisionsPayroll EntriesChapter 611.111.211.311.411.511.6464747484849Budgeting and Budgetary ControlIntroductionResponsibilitiesBudgets, a Tool for Budget ControlComputation and Reporting of VariancesInvestigation of VariancesDisclosure of Budget Information in Accordance with IPSASChapter Eleven:393939394142424344Chart of Accounts and Operating SoftwareChart of AccountsImplementation of the Chart of AccountsComputerized Accounting SystemData Security and Back UpsObjectives of the Accounting SystemBasic Recording and Books of AccountsChapter Ten:10.110.210.310.410.510.6Grants and Sub-Grantee ManagementAdministration of GrantsMode of Receiving GrantsContributions AcknowledgmentRevenue RecognitionTransfersDisclosuresGrant AgreementsSub-Grantee ManagementAccounting EntriesChapter Nine:35363637505050515152Financial ReportingFair Presentation and Compliance with IPSASs53Qualitative Characteristics of IPSAS Financial Statements s 55Notes and Supplementary Schedules56True and Fair View56Communication of Standard Accounting Guidelines56Common Information in Financial Statements57
11.711.811.9Monthly and Annual Reporting ProceduresFinancial ControlSpecific Donor Financial ReportingChapter Twelve:12.1Audit FrameworkAudit of 601: Bank Reconciliation Statement2: Payment Requisition Form3: Cheque Payment Voucher4: Cash Payment Voucher5: Journal Voucher6: Certificate of Cash Balance7: Travel Expense Claim Form8: Chart of Accounts9: Illustrative Financial Report10: Internal Control Questionnaire62
Chapter OneIntroduction1.1INDEPTH Network’s Financial SystemINDEPTH Network is an International Organization for the demographic evaluation ofpopulations and their health in developing countries. As a rapidly growingorganization, INDEPTH Network would like to develop and implement sound financialsystems that comply with internationally accepted accounting standards generallyapplicable to not for profit organizations.The INDEPTH Network’s financial system encompasses all the personnel, resources,systems and activities that work together to carry out in an effective manner thefinancial and accounting functions of the Secretariat. This manual seeks to streamlinethe functions of all the elements within this system to ensure that all the activities ofthe Secretariat are carried out in a systematic manner so as to safeguard and addvalue to assets as well as facilitate and enhance financial reporting.The implementation of sound financial and accounting systems is therefore designedin such a way as to ensure that:a) All transactions are executed only upon proper approval and authorization;b) Only valid transactions are recorded accurately to permit preparation of financialstatements that conform to generally accepted international accountingstandards, andc) All assets are safeguarded in a healthy control environment.1.2Purpose of this Manuala) The key purpose of designing this accounting policies and procedures manual is toprovide guidelines to all staff at INDEPTH Network, particularly the Finance andAccounting staff for the orderly execution of their respective responsibilities forthe purpose of preparing the Secretariat’s financial statements.b) These guidelines provide sets of operating and reporting financial standards andpractices which comply with internationally accepted accounting standards,including the International Public Sector Accounting Standards (IPSAS).
c) They also aim at ensuring that key financial guidelines and requirements as well asthose of well managed international organizations within the not-for-profit sectorhave been taken into account.d) The manual aims to set out the basic framework of systems that will provideadequate levels of internal controls including budgetary control.e) The manual also aims at ensuring and promoting the principles of accountabilityand transparency generally referred to as good corporate governance code.1.3Authority of the Manuala) In developing this manual, consideration was given to all applicable InternationalAccounting Standards, International Public Sector Accounting Standards and therequirements of the Ghana companies code, 1963 (Act 179).b) The manual also has the approval of the Executive Director and the full authorityof the Board of Trustees. Failure to comply with any policies and procedurescontained in this manual may render an employee liable to disciplinary action. Aplea of ignorance will not be acceptable as an excuse for non-compliance.c) If for any reason a given policy or procedure cannot be implemented, it would beincumbent upon the responsible official to notify the immediate senior in writingdetailing the circumstances and submitting an alternative policy or procedure forthe approval of the Executive Director, who shall either endorse or reject theexception and the procedure to be valid as a replacement.1.4Scope of the ManualThis manual is intended to cover all aspects of the control environment of thefinancial system of INDEPTH Network Secretariat. It seeks to touch on all areas of thesystem that instills order, direction and focus for efficient and effective performanceat all levels of management.The first chapter introduces the entire work, outlining its purpose and objectives, aswell as emphasize the necessity for updates and revision.Chapter Two sets forth the guiding principles, detailing the relevant concepts andconventions of the financial system.Chapters three through twelve sets out the policies and procedures framework for allaspects of the system. They establish points of reference for all the areas of thesystem consisting of cash and treasury management, expenditure controlmanagement, plant property and equipment, procurement and inventory
management, payroll management, grants and sub grantee management, chart ofaccounts and operating software, budgeting and budgetary control, financialreporting and audit framework.1.5Updates and Revisiona) This is a living manual which will continuously be adapted and aligned to theenvironment in which the Network operates. The manual shall therefore berevised annually with the approval of the Executive Director of INDEPTH Networkon advice from the Finance department and the endorsement of the Board ofTrustees.b) Suggestions and ideas on how the manual could be improved should be forwardedto the Head of Finance who would liaise with the Executive Director of INDEPTHNetwork to effect the necessary identified changes for the endorsement of theBoard of Trustees.1.6Effective DateImplementation of this manual shall be effective 1st March 2010 after the Boardendorsement.
Chapter TwoGeneral Guiding Principles2.1Accounting MethodIt is the policy of INDEPTH Network to apply the accrual basis of accounting for theentity wide financial statements during the fiscal years. INDEPTH would adopt thecash basis IPSAS for specific reports. This basis recognizes income when earned andexpenses when incurred.2.2Foreign Currency Transactionsa) It is the policy of INDEPTH Network that all transactions in foreign currency aretranslated into US dollars at the rate of exchange prevailing on the transactiondate.b) Year end balances in foreign currency are translated into US Dollars at the yearend exchange rate.2.3Revenue Recognitiona) It is the policy of INDEPTH Network that grants are recognized as revenue uponreceipt of the funds into INDEPTH Network’s Bank account or upon fulfillment ofthe requirements agreed on in writing with each Donor Agency.b) Grants represent support with donor-imposed conditions and could be restricted orunrestricted. Unrestricted grants are received in support of agreed research anddevelopment agenda and for general administration.c) Restricted grants are received in support of specified projects or activitiesmutually agreed upon between the INDEPTH Network and donors.2.4Matching PrincipleThe matching principle states that revenue is reported when earned and expenses arereported as incurred and should be matched against revenue, even if no cash outflowhas occurred. This is the rationale for the accrual basis of accounting.
2.52.6Prudencei.Prudence is the inclusion of a degree of caution in the exercise of the judgmentsneeded in making the estimates required under conditions of uncertainty, suchthat assets or revenue are not overstated and liabilities or expenses are notunderstated.ii.The prudence concept states that revenue and income are not anticipated but arerecognized by inclusion in the income statements only when realized in the formof cash or other assets or when the ultimate cash realization can be assessed witha reasonable degree of certainty.iii.All known liabilities are provided for whether their amounts are known withcertainty or are a best estimate in the light of the information availableiv.Where the matching concept is inconsistent with the prudence concept , the latterwould prevailAccrual PrincipleIt is the policy of INDEPTH Network to accrue revenue and expenditure at year-end toreflect unrecorded transactions that affect the year then ended. In order to meet therequirement of IPSAS, INDEPTH Network’s entity wide financial statements shall beprepared on the accrual basis. This is to ensure that revenue and cost are;2.7i.Recognized when earned or incurred, not necessarily when money is receivedor paid)ii.matched with each other so far as their relationship can be established orjustifiably estimated, andiii.Dealt with in the income statement for the period to which they relate.Historical Cost Principlea) The financial statements of INDEPTH would be prepared under the historical costconvention and in accordance with International Public Sector AccountingStandards (IPSAS).b) Historical cost implies that the carrying value of assets is based on their purchaseprice. Where the historical cost convention is departed from, this should be statedin the accounting policies, specifying the nature of departure.
c) However, grants in kind received by INDEPTH Network such as fixed assets orservices received from donors should be recorded at the fair values of the asset onthe date of the transaction or actual fees paid by donors for such services,respectively.2.8Going Concerna) The Financial statements shall be prepared on the assumption that INDEPTHNetwork is a going concern and would continue in operation into the foreseeablefuture.b) It is assumed that the institution has neither the intention nor the need toliquidate or curtail materially the scale of its activities unless there is an intentionto liquidate the entity.c) If the intention to liquidate the entity exists, the financial statements may have tobe prepared on different basis and, if so, the basis used shall be disclosed.2.9ConsistencyThe consistency concept explains the fact that there shall be consistency in themethods and bases for the treatment of similar accounting variables:a) Within each accounting period andb) from one accounting period to the other2.10 Fair Value Principlea) Fair value is the amount at which the asset could be bought or sold in a currenttransaction between willing parties.b) Prevailing market prices are also used to determine fair value.2.11 Disclosure PrincipleThis requires the presentation of sufficient information to permit the reader to reachan informed understanding of the financial statements.
2.12 Accounting policiesa) Accounting policies are the specific basis judged by INDEPTH Network to be mostappropriate to its circumstances and adopted for the purposes of preparingfinancial statements.b) Accounting policies applied would be based on International Public SectorAccounting Standards. In the absence of an International Public Sector AccountingStandard that specifically applies to a transaction, other event or condition,management shall use its judgment in developing and applying an accountingpolicy that results in information that is reliable and relevant to the decisionmaking needs of users, in that the financial statements:i.represent faithfully the financial position, financial performance and cashflows of the entity;ii.reflect the economic substance of transactions, other events and conditionsand not merely the legal form;iii.are free from bias;iv.are prudent; andv.Complete in all material respects.c) Where circumstances permit more than one accounting basis, the choice of policycan significantly affect INDEPTH Network’s reported results and financial position.Management shall therefore ensure that:i.The view presented can be properly appreciated by clarifying the policiesfollowed in dealing with significant items.ii.The choice and disclosure of accounting policies are carefully made topromote the appreciation by users of the Secretariat’s financial statements.
Chapter ThreeCash and Treasury Management3.1Selecting INDEPTH Network’s BanksINDEPTH Network operates both local and foreign bank accounts. It is the policy ofINDEPTH Network to consider the following in selecting the Secretariat’s banksa) Good local and international reputation and management.b) Size of capital base in the country (must meet all Bank of Ghana requirements).c) Widespread bank Network in the country.d) Adequate links with correspondent banks to facilitate transfer of funds.e) Satisfactory rating according to an independent agency.f) Quality of services (professional behavior, internet banking, sms banking, etc),cheques and payment facilities.g) Competitive COT charges.h) Competitive interest charges.i) Competitive interest on deposits.3.2Authorized Signatoriesa) It is the policy of INDEPTH Network to have two authorizing signatories for allpayments; Category A and Category B signatories for this purpose.b) Category A shall denote transaction approving signatory from the AdministrationDepartment; in this case the Executive Director and in his absence the Ag.Executive Director.c) Category B shall denote financial authorizing signatory from the Financedepartment; in this case the Head of Finance and in his absence, his Deputy.d) Limits on each authorizing signatory as per the approval matrix shall be strictlyadhered to.
e) Whenever the situation arises that an officer is not available to endorse apayment, designated officers may be authorized to endorse payments, providedthe Executive Director shall approve such an arrangement by a letter to the bank.f) No officer shall issue and sign a payment document such as a cheque in a situationwhere he is the direct beneficiary. In such circumstances the payment must alwaysbe signed by any other senior officer authorized to do so.3.3Managing Bank Accountsa) It is the policy of INDEPTH Network to operate US Dollar and Cedi bank accounts inaccordance with part 3.1 of this manual.b) The Secretariat shall also operate overseas bank accounts with the approval of theBoard of Trustees.c) The decision to open or close any bank account shall be authorized by the Head ofFinance and approved by the Executive Director. The Head of Finance shall alsomaintain a log of all bank accounts opened by the Secretariat.d) All the bank accounts shall be reconciled monthly by the Accountant or hisdelegate, reviewed and approved by the Head of Finance of INDEPTH Network.e) Bank reconciliations should be prepared and reviewed within 10 working days afterthe end of the monthf) No INDEPTH Network representatives are allowed or authorized to secure loans,overdrafts, nor to incur deficits in their operations.g) INDEPTH Network bank accounts are specifically intended for official INDEPTHNetwork transactions and should not be used for deposit or payment of personalitems.h) To reduce the impact of devaluation of the local currency, INDEPTH Network willkeep funds in hard currency accounts and convert to local currency only whenneeded to be spent in local currency.i) Available funds will be kept in interest bearing accounts, if possible.j) If the funds are to remain unspent for a reasonable period of time, INDEPTHNetwork will consider investing such funds in term deposits or similar rateinstruments.k) Control of Bank Cheques:
i. Unused cheque books shall be safeguarded in a safe or otherwise under lockand key by the Head of Finance and a register shall be maintained to recordissues.ii. All cheques must be signed for by the receiving officer.iii. The Head of Finance shall check all new cheque books to ensure that allcheque leaves are intact when received from the banks.iv. All cheque books and leaves must be issued in numerical orderv. Cheques shall be drawn only after the voucher and the supporting documentshave been properly prepared by the Accountant and duly approved as per theapproval matrixvi. Signed cheques that have not been distributed will be safeguarded under lockand key.vii. Under no circumstances will blank cheques be signedviii.ix.Voided Checks It is the policy of INDEPTH Network to maintain voided cheques logand document every cheque that has been voided regardless of thereason. If voided cheques are physically available, they will be stamped“VOID” and filed with the canceled cheques for that month orstapled to the cheque book counterfoil.Outstanding Cheques (Over 3months old) It is the policy of INDEPTH Network to call or write to the payee andinquire whether cheque was received or not. If the cheque is lost INDEPTH Network will issue an immediate stoppayment and consider issuing a replacement cheque upon verificationby the bank that the cheque has not been cashed. If the cheque has been cashed the Secretariat shall initiateinvestigation to probe the matter to the bottom and take immediatecorrecting control measures to prevent recurrence.
3.4Bank Reconciliation Statementsa) It is the policy of INDEPTH Network to have bank reconciliation statementsprepared monthly.b) Bank reconciliation statements will be prepared by the Accountant or his assistant.c) The completed bank reconciliation statements and documentation of voidedcheques shall be reviewed by the Head of Finance.d) The reconciled statements shall be approved by the Executive Director.3.5Guidelines for Preparing Bank Reconciliation Statementsa) Bank reconciliation statements shall be prepared within 10 working days after theend of the month.b) The ending date of the bank ledger and the bank statement should be the same.c) The bank name, account number, and currency should be clearly indicated.d) Ideally, the bank reconciliation should be prepared by someone who does notauthorize disbursements.e) The Head of Finance should review and endorse the reconciliation. The ExecutiveDirector will approve the reconciliation statement.f) The bank reconciliation should include a copy of the balance per the accountingrecords (the ledger balance) and a copy of the bank statement when it ispresented to the Head of Finance for review and endorsement.g) All cheques not cashed after 3 months (90 days) from the date of issue should beinvestigated by the Head of Finance. With the consent of the Head of Finance,stale cheques should be written off immediately they become invalid.h) Any unexplained difference between the bank statement and the accountingrecords should be promptly investigated by the Accountant with the expressapproval of the Executive Director of INDEPTH Network.i)Where the reconciling item requires an adjustment to the accounting records, ajournal voucher should be used, and the reference for the subsequent adjustmentshould be noted on the reconciliation.
j) Where the bank has made an error, documentation should be obtained from thebank giving the explanation and the adjusting entry made. Copies of this noticeshould be attached to the bank reconciliation.k) The reconciliation must contain complete descriptions of the reconciling items:i. Copy of the General Ledger page showing the cash book balanceii. Complete list of outstanding cheques, including datesiii. Copy of the summary of deposits and record of all transfersiv. The original bank statementsv. Originals of all bank statement enclosures, i.e. debit and credit memos andadvices, transfers advices, etc.vi. Any other documentations and working papersl) Bank statements covering a financial year should be filed together with the bankreconciliation statement.3.6Petty Cash Managementa) It is the policy of INDEPTH Network to operate an imprest system that shall beunder the responsibility of the Accountant.b) It is the policy that the amount of cash to be held in the office be reduced to thebarest minimum in order to reduce the risk of fraud or theft.c) The cash float to be held should be determined on the basis of the daily cashrequirements at INDEPTH Network.d) The cash float for the time being shall be 10,000.00 for Dollar operations and 3,000 for Cedi operationse) In any event, the cash float shall not be exceeded without the express writtenauthority of the Executive Director of INDEPTH Network.f) The cash float shall not be reimbursement until:i. The balance falls to 15% of its total
ii. A reimbursement request and a voucher with the attached valid bills, invoices,receipts and the summary account of expenditure have been submitted to theAccountantiii. The total expenditure has been checked and approved per the approval matrixiv. Reimbursement shall not exceed total vouched expenditure per the summarysheetg) All individual petty cash vouchers shall be fully attached with all the sourcedocuments creating it and must be properly checked and approved beforerecording it into the accounting systemh) Any claimant of petty cash shall endorse the relevant section of the voucher toconfirm receipti) Petty cash should be used only for small payments and in cases of larger paymentswhere either bank facilities are inaccessible or inadequate or the payee will notaccept a cheque; the main cash book shall be used in consonance with this policy.j) No single claim shall exceed GH 300.00k) Cash receipts should only be deposited into petty cash if the amount does notexceed the individual petty cash transaction limit and the established petty cashlimit is not surpassed.l) The petty cash box should be locked and stored securely when not in use. Onlydesignated custodians of the petty cash should have access to it. At all times, thepetty cash box should be kept in a safe.m) Petty cash should be counted regularly. On the last day of the month, petty cashmust be counted so that expenses can be reported within the month theyoccurred.n) Certificate of Cash Balance must be issued after the cash count. See appendix 6.3.7Cash in Safe (Main Cash Book)Due to the nature of INDEPTH Network operations and the various research activitiesthe Secretariat is involved in, it is important to set out the following additionalprocedures for the Main Cash Book to account for cash in safe.a) A maximum amount of US 10,000 would be maintained in safe to meet additionaldisbursement for research, meetings, workshops and other program activities.
b) All cash obtained for purposes of meetings and workshops will be handledseparately from routine petty cash transactions.c) The Head of Finance must submit to the Executive Director, activities or programsfor which the main cash book could be committed.d) The Executive Director must approve all transactions relating to disbursementsmade out of the main cash book.e) Separate cash counts will be done and certificates issued for such counts at theend of the month.f) Any cash balance on workshops/meetings will be accounted for in accordance withthe policy on accounting for project funds. All fund reimbursed after the activitywould be banked immediately after such meetings/workshops are over.g) All the control procedures discussed under petty cash regarding authorization andapproval of vouchers, etc, shall apply to all main cash book disbursements.3.8Receiptsa) Receipts by the Secretariat consist mainly of bank drafts, local cheques and directtransfers from the Donor Agencies’ bank accounts into the Secretariat’s bankaccount.b) All funds received shall be receipted and banked daily.c) It is the policy of INDEPTH Network to list all cheques and other inwardremittances on a Daily Cash/Cheque Receipts Register.d) The register with the remittances and supporting documents should be passed tothe Accountant who will sign both copies as evidence of receipt.e) On receipt of the mail or of any amounts paid into the accounts office, theAccountant shall take the following actions:i. Endorse cheques and other negotiable documents with the Secretariat’s nameand bank account.ii. Ensure that the name, details and date have been entered correctly. Postdated cheques and cheques which have different amounts entered in words andfigures will be referred to drawer for amendments.iii. Issue a formal receipt.
iv. Prepare bank pay in slip in triplicate. A suitably designed bank pay in slip bookswill enable the Secretariat process all receipts including direct transfers usingthe bank stamped second copy of the pay in slip. The third copy will remain inthe deposit book.v. Retain any credit transfer advices on temporary files until they are confirmedby the bank.vi. The Accountant shall input transactions into batches in the cash receipts bookand send batch input summaries to the Head of Finance for verificationvii. Each cash receipt form will be numbered sequentially, completed in duplicateand contained within a bound receipt book The top copy shall be handed or dispatched to the payer. The second copy shall remain in the receipt book. If for any reason a receiptis cancelled or not usable, the original must be firmly fixed to the receiptbook. Unused receipt books shall be held under lock and key by the Head ofFinance who will be responsible for issuing them to the Accountant.viii.forAll receipts issued shall be checked against deposits by the Accountantcompleteness of banking of cash receipts.ix. Direct credit transfers to the Secretariat’s bank accounts should be recordedfrom the bank statement.f) It is the policy of INDEPTH Network to bank all cash and cheque receipts intact.g) The daily record and receipted bank deposit slips shall be checked by theaccountant to postings into the cash books and filed in a chronological order.h) All donor receipts shall be authorized by the Head of Finance and approved by theExecutive Director before posting by the Accountant.3.9Investment Managementa) It is the policy of INDEPTH Network to adopt sound investment managementprinciples and practices that seek to ensure that the financial assets of theSecretariat are prudently invested in risk free securities to bring optimum returnsto enhance their values at any point in time.
b) Realistic and scientific assessment of the financial inflows and commitmentsshould be carefully employed to project the net cash flows from the short to themedium term to prevent any possible shortage of funds that results to operationalinefficiencies.3.10 PrepaymentsPrepaid Insurance, Rent, Rates and other utilities shall be classified underreceivables. All expired portions of the amount pre-paid shall be expensed bypassing a Journal Voucher to the appropriate account. The unexpired portionshall be carried to the Statement of Financial Position and classified underreceivables.3.11 Foreign Exchange Exposure Managementa) It is the policy of INDEPTH Network that significant local currency balances thathave no immediate use shall be deposited in stable hard currency accounts toprevent possible exchange losses.b) Assets of the Secretariat should not be invested on speculative grounds. As a policyINDEPTH Network shall not engage in hedging and foreign exchange speculativepractices of any kind.c) Prompt payment of liabilities will generally keep transaction exposure to aminimumd)
Apr 01, 2009 · FINANCIAL AND ACCOUNTING POLICIES AND PROCEDURES MANUAL FOR INDEPTH Network Secretariat 38 & 40 Mensah Wood Street, East Legon P O Box KD 213, Kanda, Accra, Ghana www.indepth-network.org Approved by Executive Director on 1st January 2
