SSFP Finance and Accounting Manual

Finance & Accounting Manual
For Franchisee and Smiling Sun Clinics
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Finance & Accounting Manual For Franchisee and Smiling Sun Clinics First version-December 2009
Finance & Accounting Manual For Franchisee and Smiling Sun Clinics
Prepared by :
Md. Rezaul Karim Abdul Motin
Finance / Management QA System Specialist Finance / Management FS & Monitoring Specialist and Franchise Operations Officer In-Charge Finance / Management Training Specialist SSFP
Md. Arif Mahmud Acknowledgement to: Technical Advisor : Grants Team Laura Harrington
Resident Technical Advisor
Prepared on December - 2009
Smiling Sun Franchise Program (SSFP) House 15 A, Road 35, Gulshan 2 Dhaka 1212, Bangladesh
www.smilingsunhealth.com
The views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
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PREFACE The Smiling Sun Franchise program (SSFP) is converting the existing network of clinics run by local Franchisees into a viable social franchise system. Franchisees are increasingly using health management and business tools that will guide and help them to achieve financial sustainability while continue serving the poorest segment of the population; meeting simultaneously these objectives is central to the double bottom line of SSFP. Keeping this in view, building on previous investment, but in an innovative way, a Financial and Accounting Manual has been developed to strengthen the financial management and accounting systems of all clinics and their respective Franchisees and Smiling Sun clinics. This is a laudable step to gradually move Franchisee and clinics from a basic and to some extent incomplete accounting system, to a professional Financial Management system conceived to improve organizations decision making. Some components of the manual such as, accrual basis of accounting, chart of accounts, income statement to estimate profits or losses, balance sheet to know the organizations financial position at a certain date and the financial review check list, have been added so Franchisee staff can appreciate how important is to count with the right and correct documentation and accurate reporting, so Smiling Sun can develop and a transparent accounting and financial management system. The intention behind this finance manual is to offer a uniform guide to all staff of partner organizations involved in finance management at all levels and to those who monitor activities, to ensure a proper and disciplined management and control of all financial activities. I would like to mention that I believe this manual is wonderful example of good teamwork, in which staff from different areas of the project and from partnering organizations, worked together to develop a user friendly and comprehensive tool. I also have to say that this manual reflects our commitment to transparency and accountability as the first and essential ingredients to decrease space for potentially corruptive practices. While there is always the risk of not mentioning the names of all who got involved in this important process, I would like to express our gratitude to Rezaul Karim, Abdul Motin and Arif Mahmud from the Franchise Operations Team (FOT), and to Shaheen Hasnat, Saiful Islam and Gulfam Ifat Ara from the Contracts and Grants division, and to Laura Harrington for her overall supervision of the process. Lets use this Manual consistently and extensively so we can actually strengthen the Smiling Sun network further, to jointly achieve our social and financial goals within a frame of transparency, accountability and respect.
Place : SSFP, Gulshan, Dhaka-2. Date : 21 January, 2010 3
(Juan Carlos Negrette) Chief of Party Smiling Sun Franchise Program
Table of Contents
Chapter Chapter 01 - Financial Management
1.1 1.2 1.3 1.4 1.5 Introduction Purpose of this manual Importance of financial management The principles of financial management Building Blocks of financial management Page No 8-11 8 8 8 9 11 12-19 12 13 13 13 14 14 15 15 16 17 17 18 18 19 20-23 20 21 22 22 22 24-28 24 24 25 28 29-31 29 29 4
Chapter 02 - Record Keeping

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2. 9 2.10
2.11
2.12 2.13 2.14
Basis of accounting Principles of debit and credit Accounting period Cost principles Petty cash book Salary register Cash / cheque payment Money receipts Vouchers Cash / bank book Ledger book Journal entries Trial balance Financial accounting system flow charts
Chapter 03 - Financial Reports

3.1 3.2 3.3 3.4 3.5 Introduction Financial statements Budget variance analysis Reports for Government Chart of accounts
Chapter 04 - Budget and Cost Classification

4.1 4.2 4. 3 4. 4 Definition of budget Budget preparation and monitoring Clarifications of various budget / cost categories Adjusting budget line items
Chapter-05 - Banking Procedure

5.1 5.2 Managing bank accounts Bank payment procedure
5.3 5.4 5.5 5.6 5.7 5.8
Cheque signatories Counter foil of cheques Cancellation of cheque Bank statement and bank certificate Bank reconciliation statement Safety of cheque book
30 30 30 30 30 31 32-33 32 32 32 32 33 34-41 34 35 35 35 37 37 37 38 38 39 39 41 42-44 42 42 42 42 42 43 43 43 44 45-47 45 45 45
Chapter - 06 Staff Travel and Perdiem

6.1 6.2 6.3 6.4 6.5 Travel Travel advance Perdiem Supporting documents for payment of travel bill Travel and perdiem per Smiling Sun guidelines
Chapter 7 - Procurement
7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7. 9 7.10 7.11 7.12 Types of goods Petty purchase procedure General purchase procedures Procurement decision making authority Purchase order Quality control Payment for procurement Accounting for consumable items Accounting for NXP and fixed assets Annual physical verification of NXP and fixed Assets Disposition of unusable items Compliance of local laws
Chapter 8 - Internal Control

8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 Introduction Internal Control a management function Authorization and approval Physical safeguards Management review and monitoring Financial related performance Human resources management Supervision Procurement and payment
Chapter 9 - Audit
9.1 9.2 9.3 Introduction Internal audit/financial review External audit 5
9.4 9.5 9.6 9.7
Preparation for audit The audit report Consequences for not taking appropriate corrective action(s) against audit findings Preservation of financial documents
46 47 47 47
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Attachments (Formats)
Sl. 1 Petty Cash Book 2 Salary Register 3 Money receipts 4 Payment Voucher 5 Receipt Voucher 6 Journal Voucher 7 Cash / Bank Book 8 Ledger Book 9 Cash flow Statement (Receipts and Payments Accounts) 10 Income Statement (Income and Expense Account) 11 Balance Sheet 12 Chart of Accounts 13 Bank Reconciliation Statement 14 Travel advance Format 15 Travel and Perdiem Expense Report format 16 Accounting for Consumable items (Stock Register) 17 Accounting for NXP and Fixed assets 18 Internal Audit/Financial Review, (Financial Review checklist)
Name of Formats
Page no 1 2 3 4 5 6 7 8 9 10 11 12-17 18 19 20 21 22 23-27
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Chapter -01
Financial Management
1.1 Introduction The Smiling Sun Franchise Program (SSFP) is committed to improve the quality of life of all Bangladeshis by providing superior, friendly and affordable services in a sustainable manner. It aims to expand the availability of sustainable Franchisees provided health services and product and to support the GOB to achieve its health targets. Through the franchise model, SSFP will convert the existing network of clinics run by local Franchisees into a viable social franchise system. SSFP will help Franchisees (1) to expand the range of health services they can provide, (2) increase service coverage to the poor, (3) and maintain and improve quality. The project will also help Franchisees in the areas of cost efficiencies and underwrite services for the poorest segments of the population. The double bottom- line approach is a unique feature. 1.2 Purpose of this Manual This manual is to be considered as the guide to of sound financial management as well as effective accounting administration and is intended to provide written guidelines to all concerned with an aim to facilitate proper control over financial activities of the partner franchisees. It will be of great assistance in bringing overall financial discipline and uniformity amongst the different areas of financial management. The basic requirement for ensuring meaningful financial management is to establish a comprehensive system so that franchisee and smiling sun clinics apply generally accepted accounting practices (GAAP) to maintain accounting records correctly and generate financial reports accurately. The manual will establish discipline, standardization, and consistency in accounting practices, as well as, ensure transparency, accountability and good governance in financial management. The compliance of these financial management policies and procedures and maintenance of accounts in a professional manner will strengthen the franchisees financial systems. 1.3 Importance of Financial Management Financial management is that part of management concerned primarily with the financial affairs. Financial management entails planning, organizing, controlling and monitoring the financial resources of an organization to achieve its objectives. It is not just about keeping accounting records. It is an important part of program management. Financial management to an organization is rather like maintenance is to a vehicle. If good quality fuels are not put in and the car is not given regular service, the vehicle suffers and it will not run efficiently. If neglected, the vehicle will eventually break down and fail to reach its intended destination. In practice, financial management is about taking action to look after the financial health of an organization, and not leaving things to chance. This involves:
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- Managing scarce resources A franchisee operates in a competitive environment, as such, we must therefore make sure that fund and resources are used properly, and efficiently, to achieve the organizations mission and objectives. - Managing risk All franchisee face internal and external risks which can threaten operations and even survival (e.g. funds being withdrawn, an office fire or a fraud). Risk must be identified and actively managed in an organized way to limit the damage they could cause. - Managing strategically Financial management is part of management as a whole. This means managers must keep an eye on the bigger picture looking at how the whole organization is financed in the medium and long term, not just focusing on one activity. - Managing by objectives Financial management involves close attention to project and organizational objectives. The financial management process Plan, Do, Review takes place on a continuous basis. The Plan-Do-Review cycle is represented as: Plan: When an organization starts up, it sets its objectives and plan activities. The next step is to prepare a financial budget for the costs involved in undertaking the activities and how cost will be covered. Do: Having identified available funds, the program of activities may be implemented to achieve the goals set out in the planning stage. Review: The actual situation is compared with the original plan. Managers can then decide if the organization is on target to achieve its objectives within agreed time scales and budget. The learning from the review stage is then taken forward to the next budget phase, and so on. 1.4 The principles of financial management There are good practices principles in financial management which are used as a standard to develop a high level guide for financial personnel to make sure funds are used economically, efficiently and effectively to achieve objectives for which they are meant. Consistency: The financial policies and systems must be consistent over time. This promotes efficient operations and transparency, especially in financial reporting. Inconsistent approaches to financial management could be a sign that the financial situation is being manipulated.
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Accountability: A strong financial management system creates and holds team members accountable for the various financial transactions that take place. The system requires the team to explain how it has used its resources and what it has achieved to all stakeholders, including beneficiaries. All stakeholders have the right to know how funds and authority have been used. Accountability is the moral or legal duty, placed on an individual, group or organization to be held responsible to how funds, equipment or authority has been used. Transparency: Transparent financial systems benefit all employees. Being open and clear avoids potential issues and misrepresentations. This includes preparing accurate, complete and timely financial reports and making them accessible to stakeholders, including beneficiaries. If an organization is not transparent, then it may give the impression that they having something to hide. Stewardship: Management must take good care of the financial resources it is entrusted with and make sure that they are used for the purpose intended this is known as financial stewardship. The managers must achieve good financial stewardship through careful strategic planning, assessing financial risks and setting up appropriate systems and controls. Credibility: Franchisee and clinics especially need to be careful in their handling of money keeping accurate financial records promotes integrity, accountability and transparency, and avoids suspicion. Integrity: Management must operate with honesty and aptness. For example, managers and others will lead by example in following policy and procedures. The integrity of financial records and reports is dependent on accuracy and completeness of financial records. Non Deficit financing: To be financially viable, the expenditure must be kept in balance with incoming funds, both at the operational and the strategic levels. Viability is a measure of the financial strength and financial continuity to show how all of its financial obligations will meet up and there will be no deficit financing. Tip: Use of seven principles may serve as a checklist to help identify relative strengths and weakness of a franchisee /smiling sun clinic. To help remember, an abbreviation formed by taking the first letter of each of the principles is CATSCIN.
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1.5 Building Blocks of Financial Management This manual describes franchisee and smiling sun clinics financial systems and financial responsibilities. Accounting Records Every organization must keep an accurate record of financial transactions that take place to show how funds have been used. Accounting records also provide valuable information about how the organization is being managed and whether it is achieving its objectives. Financial Planning Linked to the organizations strategic and operational plans, the budget is the cornerstone of any financial management system and plays an important role in monitoring the use of funds. 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. Internal Controls A system of controls that segregates duties within an organization is collectively referred to as internal controls which are put in place to safeguard an organizations assets and manage internal risk An effective internal control system also protects staff involved in financial tasks. Their purpose is to deter opportunistic theft or fraud and to detect errors and omissions in the accounting records All organizations need to set down a series of financial policies and procedures to guide operations and avoid misunderstandings. The Finance Manual brings them all together in one document. It is generally used by the finance and accounts staff for day-to-day operations and also serves as a reference in case of query by programs staff.
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Chapter- 02
Record Keeping
The systematic recording of financial transaction and timely reporting to stakeholders through preparation of proper financial statements in accordance with generally accepted accounting principles are essential. It is important to provide a system for an acceptable basis of maintaining accounts and supporting documents. 2.1 Basis of Accounting Accounting systems recognize events, records them, summarizes them and reports accounting information. A transaction is an economic event -dealing with money or moneys worth. It always involves two-fold aspect of every transaction, i.e. one giving the benefit and the other receiving the benefit. Double entry book keeping is the system which enables the cashier/accountant to record the two-fold aspect of each transaction, this being the double effect of each transaction. The classified summary of transactions of the same nature and type constitutes an account. An account is a formal record of a particular type of transaction expressed in money or moneys worth and kept in cashbook and ledger. The easiest method to understand the effect of an accounting transaction is via-T-Accounting. The left side of T-account is called debit and the right side is called credit. Debit and credit are terms used to refer to whether a particular account is increased or decreased when recording a transaction. The rules for transaction of accounts are: Debit is an entry on the left hand side of the account Credit is an entry on the right hand side of the account. Assets and expenses are an account which always have zero or debit balance. Liability, net assets and income accounts always have credit balances.
For every debit entry, there must be a corresponding credit entry that is equal in amount Or vice versa. This double entry system has been adopted to reflect accounting transactions properly in the books of accounts. Printed prenumbered vouchers and other accounting forms are to be used to control and facilitate the recording of transactions. There are two basic accounting systems. One is cash basis and the other is accrual basis accounting. Cash basis of accounting implies that all expenses are to be recorded when paid and all incomes are recognized when received. Currently, cash system of accounting is followed by franchisees. Accrual basis of accounting recognizes that all income actually earned are to be considered as income and all expenditures (payments/ disbursement made) actually incurred are to be treated as expenditure. In future the Franchisee will be required to follow the accrual basis of accounting once accounting systems are computerized.
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2.2 Principles of Debit and credit a) Assets and expenses are an account which always have debit balance b) Liability, net assets and income accounts always have credit balances For every debit entry, there must be a corresponding credit entry that is equal in amount.
Group / Type of Account
Debit
Credit
Asset
Increase
Decrease
Liabilities
Decrease
Increase
Capital
Decrease
Increase
Expenses
Increase
Decrease
Income
Decrease
Increase
2.3 Accounting period The common accounting period shall be in line with the GoB financial reporting period, July to June. Should franchisees receive donor funds they will determine with the donor what the financial period will be for the donor funds. 2.4 Cost Principles The franchisee will follow the generally accepted cost principles reasonable, allocable and allowable. 1) Reasonable costs shall mean those costs which are generally recognized as ordinary and necessary and would be incurred by a prudent person in the conduct of normal business. Allocable costs shall mean those costs which are incurred specifically for the funding agreement.
2)
3) Allowable costs shall mean those costs which conform to approved budget. It is the responsibility of franchisee to ensure that costs incurred are in accordance with the generally accepted set costs principles.
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2.5 Petty Cash Book (Attachment -01)

Small transactions that are inconvenient to make by cheque are made from petty cash. Petty cash balance should be within the limit Tk.7, 000 Tk.10, 000. The Franchisee HQ /Clinic will take the petty cash from program income fund. At the time of utilization statement submission, expenses may be allocated on the basis of source of finance i.e grants or Program Income for easy identification and necessary fund adjustment. The petty cash Book should be a chronological record of transactions of both receipt and expenditure done via cash payment. Petty cash voucher and book are similar to bank voucher and bank book. The minimum information maintained in a petty cash book should include date of transaction, payees or recipients name; voucher No., amount of payment, and budget category. When replenishing petty cash, franchisees/ smiling sun clinics should indicate the serial numbers of the corresponding bank and petty cash vouchers. All transactions must be posted in a petty cash book immediately after cash receipts or disbursement and must be balanced on a daily basis. The petty cash book must be balanced every day, and at the end of each month and during the time of petty cash adjustment. The PD/ smiling sun clinic manager must approve these. Franchisee / smiling sun clinics maintaining petty cash funds should replenish their petty cash when 80% of its balance has been spent. Admin Assistant will prepare petty cash voucher and maintain the petty cash book, designated signing authority will approve the voucher based on approved budget to maintain check and balance.
2.6 Salary Register (Attachment-02) Monthly staff salary must be paid through bank account transfers. Each staff member is required to have their own bank account. A separate "Salary and Benefit" register/sheet must be maintained. Original copy of salary register / sheet (with signature of recipient) must be preserved. Photocopy of salary register /sheet shall be attached with vouchers. In case of bank transfer of salary to individual staff bank account, shall not require fixing of revenue stamp. Information to be maintained must include but are not limited to: Month and year Name of employee and designation Number of days worked as per attendance register Monthly basic salary Applicable salary (after deduction) Monthly benefit / bonus Gross salary Deduction like income tax, provident fund, etc. Net amount paid Signature of the recipients with fixation of revenue stamps. Grand total for the month Prepared by and approved by 14
Each franchisee should maintain a separate personal file for each employee. Franchisee shall issue a letter for annual increment to each employee and a copy of the same letter should be preserved in the respective file of employee. 2.7 Cash / Cheque payment All disbursements made in cash or through cheque / bank transfer advice shall be processed through the debit voucher (payment voucher) and entered in the credit side of the cash book for ultimate debit to the appropriate head of accounts. All debit vouchers must be supported by documentation such as requisition, quotation, comparative statement, purchase committee decision, purchase order, challan, bill/ cash memo, job completion certificate etc. which should be duly approved by the authorized official. When approving a payment, all supporting vouchers or documents must be cancelled by a fixing a rubber stamp with the word PAID to minimize the risk of double payment. Payment in cash shall be restricted to new employees by bearer cheques for maximum two months to set up their account at the bank and except payment of bill for emergency supply for small amount of the vendors. The cash payment may not exceed the limit of Taka 2,000 for single transaction except for the above mention instances. Above Taka 5,000 must be paid by A/C payee cheque for a single transaction. In exceptional cases PD/ CM will decide for payment of bearer cheque above Taka 5,000 which must have written explanation and justification attached with the voucher. For final settlement to staff in case of resignation/ termination must be paid by A/C payee cheque. Generally, all cheques for payments should be crossed before handing over to the payee. Neither a blank nor a bearer cheque should ever be signed by any authorized signatory. The cheque must bear the name of the payee, date of issue, amount both in figures and words. While signing the cheque, an initial should be given on the counterfoil of the cheque where the particulars of payments will be recorded in condensed version. The cheque book must always be kept under lock and key and under the safe custody of the authorized person of the Finance department. When disbursing any amount, the signature (with date) of the payee or his/ her authorized representative acknowledging receipt of cheque or cash must be obtained on the bill/ voucher or on a separate piece of paper and kept with the other supporting documentation for the transaction. 2.8 Money receipts (Attachment - 03) If the franchise receipts funds from various actors (customers, donors, third party payers, etc.) money receipts shall be prepared and issued to the concerned parties / payees on receipt of any fund / income by the organization. Money receipt forms must be printed and prenumbered. Money receipts will be written by carbon process in triplicate. Original copy of receipt will be given to the payee and the second copy with the credit voucher. The third copy will be bound serially in a book and preserved or as per guideline of donors if they are more stringent. All the receipts in cash or through cheque shall be deposited, at the earliest opportunity, to the bank filling pay in (deposit) slip form and should be recorded in cash book preparing credit voucher. 15
2. 9 Vouchers Vouchers are the main piece of evidence in any book keeping / accounting system and three types of vouchers are recognized: Payment (Debit) voucher (For Bank and cash) Receipt (Credit) voucher (For Bank and Cash) Journal voucher (For adjustment entry)
Payment (Debit) voucher, Receipt (credit) voucher and Journal vouchers each should have distinctive colors- yellow for debit, green for credit and white for journal vouchers. Payment Voucher (Attachment 04) Payment voucher is prepared in case of cash / bank expenses or payment and shall contain following information: Project name, the date of transaction, voucher number, payees name, amount of payment, accounting code, budget category, description of transaction and supporting documents such as copy of work order, invoice, challan for goods received, bills, quotations collected and their comparative statements, photocopy of cheque subject to the availability photocopy facilities and salary statements.. No bills and vouchers shall be paid without proper checking by the authorized person and approval by the duly authorized officials. Paid seal must be affixed on the payment voucher to avoid duplicate payment. All relevant documents should be kept with the vouchers for future reference and audits. Receipt Voucher (Attachment - 05) Receipt voucher is prepared when cash, pay order, demand draft or cheque is received from any source of funds. A credit voucher should have the following information- name of the Smiling Sun and the organization, date of preparation of the voucher, Taka amount in figure and words, budget line item and code no (if any,) mode of receipt payment in bank advice /cheques / DD / pay order or cash, signature of the preparer and signature with the approval of the authorized official. Journal Voucher (Attachment - 06) Journal vouchers are prepared for the followings: To adjust an advance given earlier, bring accounts up to date on accruals basis of accounting; process record for non-cash transaction, correct a previous entry. All rectification errors, transfers and non- cash transactions are to processed through Journal voucher. The adjustment journal voucher will be prepared by Admn. Assistant /Accounts officer / FAM and approved by CM / PD as authorized by Franchisee EC. The journal voucher will be serially numbered and filed in a chronological order.
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Preservation of Vouchers Vouchers are valuable documents that support the transactions that were made. They encourage transparency and are needed for a strong financial system. They also provide documentation and can explain expenses during audits. Through examination and verification of the vouchers, the auditors take decision on the correctness and authenticity of the books of accounts and the financial statement presented to them for audit. Vouchers should be filed systematically and preserved accordingly for reference and potential audits. As per Bangladeshi regulations organizations must keep documents on file for five years. Other donors may have different terms. Be sure to check the requirements of any recipient funds you may have to ensure compliance. 2.10 Cash / Bank Book (Attachment 07) Among the important books of accounts, the cash/ bank book is the most important. Cash book with different columns are used in organizations to keep records of all receipts and payments of money. Basically, a double column cash book with additional columns for date, code number, voucher number, ledger folio number and cheque number should keep a chronologically recording all cash and bank receipt and payments. It is a book of original record because all cash and bank transactions are recorded in it as when they take place. Cash book figures should be individually posted to the respective heads of accounts in the ledger. All bank accounts should be reconciled at least monthly. The reconciliation statement should be prepared by the Admin Assistant / Accounts Officer / Finance and Administration Manager and reviewed and signed by the authorized signatory. Explanations should be given for any unusual reconciling item/items. All vouchers relating all kinds of receipts and payments into cash/ bank book and will work out daily closing balance of cash in hand and cash at bank. Cash/ bank book should be printed on both pages duly page numbered and bound in a book for durability in spite of frequent use and for preservation as a permanent record.
2.11 Ledger Book (Attachment 08)
The book in which expenses on each budget line-item is listed against approved budget is called a ledger. Each franchisee/ smiling sun clinic shall maintain separate ledger book. Ledger shall provide information of expenses in relation to budget line item. All transactions made in the bank book and petty cash book must be posted in a ledger at the end of the week. Information included in a Ledger are: budget category and line-item, budgeted amount, month of transaction, folio No., particulars, amount paid this month, and cumulative expenditure, balance of budget.
All entries on the payment side of the cash / bank shall be posted to the debit column of the respective account in the ledger. The entries on the receipt side of cash/ bank book shall be 17
posted to the credit side of the respective account in the ledger regularly so as to keep it updated. The ledger should be balanced at the end of the month marking debit/ credit balance. Daily transactions both receipts and payments through individual ledger should be posted in the general ledger, indicating cash/bank folio for cross reference. The authorized signatory will check ledger entries at least once in a month and initial the balance acknowledging all postings to date. 2.12 Journal entries: The journal entries for prepaid and outstanding expenses, advances, accrued income shall be made at the end of each month or as and when required through journal vouchers. Such adjustment will affect the general ledger accounts. As for example, for preparing monthly report for June, 09, it was found that rent of the Franchisee HQ amounting Tk. 10,000 for June, 09 was not paid. The adjustment entries will be as follows: Date 30-06-2009 Sl. No. 1. Particulars Rent A/C To Outstanding rent A/C ( Being the rent for the month of June,09, not paid) Dr. Tk. 10,000 Cr. Tk. 10,000
Suppose Insurance premium for Ambulance for 3 months (July to September,09) of Tk. 1,500 was paid in advance Date 30-06-2009 Sl. No. 2. Particulars Dr. Pre paid Insurance premium Tk. 1,500 A/C To Insurance Premium A/C ( Being the Insurance premium for 3 month paid in advance) Cr.
Tk. 1,500
All rectification errors, transfers and adjustments and non- cash transactions are also to be processed through journal voucher. The journal voucher will be prepared by the FAM in HQ and Admin Assistant for Clinic. The journal vouchers will be approved by PD in HQ and CM in clinics like other debit and credit vouchers 2.13 Trial Balance:
The ledger accounts shall be balanced monthly before preparation of the trial balance. A trial balance should be done for each smiling sun clinic and headquarter. This test the mathematical accuracy of the entries made in the cash/ bank book and the ledgers. Trial balance will be the base document to prepare the Receipts and Payments Accounts Statement, Income and Expenditure Statement and the balance sheet. If the accounting software is installed, putting entries in the software shall automatically generate the necessary financial statements as and when required.
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2. 14
Financial Accounting system Flow charts
ACCOUNTING TRANSACTIONS
All Cash / Bank payment
All Cash / Bank receipt
All Banks
Withdrawals / deposits
All non-cash transaction
Debit / Payment Voucher
Credit / Receipt Voucher
Transfer / Contra Voucher
Journal Voucher
Cash / Bank Book for Franchisee HQ & Each smiling sun clinic
General Ledger for Each Franchisee HQ and Smiling sun clinic Trail balance for each Franchisee HQ and Smiling sun clinic
Receipts & Payments Statement, Income & Expenditure Statement, Cash Flow Statement and Balance Sheet annually or as required by management
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Chapter- 03
Financial Reports
3.1 Introduction Financial reports and statements are the ultimate products of the finance and accounts department. All financial transactions occurred or generated throughout the year are recorded in a set of books and records. A systematic recording system facilitates to prepare financial reports accurately at any point of time. Financial statements and reports contain a consolidated typical presentation of financial data. Statutory financial statements are prepared in accordance with generally accepted Accounting Practices (GAAP) / International Accounting Standards (IAS) and other applicable rules and regulations. When Accounting software and Chart of Accounts will be introduced, it will be easier for all franchisees and their smiling sun clinics to prepare Cash Flow Statement, Income Statement and Balance Sheet. Depreciation: Once an accrual basis accounting system has been adopted franchisees and smiling sun clinics will begin assessing depreciation of their assets. Every asset has a useful life-span which varies depending on the particular characteristics of the assets. Under the universally accepted simple straight method, the purchase value of an assets when divided by its expected useful life in (years) results in assets yearly depreciation. Depreciation for the accounting period is charged to income statement. The straight line depreciation method should be followed consistently from year to year unless special circumstances justify a change as per donor guidelines and with FMO approval. Asset addition within the first six months of the accounting year will be charged depreciation for the full year and those within the last six month months will not be charged for the full year. Assets disposed of during the accounting need not be charged any depreciation for that year. Different rates of depreciation: Types of Assets Land Building Vehicles Medical including lab equipment Furniture and Fixture Depreciation rate 0 3% 25% 20% 15% Remarks Covers all permanent structures Cars, Ambulance, Motor-cycle and other mechanical transport, if any USG, X-ray and accessories, Auto analyzer Auto-clab machine, incubator Patient bed side cabinet, Executive chair table, examination bed, OT table , Patient Trolley cum stretcher wooden etc UPS, Generator, Refrigerator, Air conditioner, Instant power supply. Computer and computer equipments etc
Office equipment Other equipment
20% 25%
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3.2 Financial Statements - Cash flow Statement (Receipts and Payments Accounts, Attachment- 9) (a) At the end of each month Cash Flow Statement shall be prepared on the basis of all receipts and all payments recorded in the General Ledger relating to franchisee HQ and all smiling sun clinics. A consolidated Cash Flow Statement for the franchisee as a whole shall also be prepared at the end of each month. At the time of preparing the above statements the closing balance of the previous month/year should be indicated as opening balance.
(b) (c)
The Cash Flow Statement is a summary of all receipt and payment transactions during the reporting period irrespective of its nature whether revenue or capital and it may be current year or preceding year. - Income Statement (Income and Expense Account, Attachment- 10) This statement is prepared clinic-wise, monthly/quarterly/ half yearly / yearly to ascertain whether there has been excess of income over expenditure or the excess of expenditure over income. (a) (b) All income actually earned should be considered as income and all expenditure (payments made), actually incurred should be treated as an expenditure. Payments against advances or prepayments and the capital expenses should not be included in this statement. This type of expenses should be treated as items to be shown in the Balance Sheet. The amount of surplus or deficit as shown by this statement shall be transferred to the Balance Sheet as Capital Fund. The depreciation charges relating to fixed assets and the provision for bad debts will be shown in the Income & Expenditure Statement.
(c)
(d)
- Balance Sheet (Attachment- 11) The position of fund, liabilities and assets on a specific date is presented through the Balance Sheet. Franchisee HQ and smiling sun clinic wise Balance Sheet and a Consolidated Balance Sheet of the Franchisee are to be prepared on quarterly basis. (a) (b) (c) (d) The Balance Sheet shall have been drawn up on the basis of the Trial Balance and the related adjustment entries. The excess of income over expenditure (surplus) or the excess if expenditure over income (deficit) is to be adjusted with Capital Fund in the Balance Sheet. The ultimate effects of the adjustments relating to advances, prepayments, outstanding expenses and depreciation shall be shown in the Balance Sheet. The details of fixed assets should be shown in a schedule to be annexed to the Balance Sheet. 21
List of Assets Current Assets Cash-in-hand Bank Balance - Bank Accounts Grants - Bank Accounts Program - Bank Accounts RDF Bills Receivable - Product Sales - Service Sales Stock-in-hand - Stationeries & supplies - Contraceptives - Drugs - Others Fixed Deposits Loans & Advances Fixed Assets Land Building
Vehicle - Ambulance - Bi-Cycle, - Motor Cycle Furniture & Fixture
Medical Equipment Lab Equipment IT Equipment Office Equipment Generator Air-Conditioner
3.3 Budget variance analysis The FAM / Smiling sun clinic manager shall make budget variance analysis monthly / quarterly. It provides scope to analyze the budget with actual data and to take necessary steps to minimize the budget variance. 3.4 Reports for Government (NGO Affairs Bureau). NGO Affairs Bureau requires the submission of a set of financial reports along with auditors certificate (FD-4) for each donor funded project. These reports are required to be submitted within two months from the completion of each project year. 3. 5 Chart of Accounts (Attachment- 12) Currently franchisee HQ and smiling sun clinics maintain books of records on the principles of cash basis of accounting. 22
In future, franchisee HQ and each smiling sun clinic will maintain books of accounts on accrual basis that will facilitate the preparation of Trial Balance, Receipts and Payments Accounts, Income and Expense Statement and Balance Sheet at the end of each month. Income and Expenses Statement show whether the franchisee as a whole and each smiling sun clinic individually are making profit or loss and will show their actual financial position reflecting assets and liabilities at a particular date. For facilitating accurate recording of all financial transactions and subsequent preparation of Cash / Bank Book, Ledger, Trial Balance, Income and Expense Statement and Balance Sheet easily and quickly via accounting software. A Chart of accounts has been developed for franchisee HQ and Smiling Sun clinic. The HQ and clinic staff will be provided training to run the Software.
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Chapter -04
Budget and Cost Classification

4.1 Definition of Budget Budget is a plan of operation expressed in monetary terms. The budget provides an estimate of funds required for achieving goals and objectives of the franchisee. It is also a tool which helps to monitor financial activities and is an important mechanism of internal control. A budget serves as an instrument to provide focus on the future, performance evaluation, coordination, communication as well as resource mobilization. A budget is a principal document through which guidance is given for programs and activities. It performs the following functions: -Administration decision becomes easier for monetary and financial issues on the basis of budget guidelines - Sets limits of expenditure in specific areas of activities as delineates the total provisions - Provides means of monitoring performance and evaluation of impact of a project Should franchisees receive donor funds the donors will provide detail budget guidelines and templates for funded activities and business plan templates as necessary. Otherwise franchisees should use the budget templates provided by SSFP. 4.2 Budget preparation and monitoring: A separate budget should be prepared smiling sun clinic wise (e.g. Franchisee HQ and smiling sun clinic) as well as a consolidate budget for franchisee operation. Budget will be prepared giving due considerations to the followings: Mission, vision, goal and objectives of each project and organization Consistency between program priorities and resource allocation Local demand for services and products Probable sources and viability of Corporate Social Responsibility.
The expenditures will be forecast on the basis of previous year expenditures, expansion of services, and addition of new products, new activities to be undertaken and the catchment areas. Expenditures should be incurred under the same budget line as they were budgeted. PD, FAM and CM will closely monitor the budget to assess the effectiveness. The importance of having an approved budget and exercising effective budgetary control at all levels of the project and organization is highly important. In all cases expenditure must 24
remain within approved budget limit till the concerned authorities have considered the requested changes. 4. 3 Clarifications of various budget / cost categories Franchisees shall follow the SSFP provided budget line items. Should franchisees receive different donors funds for their clinics who have different budget categories the SSFP will work with the franchisee and the donor to resolve the discrepancy. SSFP budget categories are as follows: 1. Salaries (basic pay): This line item includes money to be paid to project staff for salaries. A salaried employee is generally paid on a monthly basis as per standard number of hours worked. Salaries included under this cost category are individuals who are or will be employees of the project. Monthly salaries for HQ and Clinic staff will be paid within 25 to 30 of the current month. Any salary increment of employees will be done in line with SSFP guidelines. The staffing pattern will be attached in the business plan as requirement of SSFP. For creating any new position/s not included in the approved business plan / budget franchisees must justify the break from the staffing pattern and consult with the SSFP. 2. Benefits: All employees are eligible for fringe benefits calculated at 60% of basic salary. If other donor regulations conflict with this rate the franchisee and SSFP will discuss how to resolve the issue. This includes housing allowance, transport allowance and medical allowance plus an allowable festival bonus (1.5 months basic salary) annually. Benefits are paid to employees as per policy guidelines of SSFP. Festival bonus, equivalent to one and half months basic salary per annum is allowed by SSFP for each full time staff. Festival bonus equivalent to one month basic salary will be payable during Eid-ul-fitr and the rest half month basic salary will be payable during Eid-ul Azha (for Muslim staff). For the staff of other religions, one and a half month festival bonus may be payable during their major religious festival.. Bonus may be paid before 15 days of the festival. A. B. Eligibility requirement: Staff must complete six months (180 days) continuously by the festival day. Staffs who have not completed 6 month service on the day of festival: will be allowed to receive a prorated bonus as of festival day, then balance of bonus will be paid after completion of 6 month service. Bonus payment is also subject to availability of budget against each position
C.
If the organization has established policy and subject to the availability of donor concurrence of the project there may provision for provident fund payment for its employees. Every employee shall contribute at the rate of 10% of basic salary or as determined by the organization per month from the date of joining the service and the organization will contribute equal amount every month for each employee to the provident fund. Each employee has to complete at least two years subscription in order to be eligible for 25
organizations contribution. If the position is abolished or the project is closed, the employee will be entitled organizations contribution in full in addition to his/ her own contribution. 3. Fees: Cost for professional services performed on a limited / one time basis by individuals as contract personnel. These fees are understood as honoraria or compensation for individuals who work on a short term basis. For example, when a clinic hires a physician or a paramedic to replace someone on sick or maternity leave; an emergency situation that requires surge capacity. Honoraria of CSP and their share for customer referral and from sale proceeds of items will be charged under this category. Franchisee will consider actual number of CSPs for fees calculation. 4. Travel & Allowances: This covers activity staff and/or beneficiary for travel related costs and per diem: Travel costs include: Local travel Per-diem for local travel Travel to training/workshops Per-diem for travel to training/workshops Travel to SSFP meetings Per-diem for travel Fuel costs
5. Advertising and promotion: This line provides for budgeting the costs of the activities for advertisement and promotion of the project activities generally it includes printed materials, community meetings/road shows, loyalty programs, billboards, community radio, promotional material, and specific BCC campaign to change from time to time. The costs should be budgeted in accordance with the local level promotion plan. 1. Community Meeting: Meeting with different community stakeholders (e.g. Satellite lines, Clinic Support Group, Static Clinic Advisory Committee, opinion leaders, BCC meeting/sessions with target groups, mass gathering etc.) 2. IEC (information, education, communication) printing materials: poster, leaflets, dangler, brochure, flip charts, banner, festoon, flyers, billboards, sticker, calendar etc. 3. Special events/mela/ observation days: Clinic launching, fair/mela for health and different national day observation related to health issue especially ESD. 4. Local Level Advertising: radio, newspaper insert, ads in local cable networks and others.
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6. General Administration: This covers non-personnel-related costs allocated to implementation of health service delivery. i.e rent, utilities (electricity, gas, water), window curtains, general printing like voucher, cash/bank book, ID card, money receipt etc, postage/ telephone/ fax/ courier/ email/ mobile phone, VAT and bank charges, vehicle registration, Generator Fuel casualty insurance and employment advertising. The office/clinic rent agreement period or payments should not go beyond the funding commitment the franchisees have received. 7. Office Supplies: This category includes the cost of printing formats, and stationary. Additionally supplies such as staplers, paper, pens, sharpener, and notepad, writing pad, punch machine, cloth duster, scissors, calculators, bulbs and soaps are also found in this category. 8. Clinical supplies: This category includes the cost of cotton, savlon and bleaching powder, hand towels, bandages, disinfectant disposable syringes, buckets, kerosene, matches, torch light, Reagent, BP Machine, weight Machine, Thermo Meter, Stethoscope, Glucometer, Vaccine, GoB Condom, Emergency medicine etc. 9. Services Procurement: These types of costs generally cover contractual costs with institutions. The category includes; Cleaning services Security services Facilities maintenance Equipment maintenance Motor vehicle maintenance Warehouse, freight and transportation External health services Others, if any.
Budget for patients complication management shall also fall under this category. All van drivers shall be under service procurement category, not under salary. Part time messenger and cleaner with justification can be brought under service procurement category. 10. Education and Training: This category includes the cost of trainings, workshops, seminars or conferences. Includes all amounts for tuition, training, fees, conference, registration fees, books etc. This budget category does not include any cost shown under fees or under travel (Travel to training/workshops and Per-diem for travel to training/workshops) Clinical and management training Training / Workshop (Dhaka & Regional level) Orientation / Training for CSP Others 27
11. Insurance Premiums: Under this budget category has been included the costs for insurance related to: Car/vehicle insurance Equipment insurance Facilities insurance Civil responsibility insurance
In case of new vehicle First 3 year 1st Party Insurance Next years 3rd Party Insurance 12. Capital Expenditures: Under the category of capital expenditures should budget for those purchases of goods that have a useful life of 1 year or more and unit cost price is Taka 2000.This category has line items: Furniture and fixtures, clinical equipment, office and IT equipment and motorvehicles. Furniture and Fixtures should budget for purchase of items like desks, chairs, filing cabinets, air conditioner, ceiling fans, etc. Clinic equipment includes medical commodities like ultra -sonogram, OT table, patient bed, microscope, incubator, etc. Office and IT equipment generally includes computer equipment, printers, photocopiers, generator and IPS, TV. VCP etc. Ambulance or motorcycles are included under vehicles. 4. 4 Adjusting Budget Line Items Should budget variation occur and franchisees are operating with SSFP/ donor funds then it is the responsibility of the franchisee to ensure compliance with SSFP/ donors regulations in this regard.
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Chapter-05
Banking Procedure
5.1 Managing Bank Accounts
All Franchisees shall operate four different types bank accounts: A Main bank account at Franchisee HQ level into which Grants fund is transferred from SSFP, A Program Income bank account at HQ level for depositing of Program Income transferred from Clinics for NGO HQ expense and for facility improvement / construction of clinics. A Grants fund bank account for each smiling sun clinic for transferring grants funds from Main bank account of franchisee HQ, A program Income bank account for each smiling sun clinic for depositing all program income earned by providing services, A `Revolving Drug Fund (RDF) bank account for each smiling sun clinic..
In addition, bank account for employees provident fund will be maintained. All bank accounts should be interest bearing (i.e. SB or STD accounts) and each bank account shall be jointly operated, not by a single signatory. There must be 3 (Three) authorized signatories for transaction of bank accounts at HQ level. Two signatories for each banking transaction (Project Director is mandatory and one other). There must be 3 (Three) authorized signatories for transaction of bank accounts at clinic level. Two signatories for each banking transaction (Clinic Manager is mandatory and Sr. most Paramedic / Project Director). Prior permission shall be obtained from SSFP for any change in bank signatories. The number of bank accounts and their operations must be on the basis of guidelines given by SSFP. 5. 2 Bank Payment Procedure
All payment over taka 5,000 to be paid through Account payee cheque. for a single transaction. Payment of monthly staff salary, benefits, and fees (exceeding individual payment taka 2,000) must be paid through crossed cheque or bank advice. Exception may be acceptable in the following cases: 1. In case of paying maximum two month salary of a new hire or transferred staff if he or she has not opened a new account with designated bank due to time constrains or other acceptable problem, subject to written request from the respective staff.
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2. Community Service Providers (CSP) of Smiling Sun Franchise Program will receive monthly fees, shares for referral and travel cost payment (For the total CSPs payment one bearer cheque for total CSPs payment to be en cashed and payment to be made to individual CSP through muster role). 3. Travel advance to staff for field monitoring, attending training, workshop, and seminar. 4. Payment of monthly telephone / utility bills any amount 5.3 Cheque Signatories Decisions regarding cheque signatories for operating the bank account with full particulars such as name, designation, specimen signature, initial and validity date of authorization shall be kept on record confidentially by PD and CM. Changes from time to time are also to be noted down and informed SSFP. 5.4 Counter foil of Cheques While issuing cheque, counterfoil shall also be filled in to provide information regarding the date of issue, name of payee, designation, initial of signatory and the amount. 5.5 Cancellation of Cheque
Any cheque issued but not presented for collection by the payee within 180 days from the date of issue, the bank shall be notified in writing to treat it as cancelled. On the basis of the notification, shall give reversal entry in the Bank Book and keep a note in the Bank Reconciliation Statement. Any loss or theft of the cheque or check book must be notified to the concerned bank management as early as possible. The word CANCELLED shall be written both on the counterfoil as well as on the face of the cheque in case it is required to be cancelled. 5.6 Bank Statement and Bank Certificate Collection of account wise monthly Bank Statement at month end basis and other relevant information from bank shall be ensured. Account wise bank certificate will also be collected by franchisee HQ and Smiling sun clinic manager at the end of each year. 5.7 Bank Reconciliation Statement (Attachment-13) The bank balance shown in the monthly bank statement as of last day of the month must be reconciled with the balance shown in the bank book on the same day by preparing a Bank Reconciliation Statement For various reasons balance per Bank Book/Register may not agree with the bank statement /pass book balance.
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The main reasons are:
Cheque issued but that may not be presented by the payee in the bank for collection (outstanding cheques) within specific date A cheque or DD is deposited , but the bank could not collect the money from issuing bank (outstanding deposits), Bank added interest or deducted Bank Charge from bank account, but the does not know about it and for which it will be reconciled. Any un-liquidated advances.
Bank reconciliation must be done on monthly basis reviewed by and dated and should be sent with financial report periodical along with the monthly expenditure report. 5.8 Safety of Cheque Book FAM/ CM shall be the custodian of cheque books and shall ensure that cheque books are preserved under lock and key in a safe not accessible to an outsider. A permanent register of cheque books may also be maintained by this section.
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Chapter -6
Staff Travel and Perdiem

6.1 Travel
An employee is on tour when he/she is absent on duty from his/her working place with proper approval for a specific purpose. All travel must be directly related to official activities. Appropriate authority shall approve the travel plan showing the start and end dates, duration of travel and mode of transport which should be recorded in travel register or travel approval sheet. Perdiem payments shall include lodging, meals and certain incidental expenses. Per diem may be allowed if the travel period is more than six hours but depending on each franchisee policy and/or donor guidelines. Local transportation and other expenses must be supported by receipts. Transportation cost must be supported by bus, train, steamer tickets, etc. Travel by air is per organization travel policy. 6.2 Travel advance (Format attachment- 14)
An employee may be given a travel advance once approval has been received. This amount shall not exceed 80% of the total estimated cost. Travel advance must be cleared / adjusted within 7 working days after completion of the travel or training. 6.3 There must a written application with the voucher for paying advance. All advances must be recorded in the advance register. If franchisee employees require advance for any other purpose (i.e. logistics, materials, etc.), prior approval from appropriate authority must be sought and obtained. All un-liquidated advances must be reflected in the monthly bank reconciliation statement/reports.
Per diem A per diem is a uniform allowance for each day of absence from permanent station of duty, which is intended to cover the extra daily expenditure (meal, lodging and incidentals) incurred by an employee in consequence of such absence. It should be calculated from the time of commencement of journey until return to the station of permanent duty.
6.4
Supporting documents for payment of travel bill Completed travel expense report with travelers signature. Trip report Travel approval Air, bus, train or launch tickets Original receipts airport tax Travel advance clearance copy Photo copy of cheque subject to availability of photo copy facilities Payment voucher All vouchers should be marked Paid 32
6.5 Travel and per diem per Smiling Sun Guideline (Expense Report format Attachment-15) The franchisee staff and associated executive committee members regardless of designation are entitled to the following: Perdiem is to be charged for official visit and training purpose if the staff has to spend: More than 6 hours outside duty station and Travel more than 50 kilometers from duty station, or Training is residential and food and accommodation cost not provided by respective training organization/ authority The following per diem rates will be applicable in all franchisee HQ and smiling sun clinics. SL# Particulars 1 Applicable Dhaka Travel more than 50 K.M and spend Tk.200 more than 6 hours but less than 12 hours Travel more than 50 K.M and spend Tk.400 more than 12 hours but less than 18 hours Travel more than 50 K.M and spend Tk.600 more than 18 hours but less than 24 hours Travel more than 50 K.M and spend Tk.1000 more than 24 hours Travel less than 50 K.M but spend Tk.200 more than 8 hours to 24 hours for Applicable for outside of Dhaka Tk.150
Tk.300
Tk.500
4 5
Tk.800 Tk.150
Training/meeting/workshop arranged but food and accommodation costs are not provided by respective organization/authority will applicable per diem as per duration. In case of participation in a meeting, workshop, training, breakfast, lunch, dinner is provided by the host organization/authority then Tk.100 will be paid as incidental cost. In case of participation in a meeting, workshop, training and only lunch or dinner is provide by the host organization/authority then Tk.100 will be deducted from applicable per diem rate. No per diem is allowed for less than 6 hours. No per diem is applicable when working within the duty station. Irrespective of grade and level, all are eligible to receive a per diem (food, accommodation & incidental), upon the submission of a travel expense report. All other expenses incurred must be supported by receipts. If per diem is claimed the expenses report must contain an attachment of a brief trip report. Movement register must be filled up. Without this per diem is not be allowed.
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Chapter 7
Procurement
7.1 Types of Goods:
There are three types of goods that can be procured. Consumables Items, which have a short life and will be consumed within 12 months and a unit price of Taka 500 or less, may be listed under consumables and supplies. Examples are office supplies, soap, bandages, etc. Each smiling sun clinic must maintain a stock register for consumable items. Procurement from the RDF should be considered as consumable items. According to the inventory report and considering the inventory formulas the order items should be procured in order to maintain the predetermined stock level. The procurement order has to be placed with proper approval of the authorized signatory. Excess ordering, mismanagement of funds, and lack of orders can result in a stock out. Orders must be justified following the inventory management procedures. Goods procurement with RDF has to be recorded in as separate RDF stock register as per Inventory and Logistic manual. Non expendable equipment (NXP) - These have a useful life of more than one year and a unit price is between Taka 501 to Tk. 2000. Examples are chair, table, trolleys, utensils etc. Fixed assets These items have a useful life of more one year and a unit cost of more than TK 2,000. These items may be categorized - property and building, office equipment, clinic equipment, IT equipment, examples are land, buildings, Motor vehicles, generator, computers, examination table and autoclave machine etc. NXP and fixed assets shall be recorded in the same register and updated quarterly and physical verification be done half yearly. All consumables and supplies and fixed assets belong to the franchisees and smiling sun clinics and are for business purposes only. Personal use of Smiling Sun assets is prohibited All items should be secured and maintained. It is the accepted policy that necessary purchases are to be made on the basis, which will be fair, competitive and transparent to ensuring cost savings. Before seeking quotes budget availability must be verified. There should be separate budget for consumable inventory/supplies and itemized NXP and capital items. To ensure fair and competitive price, offers should be obtained from genuine suppliers/ vendors through quotation and tenders. Medicine procurement does not require quotations or tenders, as the SSFP will select and negotiate with pharmaceutical companies and receive very competitive prices MOUs will then be signed between franchisees, SSFP and the pharmaceutical companies. Then franchisees may procure as needed at any time from the listed pharmaceutical companies. Contraceptive and other logistic supplier and prices are fixed, so the franchisee may procure as needed. 34
Other purchases may be segregated into two categories depending on the total value to be purchased on one occasion. When the total value of a purchase proposal does not exceed Taka 15,000, it may be treated as petty purchase and those exceeding Taka 15,000 may constitute general purchase. Purchases may not be broken up in to multiple purchases/transactions to avoid procurement as a general purchase. 7.2 Petty purchase procedure:
All procurements and maintenance involving up to Tk.15,000 must be done through an authorized employee and must have prior approval of the PD in case of HQ and CM for Clinic. Procurement also includes purchase of office supplies, supplies for workshop/ training, materials, etc. Employees are not authorized to undertake any purchase without proper approval. Transactions up to Tk.15, 000 do not require competitive bids but market verification needs to be done. The amount agreed must be reasonable in the light of market price. 7. 3 General purchase Procedures: All procurements may follow the franchisee's own purchasing procedures in compliance with SSFP guidelines. If any purchasing procedures of franchisees contradicts SSFP guidelines, in that case SSFP guidelines will take precedence. - Procurement Committee All franchisees shall form a procurement committee both at the franchisee HQ and clinic level. At franchisee HQ level the committee will be formed with three members, two from the HQ level staff and one from EC, At clinic level, the committee will also be formed with three members of which Clinic Manager is compulsory. The other two are Senior most Paramedic and Admin. Asst., The committees will be formed with a written resolution of the EC as per SSFP guidelines, The committee will be responsible for procurement of goods and services, commodities, furniture and equipment as approved in the business plan. .
7.4 Procurement decision making authority: Transactions involving TK. 15,000 or less can be handled by the FAM incase of HQ and Clinic Manager alone and do not require competitive bids. The amount agreed must still be reasonable in the light of market prices. Transactions valued between TK.15,001 and TK.75,000 require minimum 3 (Three) competitive quotations. Suppliers/ vendors asked to quote must be 35
legitimate suppliers of the goods services in question. The quotations and a written record of which was selected must be kept on file or with voucher as attachment. Selecting the winning bidder is the responsibility of the franchisee headquarters procurement committee in case of.HQ and Clinic procurement committee incase of clinic If the transaction value exceeds TK.75, 000, minimum three quotations and the recommended supplier must be reviewed by franchisee headquarters procurement committee in case of HQ and Clinic procurement committee incase of clinic before placing the purchase order. If the transaction value exceeds TK. 125,000 minimum 3 (three) quotations and the recommended supplier must be reviewed by franchisee headquarters procurement committee in case of HQ and Clinic procurement committee incase of clinic before placing the Franchisee EC. Franchisee EC reviews the quotations and approves supplier/ vendor in both cases.
Sole Source procurement: Sole source procurement is when required goods or services are only available from one reasonable source and no substitution will satisfy requirements. Full and open competition need not to be conducted, a one-page justification should be written detailing the reasons for sole sourcing & attached to the procurement documents. Sole Source procurement should be a last resort and not used on a frequent basis. Figure- 1 ATAGLANCE RULES OF PROCUREMENT Size of Transaction < TK 15,000 Evidence of price competitiveness competitive price (through Market verification) 3 competitive bids and work order above taka 15,000 Minimum 3 competitive bids Documentations of Selection procedure Issue work order Minimum 3 competitive bids Documentations of Selection procedure Work order 36
Decision- making authority FAM for Franchisee HQ and Clinic Manager at clinic level. Franchisee head quarters procurement committee and Clinic Procurement committee at clinic level. Franchisee head quarters procurement committee and Clinic Procurement committees at clinic level. Franchisee head quarters procurement committee and Clinic Procurement committees at clinic level. and EC.
TK 15,001-75,000
TK 75,001125,000
> TK 125,001
A single transaction must not be broken into smaller components in order to avoid the above procurement rules. It is the franchisees responsibility to ensure they are in compliance with any donor procurement regulations including obtaining required approvals if necessary. 7.5 Work Order After selecting the vendor/ supplier, prepare and place Work order to the vendor / supplier subject to exceeding the amount of Taka 15,000 and other conditions as mentioned above. Work order should include the following: i) Complete list of materials to be supplied and their specifications.
ii) In case of failure to meet the delivery schedule within specific date by the suppliers the Work order will be treated as cancelled. iii) Materials not conforming to specification given in the order or found damaged or of inferior quality shall not be accepted. iv) Short supply of materials should not be accommodated. v) Printed bills along with the delivery challan must be submitted by the supplier for payment.
vi) Bills/Invoice for services rendered should be submitted with a copy of the receipt of acknowledgement by the franchisee. vii) Payment to suppliers/service providers will be made through account payee cheque. viii) Money Receipt is to be submitted at the time of actually receiving the cheque. ix) Tax /VAT to be deducted at source as per GoB rule. 7.6 Quality control: Quality and condition of the purchase goods should always be ensured on Material Receipt Register with reference to the work order at the time of receiving and storing supplies by the store in- charge. The quality of work done by any service provider should be certified / ensured by a senior official / respective program personnel designated by the EC. Damaged, broken, reconditioned, inferior quality and goods not according to specification in the order should not be received under any circumstances. 7.7 Payment for procurement: Generally, FAM/ Clinic manager will comply with the following requirements before making any payment for procurement: Collection of quotation/ market verification market verification for procurement up to Tk.15, 000 and collection of at least three quotations are a must from different vendors/ suppliers for above Tk.15,000. A quotation must contain date, quantity, name of 37
material/works, unit price, total price, and it must be on official pad with signature of bidder/ supplier, Preparation of comparative statement -for quotations Approval of quotations, comparative statement and selection of vendor/ supplier and meeting minutes of procurement committee Issue of work order- must contain date, total quantity, material /works name, total price, date of delivery, Delivery challan - must contain date, quantity, and signature. The delivery challan must be on official pad. Material receiving report (MRR) and stock register entry. Approval for payment - Attach all of the above documents with bill and submit for approval of payment. Issue cheque after detail examination of all documents. PD will approve vouchers at HQ level. There must be 3 authorized signatories for transaction of bank accounts at HQ level. Two signatories is compulsory for each banking transaction (Project Director is mandatory and one other). CM will approve vouchers at clinic level. There must be 3 authorized signatories for transaction of bank accounts at clinic level. Two signatories for each banking transaction (Clinic Manager is mandatory and Sr. most Paramedic / Project Director). Deliver the cheque and receive the acknowledgement (money receipt). Attach the acknowledgement (money receipt) with the voucher along with photocopy of the cheque paid. Paid stamp must be used on the voucher and attached supporting documents with date and signature of preparers. 7.8 Accounting for Consumable items (Stock Register, Attachment - 16) Store keeper/ Admin Asstt. shall verify the items on the basis of purchase items. All consumable items purchased must be recorded in the stock register for consumable items immediately after receipt of goods. The register will show correctly the quantity received, quantity issued and balance of individual item. The register must be reviewed monthly and physical verification must be done half-year 7. 9 Accounting for NXP and Fixed assets (Attachment - 17) NXP and Fixed assets should be recorded in fixed assets register indicating locations. Fixed assets should be identified with an asset number, which also appears in the fixed asset register. All furniture, equipment and vehicles are assets of the organization. Individual project / unit must use, maintain and repair equipment properly to keep them in good condition. Equipment or vehicle should not be used for personal purpose. Logbook/log sheet must be maintained for use of any vehicle- Jeep, Taxi car, Ambulance, Motor cycles and users 38
signature must be put and fuel consumption must be recorded in the logbook. Responsible official should verify the log book with fuel consumption on record/ bills. Identification Number: All the NXP and Fixed Assets (equipment or furniture) purchased and provided by Franchise Management Organization (FMO) under the franchise agreement should have separate identification number in a visible place. The ID# will be: SSFP/FRANCHISEE name / Smiling sun clinic name / Item name SI of item The franchisee is responsible for reinsuring this identification number. The NXP/ Fixed Assets Register should be updated regularly and when procured. Physical verification should be conducted half yearly at a minimum. Please note a computer print out of fixed assets statement is preferred. The external auditors will also conduct a physical verification of the register. This register should reconcile to the accounting records (i.e. voucher, date, procurement process etc.) 7.10 Annual physical verification of NXP and Fixed Assets:
The NXP /Fixed assets register should be updated regularly and physical verification should be conducted half yearly at a minimum. PD will assign staff to conduct the annual physical verification of assets. On completion of the assignment the staff member will submit a report to PD indicating the excess / shortfall and condition found on physical inventory for approval. FAM and smiling sun clinic manager will take necessary actions on the approved report. 7.11 Disposition of old assets: Steps to be followed by NGO Arrange to take inventory of all assets of SSFP program through a Committee following the steps below: At HQ level, the inventory is to be conducted by a two member team headed by FAM ; and shall identify and prepare the list of Old/Unusable Assets At Clinic level, the inventory is to be conducted by a two member team headed by Clinic Manager; and identify and prepare the Old/Unusable Assets The Clinic Manager shall submit the list to FAM for review and verification with necessary information
The list should include: Name/Description of the asset (s) Quantity Date/Year of purchase Purchase price Condition Identification number 39
Process disposal based on the following level of value: For the Asset Book Value up to Tk 2,000
Disposal will be managed at clinic level. Clinic will submit the list to Project Director and Finance and Admin Manger for their information and concurrence of disposal. After receiving approval from NGO, the Clinic will arrange disposal of the item(s) through Auction committee and the sale proceeds shall be deposited in respective Clinic Program Income Bank Account For the Asset Book Value Tk 2,001 to Tk 5,000
Disposal will be managed at NGO level. After receiving the list from Clinics, the NGO will submit the list to Executive Committee for their information and concurrence of disposal. After receiving approval from Executive Committee, the NGO will arrange disposal of the item(s) through Auction committee and the sale proceeds shall be deposited in NGO Program Income Bank Account
Process disposal based on the following level of value: For the Asset Book Value Tk 5,001 to above
SSFP approval is required before process the disposal along with Executive Committee concurrence. The recommendation of disposal should submit to Grants Manager of SSFP for necessary decision SSFP shall review the proposal and after completion of required internal formalities, provide decision to respective NGO After receiving approval from SSFP, the NGO management will arrange disposal of the item(s) through Auction committee and the sale proceeds shall be deposited in HQ Program Income Bank Account If any NGO do not have any committee for Auction, they should form one as appropriate following the organization procedure. The item(s) disposed, must be written off from the Fixed Assets Register with a comment in the remarks column and also mention the Money Receipt number for receipt of the sale proceeds.
SSFP shall issue Time frame for disposition of old assets of NGOs on yearly basis. 7.12 Compliance of local laws: Deduction of Income Tax at source from the salary of male staff if the yearly income exceeds Taka 165,000 and from the salary of female staff if the salary exceeds Tk.180, 000 in the income year. This is per current income tax law. Should the GoB change the thresholds franchisee must follow GoB law. 40
Affixation of revenue stamp for Taka 5.00 if the individual payment of bill and salary is Tk.500 or more, as applicable. Deduction of income tax at source must occur if the monthly payments exceed taka 20,000 per month, i.e. office rent payment Deduction of tax from the payment of professional fees to consultant at the rate of Taka 10 percent. Deduction of tax at source from the payment to suppliers for purchase of stationeries and printing if the total amount exceeds Tk.100, 000.
The rate of taxes and range of income for tax deduction may vary from year to year as per fiscal policy of Govt. of Bangladesh.
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Chapter- 8
Internal Control
8.1 Introduction: The internal control system is important for efficient financial management of the franchisee and its sustainability. It is a plan of the franchisees methods and procedures adopted by management to provide reasonable assurance that costs are incurred in compliance with applicable laws, funds and property, and other assets are safe guarded against waste, loss, unauthorized use, or misappropriation; and revenues and expenditures are in compliance with the franchisees operational policies. All transactions must be properly recorded and accounted for to permit the preparation accounts and reliable financial reports and to maintain accountability over the assets. 8.2 Internal Control a management function The internal accounting and administrative controls of the franchisee should reasonably ensure that: Obligations and costs incurred are in compliance with applicable laws Funds, property and other assets are safe guarded against waste, loss, un-authorized use or misappropriation; Revenues and expenditure are properly recorded and accounted for to permit the preparation of accounts and reliable financial reports, and to maintain accountability over the assets. The authorities are documented and a clear management and audit trail is maintained.
8.3 Authorization and approval Appropriate authorization and approval procedures should be introduced to ensure that, Project policies, objectives and plans are adhered to; Only legitimate activities are performed; Integrity of systems are maintained; The use of systems and assets are controlled The authorities are documented and a clear management and trail is maintained.
8.4 Physical safeguards Appropriate physical safe guards should be established to: Limit access to assets, systems, and/or records; Protect franchisee assets and properties including files, records, and equipment; Establish clear control over the use of assets, and custodial responsibility for them;
42
8.5 Management review and monitoring Financial and other performance should be monitored to ensure that, Personnel understand the systems, processes, procedures, and activities established by management, Records and systems are maintained and reconciled accurately and efficiently Policies, timetables, targets, and objectives are met; Areas of weakness are identified addressed and strengthened; Errors, omission, and fraud are detected, corrected and preventive measures put in place;
8.6 Financial related performance Financial performance should be operated to ensure that; Books of records are maintained properly and professionally; Books of accounts, ledger balance and reconciliation procedures are carried out to establish that transactions are properly and correctly recorded and processed; Carried forward total are correct.
8.7 Human resources management Appropriate human resource management through compliance of recruitment policies, disciplinary measures and appraisal procedures should exist to ensure that, Personnel employed are of the requisite standard to meet the needs of the work as defined by the scope of work, Personnel employed must have the integrity, honesty and competence to meet the requirements of the assigned job, Need based training is provided to maintain and develop the competence and efficiency of the personnel, Information on human resources is accurate, complete and up to date, All personnel receive fair and equal treatment.
8.8 Supervision Appropriate supervision procedure should exist to ensure, 1. Internal checks are practiced correctly; 2. Procedural errors are detected through checks and corrective actions taken; 3. Any weakness in control structure are identified and brought to the notice of key management for appropriate actions. 43
8.9 Procurement and payment Approved procurement policy is followed for selection of suppliers / vendors and orders placed for supply of goods in approved quality and quantity. To process for payment, required procedures must have been carried out prior to payment: That goods received physically match those requested in the purchase order. The invoice price per unit and total units are checked to match with the price and units on the purchase order. Finally, mathematical accuracy tests are carried out on total invoiced costs.
Internal control system may change over time as weaknesses are identified and corrective measures taken to strengthen it.
44
Chapter-9
Audit
9.1 Introduction An audit is an independent examination of records, procedures and activities of an organization which leads to a report outlining the auditors opinion on the state of affairs. There are two kinds of audits: The internal audit The external audit
There will be a combination of internal audit / financial review and periodic external audits to make sure that the franchisee and smiling sun clinics are performing as planned, complying with guidelines, rules and regulations, and ensuring transparency and accountability. 9.2 Internal Audit/Financial Review, (Financial Review checklist, Attachment 18) The internal audit / financial review will be an important input to financial/ management supervision, and an effective periodic monitoring to ensure financial/ management quality compliance of the franchisee and smiling sun clinics. Internal audits/financial reviews should occur every year. Internal financial reviews ensure compliance with financial policy guidelines and other policies. It shall cover the following areas: Examine maintenance of books of records Payment /voucher maintenance Procurement Inventory management Revenue collection Other funds, if any Compliance with guidelines and local laws. 9.3 External Audit: Independent audit firms can be engaged to conduct external financial audits of franchisee HQ and smiling sun clinics. It is an independent examination of financial statements prepared by the organization. It is usually conducted for statutory purposes because law requires it. It can also be for investigative purposes. The audit firm conducts the audit in accordance with generally accepted auditing standards and conducts tests of the accounting records as deemed necessary. The auditors give their comments on whether the funds received by the franchisee and smiling sun clinic, generated program income, RDF, and costs incurred by them conform to generally accepted accounting principles and guidelines set out in this manual. This audit benefits the franchisee and smiling sun clinics. Review of the franchisees and smiling sun clinics financial management will indicate where adverse effects, weaknesses, or non-compliance are occurring or could occur. The 45
audit will also recommend corrective action based on audit findings. The auditors perform the following: Review the Fund Accountability Statements for the audit period. Obtain an understanding of internal controls and perform tests of internal control maintained by the franchisee and smiling sun clinic(s). Perform tests to determine whether the franchisee and smiling sun clinic(s) complied with applicable laws, regulations, and the provisions that have direct and material effect on the program. Determine that program income, expenditures and cash positions are accurately reported in the financial report that is sent by the franchisee and smiling sun clinic(s) at the end of the audit period. Reconcile ending cash in the bank to the ending balance of the Fund Accountability Statement. Determine whether the franchisee and smiling sun clinic(s) have taken corrective action on prior audit findings and recommendations. 9.4 Preparation for Audit Prior to the audit, the franchisee and smiling sun clinics shall review the accounting books to ensure that all records are complete and all documentation is organized and readily available. If the project was audited in the prior year, the franchisee and smiling sun clinic shall review findings and provide a written update on the status of each prior year findings to the auditors as per Corrective Action Plan (CAP). The franchisee shall facilitate the audit by directing the auditors to the appropriate personnel to answer questions. The auditor may require interviewing staff, Contact person / EC members of Franchisee and even request to observe the organization in pursuance of its activities. Franchisee and smiling sun clinic staff shall cooperate during such visits and be open and honest about organizational strengths and weaknesses. All audit inquiries shall be answered truthfully and completely without attempting to mislead auditors. Staff, who does not know the answer to a question, should tell the auditors that s/he does not know. But will investigate and get back to them with the correct answer as soon as possible. The franchisees should not attempt to run the audit. Auditors will do their job and the franchisee should limit themselves to responding to inquiries. Should the auditors arrive at negative findings based on incomplete or inaccurate information; the franchisee should make sure the auditors have comprehensive data prior to the completion of their field work. 46
The franchisee should arrange an entrance and exit conference with the auditors, near the end of their field work or shortly thereafter, to review and discuss the audit report and all audit findings. If there are questions or issues related to the audit process or scope of work, the franchisee shall direct these to the FMO.
9.5 The audit report In the audit report the auditor gives their opinion as to the true and fair view of the state of affairs of the organization and operations of the audit period. True means that the transaction did take place. Fair means that a transaction is fairly valued and that assets and liabilities are fairly stated. If the auditors do not agree with the financial results as presented by the franchisee and smiling sun clinics, they can refuse to sign the accounts or give the franchisee and smiling sun clinics a qualified report. The table below summarizes the type of opinion. Auditor opinion 1. Unqualified 2b.Qualified except for 3. Disclaimer Comments No issue of concern to report, accounts are signed by auditor. Disagreement on an issue but otherwise all OK, e.g. the way an asset has been valued. No opinion, auditor unable to sign.
9.6 Consequences for not taking appropriate Corrective Action(s) against audit findings: FMO may withhold all fund and/or equipment disbursement to franchisee; until the corrective action (s) are in place; or FMO may withhold franchise agreement renewal or modification until all audit findings (internal or external) are resolved; or FMO may terminate the franchise agreement with the organization.
9.7 Preservation of financial documents Financial documents include all books of accounts together with supporting documentation and records, such as, vouchers, ledgers, registers, and other accounting reports and statements. The copies of the franchise agreement, lease agreement, bank statement, cheque book, audit reports, GOB approval / clearance funds, and donor agreements if any, shall be considered as financial documents and all these should be kept under safe custody. The franchisee shall retain all records that pertain to the Smiling Sun network for a period of five years from the date of submission of the final expenditure report and may be audited by the FMO and/or Govt. of Bangladesh.
47
Attachments
48
Attachment -01, Petty Cash Book Smiling Sun Franchise Program (SSFP) Petty Cash Book Smiling sun clinic: Month: Year: (Figures in Taka)
Advertising & Promotion Community Meeting Travel & Allowances Local Travel
Cash in Hand Date Vr. No. Particulars Increased Decreased Balance Utilities
General Administration
Office Supplies Others Others Printing Office Supplies
Clinic Supplies Others Clinic Supplies
Service Procurement
Postage/ Telephone
Bank Charge
Security
Facilities Maintenance
Others
Fuel Cost
Prepared by:..
Approved by:.
Reviewed by:
1
Attachment-02, Salary Register

SALARY AND BENEFITS PAYMENT REGISTER Clinic ID :.. Name of HQ/Clinic:. Month of...............
Gross Pay
10=(Sum4-9)
Smiling Sun Franchise Program

Mode of Payment (Cheque/Debit Advice) :
Sl # 1 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL FOR THE MONTH Name of Employees & Designation 2
No. of Working Days
Year............
Franchisee.......................
Break up of Salary Housing 5 Medical 6 Travel 7 PF 8 Bonus 9
Basic 4
Deducation I. PF Other Tax 11 12 13
Total Deduction
14=(11+12+13)
Net Payment
15=(10-14)
Signature of the Recipient 12
Prepared by: ________________________

(FAM /Admin. Assistant)
Reviewed & Approved by: ________________________

(PD/CM)
Attachment 03, Money receipts Smiling Sun Franchise Program (SSFP) Money Receipt
Name of Smiling sun clinic: ..Address: ... Receipt No. Date: Received with thanks from Mr./Mrs./Messers . a sum of Taka(in figures) (In words) in cash/ cheque/ draft no..date.. On account of .
Name of the Recipient: .. Signature with date: .
3
Attachment 04, Payment Voucher
Payment voucher
Clinic ID: ___________ Voucher No. ................... Franchisee HQ/ Clinic: .......................................... Date: ................................. Cheque/ Advice No. : .......................... Paid to: ..................................................................................................................................... (Name of payee)
DESCRIPTION OF EXPENSES Category BUDGET Line Item Amount (In Taka)
Total : Taka (In Word) : ..................................................................................................................................................... Prepared by: _______________________ (Admin. Assistant /FAM) ____________________ Reviewed by : ______________________ (Received by ) Approved by : _________________________ (Project Director /Clinic Manager)
4
Attachment 05, Receipt Voucher
Smiling Sun Franchise Program RECEIPT VOUCHER

PIN # ___________ Franchisee HQ/ Clinic.......................................... ................................. Voucher #.......................... Date:
Cash/ cheque/ Advice: .. RECEIVED FROM: ................................................................................................................................................. DESCRIPTION OF RECEIPTS Category BUDGET Line Item Amount (In Taka)
Total : Taka (In Word) : ..................................................................................................................................................... Prepared by: _______________________ (Admin. Assistant) Reviewed by : ______________________ (FAM/ CM) Approved by : _________________________ (Project Director /Clinic Manager) ____________________ (Received by )
5
Attachment 06, Journal Voucher
Smiling Sun Franchise Program Journal Voucher

Clinic ID: Franchisee HQ/ Clinic: .......................................... Voucher No. ................... Date: .................................
Particulars
Ledger Folio
Amount in Tk. Debit Credit
Taka (In Word):

.....................................................................................................................................................
Prepared by: Signature: . Name: Designation: .
Approved by: (PD / Clinic Manager)
6
Attachment 07, Cash / Bank Book

Folio #:
Cash / Bank Book

Month: Date Voucher # Ledger Folio # Particulars Code: Debit (Taka) Credit Balance (Taka)
Prepared by: Designation:
Reviewed by: Designation:
7
Attachment 08, Ledger Book

Ledger Book
Budget Category: Budget Period:
Date: Particulars Cash Book/Bank/ Regd. Folio No Vouc her No. Expendi ture This Months
Budget Line Item: Approved Budget for the Year:

Receipts /Adjustment Expenditure /Received To Date Remaining Balance of Budget
8
Attachment- 9, Cash flow Statement (Receipts and Payments Accounts) Sample

Franchisee Name: Smiling Sun Franchise Program Receipt & Payment Account For the period from October'08 to January'09 Receipts Amount(Taka) Payments Amount(Taka)
Opening Balance(Grants Fund) Opening Balance(PI Fund) Opening Balance(RDF Fund) Fund Received from SSFP Bank Interest(Grants Fund) Bank Interest(PI Fund) Program Income Earned Sales from RDF Opening Stock of RDF
Salaries Benefits Fees & Honorarium General Administration Cost Office Supplies Clinic Supplies Capital Expenditure Service Procurement Education and Training Insurance Premium Advertising and Promotion Travel and Allowances Franchise Usage Fee Closing Balance(Grants Fund) Closing Balance(PI Fund) Closing Balance(RDF Fund) Closing stock of RDF Total:
Total:
9
Sample Attachment- 10, Income Statement (Income and Expense Account)

Franchisee Name: Smiling Sun Franchise Program Income & Expenditure Account For the period from October'08 to January'09 Expenditure Salaries Benefits Fees & Honorarium General Administration Cost Office Supplies Clinic Supplies Service Procurement Education and Training Insurance Premium Advertising and Promotion Travel and Allowances Franchise Usage Fee Total: Amount(Taka) Income Bank Interest(Grants Fund) Bank Interest(PI Fund) Program Income Earned Sales from RDF Excess of Expenditure over Income Amount(Taka) -
Total:
10
Attachment- 11, Balance Sheet Sample

Franchisee Name: Smiling Sun Franchise Program Balance sheet As of January'09 Conversion Grant Conversion Grant
Liabilities Fund Account RDF Stock
Assets Closing Balance(Grants Fund) Closing Balance(PI Fund) Closing Balance(RDF Fund) Closing stock of RDF Capital Expenditure
Total:
Total:
Fund Account: Amount (in Taka)
Particulars Opening Balance(Grants Fund) Opening Balance(PI Fund) Opening Balance(RDF Fund) Fund Received from SSFP Less: Excess of Exp Over Income Total
11
Attachment- 12, Chart of Accounts Smiling Sun Franchise Program

Chart of Accounts Accumulated Depreciation Dep. Building Acc. Dep. Building Dep. Furniture & Fixture Dep. IT Equipment Acc. Dep. IT Equipment Dep. Lab. Equipment Acc. Dep. Lab. Equipment Allocated Incomes Grants (International Donor) Cash-Grants In-Kind Grants Local Donor Cash Local Donor In-Kind - Local Donor Branch / Divisions Capital Account Reserves & Surplus Liabilities Current Assets Bank Accounts Bank Accounts Grants Bank Accounts Program Income Bank Accounts RDF Bills Receivable Receivable Product Sales Rec. Product Revenue From Demand Side Financing Rec. Product Rev. Corporate 1 Rec. Product Revenue From Grameen Phone Rec. Revenue From Corporate 2 Receivable Service Sales Rec. Corporate 1 Rec. Corporate 2 Rec. Demand Side Financing Rec. Grameen Phone Cash-in-hand Cash Deposits (Asset) Loans & Advances (Asset) Stock-in-hand (Sundry Debtors)
(Direct Incomes)
(Retained Earnings)
12
Fixed Assets Air-Conditioner Air Conditioner Building Building Furniture & Fixture Furniture & Fixture Generator Generator IT Equipment IT Equipment Lab Equipment Lab Equipment Land Land Medical Equipment Medical Equipment Office Equipment Office Equipment Vehicle Ambulance Bi-Cycle, MC Indirect Expenses Investments FDR on SCB Liabilities Advance Received Advance Receive Bills Payable Bill Payable Duties & Taxes Provisions Prov. Advertising & Promotion Prov. Billboards Prov. Community Meeting / Road Shows Prov. Community Radio Prov. Loyalty Programs Prov. Printed Materials (BCC) Prov. Promotional Materials ( Watches, Bags, Etc) Prov. Smiling Sun Signage Prov. Clinical Supplies Prov. Other Clinical Supplies Prov. Supplies Volume Related Prov. Education & Training Prov. Clinical Training Prov. Orientation/training for CSP Prov. Training / Workshop (Current) (Expenses Indirect)
13
Prov. Fees & Honoraria CSP Share for Referral Prov. Community / TB/ EPI Volunteer Prov. Home Delivery Share Prov. Honoraria Consultant Prov. Honoraria to CSP Prov. Honoraria to ED Prov. Others Fees Prov. Paramedics Prov. Physicians Prov. Franchise Usage Fees Prov. Clinical Equipment Prov. IT and Office Equipment Prov. General Administration Prov. Bank Charge Prov. Office Rent Prov. Other General Administration Prov. Postage/ Telephone/ Fax / Courier/ E-Mail Prov. Uniforms Prov. VAT Payment/MunicipalityTax/ Clinic registration fees Prov. Water/ Electricity/ Gas/Generator Fuel cost Prov. Insurance Premiums Prov. Car/ Vehicle Insurance Prov. Civil Responsibility Prov. Equipment Insurance Prov. Facilities Insurance Prov. License Fees Prov. Office Supplies Prov. Others Office Supplies Prov. Printing ( Forms, Stationary, Photocopy) Prov. Payroll Expenses Prov. Service Procurement Prov. Cleaning Services Prov. Equipment Maintenance Prov. Facilities Maintenance/Laundry bill Prov. Freight / Transportation Prov. Motor Vehicles Maintenance Prov. Non Hire Staff Prov. Others SP Prov. Security Prov. Side Effect Management Prov. Warehousing Prov. Travel & Allowances Expenses Prov. Fuel Cost Prov. Local Travel Prov. Perdiem for Local Travel Prov. Perdiem for Travel to SSFP Meeting
14
Prov. Perdium for Travel to Training/workshop Prov. Travel to SSFP Meeting Prov. Travel to Training / Workshop A.I.T Leave Without Pay P.F Loans (Liability) Bank OD A/c Secured Loans Unsecured Loans Misc. Expenses (ASSET) Operational Expenses Advertising & Promotion Billboards Community Meetings/Road Shows Community Radio Loyalty Programs Printed Materials(BCC) Promotional Materials ( Watches, Bags, Etc.) Smiling Sun Signage Clinical Supplies Other Clinical Supplies/ HCM Supplies Volume Related Education & Training Clinical Training Orientation/ Training for CSP Training / Workshop Fees & Honoraria Community / TB / EPI Volunteer CSP Share for Referral Home Delivery Share Honoraria Consultant Honoraria to CSP Honoraria E.D. Others Fees Paramedics Physicians Franchise Rental Fees Clinical Equipment IT & Office Equipment General Administration Bank Charge Others- G. Admin. Postage/Telephone/Fax/Courier/EMail/Mobile Rent (Bank OCC A/c)
(Direct Expenses)
15
Uniforms Utilities( Water, Electricity, Gas) VAT Payment Insurance Premiums Car/Vehicle Insurance Civil Responsibility Insurance Equipment Insurance Facilities Insurance License Fee Office Supplies Others Office Supplies Printing(Forms, Stationary, Photocopy) Payroll Expenses Basic House Rent Medical Travel Service Procurement Cleaning Services Equipment Maintenance Facilities Maintenance Freight/ Transportation Motor Vehicles Maintenance Non Hire Staff Others S.P. Security Side Effect Management Warehousing Travel & Allowances Expenses Fuel Costs Local Travel Pre-Diem for Local Travel Pre-Diem for Travel to SSFP Meetings Pre-Diem for Travel to Training/Workshops Travel to SSFP Meetings Travel to Training/Workshops Other Incomes Bank Interest Bank Interest Old Goods Sold Old Goods Sold Pre-Paid Expenses Fees ( Consultancy ) Fuel Prepaid Fuel Insurance License (Indirect Income)
16
Rent Prepaid Office Rent Salary Advance Salary Travel Advance Travel Advance Purchase Accounts Product Purchase Drug Purchase GOB Contraceptive Purchase Health Mart Product Purchase Sales Accounts Product Sales Drug Sales GOB Contraceptive Sales Health Mart Product Sales Service Sales Child Health Family Planning Lab Services Maternal Health Other Child Health Others Family Planning/ ECP Others Health Services USG Vehicle Services Registration Suspense A/c Expense & Income A/c
17
Attachment-13, Bank Reconciliation Statement

Bank Reconciliation Statement Form Bank Reconciliation Statement as of:
Franchisee HQ / Clinic name:

Nature of Account: A/C # : Bank: Branch :
Clinic ID:
Bank Reconciliation Statement as of: ______________________ Amount in Taka Line-1 Line-2 Balance as Per Bank Statement > Outstanding Deposits: (See details below) Date: DD/TT/ Cheque No Received From Amount (Tk)
Sub Total: Line-3 Line-4 Add: (Line1+2+3) Line-5 Outstanding Cheques/ Unliquidated Advances: (See details below) Date Payee Cheque # / Advice# Amount (Tk) Bank Charge not entered in the Bank Book/Register.
Sub Total: Line-6 Line-7 Add: Line 5+6) Line-8:(Line 4- Line-7 Balance as per Bank Book/ Register:
Taka Overall Fund Balance at Clinic Balance as per Bank Book/ Register Cash in hand Commodities/ Medicine Stock
Prepared by : (Signature) _____________________ (FAM/Admin.Asstt Date: ________________________ Received as Approved By: (Signature) _________ (PD/FAM/CM) Date: _____________
Bank Interest not recorded in the Bank Book/Register:
Total
18
Attachment- 14, Travel advance Format

Travel Advance Register
Franchisee HQ/Clinic (name):

Sl. No. Name of the Payee Date of Advance Payment Purpose of Advance Amount of Advance (Taka) Expected Date for Adjustment Recipients Signature Actual Date of Adjustment Actual Expenditure (Taka) Signature of Recipient/ Adjuster Signature of FAM/Admin. Remarks
1 2 3 4 5 6 7 8 9 10
19
Attachment-15, Travel and Perdiem Expense Report format

Travel and Perdiem Expense Report (TER)
Name of the Employee: _____________________________________ Designation : _____________________________________________ Purpose of Visit: ___________________________________________ Date: _______________________ HQ/Clinic (Name): _____________
(A) Travel Expenses:

Date Departure Place Time Arrival Place Time Distance (KM) Mode of Transport Amount Expensed (In Taka)
(A) Total Travel Expenses (Tk)
(B) Perdiem Allowance:

From (date).............................. To (date)................................. Applicable Perdiem Rate @ Tk. ________ Per 24 Hours/Day Total __________Days _______ Hours (B) Total Allowed Perdiem (Tk) Grand Total (A+B) Less: Advance (If Any) (Tk.) Net Payable (Tk.) Total Taka (In Word): _____________________________________________________________________________________ Signature of the Claimant Date: Checked By (FAM/Admin. Assistant) Date: Approved By Date: (Taka)
Note: Trip Report must be attached for claiming perdiem allowance.
20
Attachment 16, Accounting for Consumable items (Stock Register) Smiling Sun Franchise program
Consumable Stock Register
Name of Franchisee: _____________ CLINIC ID # ___________ Date Ref. No. CLINIC ID: HQ/Clinic Name:
Particular of Receipts/issues
Quantity
RECEIVED Rate
Value
ISSUED Quantity
BALANCE Quantity
Remarks/Reci pients Signature
21
Attachment 17, Accounting for NXP and Fixed assets
Smiling Sun Franchise Program Accounting for NXP & Fixed Assets Register
Name of the Asset : ______________________________
Opening Balance Sl.No. Description Country of Origin Warranty Period Date of Purchase/ Receipt Identification No. Purchased Non Functional items
HQ / Clinic Name: ____________________ Clinic ID: ____________________________

Closing Balance Location Type of Asset ( Fixed / NXP) Remarks
Quantity
Unit Price Tk
Value Tk.
Date of Purchase
Quantity
Unit Price Tk.
Value Tk.
Quantity
Value Tk.
Quantity
Total Value Tk.
22
Attachment 18, Internal Audit/Financial Review, (Financial Review checklist)
Finance Management Review Check List

Sl #
Particulars
A Main bank account at Franchisee HQ level into which Grants fund is transferred from SSFP A Program Income bank account at HQ level for depositing of Program Income transferred from Clinics for NGO HQ expense and for facility improvement / construction of clinics A Grants fund bank account for each smiling sun clinic for transferring grants funds from Main bank account of franchisee HQ A program Income bank account for each smiling sun clinic for depositing all program income earned by providing services A `Revolving Drug Fund (RDF) bank account for each smiling sun clinic All bank accounts are interest-bearing (SB or STD) Receipt of grants money from SSFP is regularly acknowledged by PHQ All bank accounts are jointly operated * 3 authorized signatories for each bank account * 2 signatures on each banking transaction All bank accounts are reconciled with Cash/Bank book monthly Each smiling sun clinic maintains petty cash slot Tk 7,000 10,000. Petty cash handling responsibility rests with the Admin.Asstt Replenish is done when 80% + is spent (Monthly basis at least) At the HQ level petty cash is handled by FAM or designated person Petty cash book is maintained at smiling sun clinic level. 23
Yes
If No, present status
Action Recommended
Bank Account
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 1. 2. 3. 4. 5.
Petty Cash Management
6. 7. 8. 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5.
Petty cash book is updated daily and the denomination of notes and coins of the daily closing balance accurately stated. A statement of expenditure along with supporting documentation is submitted for Petty cash reimbursement Expenditure in line with budgeted line item. Program income is collected as per approved policy Pre-numbered Money receipt is given to customers Carbon copy of receipts is preserved for audit Program income is deposited to bank at least weekly Program income is used as approved in grant agreement Lab / diagnostic services charges are shown as program income Reagents and other incidental expenses are charged against program income GP,s payment on behalf the poor is treated as program income. Service fees and contraceptive sales amount from satellites and CSPs sales of contraceptive reflected in program income A separate double column cash/bank book for each fund is maintained FAM is systematically keeping books of records of Franchisee HQ and PD reviews and counter signs it monthly at HQ. A standard general ledger is maintained approved budget category and lineitem wise Posting from Cash/ Bank book to ledger is updated daily/weekly Budget balance struck at the end of each month showing this monthly expenditure, cumulative expenditure to date and unexpended budget balance. Stock register for consumable items maintained and updated Fixed assets register is maintained systematically and updated monthly Physical inventory of NXP and Fixed asset done annually Movement register for maintained and updated Vehicle logbook register maintained and updated 24
Program Income
Cash and Bank Book
Internal Control System
6. 7. 8. 9. 10. 11. 12. 13. 14.
Personal file of each employee maintained Employees work plan done and plan followed Advance register maintained All vouchers for expenditure duly authorized and approved All supporting documents attached to vouchers Store environment up to the standard Employees salary payment according to Attendance register/ Time sheet A cash transaction is limited up to Tk.2,000 115001111 Revenue stamp of Tk.5 is affixed on payment of bills for TK.500 and above Monthly financial reports- a consolidated report, separate reports - grants money and program income are sent within 20 days of the following month to SSFP for advance liquidation All photocopies of the vouchers and supporting documents are sent with monthly financial reports All financial reports sent have attachments of the photocopies of original of monthly bank statements and bank reconciliation statement.
Maintaining Book Keeping/ Records (HQ) and Reporting

1.
2.
Advance for Rent

1. 1. 2. 3. 4. 5. 6. Franchisee not paid any rent advance beyond the present grants agreement period Travel authorization approved by appropriate authority Travel receipts submitted within 3 days of return from travel Actual expenses for travel paid after verifying supporting attached with travel bills Perdiem calculated as per rates and amount approved by SSFP M&IE for participation in training outside working place paid as per SSFP guidelines Any amount of advance in excess of approved travel bill refunded while final payment 25
Travel and Perdiem
NXP/ Fixed Assets

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 1. 2. 3. 4. Unit value more than Tk.2,000 and useful life more than one year for fixed item considered as fixed assets Purchase Committee for approval of purchase of a item /items in a single lot, the value of which is Tk. 15,000 and above Quotations / tenders invited, competitive statement prepared for at-least 3 quotations / tenders received and placed before Purchase committee for approval The amount agreed for purchase must be reasonable and Allowable Work Order issued for purchase of item as approved by Purchase Committee Entry is made in MRR on receipt of items and recorded in appropriate Identification number is attached with the item Assets not used for any personal purpose Physical verification done annually and compared with accounting records, causes for any discrepancy looked into Prior approval from FMO was obtained for the disposal of unused assets Recruitment Procedure followed for appointment of new staff Job description of all staff exist Salary payment of staff is made through staffs personal bank account Properly recorded in personnel file maintained in clinics:- CV and copies of educational and related professional certificates - Leave status - License for vehicle driver - Show cause results - Required qualification/training for the post - Annual performance evaluation Franchisee did not exceed its line item beyond 10% without FMOs written permission PD must sign appointment letters of all staff Project Directors own appointment letter signed by the Chair person of the 26
Personnel Management
5. 6. 7.
8. 9. 10. 11. 1. 2. 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. 5.
Franchisee EC committee or a person nominated by the Franchisees EC All regular staff is entitled 60 % benefits on basic salary as approved in the contract agreement A separate bank account is maintained for P.F if any. Income Tax on salary payment and vat from purchase are deducted at source as per GoB guidelines Festival Bonus @ 1.5 months basic salary is paid to employees yearly eligible for Bonus as per franchisee or FMO guidelines Unreasonable, unallowable or un allocable Personal expenses Bribes, Tips Fines/ demurrage Entertainment (amusement diversion, social, sports, alcoholic beverages) Advertisement (except recruitment or program performance related) Contingencies (Future or unknown condition) Un supported cost Franchisee is registered with Social Welfare Department Franchisee is registered with NGO Affairs Bureau Each Static clinic has DTC approval Clinics complies MCP, Tihart, Helms amendment and displayed in Consent forms for IUD, NSV and Norplant preserved and Registers are maintained in clinic
Expenditure incurred are not:
Compliance of Laws
27

SSFP Finance and Accounting Manual

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SSFP Finance and Accounting Manual

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Finance & Accounting Manual

For Franchisee and Smiling Sun Clinics

Md. Rezaul Karim Abdul Motin

Resident Technical Advisor

Prepared on December - 2009

Place : SSFP, Gulshan, Dhaka-2. Date : 21 January, 2010 3

(Juan Carlos Negrette) Chief of Party Smiling Sun Franchise Program

Chapter 02 - Record Keeping

2.12 2.13 2.14

Chapter 03 - Financial Reports

Chapter 04 - Budget and Cost Classification

Chapter-05 - Banking Procedure

5.3 5.4 5.5 5.6 5.7 5.8

30 30 30 30 30 31 32-33 32 32 32 32 33 34-41 34 35 35 35 37 37 37 38 38 39 39 41 42-44 42 42 42 42 42 43 43 43 44 45-47 45 45 45

Chapter - 06 Staff Travel and Perdiem

Chapter 8 - Internal Control

9.4 9.5 9.6 9.7

Page no 1 2 3 4 5 6 7 8 9 10 11 12-17 18 19 20 21 22 23-27

Group / Type of Account

2.5 Petty Cash Book (Attachment -01)

2.11 Ledger Book (Attachment 08)

Financial Accounting system Flow charts

All Cash / Bank payment

All Cash / Bank receipt

All non-cash transaction

Debit / Payment Voucher

Credit / Receipt Voucher

Transfer / Contra Voucher

Office equipment Other equipment

Vehicle - Ambulance - Bi-Cycle, - Motor Cycle Furniture & Fixture

Medical Equipment Lab Equipment IT Equipment Office Equipment Generator Air-Conditioner

Budget and Cost Classification

The main reasons are:

Staff Travel and Perdiem

Office Supplies Others Others Printing Office Supplies

Clinic Supplies Others Clinic Supplies

Attachment-02, Salary Register

Smiling Sun Franchise Program

Deducation I. PF Other Tax 11 12 13

Signature of the Recipient 12

Prepared by: ________________________

Reviewed & Approved by: ________________________

Name of the Recipient: .. Signature with date: .

Attachment 04, Payment Voucher

Smiling Sun Franchise Program

Attachment 05, Receipt Voucher

Smiling Sun Franchise Program RECEIPT VOUCHER

Attachment 06, Journal Voucher

Smiling Sun Franchise Program Journal Voucher

Amount in Tk. Debit Credit

Taka (In Word):

Prepared by: Signature: . Name: Designation: .

Approved by: (PD / Clinic Manager)

Attachment 07, Cash / Bank Book

Smiling Sun Franchise Program

Cash / Bank Book

Prepared by: Designation:

Reviewed by: Designation:

Attachment 08, Ledger Book

Smiling Sun Franchise Program

Budget Line Item: Approved Budget for the Year:

Attachment- 9, Cash flow Statement (Receipts and Payments Accounts) Sample

Sample Attachment- 10, Income Statement (Income and Expense Account)

HQ / Clinic Name: Clinic ID: ________