POSITIVE ACTION FOR DEVELOPMENT

/PAD/

Financial Policies & Accounting

Procedures Manual

September, 20111
Dire Dawa,,Ethiopia

Positive Action For Development Finance Manual Page 1

Table of content

1. Introduction ---------------------------------------------------------------------

1.1 Background ------------------------------------------------------------------------

1.2 Objective of the manual ----------------------------------------------------------
1.3 Methodology -------------------------------------------------------------------------
1.4 Organization of the manual ------------------------------------------------------
1.5 Application of the manual ---------------------------------------------------------
1.6 Authority ---------------------------------------------------------------------------------

2. Financial and Accounting policies

2.1 Accounting base -----------------------------------------------------------------------

2.2 Accounting system --------------------------------------------------------------------
2.3 Accounting rules -------------------------------------------------------------------------
2.4 Fiscal year --------------------------------------------------------------------------------
2.5 Cash and Cheque receipts -----------------------------------------------------------
2.6 Payments ----------------------------------------------------------------------------------
2.7 Size of Petty cash fund -----------------------------------------------------------------
2.8 Petty cash custodianship --------------------------------------------------------------

3. Document Maintenance and Preservation

3.1 Used financial documents -------------------------------------------------------------

3.2 Unused financial documents ---------------------------------------------------------

4. Purchasing practices ----------------------------------------------------------------------

5. Purchase committee -----------------------------------------------------------------------
6. Advance clearance practices -----------------------------------------------------------
7. Payday ---------------------------------------------------------------------------------------
8. Unclaimed salary --------------------------------------------------------------------------
9. Provident fund -----------------------------------------------------------------------------
10. Severance pay --------------------------------------------------------------------------
11. Bonding and Indemnity -----------------------------------------------------------------
12. Inventory valuation, Inventory Obsolescence -------------------------------------
13. Fixed assets management ------------------------------------------------------------
14. Authority limit -----------------------------------------------------------------------------
15. Cheque signatories -------------------------------------------------------------------
16. Routing of payments -------------------------------------------------------------------
17. Cost centers -------------------------------------------------------------------------------
18. Annual audit -------------------------------------------------------------------------------
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19. Allowances -------------------------------------------------------------------------------
19.1 Per diems ---------------------------------------------------------------------
19.2 Guidelines to be followed for per diem & accommodation -----------
19.3 Accommodation allowance -----------------------------------------------------
19.4 Day allowance --------------------------------------------------------------------
19.5 Transport allowance ------------------------------------------------------------
19.6 Acting allowance -----------------------------------------------------------------
20. Cash and Bank accounts ----------------------------------------------------------------
20.1 Cash and cheque receipts ----------------------------------------------------
20.2 Petty cash payments ----------------------------------------------------------
20.3 Cheque payments -------------------------------------------------------------
20.4 Bank reconciliation --------------------------------------------------------------
21. Account receivable ---------------------------------------------------------------------

21.1 Staff debtors and sundry debtors -------------------------------------------

21.2 Deposits and prepayments ---------------------------------------------------
22. Inventory management ---------------------------------------------------------------

22.1 Purchasing --------------------------------------------------------------------------

22.2 Inventories --------------------------------------------------------------------------
23. Fixed asset --------------------------------------------------------------------------------
24. Liabilities -----------------------------------------------------------------------------------
25. Fund balance -----------------------------------------------------------------------------
26. Revenue -----------------------------------------------------------------------------------
27. Expenses ----------------------------------------------------------------------------------
28. Budgeting -----------------------------------------------------------------------------------
29. Financial reporting ----------------------------------------------------------------------

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I. Introduction

1.1 Background

Positive Action for Development, founded in June 6, 2011 as an

indigenous and a non-governmental organization established to
contribute positively to efforts by government and other non
government bodies to improve the socio-economic condition of the poor
and marginalized parts of the community.

Currently, Positive Action for Development is operating in Dire Dawa

town administrative region. Positive Action for Development has a
head office in Dire Dawa, in order to effectively run and control its
activities.

Positive Action for Development’s activities are supported by funds

obtained from International NGOs and locally mobilized resources.
Therefore, the management is highly conscious on the effective use of
resources. Also it greatly believes in transparency because it enhances
acceptance and credibility. On the other hand, transparency is a result
of a good financial management and accounting system as well it is
recognized by the management of Positive Action for Development.

Though Positive Action for Development designed financial

management and accounting system that has enabled it to meet its
reporting requirements, the management still believes that the system
requires a revision in order to meet the prevailing condition of the
organization.

1.2 Objective of the Manual

The following are the objectives of this manual:

 Define clearly the financial and accounting policies of Positive Action

for Development ,
 Put in place an adequate internal control system,
 Put in place a system that will provide adequate control over the
resources of the organization, and

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 Create a system that will enable Positive Action for Development to
meet effectively the reporting requirements of donors, government
agency and other concerned bodies.

1.3 Methodology

The manual has been prepared mainly by Positive Action for

Development on the basis of the organization existing Financial Policy
and Procedures Manual.

1.4 Organization of the Manual

This manual is divided into thirty parts. The first part is the
introduction part in which background, objectives of the manual,
methodology and other related topics are presented. The second part is
on the financial and accounting policies adopted by Positive Action for
Development. The third part deals with the cash and bank accounts
while the fourth part treats the accounting aspect of payments including
bank reconciliation.

The policy has put direction how to treat Accounts receivable, inventory
management and procurement procedures. The acquisition and disposal
of fixed assets, liabilities, revenue, expenditures, and fund balance are
separately shown in the manual. The sub grants management, budget
preparation, approval and financial reports are also included in the
manual.

Further to the above, forms and record books deemed necessary for the
proper operation of Positive Action for Development are given as
annexes to this manual.

1.5 Application of the Manual

The most important aspect of the application of this manual is staffing

the accounting unit of Positive Action for Development. The unit
should have not only qualified and experienced personnel but also the
number should be adequate to meet the minimum requirement that a
good internal controls system demands. It is the personnel that make a
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system operate as planned. Another aspect which is not less important
than the staffing aspect is the provision of equipment which warrants
not only quality work but also efficiency.

1.6 Authority

The issue and implementation, and when necessary the revision, of this
manual will be made with the approval of the Board of Positive Action
for Development.

2. Financial and accounting policies

2.1 Accounting Base

The accounting of Positive Action for Development is based on
double entry book keeping and accrual basis of accounting.

2.2 Accounting System

Positive Action for Development follows decentralized
accounting system, i.e., each of its program offices or units
maintain and close their respective accounts.

2.3 Accounting Rules

Positive Action for Development follows the rules of Generally
Accepted Accounting Principles and practices.

2.4 Fiscal Year

The fiscal year of Positive Action for Development runs from
January 1 to December 31 of every calendar year.

2.5 Cash and Cheque Receipts

 All receipts of Positive Action for Development shall be
acknowledged by its official receipts.
 All collections made by each cashier at each site whether in
cash or in cheque shall be deposited to a bank account
intact on the date of collection or on the following day.
 Personal checks are not accepted by cashiers in settlement
of obligations of any kind unless the checks are certified.

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 Cashiers shall never keep third party funds in the
organization’s safes. If found so, the fund shall be
delivered to the organization against official receipt.
 Cashiers shall never accept post-dated cheques.

2.7 Payments
 All payments of Positive Action for Development shall be
effected by cheques unless the amount involved is less than
Birr 1,000 that writing a cheque will not be necessary. In that
case, payment will be effected from the imprested petty cash
fund.
 No expenditure is to be effected by finance unless properly
approved or is an integral part of the procedure that
specifically excludes written approval. Regardless of the
circumstances, all expenditures recorded by finance must be
supported with proper evidence to prove that a legitimate
transaction has taken place. Only original documents
accepted for payments.
 It is not permitted to make payments for Positive Action for
Development’s activity by borrowing money from individuals
or institutions.

2.8 Size of Petty Cash Fund

 The size of Positive Action for Development’s petty cash fund
shall be determined on the basis of the size of the operation of
the programs and the decision of the Director/Finance
Manager. The Funds shall be replenished when 80% is
utilized.

2.9 Petty Cash Custodianship

 Petty cash should be kept with the respective program office
cashier. The cashiers are fully responsible for their holdings.
2.10 Purchase Fund
 Purchase fund of Birr 2,000 should be kept with the respective
Admin Support Officer or purchaser to meet small amounts of
purchases.

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3 Document Maintenance and Preservation

3.1 Used Financial Documents

All used financial documents should be kept under the
custodianship of the finance unit. Retention and destruction
of audited financial documents should be made in
consultation with the prevailing rules and regulations of the
Government.

3.2 Unused Financial Documents

All unused documents of Positive Action for Development
should always be kept under key and lock in store. A
responsible person should be assigned to keep the documents.
Issuance of unused documents will be made upon
confirmation that the previously issued one has been properly
and fully utilized. Annual inventory of unused documents
shall be taken at the end of each fiscal year.

4. Purchasing Practices

 All purchases of less than Br. 1,000 shall be in cash.

 All purchases in excess of Br. 1,000 but less than Br. 15,000
shall be made by collecting at least three pro forma invoices
and bid analysis should be carried out by the purchasing
committee and should obtain an approval by the Program
manager.
 All purchases in excess of Br. 50,000 shall be made bid
announcement and bid analysis should be carried out by the
purchasing committee and should obtain an approval by the
Director, unless the following conditions occur:

 The supplier of the commodity is the sole manufacturer

or agent of the commodity to be purchased.
 Prices of the commodity to be purchased are legally pre
determined and tariffs are pre set.
 If it is expected that bidding will not bring change in
terms of prices or quality.

 All purchases shall be received against Goods Received Note

and all issues shall be against Store Issue Voucher.
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 All purchases should be requested and initiated by the
sectors/program office through Purchase Requisition format.
 All purchases should be made on cash basis.

4 Purchase Committee
The committee shall be established by the Program me managers
in consultation the Director/Finance Manager.

5 Advance Clearance Practices

 Travel advance shall be cleared within 15 days after the return
of the traveler from field.
 Salary advance should be cleared in the month in which it is
given.
 Purchase advance should be cleared within three days after
items purchased are delivered to store against the appropriate
store documents.
 Project advance shall be cleared as soon as the project is
completed.
 In all cases, no additional advance shall be given unless the
outstanding ones are cleared.

6 Payday
Positive Action for Development ’S payday shall be the 25th day
of every Gregorian month unless such date falls on public
holidays or weekends.

7 Unclaimed Salaries
Unclaimed salaries shall be paid to the beneficiary after clearing
the causes of the delay and obtaining official approval.

8 Provident Fund

The organization keeps the provident fund of the regular

employees separately by opening saving account for each
employee. Employee, who has a service year of one year, is
eligible to claim 75% of the balance shown on the passbook, but
the payment will be effected for valid reasons only and after
obtaining the Director’s approval. The employee could request
their PF everyone year.

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9 Severance Pay
Positive Action for Development shall make a provision for severance pay at
the end of each quarter of the prevailing fiscal year. Severance payment will be
made as per the prevailing rules and regulation of the Government.

10 Insurance and indemnity

 Positive Action for Development shall insure its staffs for Group and
accidental insurance.
 Positive Action for Development shall insure its cashier(s) for fidelity and
money insurance. The management shall set the amount of monthly
indemnity.
 Positive Action for Development shall insure all its fixed assets for
burglary, fire and lightening. This insurance required for office and
residential buildings, store items, workshop tools etc. list showing
reasonable value of the assets to be insured is a basic requirement to be
submitted to the insurance company.

11 Inventory Valuation, Inventory Obsolescence

Inventory of Positive Action for Development, if there is any, shall be valued at

cost. In case of obsolete stock disposal the management committee shall decide
on the items, which amounts up to 10,000 Birr, where as regarding the items,
whose value more than Birr 10,000 shall be decided by the Director.

12 Fixed Assets Management

 Fixed assets acquired by Positive Action for Development shall be recorded

as expense at the time of acquisition. If the original cost of a fixed asset is
not known, the purchase committee should estimate its value for record.

 All fixed assets having a purchase price of Br. 2,000.00 and a useful life of
more than one year shall be recorded in the fixed assets register. For the
fixed assets which have a value of Br. 2,000 and above appropriate
depreciation shall be calculated on each.
 Annual inventory of fixed assets shall be taken at the end of each fiscal
year and reconciled with record.

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 Fixed assets shall be disposed off only as per the stated in inventory
valuation and obsolescence.
 Positive Action for Development’s vehicles shall be used for the
organization’s business purposes only and each driver shall maintain a
logbook.

13 Authority Limit

In order to smoothen routine or day to day operations, the following authority

limits regarding authorization of expenditures is put in place.

 The executive director or his official designee shall authorize any one-time
payment in excess of Br. 10,000.00.
 The program managers of each unit shall authorize any one- time payment
of up to Br. 10,000.00.

14 Check Signatories
 Signatories of checks must be authorized by the Board.
 Signatories shouldn’t be from the same department. They should be from
two different responsibility areas, these are:-
 Operational or implementation responsibility area, and
 Financial responsibility area.
 Each check should be signed by at least two officially designated personnel.

15 Routing of Payments

All payments should come directly and/or pass through the Finance section of
each program of Positive Action for Development thereby enabling the section
to prepare the necessary payments in accordance with the policy of the
organization.

16 Cost Centers

Different types of projects such as health service, education service,

environment etc, are considered as cost centers to which the organization’s
expenditures are charged or absorbed.

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17 Annual Audit

Positive Action for Development’s accounts shall be audited annually by an

external auditor recognized by government agency.

18 Allowances

19.1 Per diems

Per diems will only be paid if a staff spends a night away from his/her duty
station for Positive Action for Development’s duty. This does not apply to staff
movements within the intervention area. The rate will be applied as per the
Human Resource Policy of Positive Action for Development.

19.2 Guidelines to be followed for per diem and accommodation

 All per diems must be recommended by the immediate supervisor who has
the responsibility to evaluate the necessity of the travel, the number of days
required during the travel stay, the departure and arrival times, etc. before
approving travels.
 Travel requiring above one month’s stay should get special approval of the
Director.
 If for some reason, the person in question stays longer than the expected
period, extra costs will have to be refunded by the organization upon
his/her return.
 Reimbursements for accommodation costs shall be effected by Positive
Action for Development only upon submission of authentic receipts from
hotels. pensions and lodges upon return from duty to Finance Section.
 Unless there is approval from Program Manager, Financial Manager or
Director, per diems will not be paid in places other than the place of
assignment.
 Employees who have taken travel advance should clear their accounts by
completing “Business Advance and per diem Claim Form” within five
days upon their return.
 The “perdiem advance and per diem Claim Form” should be reviewed
and approved by the immediate supervisor before it is presented for
payment to Finance section.
 An employee who has not cleared his previous business /travel advance
is not permitted to take another advance.
 If an employee does not clear his/her business/travel advance within the
month upon his/her arrival, salary will be withheld until clearance.
 Care must be taken that travel advances are limited to minimum days by
discouraging allowances for contingencies.

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19.3 Accommodation Allowance

Accommodation Allowance is the reimbursement of actual expenditure

incurred and will be paid for lodging hotel rooms when a staff is on Positive
Action for Development’s duty travel.

19.4 Day Allowance

 If a staff does not spend a night but spends at least eight

hours on a trip out of his duty station and returns to his
place of work he will be entitled for a day allowance.
 Day allowances will be paid as per the Human Resource
Policy of Positive Action for Development. The allowance
does not include travel costs within the Program Area.

19.5 Transport Allowance

 Every Positive Action for Development regular staff shall

be entitled to a monthly transport allowance.
 Only the Director shall be the official user of Positive
Action for Development’s vehicle. However, he/she shall
be obliged to pay fuel expense for private travels outside
of Dire Dawa.
 Other Positive Action for Development staff shall be
entitled to vehicle for private use upon the approval of the
manager.

19.6 Acting Allowance

 A staff, who assigned to act temporarily at the superior

position, will be entitled to “Acting Allowance” as per
human resource policy. Acting allowance is payable only
on movement to a higher post in a higher grade. Lateral
and downward movements will not be accompanied by
acting allowance.
 Acting allowance will be paid only if the staff holds the
acting position for a period exceeding fifteen consecutive
days.
 Payment for the acting allowance will be calculated
proportionally to the exact period of replacement and will
be paid at the time of monthly salary payments.

20 CASH and BANK ACCOUNTS

20.1 Cash and Cheque Receipts

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20.1.1 Definition
Cash is a medium of exchange for goods and services. It consists of
coins, notes, cheques on hand as well as cash on deposit with Banks. It is
the most liquid of all assets and hence, it requires the most efficient
system of recording and controlling.

20.1.2 Origination
Cash receipts originate from donations, contributions, grants, collection
from sales of scrap materials, etc. It is collected either in the form of
cash, cheques and bank transfers.

20.1.3 Documentation

20.1.3.1 Cash Receipt Voucher - Annex 1

 This is the document used to acknowledge cash receipts. It
is prepared in three copy; original for the payer, 1st copy
for accounts, and the 2nd copy remains in pad. This
document is pre numbered and printed.
 Bank Transaction Formats
Deposit slips for cheques and cash, bank credit advices,
bank statements, and bank correspondences are prime
sources of accounting transactions between the bank and
Positive Action for Development.

20.1.3.2 Recording Cash and Bank Receipts

 Each cash and cheque receipt transaction is recorded in the prime

document of cash receipt voucher.
 Journal entries are made on each Cash Receipt Voucher in order
to facilitate posting.
 The journal entries are posted to the general ledger accounts as
designated for cash and bank.
 Bank transactions emanating from the bank through bank credit
advice, bouncing cheques of collections shall be investigated and
verified for correctness and fairness.
 Reversal journal entry shall be passed on bounced cheques if not
cashed immediately.
 Bouncing cheques shall be returned for collection after
notification and review by senior staff and signing for receipts.

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 Cheques deposited in the bank by outsiders shall be recorded in
the general journal after identifying the purpose and source of
deposit.

20.1.4 Internal Controls

20.1.4.1 On Cash Receipt Vouchers

 Make sure that receipt vouchers are pre numbered and printed by
order of the proper authority.
 Ensure all cash receipts are recorded in the cash receipt vouchers.
 Ensure writings in cash receipt vouchers are completed only in ink.
 Ensure only one receipt voucher pad is issued to the cashier against
signature and that a new pad is issued after checking all the leaves of
the previous pad is used.
 Make surprise cash counts at irregular intervals.
 Make cash transfers through banks only.
 Ensure the one, who substitutes the cashier while she/he is taking
leave, is honest and capable of carrying out the duty. Ensure daily
cash collections are deposited intact in the bank account of the
organization
 Ensure physical controls over cash such as:
 Fidelity and money insurance for the cashier
 Insurance coverage for cash in premises and in transit
 Protection of cashier by accompanying guards when
carrying cash from and to banks
 Ensure providing fireproof, safe box, reinforced separate
room and dependable lockers.

20.1.4.2 On cheques

 Never accept post-dated cheques

 Search for forgeries on cheques to be received
 Ensure receipts are deposited at bank in tact
 Notify senior management about bouncing cheques
 Segregate the duties of cashier and accountant
 Bank reconciliation shall be done by an accountant who
doesn’t have accesses for cash and cheque.
 Post dated cheques; disputed items, unidentified receipts
of cheques etc. should be investigated and reported

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20.2 Payments

Payments are disbursements against receipt of goods and services.

Payments are effected either by cash or cheques.

20.2.1 Petty cash Payments

20.2.1.1 Definition

It refers to a system of imp rest fund established to meet small and

recurring expenses, which would not normally require cheque
preparation. Petty cash fund could be general or specific to a program.

20.2.1.2 General Petty Cash Fund

 Operation
Operation of the petty cash fund should follow the imp rest system
where the cash on hand plus the documents paid out of the fund
should equal to the established petty cash fund at any one time.

 Payment Limitations
The maximum amount to be paid out of the general petty cash
fund at any one time should not exceed Birr 750.

 Replenishment
Petty cash fund shall be replenished when 75% of the established
fund is utilized or at the end of the accounting period.

20.2.1.3 Special purpose petty cash fund.

 Special purpose petty cash funds may include petty cash fund for
projects, petty cash fund for specific projects, etc.
 Special petty cash funds facilities are created in writing specifying
the amount, the person in charge of the fund, its purpose and the
specific conditions of its expenditure and signatories to the petty
cash fund.

20.2.2 Documentation

20.2.2.1 Payment Request/Order. - Annex 4

This is a format originating from all activity centers. It shows the
amount requested the project to be charged with a brief explanation
of the reasons for payment. It is also used for cheque payments.

20.2.2.2 Petty Cash Payment Voucher (PCPV) - Annex 5

This Voucher is printed and pre-numbered. It is prepared in two
copies and the original goes to accounts so as to use as a supporting
document while the second copy remains in the pad.
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20.2.2.3 Petty Cash Report and Reimbursement Request-Annex 6
Petty Cash Report and Reimbursement Request is prepared in two
copies and the original goes to accounts with the PCPVs attached to
it. In this regard, the cashier ensures that payments have been made
to the right person and after all supporting vouchers and documents
have been produced. Replenishment shall be made only to the extent
of the amount of the undisputed vouchers, while the disputed
vouchers, if any shall be returned to the cashier.

20.2.3 Internal Controls

20.2.3.1 On the Petty Cash Fund

 Each petty cash fund must be operated on imprest system where

fund amount is always equal to the sum of the cash of the fund
and the sum of the vouchers paid from the fund.
 Segregate petty cash funds from other collections of cash and
funds.
 Ensure that the entries in the PCPVs are completed in ink and the
amounts in words and figures must be the same.
 Make sure that all payments made from petty cash fund should
not exceed the upper amount set.
 Accountants should make surprise Cash counts.

20.2.3.2 On petty cash payment vouchers

 Petty cash payment vouchers should be prepared in two copies.

They should be pre numbered and printed.
 Petty cash payment vouchers should be completed in ink.
 Signatories must be from senior staff positions and other than the
custodians of the petty cash fund.

20.2.3.3 On Petty Cash Replenishment

 Petty cash payment vouchers and supporting documents should

be received before replenishment.
 Make sure that the cheques for petty cash replenishments are
made to the order of the petty cashier.
 Petty cash payment vouchers and their attachments should be
stamped either “paid” or “replenished” immediately after a
replenishment cheque is signed.
 After signing on the cheque payment vouchers, replenishment
cheques should be collected by the cashier.
 Petty cash fund should be kept in safe.

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20.3 Cheque Payments

20.3.1 Definition

Check payments are ordering the bank to make cash payments to the
person or organization named in the check. Check payments are
transactions that reduce bank balances. Bank cheque payment practices
have the advantage of safe keeping cash, saving of cash counting time,
avoidance of the risk of carrying of large amount of cash, as well as
handling big cash payments.

20.3.2 Documentation

Cheque Payment Voucher (CPV) - Annex 7

This format is printed and pre numbered in a set of two copies. The
original copy with supporting documents is given to accounts for
processing. The second copy is retained in the pad.

20.3.3 Internal Control

20.3.3.1 General
Opening of bank accounts, change of signatories and closing of bank
accounts should be authorized and communicated to the concerned
banks immediately by authorized officials.

Further to the above, the following precautions should be taken as

regards to cheque and cheque payments.

20.3.3.2 On cheque payments

 Check preparation should be made by cashier who is independent of
voucher and invoices approvals.
 All payments of more than the petty cash limit should be made in
cheques.
 Segregation of duties of cheque payments, receipts, deposits, and
recordings of cheques should be in place.
 Prior to the preparation of payment vouchers, the validity of
attachments of supporting documents should be properly compared
with vendors’ invoices, Goods Received Notes, etc.
 Cheque payments should be made from properly budgeted amounts.
 The payment vouchers and supporting documents should be
canceled with a “Paid” stamp to avoid double payment.
 Each cheque should be signed by at least two authorized signers.

20.3.3.3 On signing of cheques

 The Board should delegate the check signatories.

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 Authorized signatories should be independent of cheque payment
voucher preparations, collections, and disbursement duties.
 Each cheque should be signed by two of the authorized signatories of
cheques.
 Blank cheques should not be signed.

20.4 Bank Reconciliation

20.4.1 Definition
 A Bank Reconciliation Statement (Annex 8) is prepared to reconcile
the differences between the ending balance of bank statement and
books of Positive Action for Development , and the difference may
arise because of delay in either party in recording a transaction or of
an error.

 Bank accounts should be reconciled with the records of Positive

Action for Development as soon as the bank statements are received
from the bank and a bank reconciliation statement should be
produced in detail and include the date, reference numbers and
descriptions of all outstanding items.

 Bank reconciliation statement is prepared by the program accountant

and obtain approval from the program manager

20.4.2 Documentation

Statement of bank reconciliation (Annex 8) will be prepared on the basis

of the following documents:
 CRV (cash receipt voucher) - summarized
 Deposit slips (summarized)
 Bank debit and credit advises - Summarized
 Check Payment voucher - Summarized
 Check stubs and list of voided cheques
 Previous month(s) bank reconciliation statements

20.4.3 Recording Bank Transactions Based on Bank Reconciliation:

Bank advises (both debit and credit advises) received from the bank are
to be journalized. Bank deductions in regard to cost of cheque books are
journalized by separate JVs, the source document being the bank
statement.

20.4.4 Internal Control on Bank Reconciliation

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 Check the date, number and amount showed on every cheque stub
agrees with the corresponding date on the bank statement and note the
difference, if any, and that voided cheques are not cashed.
 Check all deposits are included in the month’s Bank Statement.
 Ensure that bank statements and reconciliation reports are properly filed
for future references.
 If a change made on in the signatories of bank accounts, the bank should
be notified immediately about the change and the effective date of the
change.
 Make sure that the bank reconciliation statement prepared by an
independent person who does not have an access for the preparations of
cheques and deposits.
 When collecting cheque books, the person collecting should check that
all the cheque leaves are in place and in sequence.
 Voided cheques should be kept attached to the cheque stub.

21 Accounts Receivable

21.1 Definition

Accounts receivable refers to money due from third parties both within
the organization and outside. Receivables in POSITIVE ACTION FOR
DEVELOPMENT include project advances, salary advances, travel
advances, purchase advances etc; and the receivables of the third parties
will include deposits and prepayments, fund receivable, sundry debtors,
etc.

21.2 Accounts Receivable - Staff Debtors and Sundry Debtors

 Money is advanced to employees as travel advance only for approved

business travel of Positive Action for Development.

 There are circumstances in which some activities require disbursement

of money in advance to external third parties to access their services
and/or to facilitate discharge of contract obligations.

 Staff advances are monies advanced to staff of Positive Action for

Development. This includes salary advances and staff loans.

21.3 Deposits and prepayments

 These refer to a sum of money paid in advance and may be reimbursable

in the future. This is used particularly to account for money kept by
service giving parties in a form of guarantee deposits, and office rent.

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21.4 Documentation

 Business Advance and Per diem Claim Form - Annex 9

This format is prepared in two copies. The original copy goes to
accounts; the second copy is given to the traveling employee.

21.5 Internal Controls

21.5.1 On project Advances

 Project advances should be in writing & authorized.
 Advances to third parties should be on the basis of written agreements.
 Follow up should be made to ensure the utilization of the advance is for
the intended project.
 Project advances should be cleared within specified time.

21.5.2 On staff Advance

 Request for salary advance must get an approval by a responsible
official.
 Salary advance should not exceed the current monthly salary of an
employee.
 Salary advance must be liquidated in full at the time of the salary
payment in which the advance taken.
 Staff loans must be recovered within the time stipulated in the HRD
policy.

21.5.3 On Travel Advance

 Travel Advances must get an approval by the higher officials of Positive

Action for Development.
 Travel advance should be limited to reasonably expected expenses such
as transport, lodging, meals, and reserve for unforeseen expenses.
 Travel advances must be cleared in full within two days upon return
from trips.
 If the traveler is not in a position to settle in due time the advance he has
taken, the settlement period will be changed by the approval of the
Programme Manager or Director.
 Additional advances must not be given before the previous advances are
liquidated. If the traveler has not returned from the previous trip and
requests an additional travel advance, the request should get an
approval by the relevant body.

21.5.4 On Purchase Advance

 Purchase advances should be made in cheques in favor of vendors.
 Purchase advances should be cleared within specified period against the
invoice of the supplier and goods received note.
 Purchase advances made in cash, if any should be liquidated within the
specified day or period.

21
21.5.5 On Prepayment
 Unexpired portions of prepaid expenses should be recognized and
adjusted to a receivable account as at the end of the fiscal year.

21.5.6 On Fund Receivable

 Money of restricted funds should not be used for other Fund
expenditures.

22 Inventory Management

22.1 Definition

Inventory here refers to any tangible physical materials, be it

consumable such as stationery, fuel, or long life items commonly known
as fixed assets such as vehicles, furniture, office equipment etc. The
acquisition of such property could be through purchases or donations
in-kind.

The operation and the accounting of inventory management is divided

into two major functions: i.e. Purchases and Inventories

22.2 Purchasing

22.2.1 Definition and General Principles

Purchases are acquisition of goods and services at the least price that the
market can offer. To achieve the best advantage in purchasing, the
following policies are set in place:
 All purchases exceeding Birr 1,000 should be through a purchasing unit.
 All purchases shall be made to the satisfaction of the requesting unit as
regards specification, quantity, quality, size, and packing and delivery
date.
 All purchases should be made in the most appropriate legal terms
and business ethics.
 All purchases should be executed in accordance with the
condition declared in the policy part of this manual.

22.1.3 Obtaining the right price

 Price is the figure appearing on the seller’s invoice and should be seen as
one element in relation to total cost which also includes such costs as
order processing, transportation, receiving, delivery, handling, etc.

 There are two methods of determining the right price. These are:
Competitive bidding, and Negotiation.

22
 Competitive bidding is a good method of obtaining a fair price when the
following conditions prevail:
 The specifications of the item to be purchased or service to
be rendered are explicitly clear and standardized to both
buyers & sellers.
 The market consists of an adequate number of sellers or
the supplier is not a sole agent or manufacturer.

 Negotiation or purchases without tender can be used if the following

conditions prevail:
 The supplier is the sole manufacturer or agent
 Those prices are legally predetermined and tariffs are pre set
by official proclamations and when the prevailing market
accepts prices.
 Bidding will not bring any change in terms of price & quality.

22.1.4 Purchase values for competitive bidding

Competitive bidding is a method of purchasing in which vendors are

requested to quote the prices. The bids received are received as
recommendation made by a purchase committee

22.1.5 Purchasing Committee

A purchase committee consisting of 3-5 persons with the following

members shall be formed as spelled out in the policy part of this manual.

22.1.6 Documentation

22.1.6.1 Purchase Requisition - Annex 10

This format will be filled in two copies by the user unit. The original
goes to the Admin support officer. Purchasing process shall be
carried out to budgeted and approved items only.

22.1.6.2 Offer Evaluation Sheet - Annex 11

This format is a multi-column, printed or stenciled work sheet with
the items to be purchased listed in rows and the prospective
suppliers in columns. Towards the end of the Offer Evaluation
Sheet, the conditions of purchase are disclosed, if there are
provisions of discounts, delivery dates, taxes, delivery conditions,
and other conditions relevant information to purchase decisions.
Offer Evaluation Sheets are made only to responses of more than
three quotations. Offer Evaluation Sheets are prepared in three
copies for the use of Purchase Committees, Purchaser and purchase
file. The results of the evaluation have to be recorded and signed.

23
22.1.6.3 Internal Controls
 All purchase requisitioning activities should comply with the
purchasing policies and procedures of Positive Action for Development.
 All requisitions should be properly supported and authorized in
accordance with Positive Action for Development’s authority limit set
up.
 Purchase requisitions should be properly signed by the respective
authorized personnel and has proper accounting distribution and
budget reference.
 Material receipts should be prepared reflecting the goods and services
received at time of receipt and that incorrect goods delivered should be
returned by the admin support officer to the supplier and that such
items should not be recorded.
 All outstanding and not yet received items should be cleared within a
reasonable period of time.

22.2 Inventories

22.2.1 Definition
Inventories are stock of tangible goods held in stores.

22.2.2 Documentation

22.2.2.1 Stores Requisition - Annex 12

It is prepared in two copies by the requesting user unit. Both copies
are detached from the pad and delivered to the stores unit. The
second copy shall be returned back after getting the signature of the
person in charge of stores, as evidence of receipt of the original
requisition. The copy of the requisition is filed in the
project/program file. Store Requisitions shall bear budget
references and shall be processed only when funding sources and
budget line items are cross-referenced.

22.2.2.2 Goods Received Note (GRN) - Annex 13

This document is a pre numbered and printed voucher which is
prepared in three copies to acknowledge receipt of goods. The GRN
is prepared by the store keeper after the inspection of the physical
conditions of the materials for specifications, quality, quantity,
physical damage; after comparing the delivery note with the
purchase order, and the purchase requisition. The distribution is as
follows:
i. Original to purchaser
ii. Second copy to Accounts, and
iii. Third Copy is retained in Pad.

24
22.2.2.3 Stores issue Voucher (SIV) - Annex 14
The delivery of goods to users or requesting units is effected by the use
of the Stores Issue Voucher. The SIV is pre numbered and printed in
three copies. The distribution of copies is as follows:
i. Original to accounts
ii. Second copy to user
iii. Third copy remains in pad.

22.2.2.4 Stock Card - Annex 15

This is a stock control record kept for each stock item by the unit to
be assigned by the accounting unit segregated from store functions.
It shows the receipts and issues of each stock item in quantity and
value.

22.2.2.5 Inventory Count Sheet - Annex 16

This is form used to itemize inventory counts. It could be printed or
stenciled. It is prepared in two copies.

22.2.2.6 Internal Controls

 Receipts of all donated/purchased materials should be filled in Goods
Received Notes and reported to accounts.
 Materials should not be held for the user for more than a specific period.
The user should be contacted to determine whether the goods should be
put into stock or disposed off.
 Each material issued from store should be properly documented and
delivered to the appropriate final user.
 Annual inventory taking and inventory certification should be carried
out at least once in a year. The original goes to accounts and the 2nd copy
to the storekeeper. This form has to be signed by the storekeeper the
counting officer and a witness.

23 Fixed Assets

23.1 Definition

Fixed assets refer to tangible items of durable nature that could be used
in operations of the organization for more than one year. During their
life time of operation, the economic usefulness of fixed assets will
declines over time (depreciation).

Positive Action for Development recognizes tangible items with the

following characteristics as fixed assets:

 That they have a purchase price of Br 2,000.00 and above.

 That they have an expected service life of more than one year.

25
Positive Action for Development holds fixed assets in the form of
vehicles, furniture, equipment, etc.

23.2 Acquisition of Fixed Assets

Positive Action for Development acquires Fixed Assets through

purchase for cash and/or donation in kind.

23.2.1 Acquisition by Purchase

Whenever fixed assets are purchased, the following procedures should

be observed.

 The purchase requisition should be filled properly by identifying

the funding source, budget line, and the amount budgeted. (It
shall be filled by the requesting dep’t.)
 The P R shall be approved by the relevant body.
 Purchase of fixed assets should follow the procurement
procedures of Positive Action for Development.

23.2.2 Donated Fixed Assets

In some cases, Positive Action for Development acquires fixed assets by

donation. If the cost of the donated item is not specified on the donation
certificate, the cost will be determined by at fair market value by the
purchase committee.

23.2.3 Principles of Recording Fixed Assets

23.2.3.1 Principles

 Fixed assets are recorded in a manner that is consistent with Positive

Action for Development’s accounting base (i.e. modified cash basis) and
reporting requirements.
 Fixed Asset Register shall be maintained containing detailed
information about fixed assets of the organization as a whole and shall
be used periodically to reconcile the physical existence of the assets with
the corresponding data.

26
23.2.3.2 Disposal of Fixed Assets

The procedures for disposal of fixed assets are:

 Top management of Positive Action for Development should

be responsible for the disposal of any fixed assets.
 The person in charge of the asset should prepare a written
proposal for the disposal of the asset that is no longer in use
stating the condition of the asset and the approximate value.
 The proposal is then approved by the relevant body of Positive
Action for Development, the donor in the case of restricted
fund and supervising government agency.
 If the a decision has been made on the item(s) to disposed off, a
fixed asset disposal certificate will be issued as per the
following procedures:

 The Fixed Asset Disposal Certificate is prepared

in triplicate by Finance Section on the basis of
information supplied by the location/unit
responsible for the asset. The following
information will be included:

a) Asset Number
b) Location
c) Description
d) Year of Acquisition
e) Original Cost
f) Net Book Value
g) Reason for Disposal/Write off
h) Method of Disposal
i) Estimated Income/Loss

 The certificate is signed by the program manager who

is responsible for the asset and by the FC as a formal
recommendation to the director. The certificate then is
forwarded to the Director for authorization.

 The finance section shall use the second copy of the

certificate to record the transaction.

 The original of the fixed asset disposal certificate is

retained by FC while the 1stcopy is sent to the concerned
program office.

27
23.2.4 Documentation

 In the case of assets acquired in cash/bank or credit, the documentation

requires purchase requisition, budget, pro-forma invoices, goods
receiving notes, payment vouchers, etc.
 When assets are acquired by donation, the documentation requires the
agreement, gift certificate, and hand over document, and the goods
receiving note.

23.2.4.1 Fixed Asset Register - Annex 17

 A register of all fixed assets should be maintained for all assets under
control of Positive Action for Development. Fixed Assets with value of
more than Br. 2,000.00 and a life of more than one year should be
recorded in the register.

 The register should contain the cost, location, employee responsible for
the assets, date of acquisition etc.

23.2.5 Depreciation of Fixed Assets

 The main purpose of calculating depreciation is to maintain the proper
recording of the Fixed Asset Register Book.
 The depreciation method of Positive Action for Development is straight-
line method.
 The depreciation rate is as follows:-
Motor vehicles 20% (per annum)
Furniture 10% (per annum)
Equipment (not include computers) 10 %( per annum)

23.2.6 Internal Control

 Only required assets, which can be used efficiently and effectively for
fulfilling the overall objectives of Positive Action for Development,
should be purchased.

 Fixed assets must be insured against such risks as fire, burglary, motor,
etc
 Physical inventory of fixed assets should be taken once in a year to
verify the existence and condition of the assets.
 The physical count should be compared with the register book, if any
discrepancy occurs, it should be clearly known and the necessary
correction should take place.
 Regarding authorization disposal of fixed asset should be implemented
as per art. 23.2.3.2

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24 Liabilities

24.1 Definition

Liabilities refer to obligations owed to third parties. In principle, this

may involve both external parties (organizations or individuals) as well
as members of the organization, such as, employees. The commonest
types of liabilities are income tax payable and unclaimed wages and
salaries payable. In the balance sheet, these items are classified as
current liabilities.

24.2 Current Liabilities

 Current liabilities are money due within one year. They include
Income tax payable: This is tax withheld from the salaries of
employees.
 Unclaimed wages and salaries: This account is used to consider, in
some rare situations, when some workers are not presented on
payday and the amount returned to Bank account.
 Sundry payable (liabilities originating from other sources).
 Severance Reserve: This is a reserve for future severance
payments.
 Retention Payable: This is amount retained from the payment to
contractors in accordance with the agreement to make a reserve
for future defects in construction.
 Provident Fund payable: It constitutes the provident fund
contribution of the organization.

24.3 Documentation

The documents such as agreements, HRD policy, Gov’t tax laws, etc.
used as a supporting document to pass necessary accounting entries.

24.4 Internal controls

 Income tax should be paid to the Inland Revenue Authority within one
month from the date of collection.
 Payment of retention money should be made as per the agreement.
 Unclaimed salaries should be paid according to the payment procedures
of the organization.

29
25 Fund Balance

25.1 Definition

A fund is defined as the accumulated balance of the difference between

the revenues received and expenditures incurred in an accounting
period. It is a balance sheet item, i.e. total assets are equal to total
liabilities plus fund balance. In the Revenue and Expenses statement,
fund balance represents the difference of revenue and expenditures.

All revenues received are classified as follows:

 In the case of restricted funds

 Where revenue is greater than expenditure the
difference between the revenue received and the
expenditure made is closed to a Funds Payable
Account.
 Where the revenue is less than the expenditure
(provided that the expenditure) is within the overall
budget approved and committed it will be closed to
a Funds Receivable Account.
 In the case of unrestricted funds, the difference between the
revenue and expenditure is included in the fund balance.
 In the case of contracts, the surplus or deficit shall be closed to the
fund balance.
 In the case of surplus/deficit from income generation activities,
the difference shall be closed to the fund balance.

25.2 Documentation
There are no separate documents for the fund balance. However, the
following books of original entry and project documents could serve as
source documents for initiating accounting action.

 Ledger cards
 Project Agreement
 Project Budgets

25.3 Internal controls

 Deficits on restricted funds should be recorded in the Funds Receivable

account and excesses should be recorded in the funds payable account at
the end of each fiscal period.

30
 Restricted funds should not be spent in excess of the ceiling budget (in
the case of the overage should not exceed 20% of the allocated budget)
without prior approval of the Director with the consent of the Donor.
 The spending of prior years’ fund balances needs an authorization of the
respective personnel of Positive Action for Development or the Donor.

26 Revenue

26.1 Source of Income

26.1.1 Income from Donors

Positive Action for Development shall solicit funds from domestic and
international donors for specific programs/projects.

26.1.2 Funds shall be credited to accounts pertinent to each program and

project thereof.
26.1.3 Income Generated by Positive Action for Development

 Positive Action for Development shall generate income based on

the principles of cost recovery to ensure sustainability.
 Income generated as per sub article 26.1.1 shall be used for the
specific purpose originally intended for. A separate account shall
be maintained for such funds.

26.1.4 Other Sources

 Funds shall also be raised from special events, gifts, fines of

sales scraps and other collections.

 Collections from sources mentioned in sub article 26.1.4.1

shall be deposited in a separate bank account and be
utilized for solving unforeseen problems of the program
areas and community motivation.

26.2 Remittance from Abroad

 At the time when budget is approved for a financial year a

remittance schedule showing the amount of money to be prepared
and sent to donors. Based on the remittance schedule the Director or
FC should request the Donor to release the fund.
 All the remittance received from donors and all expenditures
incurred in abroad on behalf of Positive Action for Development are
part of the income at the local currency received or as per the
expenditures by using the prevailing exchange rate.
 A review should be made by the finance manager every month on
the actual exchange rate and should be reported to the Director to

31
enable him to notify donors if there are a change in exchange rates as
stated above.
 Positive Action For Development shall request remittance from
international and domestic donors as per their respective financial
policy and procedures.

26.3 Exchange Rate

 To avoid the inconveniences on currency value fluctuations donors

shall be requested to remit their donations in USD/EURO.
 In the event of devaluation or increase in exchange rate of the Birr a
currency gain will arise which will be available for the program’s use
against a revised budget. However, if revaluation or decreases in
exchange rate of the Birr takes place Positive Action For
Development should reduce its local currency expenditure for its
program unless a specific authorization is obtained from donors.

26.4 Expenditure by donors

There are different types of expenses incurred on behalf of Positive
Action for Development by donors. In such cases, firstly, the FC should
verify whether the expenditure is proper or not and consequently
she/he has to ask the appropriate supporting document for the
expenditure they made.

26.5 Internal Controls

 Records should be maintained for donations including the donor’s

name, amount, date and the compliance requirement.
 A designated individual should be made responsible to follow up the
implementation of the donations in accordance with donor’s
requirements.( in most cases the Finance Officer is responsible)

 General ledger accounts should be opened for each donor.
 General ledger accounts should be opened for each income-generating
center.
 Donated materials should be physically inspected.

27 Expenses

27.1 Definition
Expenses are layouts of resources in the form of materials, labor, money,
and services to achieve the overall organization’s goal.

Expenditures are grossly classified as capital expenditures, where assets

are expected as a result of completion of a contract; and operating
expenses, where resources are consumed in the process of production of

32
revenue generating activities or completely consumed as a result of free
distribution in the case of humanitarian activities.

27.2 Program Expenditures

Programs require concentrated efforts towards the attainment of their

objectives and they are isolated from other operations as projects and the
expenditures made towards those ends are known as project
expenditures.

27.3 Kinds of Expenditures

Expenditures are regrouped and reclassified to facilitate meaningful

interpretations of economic analysis and financial information for
decision making. As inputs to any economic activity, expenses are
classified as program, capital and administration expenses.

27.4 Management and Administrative Expenses

These are expenses incurred but in no way related to any particular

project, operation or revenue generating activities. These expenditures
are accumulated in general overhead accounts until year-end and
distributed to activity cost centers on a selected and meaningful ratio.

27.5 Documentation
 Payment vouchers and supporting documents are the main
documents.

27.6 Internal Controls

 All expenses should be properly accumulated, classified and

summarized.
 Expenses of previous year should be compared with current year’s
expense reports and evaluated for differences.
 Expenditure coding should be properly reviewed prior to recording.
 Expenditures should be made from the related budgets and project
funds.
 All expenses should be included in the year-end reports.

27.7 Payroll Management and Labor Expense

27.7.1 Definition

Payroll (Annex 18) is a spread sheet with lists of employees of Positive

Action For Development by cost centers who are entitled for pay with
information concerning monthly payments due to them and deduction

33
for a pay period (the period covered by salary payment is called a pay
period).

Employees are entitled to receive their salary at the end of a pay period.
In this respect, a payroll is prepared at the end of the pay period
showing the earnings as well as the income tax and other deductions.
All payroll taxes are based on the earnings of the employees. Positive
Action for Development is required by law to withhold certain payroll
taxes from the salary paid to its employees. Errors in payroll record
cause incorrect payment of the payroll taxes and therefore it needs the
necessary precaution to be paid in the preparation of the payroll.

27.7.2 Documentation

 Payroll Register - Annex 18

The payroll register is described under item 11.5.1.

27.7.3 Terminated Employees

Terminated employees shall not wait for the payroll. They shall be
excluded from the payroll; and their final payment should be made
within seven working days from the date of the presentation of fully
signed clearance paper.

27.7.4 Internal Controls

 Payroll preparation and payment functions should be segregated.

 The Finance Officer should check the payroll.
 Information like pay rate, allowance, and service charge, if any, should
be made available to accounting unit at the time of employment.
 Payroll should be approved by the project manager or by the officially
authorized representative.
 Payment of salaries and wages should be made direct to employees or to
their legal representatives.
 Unclaimed pays, not paid out within one week from the effective
payday, must be deposited in bank.

28. Sub grant management

Positive Action for Development will made sub grant to third parties by
entering an agreement. The financial recordings and reporting of the third
parties should be in accordance with the Generally Accepted Accounting
Principles.
 Pre Award assessment - Before the award transfer to third party a pre
award assessment should be made of on the capacity of the institution
on the administering, recording and reporting.
 Training on the financial management shall be provided to the
institution if the need arises to do so.

34
 Ensure that all supporting documents for the expenditures are viable
and acceptable.
 Ensure that all expenditures are made as per the agreed document,
not used for other purposes.
 Before releasing the next installment, check the financial reports are as
per the stipulated in the agreement.

29 BUDGETING

29.1 Definition

Budget is a plan of operation based on the estimates often itemized, of

expected income and expenses, for a given period of time, which could
be prepared for one year or for multi-years.

29.2 Budget Information Requirement

Each project office has to prepare its budget requirements based on its
objectives and the activities required for implementations.

To carry out activities planned, each unit of the project office has to
prepare a break down of the required materials, human resource,
equipment and other services in quantity and value. To finance the
planned activities, information on source of funds such as commitments,
contributions in cash and in kind, free services, internal revenue
generations, etc., are required.

29.3 Need for Long term Budget Document

Long-term project document is the base for preparing the multi-year
project budgets. After the long- term project budget document gets
prepared, it can serve as a base for the preparation of the budget
document for the succeeding financial years. The long-term forecasts are
subject to revision in order to reflect the prevailing situations.

29.4 Need for Annual Budget

Annual budgets are plans of operations, which expressed in monetary
terms, for programs and services to be implemented in the following
financial year. The annual budgets are mainly used for the purpose of
controlling and monitoring the annual revenues and expenditures.

29.5 Elements and Forms of Annual Budget

The income and expenditure budget should include the expected
income and expenditure by line items that are going to be received and
incurred in the coming financial year. The elements of budget are mainly
Budgeted Revenue, Operational Expenditure, and Capital Expenditure.

35
29.6 Preparation of Budgets
 Program personnel are responsible for preparing annual plan of
operation.
 Finance controller is responsible for preparing the monetary
expression of the plan of operation.
 The income budget is prepared by Accounting Unit using the most
up-to-date information including grants and donations, internally
generated income, sales of assets, etc.
 All costs should ultimately be charged to project/programs; those
budget centers which are not belongs to the particular project
specifically should be allocated or apportioned to project cost centers
before finalizing the budget.
 When major fluctuation in price occurs or if the significant
components of the existing project have to be changed, at this
juncture, the budget may necessitate revision.
 After preparation of the budget or a recommended revised budget
should be sent to the donors at the earliest opportunity in order to
obtain approval before implementation.

29.9 Budget as a Measure of Performance

Budgets are prepared on the basis of the plan of operation which leads
to attain the overall objective of the program. Through the project period
expenditures incurred as per the approved budget. These expenditures
should be compared with the quantified performance so that budget
could be used as measure of performance.

30 FINANCIAL REPORTING

30.1 Definition and Description

Financial statements include: - Balance sheet, Revenue and Expenditures

Statement, Cash Flow Statement. Financial statements have specific
objectives, some of which are:

 Serve as information sources to management and other

authorities for planning and economic decisions.
 Provide donors/users with information for predicting,
comparing and evaluating earning and spending power.
 Judge management’s ability to utilize resources effectively in
achieving primary goals.
 Serve as source of disclosure for underlying assumptions with
respect to matters subject to interpretation, evaluation,
prediction or estimations.

Financial statements play very important role, therefore, they should

meet the qualitative characteristics of relevance, understandability,

36
reliability, verifiability, neutrality, timeliness, comparability and
consistency.

Each program office is required to submit a Quarterly Cumulative

Comparative Budget Report prepared to indicate budget variances, i.e.,
comparing actual expenditure with plan. If the variances are 10% or
more both ways, the reasons should be fully disclosed.

30.2 Types of Reports

30.2.1 Balance Sheet

Balance sheet is a statement showing the financial position of the
program/organization as at a specific date.

30.2.2 Statements of Revenue and Expenditures

The statement of revenue and expenditures shows the results of
operation. The statement in the case of Positive Action for Development
should show the different program expenditures separately with sub-
total, to which is added the administrative expenditures as separate line
items. The details of revenues, each project expenditure and
administrative expenses should be shown in the notes to the accounts.

30.2.3 Cash Flow Statement

This statement shows the flow of cash over the financial period. It is the
expected remittance from the funding agency in monthly/quarterly
basis.

30.2.4 Notes to the Accounts.

Notes to the accounts constitute an important part of the financial
statements as they give the readers of the financial statements additional
information detailing those contained in the balance sheet and statement
of revenue and expenditures. They also include the accounting policies
adopted by Positive Action for Development.

30.2.5 Management Reports

Management reports are reports produced monthly for management at
program level and quarterly at head office level to enable them to take
appropriate action. Such reports are also produced at the end of the
fiscal period. As far as Positive Action For Development is concerned the
following quarterly reports are expected from Program Areas:

a) Revenue and Expenditure statement

b) Cash movement

37
30.2.6 Reports to Donors

The financial reports should be prepared as per the agreed terms and
formats with the donor and it will be sent to donors.

30.2.7 Date of Delivery of Financial Reports to External Auditors

The financial statements should be reviewed by Finance controller and
submitted to the external auditors within two months days after the end
of the financial period.

38
Annex 1

POSITIVE ACTION FOR DEVELOPMENT

CASH RECEIPT VOUCHER

No
Date:
Received form _______________________________________________
Purpose -----------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Amount in words ____________________________________________
Amount in figure ______________________________
Cheque No.______________
------------------------------------------
Name and Signature of Cashier
For Accounts Use only
Account Distribution
Account Code Account name Amount
Debit Credit

Distribution: Original - Payer

1st copy - Accounts
2nd copy - Pad

39
Annex 2
POSITIVE ACTION FOR DEVELOPMENT

LEDGER ACCOUNT CARD

ACCOUNT NAME ACCOUNT NO.-----
Balance
Date Explanation P/R Debit Credit Debit Credit

Positive Action For Development Finance Manual Page 1

Annex 3

POSITIVE ACTION FOR DEVELOPMENT

JOURNAL VOUCHER
NO.--------------
Date ACC. ACCOUNT NAME DEBIT CREDIT
CODE

Prepared--------------- Checked------------------ Approved----------------

Positive Action For Development Finance Manual Page 1

Annex 4
POSITIVE ACTION FOR DEVELOPMENT

PAYMENT REQUEST FORM

Date

To: Accounts ________________________________________________________

From: _________________________________________________________________
Please prepare payment to _____________________________________
Amount (in words)_________________________________________
in figure
Reason:_______________________________________________________________
______________________________________________________________________
______
As per the attached supporting documents.
____________________ ______________________
Requested by Checked by Approved by

2
Annex 5
POSITIVE ACTION FOR DEVELOPMENT
ADVANCE PAYMENT VOUCHER
Date_____
To__________________________________________

Reason for Payment____________________________________________________

_____________________________________________________________________

Cost Center ___________________________ Account Code __________

Amount in Figure _______________________
Amount in Words
_______________________________________________________

Requested by Approved by Received by

___________ ________________ ________________

Annex 6

POSITIVE ACTION FOR DEVELOPMENT

PETTY CASH PAYMENT VOUCHER

No.

Date
Pay to ______ _________________________________________________
Purpose ______________________________________________________
Cost Center Code _______________ Acct. Code ________________
Amount in word ___________________________________________________
Amount in Figure ___________________

Prepared by Checked by Authorized by Received by

__________ ___________ ______________ ____________

3
Annex 7
POSITIVE ACTION FOR DEVELOPMENT

PETTY CASH REPLENISHMENT FORMT

Date ___________

S/N PCPV NO. DECRIPITION AMOUNT

Total Amount to be Replenished

Cash on Hand _____________

TOTAL ______________
Prepared by Checked by Approved by
____________ ______________ ____________

4
Annex 8
POSITIVE ACTION FOR DEVELOPMENT

CHECK PAYMENT VOUCHER

Pay to: _________________________________________________ No.

Date
Reason for payment
_____________________________________________________
__________________________________________________________
Amount in words
_______________________________________________________
___________________________________________
Cheque No. ___________________________ in figure

Prepared by Checked by Approved by Received by

______________ _____________ ______________ ______________

For Accounts Use Only

Account Code Account Name Amount
Debit Credit

5
Annex 9
POSITIVE ACTION FOR DEVELOPMENT
BANK RECONCILIATION STATEMENT
Bank Account No. _______________________ Month___________

Balance brought down _________________

Add
Receipts during the month _________________
Deduct
Payments made during the month __________________
Cash book balance at the end of the month ___________________

Add 1 _______________
2 _______________
3 ________________
Sub Total ___________________
Less 1 _________________
2 _______________
3 ________________
Sub Total __________________
Adjusted Cash Book Balance _________________

Balance as bank statement _________________

Add deposit in transit
1 ______________
2 ______________
3 ______________
Sub Total _________________
Less outstanding Cheques
1 ______________
2 ______________
3 ______________-
Sub Total _________________
Adjusted Bank Balance __________________

Prepared by Checked by Approved by

___________ ____________ _____________

7
POSITIVE ACTION FOR DEVELOPMENT
Per - Diem Settlement Format
Name __________________
Position Tittle ______________________
Division __________________________
Monthly Salary Birr _________________ ___________________
Place of Departure Arrival Time Spent Daily Amount
Travel
Date From To Date Hour Date Hour Date Hour Allowance in Birr

__________________________ _______________________
Signature of Traveling Person Approved by
(Traveling Person Supervisor)
For Accounts Only:
Total Advance given ______________
Total Per diem _____________
Transportation _____________
Other Expenses _____________
Sub Total _____________
Amount due to Organization/Employee _____________

Prepared by_______________ Cheeked __________ Approved by _____________

8
Annex 10
POSITIVE ACTION FOR DEVELOPMENT
PURCHASE REQUISITION

To purchase _______________________________________________ No.__________________

From ______________________________________________________ Date ________________
Budget Ref. ______ Account Code ___________

S/n. Unit of Quantity Estimated

No Description Cost
Measure

Requested by _________________

Cheeked by __________________

Approved by _________________

9
10
` Annex 11
POSITIVE ACTION FOR DEVELOPMENT
OFFER ANALYSIS SHEET
DATE _________

SUPPLIERS NAME
S/ ITEM QTY UNIT UNIT TOTALP UNIT TOTAL UNIT TOTAL UNIT TOTAL
N PRICE RICE PRICE PRICE PRICE PRICE PRICE PRICE

AMOUNT
TAX
NET PAYABLE

COMMITTEE’S RECOMMENDATION ____________________________________________________________________

SIGNATURE OF THE COMMITTEE ___________________ APPROVEDBY _________________

___________________
___________________
___________________

Positive Action For Development Finance Manual Page 1

POSITIVE ACTION FOR DEVELOPMENT
STORE REQUSITION VOUCHER
No. _______________
Date _____________
Delivered to _______________________________________________________
Budget Ref. ____________ Account Code_______
S No. Unit of Quantity Quantities
Description Measure Requested Approved

Requested by _________________ Cheeked by __________________

2
Annex 13

POSITIVE ACTION FOR DEVELOPMENT

GOODS RECEIVED NOTE
GRN No. __________

Purchase Order No. ___________________ Date ______/_____/_____ ___________ Store Code ____ ___ ___
Invoice/Delivery No. ____ Date ______/______/_____

S/ Description Unit of Quantity Unit cost Total cost Remark

No.

Measure Received

Store keeper’s
Signature

Distribution: Original to purchaser

3
First copy to Accounts
Second copy retained in the pad

4
Annex 14
POSITIVE ACTION FOR DEVELOPMENT
STORE ISSUE voucher
SIV No.
_______________
Date _____________
Delivered to _______________________________________________________
Store Requisition No. __________________ Dated ________________
Budget Ref. ____________ Account Code_______
S/ No. Description Unit of Quantities UNIT TOTAL
Measure Issued PRIC PRICE
E

Storekeeper’s Sign._________________ ___________ ________

Receiver Signature_____________________ ___________ ________

Positive Action For Development Finance Manual Page 1

Annex 15
Page ___________
Card No. ________
POSITIVE ACTION FOR DEVELOPMENT
STOCK CARD
Item______________________
Usage ___________________________ part or size or______________
Location _________________________ Manuf. I.D No. _____________
Max. Stock level ____________ Min Stock level
_____________

Date GRN SIV Unit of Quantity Value Unit Postin

g
No. No. Measure In Out Balance In Out Balance Cost Positio
n

2
Annex 16

POSITIVE ACTION FOR DEVELOPMENT

Inventory Count Sheet

Counted as at __________________

Quantity
S.N Description Unit Counted Book Differen Remark
Balance ce

Counted by _______________________ _______________

Name Signature
\Storekeeper _______________________ _______________
Name Signature

Witnessed by _______________________ _______________

Name Signature
Annex 17

POSITIVE ACTION FOR DEVELOPMENT

Fixed Asset Register

Property Description _______________ Group _____________ Acquisition Ref._____________
Tag No. _________________________ Service life _________ User Custodian _____________
Location/Place and Dept. ___________ Cost or Valuation _____ Supplier's Address ________
Plate No. Depreciation Rate ____ Acquisition PV __________
Chassis No. ___________________
Engine No. ___________________

Item Cost Depreciation Accumulated Dpre. Book Value Remark

3
Annex 18
POSITIVE ACTION FOR DEVELOPMENT

PAYROLL REGISTER
Month of ________________ 200 ____
S/ Basic PF Taxab Deductions Total Transp Total Net
n Name Salar 12% le Inco Loan Othe Ded ort PF Pay Signature
y Earni me rs uctio Allow
ngs tax ns ance

Positive Action For Development Finance Manual Page 1

Annex 19
POSITIVE ACTION FOR DEVELOPMENT
FIXED ASSET INVENTORY COUNT SHEET
AS OF _____________________

S/N DISCRIPTION CODE QTY.COUNTE QTY. As per CONDITIO

D Book N

Inventoried by __________________
Witness________________________

2
POSITIVE ACTION FOR DEVELOPMENT
TAXI FARE
Name of User _______________________________________
Date __________________________

S/ Departure Arrival Total Time Charge

n Time Time

Total payment for

Refund

Requested by Checked by Approved by

_______________ ________________ ______________

POSITIVE ACTION FOR DEVELOPMENT

NON RECEIPT AVAILABLE PURCHASES/SERVICES
SETTELMENT FORMAT (NRPS)
Date ________________________

Items QTY Unit Unit Price Total Price

Prepared by Checked by Approved by

________________ _____________ ____________

Positive Action For Development Finance Manual Page 1