Nonprofit Operational Manual

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Financial Management

A good financial management system is derived through sound financial procedures policy. An organisations financial procedures policy lays down procedures for ensuring that resources are put to use properly. It is necessary that this policy is understood by members of staff and Trustees (Board) since they are the ones charged with the responsibility of managing the organisations resources effectively.

Ideally the financial procedures policy is developed by the Board and the Executive Director, involving other members of staff especially those responsible for managing the organisations finance. The policy document details the financial management procedures of the organisation and clearly lists the roles and responsibilities of staff and board (Trustee) members. It is good to state in the document that it cannot be changed without formal approval of the Board (Trustees).

The following elements must be included in your financial procedures policy

Key questions to help frame the accounting system part of the policy
Fraud Systems Banking Cash policy Assets Vehicles Staff Purchasing Insurance
The Four Pillars of Good Financial management

Internal Controls: Internal control is a system of common sense controls, checks and balances designed to manage internal risk and safeguard the organisation’s money, equipment and other financial assets. The purpose of internal control is to minimize losses, such as through theft, fraud, corruption, bribery or incompetence. An effective internal control system also protects staff, an organisation’s most important asset.

Record Keeping: Every organisation must keep an accurate and complete record of all financial transactions that take place during the financial year so they can show how organisation funds/grants have been used. Accounting records include both the physical paperwork (such as receipts and invoices) and the books of account where the transactions are recorded and summarized.

Planning: Linked to the organisation’s strategic and operational plans, budgets are the cornerstone of any financial management and play an important role in monitoring the use of organisation funds/grants. The financial planning process includes building long-term plans, such as a financing strategy, and shorter-term budgets for projects, grants and programmes, and cash flow forecasts.

Monitoring: Provided the organisation has kept accurate and timely accounting records, and has set its budgets, it is possible to produce financial reports for the use of different stakeholders. For example, budget-monitoring reports help managers to monitor the progress of their projects or grants, and annual financial reports provide accountability to external stakeholders.


There are seven key players or groups/teams of players in financial management in an organisation.

Those players and their responsibilities are:

Board of Director’s Responsibilities: to ensure transparency and accountability in using the organisation’s resources according to organisational values, vision and mission to achieve organizational goals and objectives

Management Team (a team of managers led by Executive Director). Responsibilities: plays important roles in acting between the board of directors and the executive director. They are responsible for ensuring that resources are effectively and efficiently used to achieve organisational goals and objectives.

Executive Director Responsibilities: ensures that all income and expenses adhere to organisational by-law or charter that organizational resources are properly used to achieve the set strategic plan and complies with donors’ agreement and organizational policies and procedures.

Program Manager’s Responsibilities: financial transparency of the program. It is the program manager’s responsibility to deter major fraud by putting in good basic systems and by personally making a few key checks. This needs not be overwhelming. The key is to judge what the really significant risks are and to make efforts to control them. Additionally, the program manager is responsible for ensuring that the budget is developed based on an accurate activities plan and monitoring the progress and utilization of funds according to the approved budget.

Finance Manager. Responsibilities: the overall operation of the organisation’s financial management and ensuring that all financial transactions comply with organisation financial policies and procedures and are supported with enough and valid supporting documents. Besides this, he or she shall ensure that financial statements are produced accurately and in a timely manner.

Accountant’s Responsibility: to produce reliable and timely financial reports, which comply with accounting principles, in order to help management to make financially viable decisions.

The Cashier’s Responsibility: custodian of finance assets and its related documents, such as cash, checks, passbook, and safe key and code. In addition the cashier is also responsible for recording the movement of cash in the cashbook to ensure that the accountant’s records are accurate and timely. See for a sample financial policy