FINANCIAL MANAGEMENT AND ACCOUNTING PROCEDURES

HIGH LEVEL CONTROLS

Name of Reviewer (s)

Review Approved by

Date (s) of Review

TABLE OF CONTENTS

I. General Accounting System

II. Testing/Observation of records, controls and operations
II.1 Cash and Bank Management
II.1.1 Cash and Bank Balances and Receipts
II.1.2 Cash and Bank Disbursements
II.1.3 Petty Cash Disbursements
II.2. Payroll
II.3 Procurement
II.4 Inventory and Stores Management and Control
II.5 Control over Property and Assets
II.6 IT Management, Structure and Strategy
 Pick and Drop
High Level Controls

FINANCIAL MANAGEMENT AND ACCOUNTING PROCEDURES

HIGH LEVEL CONTROLS

Name and Location of organization:

Number of Employees:
Names and Titles of Key Staff:

Does each staff person have a job description?

Does the project have written policies, procedures, for:
1) Procurement?

2) Accounting?

3) Personnel?

4) Travel?

Are procedures up to date?

What is the Accountant's name?

What is the Cashier's name?

List all other staff and their duties who participate in the accounting and material control
functions. (Attach list)

2
 Pick and Drop
High Level Controls

I. General Accounting System Yes/No/ Remarks

NA
I.1 Is the Accountant qualified in terms of
education, professional and training
experience?
I.2 Does the Accountant have a clear
understanding of:

A. Procedures for recording transactions?

B. Approval (s) necessary for expenditures?

C. Reporting requirements to donors?

I.3 Are accounting procedures in writing?

I.4 Are accounting/financial staffing

changes/turnover high?

I.5 Is a written chart of accounts maintained

to describe accounts used by PICK AND
DROP?

I.6 Is the chart of accounts effective in

meeting PICK AND DROP reporting
and record keeping requirements?

I.7 Is a monthly summary of expenditures

prepared for presentation to management
staff?

3
 Pick and Drop
High Level Controls

II. Testing/Observing of PICK AND Yes/No/ Remarks

DROP Records, Controls and NA
Operations

II.1.1 Cash and Bank Balances and

Receipts
1. The management authorizes all new
bank accounts.

2. Is a separate interest bearing bank

account maintained to deposit funds?

3. Is a cashbook maintained and up to date?

4. Are cash receipts deposited in the bank

accounts on a timely manner (within the
next following day of receipt) when
received on a daily basis and recorded in
the cash book?

5. If deposits and a record of deposit are

not made daily, does the frequency of
deposits appear reasonable? If so please
explain the reasons for your conclusion
in the comments section.

6. Do different individuals receive, record

and deposit cash receipts?

(Give the name of the person who)

Particulars Imprest Petty Cash
Cash
Receives
Cash
Records Cash
Deposits cash
receipts
Paying cash

Preparing
bank
reconciliation
Bank reconciliation statement
8. Are monthly bank statements reconciled
on a monthly basis?

If yes, what is the date of the last

Reconciliation?

8.1 Is the reconciliation prepared on a timely

basis? (i.e. within the end of end of each
month)
9. Is the reconciliation statement reviewed
and approved by a responsible person
other than the one preparing it.

4
 Pick and Drop
High Level Controls

10. Are pre numbered checks used and

controlled.
11. The spoiled checks are canceled and kept
on file
12. Are there two signatories on the checks
13. Is there adequate security over the cash
balances held in the office and for transit
to the bank?

Segregation of duties

Duty Segregation from

 Opening mail  Recording cash receipt

 Credit controller  Posting cash receipts to the

detailed debtors ledger

 Recording cash payments  Delivery of cash payments

(eg by posting cash to detailed
creditors’ ledger)

 Delivery of cash payments (eg by  Preparing bank reconciliation

signing checks)

 Preparing bank reconciliation  Reviewing bank reconciliation

5
 Pick and Drop
High Level Controls

II.1.2 Cash and Bank Disbursements Yes/No/ Remarks

NA
1. Is a cash book maintained and up to
date?

2. Is the cash book balanced on a daily

basis by the accountant and signed?
3. Has the officer to authorized payments
signed the cash book on a weekly basis?

4. Are check books kept in safe place under

lock and key?

5. Do the totals per the cash book agree to

the general ledger/budget book?

6. Are invoices, receipts, and vouchers

maintained for each payment?

7. Are vouchers and supporting receipts

marked paid after the related checks
have been signed and/or cash payment
made?

8. Is payments exceeding a reasonable

amount made by check?

9. After signing, checks are handled and

dispatched only by a person independent
of the payment function?

6
 Pick and Drop
High Level Controls

II.1.3 Petty Cash Disbursements Yes/No/ Remarks

NA
1. Is a petty cash imprest system used?
Give the following information
regarding petty cash
1.1 Amount of imprest fund
1.2 Name and title of petty cashier
1.3 Maximum amount per transaction
that petty cash can be used.

Comment on the petty cash procedures

in place.

2 Are any other accounting records

accessible to the petty cash clerk?

3 Does the petty cash clerk obtain petty

cash request for each payment made
from the fund?

4 If yes, are the requests and supporting

receipts in ink or some other manner that
would make alterations difficult?

5 Are all requests approved by the project

Director or designated staff person?

6 Are reimbursement vouchers and

supporting documents stamped or
marked “PAID” at or following
reimbursement?

7 Are petty cash funds and transactions

within the stated maximum?

8 Conduct a physical count of the petty

cash fund. Note any differences?

9. Are payments exceeding a reasonable

amount made by check?

10. Select 10 petty cash disbursements and

vouch for the supporting documentations
in line with its approved policies.

11. Document the findings and conclude

your view on control over petty cash
disbursements?

7
 Pick and Drop
High Level Controls

II.2 Payroll Yes/No/ Remarks

NA
1. Is a payroll register/payroll master
data/file kept?

2. Does PICK AND DROP use pay slips to

record and disburse salaries?

3. Does each staff person sign the register

and/or pay slip/receipt for the payment
of his/her salary?

4. Are salaries paid to individuals by

check?

5. If not, is the individual who makes the

payments a cashier or an individual who
does not prepare the payroll?

6. Does PICK AND DROP use time sheets

to record employee presence?

7. Do employees have signed employee

contracts?

8. Are employee details maintained on a

payroll master file which record details
such as start date, current salary, and
salary review date?

9. Are all amendments to payroll master

file such as, new employees, new
benefits, initial setting of salary and
changes thereof, approved and supported
prior to entry?

10. Payroll is approved before payment by

check is made?

11. There is segregation of duties as to:

 Preparation of payroll and approval
of hours worked
 Maintenance of records and
preparation of payroll
 Approval of payroll summary and
paying payroll

12. Is salary adjusted for days where staffs

have taken leave without pay (LWOP)?
Further are deductions made for

8
 Pick and Drop
High Level Controls

Provident fund, Tax withholding,

advance repayments and recovery of
asset (if any)?

13. Are leave records maintained up to date?

Have the accrued leave for each staff
calculated and provided for? Have the
provision for accrued leave been charged
to related donor funds?

14. Are personal files of staff maintained?

And do they contain the following
information?
 Personal history forms
 Employment contract
 Current job descriptions
 Copies of all certificates, licenses,
correspondence with/employees,
performance appraisal report, salary and
benefits adjustment notices and
appropriate medical records?

Segregation of duties

Duty Segregated from

 Preparation of payroll  Approval of hours worked

 Maintenance of personnel records  Preparing payroll
 Approval of payroll summary  Paying payroll
 Reconciliation of the payroll  Posting the payroll to the
control account/bank account general ledger
 Authorizing change in pay rates,  Preparing payroll
employing new staff
 Paying payroll  Posting the payroll to the
general ledger

II.3 Procurement Yes/No/ Remarks

NA
1. Obtain “conflict of interest statements”
signed by the employees in the
procurement department.

2. Ensure competitive procurement policy

has been adhered to on procurement.
Further ensure that re-quoted quotations
are avoided.

3. Ensure that VAT exemption for major

materials and equipment procurement as
per the provisions of the project and
basic country agreement.
4. Review the records for VAT amounts

9
 Pick and Drop
High Level Controls

II.3 Procurement Yes/No/ Remarks

NA
paid through the vendors to get refund
from IRD maintained by the Finance
Section.

5. Review the procurement details from

donor fund and ensure that has been
procured by utilizing the fund.

6. Verify that procurement has been

undertaken only from the listed vendors
as listed in Annexure of the Procurement
policy. Obtain copy of approval for
soliciting the quotations from unlisted
vendors.

7. Verify whether the vendor list has been

updated at least once every year.

8. In case of procurement of construction

material verify that a test certificate of
quality has been obtained with the
invoice.

9. Ensure that cash payment is made by

way of cash/ bearer/account
payee/crossed/ LC/ drafts or telegPick
and Drophic transfer as the case might
be.

10. Obtain reasonable assurance that the

cheques are collected by the vendors
from PICK AND DROP office either in
person or through representatives.

11. Verify that payments are made by the

Finance department only after receiving
payment request from the Procurement
Section and after verifying the
following:

-approved purchase request

-quotation solicitation letter
-approved quotations, comparative
chart/basis of award
-signed purchase order
-invoice by vendors
-approved store entry form or waybill

13. Review the procurement planning

submitted at the beginning of the year.

14. In case where procurement is to be made

over the petty cash limit a purchase
request has been prepared with details
such as Name, Date, Items, Units,
Quantity, description/specifications,
delivery schedule, delivery locale, fund

10
 Pick and Drop
High Level Controls

II.3 Procurement Yes/No/ Remarks

NA
code, project no., account code, available
source, requestor, approval etc.

15. The procurement process is as follows:

-Purchase Requisition
-Vendor Selection and Identification
-Quotations Seeking
-Obtaining quotations
-Cost Analysis
-Comparative chart
-Documentation of the basis of award
-Summary of Bid Analysis
-Informing Vendors
-Purchase Orders
-Goods receipt
-Payment

II.4 Inventory and Stores Management Yes/No/ Remarks

and Control NA
1. Is store ledger maintained separately
for Inventory items, expendable and
Non-expendable stock items
2. Is separate store ledger maintained for
the items returned from the sites.
3. Is Requisition form filled and
approved by the PM, Department
/section head prior to submit to store.
4. Is property Custody Receipt Form
/Ledger filled to control the loan of
stock to Non-PICK AND DROP staffs
and PICK AND DROP staff
respectively.
5. Is the list of Vehicles and
Motorcycles, as well as Furniture,
Fixtures and Office equipments report
as of July are submitted for insurance
purpose

II.5 Control over Property and Assets Yes/No/ Remarks

NA
6. Is a detailed perpetual property record
maintained? Does it contain:
 A description of the item?

 Identification number for each item?

 The source of funds used to

purchase the item?

 The acquisition date?

11
 Pick and Drop
High Level Controls

II.5 Control over Property and Assets Yes/No/ Remarks

NA
 Location uses and condition?

 Disposition, if applicable?

2. Is inventory of fixed assets taken once a

year and compared and reconciled to the
general ledger?

3. Is the process of physical count

adequate?

4. Does PICK AND DROP have

procedures to dispose of fixed assets
when they are no longer serviceable?

5. A person maintains the assets register

independent of those having physical
control of the assets.

6. Depreciation policies, equipment to be

sold or scrapped, and related matters are
tied into long and short-term business
plans.

7. Physical control over fixed assets against

fire, theft, and environment is adequately
maintained.

8. Does the project mark items with

identification tags?

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
A. Overview of computers Operations
& Administration
Objective:
To understand the existing operations and
administration of computers.
1. Which department is responsible for
managing computers and providing
technical support to all users?
2. Does the department's roles and
responsibilities include the followings:
 Training of computers

12
 Pick and Drop
High Level Controls

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
users;
 Technical support on installation of
software package and trouble-
shooting;
 Security administration;
 Development of in-house
applications;
 Evaluation of purchased
software package; and
 Administration of LAN (if
any?)
3. How many computers/printers are there
in the organization? For network,
obtain a schematic diagram showing the
configuration.
4. What are the applications presently
being used by the various users?

5. Is there a formal policy on acquisition

of computers?
6. Does the acquisition policy include the
following:
 Budget vs cost approval;
 Specific types of
hardware/software;
 Other acquisition
requirements
B. Organization & Administration
Objective:
To ensure that users are aware of existence of
computer security policies and procedures,
and these are in place as prescribed by
management.
Risk:
There is a potential risk that such policies and
procedures may be improperly or not
communicated to all users, especially new
staff.
Computer security policies and procedures
manual
1. Is there a formalized manual?
2. Does the manual include the following:
 Password Maintenance
Policy
 Control over diskettes:
 sensitivity classification
 inventory of diskettes
 Backup procedures
 Micro Program

13
 Pick and Drop
High Level Controls

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
Development Procedures
 Documentation standards
 Contingency planning
3. Has responsibility being assigned to
review and update this manual?
4. In between updates-are memoranda
used to inform users on additions,
deletions and modifications to the
manual.
C Computer Application Development
Guidelines
Objective:
To ensure proper system development
methodology in developing applications.
Risk:
Inadequate or unjustified requests may be
submitted which cause additional time and
effort in clarifying or re-submitting the
request to ensure only appropriate requests
are approved.
1. Is there a formal methodology
covering:
 definition of objectives
 cost benefit analysis
 estimation of time and
resources
 testing
 implementation
2. Does internal audit review the request
with emphasis on internal controls and
verify the cost benefit analysis?
D Computer hardware and software
inventory
(Software)
Objectives:
 To ensure data maintained in these
system is not duplicated.
 To ensure data integrity is maintained
and there is minimal data redundancy.
 To assist in formulation of an overall
system plan for the organization.
Risk:
Similar applications may be developed by
different people, thus causing duplication of
effort and resources.
(Hardware)
Risk:
Similar applications may be developed by

14
 Pick and Drop
High Level Controls

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
different people, thus causing duplication of
effort and resources.
(Hardware)
Risk:
Theft of computers can go undetected, for eg,
CPUS and memory expansion boards can be
easily misappropriated.
1. Is there an inventory of hardware and
software including Laptops?
2. If not, will there be an exercise to
conduct an inventory count of all
computers hardware and software?
3. If yes, is there a record of all existing
software packages used in the
organization such as the following:
 Date of purchase
 Product name
 Type of license agreement (single
user or site user)
 Cost
 Version number
 Serial number
 User department
 Date of last update
 Vendor (for purchased
software) or
 Program name/author (for in house
developed program)
 Warranty;
4. Does hardware inventory include the
following:
 model & serial number
 memory and storage space
capacity
 operating system and version
number
 quantity and type of
peripherals
 number of disk drive and
capacity
 type of application used at each
workstation
 number and types of communication
ports
 location

15
 Pick and Drop
High Level Controls

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
 date of purchase
 vendor
E Security Administration
Objective:
To ensure proper implementation and
supervision of computer security policies and
procedures.
Risk:
Difficulty in monitoring adherence to
security policies and procedures at user level.
1. Who is responsible for the overall
implementation and supervision of
computer security policies and
procedures in the Organization?
2. If the computer is operating in a
decentralized environment, does
adherence to these security policies and
procedures at the user level appear to be
difficult to monitor?
3. Is the monitoring of security policies
and procedures delegated to a
coordinator from each department?
4. Does the coordinator have sufficient
authority to ensure that all users within
their departments conform to existing
computer policies?
5. Is the violation reported and used as
feedback on the effectiveness of these
policies and procedures?

6. Is the password change policy

monitored for compliance?
F Copyright Protection
Objective:
To ensure that the organization is not
exposed to litigation in respect to copyright
infringement.
Risk:
 Possible litigation from usage of
unlicensed software.
 May lead to operational inefficiencies
due to incompatibility when operating
system and hardware is upgraded.
 Risk of viruses introduced to the
computer system.
1. Does the organization purchase
licensed copies of computer software
packages only?
2. Are the agreements with vendor single
users or site arrangements?
3. Are unlicensed software packages
installed on any of the computers, and

16
 Pick and Drop
High Level Controls

II.7 IT Management, Structure and Yes/No/ Remarks

Strategy NA
what are these applications?
4. Are users reminded to use only
software packages that are licensed and
authorized by the organization?
5. Are games diskettes specifically
prohibited by the management?
6. Is there any exercise performed to
ensure only authorized software is
residing on the computer system?
G Control over computer diskettes/
laptops
Risk:
Unauthorized disclosure of sensitive
information may occur.
1. Are laptops issued to authorized
employees only?
2. Is there an information security and
classification policy to cover
information residing on the computer
diskettes/laptops?
3. Are the movements of diskettes/laptops
appropriately controlled?
4. Is there a periodic check to ensure all
diskettes/ laptops are accounted for?
H Others
1. Computer hardware and software used
by the organization are as recommended
by the IT unit at Head Office.
1. Does the organization recruit an IT staff
to handle the IT related equipments?
2. If no, explain how the organization
manages to handle such equipment?
3. Does the organization have the system of
getting daily/weekly back up of finance
and other important data?
4. Does the organisation have system of
off-site office data back-up?
5. In such case, Is the responsibility to
delegate off-site back up documented in
writing?

17