Sumber: Financial Control and Accountability Toolkit by Janet Shapiro (CIVICUS)
Organisations and projects keep books to:
- Provide an accurate account of financial management practices to stakeholders;
- Prevent misuse of money;
- Provide a management tool for organisational and project leadership and management.
Part of keeping the books is to provide monthly and annual reports to management and leadership on the finances of the organisation. This should be done in a way that is userfriendly for non-financial managers and leaders. The information provided should enable the management and leadership of the organisation to make decisions about the running of the organisation.
Financial reports generated by your bookkeeping system should enable you to answer questions such as:
- Are there variances (differences) between the budget and actual income and expenditure? If so, why? Do we need to take action?
- Are donor grants being spent as intended? If not, why not?
- Is most of our money being spent on programmes as opposed to core costs?
- Are there any items for which we are not allocating enough money (e.g. replacement of major equipment)?
- What do we owe and own at the moment? (from the balance sheet).
- Why are our assets worth so little/so much?
- Are we spending too much on any item relative to the work being accomplished?
- Is our financial position healthy? (Can we continue to operate and do the work we are supposed to do?)
- Do we have a good distribution of sources of income? (Are we too dependent on one source?)
- Are any cash flow problems likely to occur? If so, what can we do about them?
There are some financial ratios that can help you answer these questions. A ratio tells you what percentage (%) of the total something is. You take your financial reports and use them to calculate the ratios. These ratios will help you to decide whether there is an area of concern or not.
If a ratio does not look healthy then you need to look at the situation carefully. There may be a good reason and the situation may not be a cause for concern, but the ratios provide you with a “stop and check” warning.
Most ratios are best looked at over a few years. Some ratios include:
Self-reliance versus overly dependent on foreign grants
Take the amount of money you have received from outside the country during the past three years;
- Divide it by your total income for the three year period;
- Multiply this by 100;
- Your answer will be a percentage that tells you what your degree of financial dependence on foreign donors is. You can then set goals to reduce it if you think it is too great a dependence.
- Work out your salary budget as a percentage of your overall budget.
- In most development work it is likely to be high (60% and above) because development work is often labour-intensive. You need to be able to discuss this with your donors in an informed manner if they query it.
- Work out your core budget (that which is not covered by programmes) as a percentage of your total budget.
- Between 12% and 20% is probably acceptable as the ratio.
- Anything more than that will raise questions with your donors for which you should have good answers.
- This identifies the relationship between current assets and current liabilities to show how able your organisation is to pay its short-term debts.
- The liquidity ratio is calculated by dividing the total of current assets (excluding stock) by the current liabilities and then multiplying by 100 to get a percentage.
- The reason for excluding stock is because the stock of civil society organisations is often not that easy to turn into cash. If your stock is easy to turn into cash, then you need not exclude your stock. The formula looks like this: Current assets (excluding stock) x 100 : Current liabilities
- If your percentage is around 200% (in other words, your assets are twice as much as your liabilities), then your ratio is healthy.
CIVICUS: World Alliance for Citizen Participation is an international allianceestablished in 1993 to nurture the foundation, growth and protection of citizen actionthroughout the world, especially in areas where participatory democracy and citizens’freedom of association are threatened. CIVICUS envisions a worldwide community ofinformed, inspired, committed citizens in confronting the challenges facinghumanity.
These CIVICUS Toolkits have been produced to assist civil society organisationsbuild their capacity and achieve their goals. The topics range from budgeting,strategic planning and dealing with the media, to developing a financial strategy andwriting an effective funding proposal. All are available on-line, in MS-Word and PDFformat at www.civicus.org and on CD-ROM.