Manual for Financial Management

1
Manual for Financial Management
(C) Operation of the Financial Management
Mechanism

• 18 November 2005

2
CCIF CPA Ltd ?????????
????

• BA(Hons)(Acct), M Ed, MBA, CA(Aust.), CPA(Aust.),
  ACA, FCCA, FCPA
• ???????
• ????
• ??????
• ???????
• ???????
• ????????????????
• ?????????????
• ?????
•  

Edmund Li ????? ???? ?? 2894 6895 Edmundli_at_ccifc
pa.com.hk
3
CCIF CPA Ltd ?????????
????

• MPA, B Com(Hons), FCCA,
• ACA, MHKSI, FCPA
• ??????
• ????(??)??
• ?????????????
• ????????????????
• ??????????
• ?????
•  

Eddy Yan ????? ?? ?? 2894 6826 Eddyyan_at_ccifcpa.c
om.hk
4
Operation of the Financial Management Mechanism
Code of Practice
Long Term Financial Planning
Reporting
Annual Budgeting Budgetary Control
External Auditing
IMC
Independent Control
Accounting Disclosure
Internal Control
5
Preparation of Budget

• Commence at least 6 months prior to the period
  (i.e. Feb 06 for 2006/07 Budget)
• Establish Budget Committee (comprised Principal,
  Treasurer, designated IMC Manager and Accounting
  staff) to
• Agree on a policy with regard to budgets
• Co-ordinate budgets
• Suggest revision to budgets
• Report to IMC

6
Step-By-Step to prepare Budget

• Included number of operation classes, manpower
  plan, all subventions, other income and all
  expenditures
• Detailed outlining and allocations on a
  line-by-line for income and expenditure
• Reasonable basis of estimation with realistic
  assumptions

7
Step-By-Step to prepare Budget (Contd)

• Income (including grants, fees and donations) and
  expenditure of a similar nature to be grouped
  under the same budget heading
• Review on all existing income and expenditure
  items
• Can refer to the actual amount of income and
  expenditure for the previous year

8
Step-By-Step to prepare Budget (Contd)

• Reference should also be made to the past three
  years average
• IMC should be prepared to answer any budget
  enquiries from other stakeholders
• Apportioned into four parts for each category of
  income and expenditure for each quarter of a year

9
Step-By-Step to prepare Budget (Contd)

• For those items that cannot be easily
  apportioned, judgment should be made to allocate
  the annual budgeted amount on a fair basis
• Basis of assumption should be clearly stated
• Budget Committee should compare the budget to
  actual income/expenditure for each quarter

10
Step-By-Step to prepare Budget (Contd)

• Explanatory notes should be used where necessary
  to account for
• Any expenditure not budgeted
• Expenses on non-recurring expenditures
• Significant variations (over/under 15 of the
  budgeted amount)
• Corrective action should be followed up if
  appropriate

11
Approval and announcement of Budget

• The Budget Committee should
• Review and revised the budget if appropriate
• Provide variance analysis between the budgeted
  amounts and actual performance
• Actual amount budgeted amount
• Budgeted amount
• Determine any follow up or corrective action

Variances
X 100
12
Report Significant Variance

• The Budget Committee should
• Update actual income and expenditure
• Find out reasons for any significant variance
  (over 15 of the originally planned amounts)
• Take corrective actions for significant variance
• IMC should inform EMB about any
  abnormal/exceptional incidents

13
Accounting and Disclosure (Contd)

• The IMC should take into account the following
  control measures
• Voucher should be pre-numbered and with voucher
  numbers stated in the relevant ledgers for
  reference
• Voucher should be filed with the supporting
  documents in sequence
• Cancelled vouchers should be crossed out, marked
  cancelled and kept for auditing purpose
• Voucher and supporting documents should contain
  adequate details of expenditure

14
Accounting and Disclosure (Contd)

• No correction on supporting documents except
  approved by authorized IMC managers
• Payment vouchers must be supported by original
  invoices or debit notes
• Invoices and debit notes for payments processed
  should be stamped paid to prevent duplicate
  payments
• Specimen signatures of the authorized IMC
  managers should be kept for verification purposes

15
Accounting and Disclosure (Contd)

• Other relevant supporting documents (e.g.
  minutes, bank statements and contracts) should
  also be properly filed and referenced to
  accounting entries
• A fixed asset register should be used to record
  all fixed assets with individual amounts over
  HK1,000
• An inventory record should be kept to control the
  use and storage of consumable items

16
Transparency of the Accounting System

• Transparent accounting system facilitates
  external monitoring and reduces abuse/allegations
  of impropriety
• To enhance transparency, the IMC should
• Publicize and endorse the accounting policies
• Publicize the authority delegated to its IMC
  managers
• Properly keep the books and accounts and
  supporting documents

17
Transparency of the Accounting System (Contd)

• Ensure audited Annual Accounts are reviewed by
  the Audit Committee, approved by IMC and signed
  by the Supervisor and an IMC manager
• Submit audited Annual Accounts, auditors report
  and auditors management letter, if any, to EMB
  for record
• Convene an IMC meeting to consider comments in
  the auditors report and management letter

18
Transparency of the Accounting System (Contd)

• Upload the audited Annual Accounts to IMC website
• Treasurer ensure IMC maintains proper books and
  records, preparation of Annual Accounts in
  accordance with the EO

19
Opening and Operation of IMC Bank Accounts

• IMC should open and maintain at least 2
  interest-bearing accounts (1 for government funds
  and 1 for non-government funds) and a current
  account for keeping the funds and paying school
  expenditures
• Following controls are required
• Opening of bank accounts approved by IMC
• All bank accounts should be operated by jointly
  authorized signatories approved by the IMC
• Cheques and cash received should be banked in
  promptly

20
Opening and Operation of IMC Bank Accounts
(Contd)

• Bank statements should be checked against
  receipts and payments
• Bank account balances and the accounting records
  should be reconciled. Any outstanding items
  (e.g. unpresented cheques) should be followed up
• Bank reconciliation statement should be reviewed
  by Treasurer and validated by Supervisor or any
  designated IMC manager

21
Receipt and Payment

• A solid fund control mechanism must be in place
• with a view to preventing misappropriation
• and/or embezzlement of funds
• Following controls should be implemented to
• facilitate proper making of false or inflated
  claims
• Accounting staff should ascertain all grants
  received are properly accounted for

22
Receipt and Payment (Contd)

• Receipts of cash or cheques by school clerk or
  teachers must be supported by official receipts
  acknowledged by accounting staff
• Post-dated cheques should not be accepted
• Only crossed cheques payable to IMC are accepted
• All official receipts should be pre-numbered and
  properly accounted for the sequence
• Payments should be made via autopay or cheques.
  Cash transactions should be avoided if possible
  

23
Receipt and Payment (Contd)

• Payments should be properly approved by
  authorized IMC managers
• Cheque books, bank books and IMCs official stamp
  should be kept properly
• Cheque should be crossed and printed Account
  Payee Only
• The IMC has the autonomy and flexibility of
  handling its income and payments as prescribed in
  the EO and COA. Such income must be solely used
  for the school itself for educational purposes
  and should not be transferred to other payees or
  IMC managers

24
Salaries for Teaching and Non-Teaching Staff

• The COA requires the IMC to establish the
  following controls on the Salaries Grant
• IMC should maintain a systematic and updated
  personnel record of staff at all times
• Principal should be responsible for maintaining
  up to date personnel records of teaching and
  non-teaching staff

25
Salaries for Teaching and Non-Teaching Staff
(Contd)

• IMC should set up procedures for the appointment,
  promotion, resignation, retirement, termination,
  dismissal of staff and any other personnel
  matters
• Payroll accounting staff should reconcile the
  grants already paid out with the actual approved
  Salaries Grant and adjust only overpayment or
  underpayment of salaries, accordingly
• The IMC should notify the EMB immediately of any
  staff changes in accordance with
  provisions/requirements set out in EMB circulars
  from time to time

26
Petty Cash

• The following controls should be adopted to
  safeguard the IMCs assets
• Appropriate amount of petty cash (e.g. 3,000 to
  7,000) should be maintained to cover daily
  operational needs
• Petty cash payments should be supported by
  receipts and certified by the Principal
• An Imprest system should be implemented

27
Petty Cash (Contd)

• After reimbursements, claimants should
  acknowledge receipt for payment on the claim form
  
• Significant cash advances should not be allowed
• Repeat payments using petty cash for purchases
  should not be authorized

28
Thank you
Question and Answer