Group Finance Manual-0000.02

GROUP FINANCE MANUAL
UPDATED MARCH 2019

Approval required from Name Date approved
Manual Owner: Head of Finance March 2019
Responsible Director: Director of Finance and Services
Board approval Not applicable
This manual seeks to move all areas of Practical Action towards a set of
common finance and accounting practices, policies and procedures based
on International Accounting Standards. It was initially developed by senior
finance staff, including all regional finance managers, at a conference held
in Nairobi in November 2016 and is now being revised in March 2019.
The provisions of this manual apply to all units and subsidiaries of
Practical Action, including Practical Action Consulting. It supersedes and
replaces all existing finance manuals. Where localisation is required or
expected this is clearly shown.
The manual codifies some important shifts from historical practice. All
Business Units (BU) are expected to work towards full compliance by April
2020. Compliance with some sections is mandatory from April 2018 these
sections are indicated alongside the header for each section.
This manual is intended for use by all Practical Action staff working in
finance functions or performing finance roles (budget holders and non
finance staff may want to make reference to some sections relevant to
them). Where a policy has wider applicability this is published separately
and referenced in this manual. However it may be accessed by or shared
with other Practical Action staff, donors and stakeholders who wish to
understand more about our finance and accounting practices.
2
Table Of Contents
Page 3 1 Fundamentals
1.1 All business units must have:

1.2 Strategic Business Plan and Approved Budget
1.3 Working (secured) Budgets
1.4 Unrestricted Allocations from central resources
1.5 Financial planning Roles & Responsibilities
1.6 Global accounting, internationals standards and local reporting
1.7 Funds, Reserves and Investments
1.8 Delegated Authority
1.9 Value for Money
1.10 Unit and Organisational Planning and Budgeting
(Strategic Business Planning)
1.11 Project and Award Planning and Budgeting
1.12 Programme Delivery
1.13 Monitoring
Page 14 2 SUN Accounts Overview
2.1 Dimensions and their use

2.2 Account Code
2.3 A very simple Trial Balance
2.4 Cost/Income Code
2.5 Award Code
2.6 Partner Code
2.7 Cost Coverage Code
2.8 Donor Reporting Code
2.9 Item Code
2.10 Funder Code
2.11 Roles and responsibilities for system administration
2.12 Statutory Entities and Group Structure
Page 19 3 Income Management
3.1 Income Types

3.2 Restricted Income
3.3 Results Based Contract
3.4 Donations
3.5 Unrestricted Income
3.6 Trading Income
3.7 Contract Terms
3.8 Difference between PAC and PBR contracts
3.9 Summary
3.10 Income Recognition Policy
3.11 Restricted Income: Grants
3.13 Restricted Income: Donations
3.15 Income from donated goods, facilities and services
3.16 Trading Income
3.17 Accounting Practice for Restricted Income
Page 25 4 Award Budgeting, Monitoring and Reporting
4.1 Award Budgets at different decision gates

4.2 Budget Preparation
4.3 Award Codes
3
4.4 Types of Award Codes
4.5 Award Code Structure
4.6 Setting up Award Codes on SUN
Page 31 5 Monitoring Award balances on the Balance Sheet
5.1 Award Recognition (Income Accruals) Account

5.2 Donor Claims Account
5.3 Award Code for Cash Transactions
5.4 Monitoring Award Budgets and expenditure
5.5 Budget Line Flexibility
5.6 Award Expenditure Tracking
5.7 Dealing with Multiple Donor Funding
5.8 Co Funding
5.9 Joint Funding
5.10 Award Cost Allocation routine
5.11 Donor Reporting
5.12 Donor Reporting Formats
5.13 Preparing Reports
5.14 Co Funded Project/Program
Page 37 6 No Co-Funding
6.1 Common Procedures

6.2 Foreign Exchange Differences
6.3 Indirect Cost Coverage
6.4 Cash Claims and Managing Debtors Ledger
6.5 Donor Claims, Award Recognition and Receivables Ledgers
6.6 Accounting entries for PAC income and Payment by Results Contracts
6.7 Accounting entries for donations and unrestricted income
6.8 Money Receivables and Bad Debts
6.9 Key Controls
6.10 Accounting for traded goods and services
6.11 Policies and Procedures
6.12 Invoicing
6.13 Accounting entry using SUN
Page 42 7 Foreign Exchange Management
7.1 Purpose
7.2 Principles
7.3 Reporting foreign currency transactions in the Base Currency
7.4 Translation to the Presentation/Reporting Currency
7.5 Hyper Inflationary Economies
7.6 Official Exchange Rate Site
7.7 Exchange Rates
7.8 Foreign Currency Fund Transfers
7.9 Local Currency Reserves
7.11 Currency revaluation at the month end
Page 47 Inter Business Unit Transactions
8.1 Income and Expenditure transfer

8.2 Controls
8.3 Accounting for interco transactions when one BU procures for another BU
8.4 Accounting for where one BU transfers funds (grants) to be spent and controlled by another
BU
8.5 Inter Business Unit Monthly Timetable
4
8.6 Funds transfer between Business Units
8.7 Controls
8.8 Accounting
8.9 Procedure
8.10 Remittances from Country/Regional Head Offices to Field Offices
intra region transfers
Page 55 9 Award Budgeting, Monitoring and Reporting

9.3 Award Codes
Page 60 10 Monitoring Award balances on the Balance Sheet

10.8 Co Funding
10.9 Joint Funding
Page 66 11 No Co-Funding
Page 67 12 Expenditure
12.1 Payroll
12.2 Organisation related policies – refer to NetConsent
12.3 Procedures
12.4 Accounting
12.5 Using SUN
12.6 The Dos and Don’ts
12.7 Controls and Reconciliations
Page 69 13 Staff Expenses, Loans and Advances
13.1 Principles, Aims and Accounting Practices

13.2 Organisation Policies – refer to NetConsent
13.3 Staff Expenses Approval
13.4 Staff Work Float
13.5 Staff Expenses
13.6 Staff Salary Advance
13.7 Personal Staff Loan
13.8 Using SUN
13.9 Dos and Don’ts
5
Page 72 14 Purchasing and Payment of Suppliers
14.1 Principles, aims and accounting policies

14.2 Organisational policies
14.3 Principles of Procurement
14.4 Procedure
14.5 Preferred Suppliers List (PSL)
14.6 Purchase Ledger
14.7 Accounting Entries
14.8 Key Controls and Reconciliations
Page 76 15 Managing and Accounting for Stock
Page 79 16 Managing Sub-award Partner Expenses
16.1 Sub-Award Partnership Principles

16.2 Budgeting to work with Sub-award Partners
16.3 Sub-Award Partner Assessment
16.4 Sub-Award Partner Agreement
16.5 Sub-Award Partner Orientation
16.6 Sub-Award Partner Monitoring
Page 81 17 Sub-Award Partnership Management
17.1 Sub-award Partner Capacity Building

17.2 Organisational policies (Refer to NetConsent)
17.3 Procedure
17.4 Accounting
17.5 Using SUN
Page 83 18 Common Procedures[JL1]
18.1 Risk Assessment of potential partners[JL2]

18.2 Minimum standards of potential partners
18.3 Risk assessment for established larger Partners and
Partners that may be reappointed
18.4 Partners in the Private sector
18.5 Memorandum of Understanding (MoU)
18.6 Contingent Agreement
18.7 Contract[JL3]
18.8 Letter of Agreement (LOA[JL4])
18.9 Partner Monitoring
18.10 Partners that are co-funding a project
18.11 Agreements where Practical Action is not the lead partner
18.12 Using SUN
18.14 Organisational Policies
Page 87 19 Expense Accruals and Prepayments

Page 88 20 Fixed Assets

20.3 Recognition Criteria
20.4 Carrying Amount
20.5 Revaluation Model
20.6 Depreciation Policy
20.7 Impairment
20.8 Disposal and Derecognition
6
20.9 Title (Ownership) of the Assets
20.10 Fixed Assets Register
20.11 Assets Identification Numbers
20.12 Acquisition of Assets
20.13 Accounting for Donated Assets
20.14 Fixed Assets Verification
20.15 Assets Movement
20.16 Intangible Assets
20.19 Authority to open Bank Accounts
20.20 Names of Accounts
20.21 Signatories
20.22 Bank Statements
20.23 Bank Reconciliation
20.24 Cheque Books/Digital Banking Gadgets
20.25 Cheque Book Requisition
20.26 Inter Bank Transfers
20.27 Bank Transfers to Others
20.28 Currency Accounts
20.29 Petty cash
20.30 Documentation and Approval
20.31 Petty Cash Holding Limit
20.32 Monies Received
20.33 Petty cash box operation for multiple currencies
20.34 Monthly Reconciliation
Page 99 21 Document Management

21.2 Definition of document management
21.3 Do
21.4 Controls
Page 101 22 Micro-finance/Revolving funds/ Guarantee funds

Page 102 23 Tax and Tax Accounting

23.3 Accounting & Procedure
23.4 PurchaseTax
23.5 Income Tax
23.6 Using SUN
Page 104 24 Monthly Routines and Year End Closure
24.1 Principles, Aims and Accounting Policies

24.2 Month-end reporting
24.3 Content for monthly reporting
24.4 Management reporting Roles & Responsibilities
Between Finance and Programme staff
24.5 Monthly review process
24.6 Guide to Monthly Review of Key schedules
24.7 Using SUN
7
Page 111 25 Commissioning and Managing Audits

25.2 Organisation Policies
25.3 Statutory audits
25.4 External Audit: Financial audit
25.5 Accounting and Procedure -same as above under ‘statutory audits’
25.6 Organisational audits
25.7 Audit tender/appointing auditors
Page 115 26 Financial Crime: Fraud, Bribery and Money Laundering
Page 116 27 Appendices to Group Financial Manual
Appendix 1 Group Organogram Legal Structure

Appendix 2 SUN Accounts Structure
Appendix 3 Group Structure of Business Units
Appendix 4 Finance Policy Index
Appendix 5 Co-Funding Wrapper Award Process
Appendix 6 Financial Management – A Country Director’s guide to balance sheet reviews
8
1 Fundamentals
This section outlines the most fundamental of our accounting and financial policies and
principles that underpin the way we manage our finances and record and report on
financial transactions.
Any significant operational entity that controls its own balance sheet must operate as a
separate business unit.
All subsidiary statutory entities must keep accounts as a separate business unit.
A new business unit must be created whenever a piece of work belongs to one
statutory entity, but is managed by another country.
 This allows us to consolidate, either by statutory entity, or by country of

management and helps with reporting.
All business units in Practical Action must use double-entry book keeping.
1.1 All business units must have:
a) a balance sheet:
Assets (including cash), liabilities and funds (inclusive of current year balance
on the income and expenditure account)
b) an income and expenditure (I&E) account for the current financial year:
Income, expenditure, surplus or deficit.
Note that as a non-profit organisation we use the term “income and expenditure
account” in preference to “profit and loss account”, and “surplus or deficit” in
preference to “profit or loss”. From an accounting perspective the concepts are
very similar.
All business units must account by donor award, across the balance sheet and
I&E account.
This way of accounting is usually referred to as fund accounting and enables

our accounts to be split down by donor award to facilitate:
 reporting,
 accountability,
 asset and foreign exchange management,
 financial control and Award management.
A summary set of accounts for a very simple unit might look as follows:
9
Unrestricted Restricted Funds
Total
Funds Award 1 Award 2
Fixed Assets 1,000 500 1,000 2,500
Cash 2,000 4,000 2,000 8,000
Other Assets 100 - 100
Liabilities (500) (4,000) (2,000) (6,500)
Balance Sheet
Total Net Assets 2,600 500 1,000 4,100
Funds b/f 2,700 500 - 3,200

Income and Income 1,000 6,000 12,000 19,000
Expenditure Expenditure 1,100 6,000 11,000 18,100
Account Surplus / (Deficit) (100) - 1,000 900
Total Funds 2,600 500 1,000 4,100
Note that we do not currently require units to account for all cash by award. Cash balances are normally retained in the
UK to reduce the risks of holding large amounts of cash locally and unit books may therefore show a debtor balance
with the UK in place of cash by award.
All business units must use accruals accounting, not cash accounting.
All business units must keep their accounting records on the SUN accounting system.
1.2 Strategic Business Plan and Approved Budget
The annual financial plan (budget) is an integral part of the strategic business plan
(SBP). A budget is prepared for the year ahead and must be approved through Line
Management and ultimately by the Board of Trustees. This approved budget sets the
financial targets for which unit or regional directors are accountable. The financial plan
also includes indicative income and expenditure plans for the subsequent two years, to
assist long term financial, fundraising and resource planning. The Regional Country
Office (RCO), or Unit Director will lead and is responsible for the planning process for
their area.
Financial plans and budgets should be based on secured income and a realistic
estimate of further income, likely to be secured and spent, alongside an assessment of
a unit’s capacity to deliver. Resourcing and expenditure plans should be made in light
of the likely level of funding available, taking into account that funding is usually
contingent on delivery. Typically units or programmes should seek to balance budget
income and expenditure. However RCOs may opt to budget for a small deficit, if future
income projections suggest that it will be possible to run off-setting surpluses in future
years. Similarly regions may budget for a surplus if they have an accumulated deficit
from previous years, or if income is expected to be unusually high in the year ahead.
In this way regions have some flexibility to make longer term decisions to effectively
manage their finances.
Budgets holders and responsible program staff should analyse the financial plans in
conjunction with programmatic plans and objectives to ensure that these are accurate
and consistent. The finance team should provide good analysis of the plan and support
scenario planning by presenting choices and consequences. Unit Heads of Finance
have a responsibility to ensure that budgets are realistic (i.e. based on reasonable
projections of income and capacity to deliver), provide value for money given strategic
objectives and priorities, and provide for financial sustainability.
10
1.3 Working (secured) Budgets
Award income and expenditure budgets must be uploaded to SUN when funding is
secured and only when funding is secured. The budgets uploaded must match the
approved donor budgets. Award budgets must be updated whenever a budget
amendment has been agreed with the donor. The working budget must cover the
entire period of the award, must be in donor/client currency and should use award
budget exchange rates. Working budgets must be uploaded to SUN within a month of
securing an award and before any expenditure is made.
Award budgets must be accurately phased by month, so that they provide useful
comparators against which to assess actual spend, whether this is by award period or
Practical Action accounting period. Where award plans and budgets are by quarter the
quarterly budgets can be divided by three or shown at the end of the quarter,
depending on when the expenditure is expected to be recognised (e.g. Practical Action
staff costs would be recognised each month, whereas partner expenditure may not be
recognised until a partner reports at the end of a quarter). It is never appropriate to
phase activity budgets by dividing an annual budget by twelve as this will not provide
useful comparators, against which to assess whether award spend is on track.
Co-funding budgets should be uploaded to the appropriate Wrapper Award Code when
funding is confirmed from central resources. Where specific co-funding is secured and
a new Award Code created then the budget should be uploaded per the new funding
agreement and the Wrapper Award Budget reduced accordingly.
Unrestricted spend budgets should only be uploaded when funding is confirmed, i.e.
when funding is allocated from central resources or indirect cost coverage is secured.
Unrestricted budgets should be updated whenever award budgets are updated. This
may involve adjusting the indirect cost coverage budgeted for a period or adjusting
unrestricted budgets to account for costs chargeable directly to restricted awards. In
this way comparisons to the unrestricted working budget should reveal any under or
over spending against available funding.
1.4 Unrestricted Allocations from central resources
The allocation of unrestricted funding from central resources will always be confirmed
formally in writing by the Director of Finance and Services. This includes any allocations
to support specific investments or initiatives. Communication will always be addressed
to the responsible director and copied to the relevant Head of Finance.
Unrestricted funding is intended to support business development, fund risky or strategic

opportunities, contribute to knowledge sharing activities (e.g. change hubs) and to retain
capacities where we have short term funding gaps. Unrestricted funding is not intended
to subsidise under costed awards or to cover local support and management costs which
should be fully costed in awards.
Unrestricted funding should be allocated to budget holders and managed accordingly.
Unrestricted funding may be made conditional on a certain programme or on

communication activities being completed. This will be made clear at the time funding is
allocated. Funding may be stopped or reclaimed if the conditions are not met.
1.5 Financial planning Roles & Responsibilities
Senior management is responsible for identifying priorities and directing efforts and
funding accordingly.
11
Budget holders and their line managers are responsible for the compilation of work
plans and the associated budgets.
Finance are responsible for quality assuring budgets, consolidating plans and
presenting to Units. Finance are responsible for analysing financial plans, distilling
issues and supporting decisions that need to be made, in order to balance income and
expenditure and provide for financial sustainability. Unit heads of finance must assure
themselves and senior management that budgets are realistic and that financial risks
are manageable.
1.6 Global accounting, internationals standards and local reporting
This manual is based on International Accounting Standards (IAS). These have been
adopted by almost all countries, but in some countries they are interpreted slightly
differently and statutory reporting requirements and formats do differ.
Our primary books of account, as held in the SUN accounting system, must be based
on the common accounting policies laid out in this manual. This basis will be used for
all our management accounting and reporting.
Some local reporting requirements will need to be dealt with off line, including those set
out in the UK Statement of Recommended Practice (SORP), which forms the basis of
our annual consolidated accounts.
 This will generally involve downloading information from SUN and making
adjustments or mapping to local statutory formats in a spreadsheet.
 All adjustments should be clearly set out, referenced to any supporting
documentation or calculations and filed, as it would be in a system journal. The
full audit trail will thus consist of In System Accounting and off line adjustments.
The harmonisation of accounting practices around IAS should minimise, but not
eliminate, the need for off line adjustments. Where these are required to meet local
standards there is no need to reflect these in the accounting system and we should not
do so. A good off line audit trail must be kept.
Please see the section on Statutory Reporting for fuller details on meeting external
reporting requirements.
1.7 Funds, Reserves and Investments
Total funds are the net sum of all assets and liabilities and are shown at the bottom half
of a balance sheet. Funds may be restricted for a particular purpose or unrestricted.
Restricted funds may arise on active awards currently being delivered and represent
financial obligations to donors not reflected by liabilities. See Award Management.
Unrestricted funds are:
 accumulated where unrestricted income exceeds unrestricted expenditure (a

surplus or profit)
 consumed where unrestricted expenditure exceeds unrestricted income (a
deficit or loss).
By definition unrestricted funds are the sum of:
 accumulated surpluses
12
 any equity investments made by shareholders (for trading companies) and
 any asset revaluations that have not passed through the income and
expenditure account.
Unrestricted funds may be retained to provide for working capital (cash flow, where
assets and debtors exceed creditors), or to be held as reserves.
Reserves are held by Practical Action against identified risks to enable the organisation
to survive, protect its programmes of work and adapt in the event that the risks
materialise. Practical Action’s overall reserves are managed at a global level, as per
the Reserves and Investments Policy – refer to NetConsent. In this way major risks
are pooled and the overall reserve requirement reduced.
 Individual business units must not seek to accumulate reserves to cover risks.
 Business units may hold reserves to smooth planned expenditure over financial
years and enable effective use of income.
 Any business unit having negative reserves must make credible plans to reduce
and eliminate the negative balance over a reasonable timeframe (note that
negative reserves are not the same as insolvency, providing sufficient credit is
available to meet cash flow needs).
1.8 Delegated Authority
Expenditure and expenditure commitments must be made in line with our Delegated
authority limits policy – refer to NetConsent. Any breach of this policy may be
considered gross misconduct.
1.9 Value for Money
Value for Money (VFM) is a principle that must run through everything Practical Action
performs. It is about how we make choices to generate the maximum possible impact
on the lives of those who benefit, directly or indirectly, from our work. We need to use
evidence and consider alternatives, whenever we make a decision to deploy resources,
to ensure that we’re doing the right things, in the right way and at the right price
(effectively, efficiently and economically). However achieving value for money will also
require all staff to understand and apply value for money in their day-to-day roles. A
culture that encourages enquiry, challenge and creativity in the use of time and money,
will ultimately be the most powerful way to drive improvement. This framework outlines
some key junctures, at which we must consider value for money and support optimal
resource allocation.
1.10 Unit and Organisational Planning and Budgeting

(Strategic Business Planning)
During the annual planning process we consider carefully all expenditure on business
development and shared support costs. Are these proportional, given the expected
level of direct activity? Could the intended outcomes be achieved more effectively, or
at lower cost by taking a different approach? We should pay particular attention to staff
and alternative resourcing options, which make up a large proportion of shared costs.
See the Strategic Business Plan section, later in this manual.
13
1.11 Project and Award Planning and Budgeting
All project and award planning starts with a clear articulation of the intended outcomes.
Alternative approaches to delivery should then be considered and costed, to assess
which will probably provide the best outcomes, at the lowest possible costs. What
combination of direct delivery knowledge and influencing activities, will provide for the
best outcomes and for the lowest cost? Does working through Partners, once
monitoring and management costs are accounted for, provide better value for money
than delivering ourselves? Clear articulation of options can help us ensure that we
have considered alternatives and therefore both achieve and demonstrate that our
preferred approach provides value for money. To be clear, all award proposals should
be fully costed, based on realistic budgets, for delivery and support activities.
See Project and Award Planning and Budgeting section, later in this manual.
1.12 Programme Delivery
Good procurement practice can help us obtain better quality at lower costs. The
primary principle is again to ensure that we’ve considered options. This may mean
considering cheaper or more effective approaches, or simply ensuring that we have
considered a range of potential suppliers. See Procurement section later in this
manual.
Sub-Grants to Partner organisations are normally on the basis of costs incurred.

Appropriate Partner monitoring and ensuring that a Partner follows good procurement
practices is also, therefore, important in achieving value for money.
Staff are a major component of costs. Steps to ensure that staff are fairly, but
appropriately paid, in line with appropriate market benchmarks, are set out in our
remuneration policy and Terms of Reference for Remuneration Committees. Time is
monitored through time-sheets (see section later in this manual) and our People
Management Process is designed to support staff to deliver to their potential (see
Global People and Culture Manual).
1.13 Monitoring
It is sometimes possible to build value for money auditing into our M&E programmes
and we should seek to do so wherever a Donor is willing to support this. Any value for
money audits completed should be shared with the Head of International Finance and
Head of International Programmes.
2 SUN Accounts Overview
2.1 Dimensions and their use
SUN is a multi-dimensional accounting system that allows us to capture and

summarise a range of information on each transaction, to meet our reporting needs.
Understanding the function of each dimension is key to being able to use the system
effectively and understanding this manual. For further guidance, refer to appendix 2 SUN
Accounts Structure Document
14
Each statutory and discrete management entity holds, in SUN, its own full accounts in
a separate business unit. Each business unit (BU) will have its own base currency, in
which most of its business is conducted, in addition to a common second base
currency (GBP) used for consolidation and transaction currencies, that is used for
recording the currency of the transaction (which can be any currency) . Transactions
between business units involve formal cross charges being approved and made.
Within each business unit the following dimensions are used:
2.2 Account Code
This dimension provides a balance sheet and full trial balance. There are two broad types
of account code. Balance sheet account codes and P&L account budget centres.
Each P&L budget centre may hold a debit or credit balance for the year and the total of
them all will equal the surplus or deficit for the year.
2.3 A very simple Trial Balance might look as follows:
Account
Code Account Name Debit Credit
1000 Fixed Assets 1,000
Balance
1200 Prepayments 100

Sheet
1400 Bank 2,000

1600 Accurals 500
Expenditure
SDN12345 Cost centre A (income) 100

Inome &
KEN25845 Cost centre B (income) 1,000

GBR32981 Cost centre C (expense) 1100
BOL41289 Cost centre D (income) 2,600
4,200 4,200
A budget centre is a grouping of income and/or expenditure and identifies whole or

part of a budget centre, i.e. a section or area of the organisation, under the
responsibility of a manager for which budgets are prepared; these budgets are
compared with actual performance as part of the budgetary control process. A
budget centre may be a function, department, section, individual, cost centre,
project, programme, or any combination of these that the management wishes to
treat as a budget centre. We produce regular financial statements on the basis of
each budget centre so that each budget centre manager is aware of their budgeted
and actual performance and any variances that arise.
A P&L budget centre may be a profit centre capturing income and real costs or a
cost centre which contains only costs.[JL5].
A P&L budget centre may be funded by a single award (see below) or by multiple
awards. An award usually funds multiple budget centres. It is important to correctly
distinguish between a budget centre for budget holding purposes from award
funding of our costs.
P&L budget centre can be variously used to:

a. Group activities into projects or programmes of work, to monitor the direct
delivery costs and cost overruns on a programme of work.
15
b. Group shared costs, to reflect the full operational costs under the oversight
of one budget manager. For example, all costs of office rent are managed
in one P&L account and overseen by one budget holder. If rent is covered
by various awards the rent does not get 'recharged' out of the 'shared costs'
but the amounts within shared cost centres get reallocated to the specific
awards that will contribute towards it.
c. Enable more effective budget management, e.g. by breaking an award
down into separate geographical components.
d. Identify programmes of work being managed as Practical Action Consulting
(PAC) activities (where there is no separate PAC entity or business unit).
This is done by assigning the relevant business type when setting up the
P&L code.
It is important to consider how to set up new budget centre (and award) codes
when compiling the SBP and at the start of any programme to make the reporting
as straightforward as possible. This can only be done once an internal budget has
been approved or a contract has been approved through PAMS.
2.4 Cost/Income Code
This transaction[JL6] code describes the type of cost or income being incurred. It
provides a standard and common breakdown of our P&L account. It does not apply
to balance sheet accounts.
2.5 Award Code
This transaction code captures award income or expenditure.

An award may be unrestricted or restricted
 As part of our full cost coverage approach, an award contributes to several

budget centres, including those containing direct project delivery costs and
those containing shared costs. An award may also contribute to more than
one business unit.
 All income from and expenditure chargeable to a grant or contract is coded
to the corresponding award code.
o Ineligible expenditure, for example overspends, is not captured
against the award (it would be charged to unrestricted funds).
 Allocation of transactions may be made directly or by using a month end
allocation routine.
We should capture all eligible costs against the award code. These may include
allocations of shared staff costs made on a standard costing basis or in accordance
with donor agreements:
Example:
A business unit receives an award of 100,000 broken down as follows:
Budget Centre Award
contribut
ion
GBR*5- (Energy project delivery costs including project staff) 63,000
GBR*4 (Finance – shared costs) 8,000
GBR*3(Program support – shared costs) 8,000
GBR*2(Admin, IT – shared costs) 5,000
16
GBRZZZZ Indirect cost coverage 12,000
Total award 100,000
Assuming P&L budget centre GBR*5 includes a contribution of £10k for project
staff costs.
 If the actual project staff costs charged to GBR*5 exceed £10k they
must be charged to a different award code subject to applicable
award rules. Otherwise the additional costs are charged to the
unrestricted award code, but the costs will continue to be posted to
the GBR*5.
2.6 Partner Code
This transaction code is used to identify the partner or sub-contractor making

expenditure where we have sub-granted or sub-contracted.
 Any funds advanced to a partner should be treated as a cash advance
(posted to the balance sheet Partner account) until the expenditure report is
received.
 Partners are typically required to provide full expenditure reports and when
accounting for partner spend, all other dimensions of our accounts should
also be populated.
 Information recorded under this code is important as it is required for Group
Audit Purposes and the International Aid and Transparency Initiative
2.7 Cost Coverage Code
This transaction code identifies the type of expenditure being made with reference
to our standard cost coverage model. Costs are considered as direct, programme
support or support costs. All transactions should be tagged to one of these to
enable the analysis under these headings.
2.8 Donor Reporting Code
This transaction code is used to capture costs in line with the budget set out in an
award. Donors often analyse costs differently to us and this code allows us to map our
internal cost codes to their analysis/budget headings. This is a free format code so can
be set up differently for each award.
2.9 Item Code
Usually this transaction code is the staff code and is used to itemise staff loans and
advances and to track the allocation of staff time to awards and P&L account codes.
2.10 Funder Code
Prior to 24 October 2017, this transaction code was used to record the funder code.
Funder code should no longer be recorded.
Reports can still be run against pre Oct 2017 transactions including funder code, which
can be selected from LAA Ledger Additional Descriptions.
17
Further dimensions may be used to meet specific local requirements, for example to
account for taxes.
In summary:
 The balance sheet is given by the account code;

 Budget centre is given by the account code (P&L accounts)
 The P&L account is broken down by standardised income and cost type in
analysis dimension 2 (T1);
 The award is captured in analysis dimension 3 (T2).
 Further analysis dimensions, coding structures, markers etc. are used to
facilitate a range of processes and reporting – see Appendix B SUN Accounts
Structure and various sections throughout this manual.
2.11 Roles and responsibilities for system administration
There will be a 2 tier level of systems administrators in order to have segregation of

duties in place:
1. High level: Full systems administration (no limitations). There will be limited
number of users at this level and who will be responsible for ensuring
consistency with central code set up and ensuring internal approval before set
up with reference to account code and award code set up.
2. Low level: Access to create CoA and analysis codes, open periods (excludes
BU setup, new users, budget ledger setup, unbalanced journal override)
18
2.12 Statutory Entities and Group Structure
Each Business Unit has a 3 alpha-numeric code.

The first character is the Country reference (e.g. U for UK, N for Nepal).
The second character indicates the business type:
C Consulting
B Publishing
P Charity
F Foundation (India only – reported within the Charity grouping)
The third character is a sequential number to distinguish countries (BP1 Bangladesh
Charity, BP2 Bolivia Charity).
Refer to Appendix A & C for Group and legal structure business units.
3 Income Management
3.1 Income Types
Practical Action receives three types of income to achieve its set objectives and
ambitions:
1) Restricted 2) Unrestricted and 3) Trading Income
Restricted income must be used as specified by the donor, to deliver specified outputs
or outcomes. A grant agreement or contract is signed with donor(s) with a commitment
to follow agreed policies and procedures.
For the purposes of financial and risk management, restricted income can be further
categorised into three:
1. Grant income – Following a successful application process, the donor agrees to

grant Practical Action an amount of funding to implement a program(s) of work, as
outlined in the agreement.
Entitlement to grant income is subject to some conditions such as:

 Achieving agreed outputs and outcomes within an agreed timeframe
 Monitoring and reporting progress on delivery periodically.
 Delivering to an agreed budget
 Meeting Compliance criteria as set out in the general and specific terms of the
grant agreement
3.3 Results Based Contract
For accounting purposes, an award should be considered as a results based

contract if:
 Payments to Practical Action are conditional on reaching strict measurable
milestones
19
 Budgets for delivery are not set at cost. The inherent risks of delivering a
payment by results contract are managed by adding a mark-up on the actual
cost of delivery.
3.4 Donations
Funding by individuals or organisations with no reporting requirements or specified

timeframe for delivery.

Unrestricted income has no conditions attached to its receipt. There are three types of
unrestricted income.
1. Fully unrestricted income is received by Practical Action to be used in line with our
charitable aims and according to our strategic priorities. This is usually in the form
of donations, gifts, legacies and grants from individuals, trusts and foundations.
Gifts can take the form of goods, facilities and services, and must be recognised as
income.
2. Income generated from restricted awards in the form of indirect cost coverage (but
not accountable support costs) should also be considered as unrestricted income
for management accounting (though not statutory reporting) purposes.
3. Income may be loosely restricted requiring only that the funds are used in a
specified country. For the recipient unit this income will be treated as unrestricted.
Such income is frequently part of the unrestricted grant allocated by UK to Regional
Country Offices (RCOs).
3.6 Trading Income
Trading income is mainly received by the trading companies in the group (PAC and
Publishing), although the Charity may also raise trading income. This type of income is
categorised as trading income using account type in the Chart of Accounts.
3.7 Contract Terms
The terms of a contract will help to clarify if it is a consultancy or restricted grant. A

contract for consulting services specifies the services to be delivered.
It is important to identify the type of contract at the start, as part of the proposal and
award approval process. The award codes will be set up on SUN using the details on
the Project and Award Management System, including the type of contract.
3.8 Difference between PAC and PBR contracts
A PAC consultancy contract is a type of Payment by Results contract, which is

identified in SUN systems as PAC business type. However, not all PBR contracts are
PAC consultancies. PBR contracts that are awarded to the charity are assigned a
charity (PA) business type on SUN. The scope of PBR/contracts or hybrid grants is
typically broader than consultancy contracts.
20
3.9 Summary
Income types can be summarised as follows:
Restricted Income Unrestricted Income Trading Income

Awards/ Grants from Donations, gifts, legacies Publishing – books,
donors with specific Grants from donors with journals
reporting or compliance no specific reporting
requirements requirements and no
specified project links
Results based contracts Indirect cost coverage PAC – development

from restricted awards consulting services
Donations to a specific Donations to a specific Charity – miscellaneous

project / program country e.g. sale of assets
3.10 Income Recognition Policy
Income is the inflow of economic benefits to Practical Action from the activities that it
undertakes.
Practical Action should recognise income when all of the following conditions are met;
 Entitlement – control over the rights or other access to the economic benefit
has passed to the charity
 Probable – it is more likely than not that the economic benefits associated with
the transaction or gift will flow to the charity
 Measurement – the monetary value or amount of the income can be measured
reliably and the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably.
All income must be reported gross when earned. Any fee charged for fundraising by a
third party and deducted from the amount collected before it is remitted to the charity
must be recognised as expenditure.
3.11 Restricted Income: Grants
The rationale behind income recognition for Grant income is as follows:
 Entitlement - to the income arises at the point of expenditure, provided the

conditions of the grant have been met.
We are not entitled to keep advanced income where we are unable to complete
all the grant activities.
 Probable – it is more likely than not that the charity will receive income in line
with expenditure, subject to a final evaluation/audit against conditions of the
grant.
 Measurement – The actual expenditure can be measured reliably.

21
In summary, income for grants should be accrued at the point of expenditure, provided
we have met all the conditions of the grant. Accrued income reverses out in the next
period. The process is repeated until we submit a report to the donor at which point
income is recognised on a non-reversing basis.
Restricted grant income must not be recognised on receipt of the cash. It is recorded in
the balance sheet.
The rationale behind income recognition for this type of income is as follows:
 Entitlement – arises with reference to the stage of completion of award,

provided the milestones of the contract have been achieved
 Probable – it is more likely than not that Practical Action will be paid in line with
the completed stages of the award.
 Measurement – the amount can be measured reliably.
In summary, income for results-related grants should be recognised when agreed

milestones are achieved and when entitlement conditions are met.
3.13 Restricted Income: Donations
The rationale behind income recognition for this type of income is as follows:
 Entitlement – to the income arises on when a donation is agreed

 Probable – it is more likely than not that Practical Action will receive the income
if an agreement is signed
 Measurement – the amount can be measured reliably
In summary, income for donations should be recognised at the point of the agreement
or on the receipt of cash where there is no agreement.
IFRS States: Recognition of a grant or donation without pre-conditions should not be

deferred.
Income is only unrestricted where we are free to use the money however we wish (in
line with charitable objects). If the donor gives any direction as to how the donation
must be used then the money is restricted.
The rationale behind income recognition for unrestricted income is as follows:
 Entitlement - to the income arises on the donation is made.

 Probable – it is more likely than not that the charity will receive the income
following a grant or donation agreement.
 Measurement – the grant or donation agreement should have a monetary
value so can be measured reliably.
In summary, income for unrestricted grants or donations should be recognised at the

point of grant agreement or on the receipt of cash where there is no grant agreement.
22
Legacy income: a specific case
The rationale behind income recognition for Legacy income is as follows:
 Entitlement - arises when probate has been granted

 Probable – the executors have established there are sufficient net assets in the estate to pay the
legacy and any attached conditions are within the control of the charity or have been met
 Measurement – the legacy agreement will have a monetary value
In summary, legacies should be recognised as income when:

 probate has been granted
 the executors have confirmed that the estate’s assets are sufficient to pay the legacy and
 any other conditions have been met.
Each legacy should be considered independently.
A legacy should be included as income for the month / year if:

 the payment had been agreed with the executors prior to the balance sheet date
 the payment is received or notified as receivable and
 the receipt is probable.
3.15 Income from donated goods, facilities and services
Donated goods, facilities and services are unlikely to be subject to results-related

conditions which would result in the deferral of income until those conditions are met.
Even if they are, a restriction on the use of a donation does not prevent its recognition
as income.
The rationale behind income recognition for donated goods, facilities and services,
including the services of volunteers, is as follows:
Entitlement – control over the expected economic benefits that flow from the donation
has passed to the charity and any results-related conditions attached to the donation
have been fully met.
Probable – it is more likely than not that the economic benefits associated with the
donated item will flow to the charity.
Measurement – the fair value or value to the charity of the donated item can be
measured reliably.
In summary, income should be recognised in line with IAS as interpreted in the UK

Charity SORP, section 6, donated goods, facilities and services, including volunteers.
Measuring the fair value of donated goods and services can be complex so it is
important the rules stated in the SORP are followed and important that income and
expenditure (that net off) is recognised.
Donated goods, with an estimated value of less than £100, do not need to be
accounted for.
23
3.16 Trading Income
Practical Action Publishing
The rationale behind income recognition for trading income is as follows:

 Entitlement – to the income arises on the despatch of goods
 Probable – it is more likely than not that the income will be received
In summary, income should be recognised when the goods are despatched or on

invoice for service contracts and digital content.
Practical Action Consulting
The rationale behind income recognition for trading income is as follows:

 Entitlement – to the income arises on the delivery of the services
 Probable – it is more likely than not that the income will be received
In summary, income should be recognised when agreed milestones are achieved and
when entitlement conditions are met.
3.17 Accounting Practice for Restricted Income
Accounting for restricted income must take into account award currency
requirements and restrictions on allowable costs.
 Income must be recorded in the accounts of the business unit that is

responsible for managing and reporting against the associated award, or
component of an award.
 Indirect cost coverage on restricted income must be recognised on a monthly
basis in line with recognition of restricted income accruals.
 Income accruals must be made on a monthly basis (in award currency), based
on income recognition policies, and reversed in the following month using the
journal type INA.
 For all restricted income accruals, the corresponding debit entry must be made
to the Award Recognition Account on the balance sheet.
 Confirmed income postings must be made when and only when the report
verifying the associated expenditure is submitted to the donor – see also foreign
exchange differences below.
 The appropriate award code must be used on all income postings and for the
corresponding balance sheet postings, but NOT for any foreign exchange gains
or losses.
 Cash must be managed as a balance sheet item. The double entry will always
be to the balance sheet (for both advance and arrears receipts), never directly
into the income and expenditure account.
 If cash is received in a different business unit (often cash is received through
the UK) it must be transferred in line with cash flow requirements using the
interbusiness unit accounts.
 As cash advances should never be posted directly to income it should not be
necessary to post income deferrals in the income and expenditure account.
24
When accounting for income and associated transactions it is important to distinguish
between:
 Income accruals (Award Recognition) - to recognise income on a monthly

basis. The accrual will be based on the terms of the award, not necessarily on
the spend on an award.
 Cash claims - may be made:
o in advance of any work being done
o when certain milestones are reached
o in arrears with submission of an expenditure report.
 Cash receipts - when a donor pays against a cash claim.
4 Award Budgeting, Monitoring and Reporting

An award is a discrete funding commitment from a donor or group of donors which
carries obligations on the part of Practical Action.
Awards may take the form of grants, contracts or donations. An award may cover a
single whole project, a part of a project/projects or cover many projects.
The purpose of this section is to ensure that costs are adequately covered in award
budgets, can be tracked, monitored and reported on in a transparent way.
This section covers:
 Preparation, review and approval of award budgets
 Award codes and expenditure tracking

 Balance sheet transactions for awards
 Accounting for multi-funded work such as co-funding and joint funding
Appropriate and consistent approaches are required for timely preparation, review and
approval of proposal budgets and to ensure that all attributable costs are fully covered
in funding applications.
Proposal budgets will be reviewed and approved through the Projects and Awards
Management System (PAMS).
Details of all elements of the decision gates for funding applications are contained in
the PAM guidelines. The decision levels include
1. Go/No-go Decision Before any substantial work is done on developing a donor

proposal, we must assess whether or not to go ahead[GP7][AK8]. A quick
assessment of the viability of the funding application such as cost coverage
donor rules should be taken into account at this stage.
2. Proposal Quality Assessment (PQA): A budget should be developed and
reviewed at this stage.
 Costs should be calculated and allocated in the proposal budget on a
proportionate basis and in line with donor rules. Scope for further
adjustments to the budget should be prudently assessed.
25
 The Proposal Quality Approval (PQA) form in PAMS must be signed off
in all cases. This requires ALL proposals to be approved by the
Business Unit director, programme lead and country Head of Finance.
 Review and approval by the UK prior to submission is required for all
proposals in line delegated authority and sign off thresholds.
3. Award Approval stage (AA): Final budget revisions may be made at this stage.
Reporting requirements, line flexibility.
 All contracts must be signed in accordance with the Delegation of
Authorities Limits.
Budgets underpinning Donor Proposals are fundamental to Practical Action’s ability to

meet its financial commitments.
Every Proposal/Award budget should:
 Be fully costed. Award budgets must be prepared on the basis of fair share
contribution to all direct and shared costs.
 Specify the currency of the award and budgeted exchange rate
 Checked for line item and/or total budget flexibility.
 Checked for donor rules about foreign currency rates to be used, and how gains
and losses will be managed. If no specific rules are expected Practical Action’s
approach will be applied.
 Checked for reporting frequency to assess the opportunity costs of signing up to

the award.
 Checked for payment terms and the billing schedule (advance payments/ arrears
/ periodic schedule/ mix) to enable efficient working capital management.
 Ensure inflation and cola is adequately budgeted.
 Must not present staff or any shared costs as co-funding contribution by Practical
Action
It is the accountant’s role to satisfy themselves that:
 all appropriate costs have been included in the proposals
 the phasing of the budget is appropriate and agreed with the project manager
 the proposals and budgets have been prepared taking into account the value-for-
money elements
Detailed guidance on preparing award budgets is set out as part of the guidance pack
for PAM.
4.3 Award Codes
Following approval of award contracts on PAMS, a notification is sent to the Finance

Systems Manager to set up an award code. The award code is created in the relevant
Business Unit and the UK charity.
26
Award codes must not be created by staff in other business units.
1. Primary award codes: An award code must be created for all Primary or lead
awards who have specific reporting and other compliance requirements.
(QR0****)
2. A co-funding award is created to collect funds from various donors to provide a
contractual contribution to a main award. A co-funding award to a business unit
must be managed in the same way as a restricted award. (QR90***)
3. A wrapper award is a funding package which is created and underwritten by UK
charity for specific agreed work. Wrapper funds must be managed in the same
way as restricted awards with specified reporting back to UK (may be QR95***
or QU*****)
4. Unrestricted awards where we want to monitor expenditure (QU*****)
Generally, an award code will need to be created if:
 A donation is significant c£100k and the donor has distinct reporting

requirements which vary to that of the primary donor.
 An award requires balance sheet transactions (managing debtors or creditors)
 A contract has to be signed in order to receive money or
 any reporting is required or
 Funds need to be tracked
Award codes are set up in two broad categories, corresponding to income type.
Including 5 digits (NNNNN) ranging from 00001 to 99999, the format of award codes is
as follows;
1. Restricted (QRNNNNN). These are set up through PAMS and it replaced the
old funder code R****
2. Unrestricted (QUNNNNN). Unrestricted awards will be created in number bands

to help with reporting. See 8.3.2.1 (unrestricted awards) below
a) The old unrestricted funder codes (UC***) were replaced as shown below:
 UC001General Fund (Funding allocation)individual unrestricted award codes
(Country allocations)
 UC002General Fund (Funding Gap)individual restricted award codes (Co-
Funding Wrapper)
 UC003General Fund (Investment)individual unrestricted award codes
(Investment)
 UC004General Fund (Fund pots)individual unrestricted award codes
(Thematic wrapper)
 #UnallocatedQU# for unrestricted funds or
 #Unallocated QR# for restricted funds
b) Thematic Wrappers and investment funds

Each thematic award has a unique unrestricted award code, which is created in the
UK. Numeric 5 digit range prefixed with 3.
27
 Energy QU30000
 Food and Agriculture QU30100
 Urban Water and Waste QU30200
 DRR QU30300
 One-off wrappers (e.g. prizes). These start at QU30500 e.g. Zayed QU30500
 Investment. Each investment amount allocated is assigned a unique

unrestricted award code starting at: QU40000
c) Country allocation (General unrestricted grant)

Each Business Unit has a unique unrestricted award code to be used to record
unrestricted income and expenditure. Numeric 5 digit range prefixed with 1 for Charity
or 2 for PAC.
UC001 is replaced by:
Business
Office Unit Charity PAC
UC1 QU20000
UK UP1 QU10000
BC1 QU20100
Bangladesh
BP1 QU10100
KP1 QU10200
East Africa RP1 QU11000
RC1 QU21000
BP2 QU10300
Latin America PC1 QU20400
PP1 QU10400
IC1 QU20500
IF1 QU10550
IP1 QU10500
South Asia LP1 QU10600
NC1 QU20700
NC2 QU20750
NP1 QU10700
MC1 QU21100
Southern Africa
ZP1 QU10800
Sudan SP1 QU10900
West Africa SC2 QU21200
The award code in SUN is created using Customer Accounts.
Setting up the Customer Account (or Customer Code) automatically creates the related
award transaction analysis code, in the format specified in section 8.2.3 below. If a
28
customer code is needed for purposes other than award management (e.g. for sales of
assets or training courses), an award code will also be created. It is very important not
to create these customers with a code beginning with Q.
Using award codes enables transactions to be assigned to the specific contractual

agreement, allowing different funding agreements from the same donor to be
distinguished.
The award code should be used against both income and expenditure and balance
sheet postings
The Customer Analysis screen captures 12 pieces of information about the award that
can be used in Q&A reports:
These are:
1. Income Type (see Income Recognition Policy for further explanation)
a. DONATION
b. GRANT
c. RESULTS BASED- generally PAC
d. TRADING- e.g. sale of asset
2. Donor Name (*)
3. Ultimate (or originating) donor (*)
4. Donor Type (*)
29
5. Funder (previous SUN funder code if available)
a. RXNNN
b. UXNNN
6. Award Amount
7. Award currency
8. Income/cost code
a. 1110 Government
b. 1120 NGO
c. 1130 Other
d. 1140 Legacies
e. 1150 Donations
f. 1210 Other income
g. 1220 Sales of materials
h. 1230 External Consultancy Fees- generally PAC
i. 1250 Internal Consultancy
9. Co-funding link-(probably a PIN number). This will aid linking award codes
across multi BU’s that require co-funding so that we can run better/meaningful
co-funding reports.
10. RE Fund (Raisers Edge Fund code). This is the link between SUN and Raisers
Edge.
11. Spare
12. Total Co-funding – the amount to be underwritten.
13. Start Date – the date the award contract starts

14. End Date – the date the award contract ends
The transaction analysis dimensions for Award Customer accounts are set as
prohibited.
The General screen also allows for additional free text to be recorded in the ‘Comment’
box, which can be used for any further relevant information. For example in the case of
co-funding wrapper awards this can show the principle award code.
Note: Award code in the Chart of Accounts: The award Customer Code is also
created as an Account Code in the Chart of Accounts to allow transactions to be
posted correctly.
30
5 Monitoring Award balances on the Balance Sheet
For each award a new “Customer Account Code”, to be known as an Award

Recognition Account, is set up in Sun in the format specified in the section above (so it
is identical to the award transaction code).
This Award Recognition account has the following features:
 It is used to report the income accruals generated each month, and crystallised
income, regardless of whether money is received in advance or in arrears.
 Contains a mix of debtors and creditors depending on the terms of the award.
 Clears to £nil at the end of the award.
 Is a debtors ledger with any creditors being reclassified at the period end
1. Donor claims accounts are used to record all claims to donors, except co-
funding wrapper claims to Head Office. The accounts are set up by currency
and must be selected based upon the donor currency.
E.g.: DEUR01 for Euro claims

DLOC01 for local currency claims, DGBP01 for GBP claims
 These accounts must only be used to record amounts requested from the donor
for the relevant award.
 Any claims requested must be tagged with the award code against which the
claim is being made.
 Any amounts received from the donor must be credited to:
o the Donor Claims account if a debtor has been created
o the Award Recognition account if the donor claim had not been recorded
 The award code must be included on the journal posting to the donor claim
account.
Claims for payments should always be made as soon as these conditions are met. On
receipt of payment from the donor, reconcile income and expenses with donor funds
received.
The management of these claims is set out in the Cash Claims and Managing the
Debtors Ledger section of this manual.
2. Co-funding wrapper awards are claimed through an inter-country account at

the time when the main donor report is submitted.
 Debit inter-country –tag the relevant QR9 code in main award currency-
Journal type DRT
 Credit Restricted income (I&E) income code 1150
 Work in-progress co-funding award income is accrued to inter-country income
Journal type CIN
31
 Debit inter-country income –tag the relevant QR9 code in dimension 2
 Credit Restricted income (I&E)
A grant for € 1m is received in arrears.

Account code Award code Country
(T2) Dr Cr
€'000 €'000
On winning award, start work:
Expenditure (I&E) XXXNNNNN QRnnnnn 300
Bank (B/S) 14** n/a 300
Country accrues for income at month end:

Award Recognition account (B/S) QRnnnnn QRnnnnn 300
Restricted income project (I&E) XXXNNNNN QRnnnnn 300
By end of contract:
Work has been completed:

Expenditure (I&E) XXXNNNNN QRnnnnn 1,000
Bank (B/S) 14** n/a 1,000
Country claims grant:

Donor Claims account (B/S) DEUR01 QRnnnnn 1,000
Restricted income project (I&E) XXXNNNNN QRnnnnn 1,000
Note: For traditional grants, donor claims can only be posted to restricted income (I&E) if the
amount claimed is the same as the amount reported to the donor. If the two are different, two
different journals are posted. One journal credits restricted income (I&E) with the amount
reported to the donor, and debits the award recognition account (B/S). The second journal
credits the award recognition account (B/S) and the double entry debits donor claims (B/S).
We will not track cash by award code for the time being, though it is expected this will
be introduced in time. By tracking debtors, creditors, income and expenditure by award
there is enough information needed to record award income and expenditure
effectively.
Where required by donors we will continue to use separate bank accounts to ring fence
donor funds (but we should normally be able to negotiate out of this requirement).
Where we must monitor interest accrued on donor funds, this can be inferred by
applying bank interest rates to the sum of debtor balances on an award and posted as
income to the award.
Once final negotiations are complete and the contract is signed:

 The budget should be reviewed if necessary to take into account any results of
final negotiations or long lead time to signing the contract, and the phasing of
activities.
 The budget, itemising expenditure by donor budget line, must then be loaded in
the working budget ledger for the entire period of the contract. This should be
before any expenditure is made.
32
 Check that the uploaded budget reconciles to the contract value.
 If any revisions are agreed with the donor the system budget must be updated
accordingly.
If allowed by the donor, we may be able to re-allocate a percentage of costs between

budget lines according to the level of flexibility permitted by the donor. Before adjusting
an award budget,
1. Ensure that written approval is obtained from the donor before re-allocating
funds between budget lines if:
a. The re-allocation is above the allowable budget line flexibility or
b. there is no advice within a contract
2. The budget must be updated in SUN and saved in PAMS, along with the
approval for the change
a. if we have reallocated across budget lines or
b. a donor has agreed to increase a budget line item

3. If the change is within our own discretionary limits:
a. the budget must not be updated in SUN, so it can continue to be used to

report to the donor
b. a separate forecast should be held offline to track the changes we have

approved
c. the reason for change (including reference to the contract clause

allowing the change), must be written into the “Reason for Update”
worksheet in the updated budget file saved in PAMS.
All expenditure must be carefully considered against the award’s terms and conditions,
including the approved budget lines. See also Award Codes.
 All expenditure charged to the award must be eligible according to the donor
rules
 Costs booked to an award must not include those funded by other awards.
 Award expenditure must be managed to ensure it does not exceed the amount
allowed by the donor. Over-spends on award budgets can put pressure on
unrestricted funding therefore they should be avoided where possible or
approved by the business unit Director if essential.
 Donor financial reports are generated using the award code
 The approved award budget must be uploaded on PAMS, as well as all future
revisions. Suffix the approved budgets with a sequential number code. Initial
budget is Budget v00.xlsm, next Budget v01.xlsm etc.
33
Note that actual expenditure should always be coded to the correct cost code
regardless of whether there is budget availability or not.
The purpose of this section is to ensure Practical Action can differentiate transactions
against a specific award in order to meet individual donor reporting requirements.
We recognise two different types of funding by multiple donors against a project:
1. Co-funding:
where part of an award we are obliged to contribute further funding either in
cash or in-kind.
Typically the award will require us to report back on total outputs and spending
including co-funding contributions.
2. Joint funding:
Where there is no contractual obligation for Practical Action to make a
contribution, but we choose to source funding from multiple donors for a project
or program of work. We would usually report back to each donor on their funded
outputs/outcomes using the relevant award code.
5.8 Co Funding
A co-funding wrapper award in the range starting QR90XXX is set up for each primary
award that needs co-funding. Any co-funding that does not require specific reporting
will be part of award code QR90XXX.
 Co-funding income is accrued on a monthly basis,

o Credited income code 1150 and
o Debit the relevant inter-country code
 A claim for co-funding is submitted at the same time as a donor report by
posting a non-reversing journal to
o Credit income code 1150
o Debit the relevant inter-country account
 The UK business unit will post the donations for QR9 awards as income and
recognise expenditure through inter-country.
 The RCO inter-country income will contra with UK expenditure on the same
account
 When the co-funding claim is received by UK, the donations held in UP1 will be
transferred to the Business Unit along with any unrestricted amounts required to
make up the balance.
 Unrestricted income may be replaced at a later date with income donated
directly to this award.
A restricted award code in the range starting QR00XXX must be set up for each
contributing award with different reporting requirements. The balance on the co-
funding wrapper will be reduced by an equivalent amount.
Each contributing award must be included when reporting to the principal donor as they
are interested in the total expenditure, including co-funding.
We must be able to track expenditure against each contributing award as some donors
may wish to see their contribution to the project.
34
Co-funding awards (QR9***) are treated as restricted income and expenditure within
Business Units. See Co-funding for further information
5.9 Joint Funding
Where more than one award funds a project/program and the donors only wish to see
their portion of the costs, donor reporting is based on their respective award code only.
If a cost centre is funded by more than one award then costs should be allocated to the
correct funder at least every month end.
1. Shared cost allocation to awards

 Post the transactions (such as salaries) to a QU code
 Then re-allocate the costs to relevant awards, using the amounts
specified in the award budget.
 Do not re-charge costs from one P&L account code to another. The re-
allocation process is only applicable to the award code
2. Splitting costs to various awards as part of co-funding:

 Scenario one: If the main award contributes most of the funding and others
make up a percentage of the total costs;
o Post 100% of the costs to the lead award in the course of the month
o At month end, re-allocate the costs to co-funding awards on the basis of
their relevant percentage contribution. Use cost code 9999 on both the
debit and credit sides of the journal
 Scenario two: Co-funding is assigned to specific lines (cherry picked). This

should happen in rare circumstances
o Assign the relevant transactions to the co-funding award as and when
they occur.
o Invoices relating to joint-funded or co-funded projects where allocations
to awards are more complex have always been posted at a detailed
level to the relevant award codes, as determined by the budget holder,
ensuring no entries are made to the unallocated Award Codes (QR# or
QU#).
o
 Scenario three: A mix of scenario 1 and 2. This should be rare
o Assign costs to the main funder except those which were ‘cherry-picked’
by a co-funding award
o Calculate the percentages at the month end and re-allocate the
remaining costs as relevant.
Accurate and up to date accounting records and budgets must be maintained in order
to extract all reports from the accounting system, including those intended for donors.
All accounting entries, reconciliations and reports should be completed promptly at the
end of a defined reporting period and always within the timescale agreed with the
donor.
35
We should ensure that

 We report accurately in the formats provided by the donor if these are available and
 We are consistent in reporting to donors who have no pre-defined reporting formats
Restricted awards have varying levels of compliance, reporting formats and

requirements which must be complied with. The format of the reporting required will be
agreed at the time the contract is signed.
Example:
DG ECHO.
Details on how to produce a final report are at http://dgecho-partners-
helpdesk.eu/final_report/start
Reports for co-funded programs involve additional allocation routines as opposed to

those that are funded by one award.

The principal donor is interested in:
 the total costs their contribution and all other all co-funding awards
 the amount of their contribution (their award)
The information extracted from SUN should include all project costs split by award.
A simple example is as follows:

P&L codes
funded by the
combination of SDN12345
co-funding SDN23456
awards SDN34567 75% 25% 100%
Restricted Funds
Principal CF Total
Donor Award Wrap Award 3 Award 4
Fixed Assets 100 20 50 100 270
Balance Other Assets 400 - - 400
Sheet
Liabilities (500) (20) (50) (100) (670)
Total Net Assets - - - - -
Income 7,500 300 200 2,000 10,000

Income & Expenditure Salaries (2,000) (100) (200) (500) (2,800)
Expenditure
Office (1,000) (1,000)
Materials (4,500) (200) (1,500) (6,200)
Profit & Loss - - - - -
36
6 No Co-Funding
If the donor does not wish to see other components of a co-funded project then the
donor report will be generated using the relevant award code.

For all donor reports consider:
 Award currency
 The correct exchange rate must be used to convert the expenditure into award
currency. Check the terms and conditions of the award for rules about the
exchange rate, otherwise use internal system rates
 Whether accruals can be included
 Budget Holder Reports should be issued in donor format and award currency
6.2 Foreign Exchange Differences
When claiming for income from the Donor ensure that:
 The income due must be calculated using donor specified or otherwise agreed
exchange rates, based on income recognition criteria.
 Amounts are claimed in line with contractual terms and in award currency.
 If the exchange rate or amount in Donor currency is not pre-defined use the
average period rate.
 The income must be posted to SUN in the award currency (using transaction
field).
 The value of SUN base currencies must be forced so that the income exactly
contras with the corresponding expenditure. This will ensure, correctly, that no
surplus or deficit is recognised on the award except where ineligible
expenditure has occurred.
Note that exchange gains and losses will be generated on balance sheet balances.
These are typically the responsibility of Practical Action, unless a separate
arrangement is agreed with the donor. As such foreign exchange differences may not
be reported to the donor.
See Foreign Currency Management for further details relating to foreign exchange.
Indirect Cost Coverage (ICC), also known as Indirect Cost Recovery (ICR), is a
standard mark up (usually a set percentage) which is applied to direct costs on an
award.
6.3 Indirect Cost Coverage

It is designed to cover unspecified organisational overheads and there is no
requirement to itemise the costs for which it has been utilised. In effect ICC provides
unrestricted funds.
ICC should initially be added to income for recognition purposes, ensuring that the full
value of any debtor is captured on the balance sheet. The appropriate income code
(19**) should be used for this posting.
37
Note that we treat this income as unrestricted income and do not offset the credit
against unrestricted expenditure, which should be reported gross (this will enable more
straightforward and transparent budget management).
Where ICC is split with consortium partners then the element granted to partners
should not be treated as unrestricted income. Rather the grant (sub-award) to the
partner should be recorded as part of the award expenditure (cost code 54**). Only
that part of the ICC retained by Practical Action should be treated as unrestricted
income.
6.4 Cash Claims and Managing Debtors Ledger
Debtors resulting from cash claims or income postings should be monitored on a

monthly basis.
All units must maintain a complete list of all confirmed contracts on the Project and
Award Management System.
The following must be monitored closely:

 The contract income amount per year
 the forecast timings of cash flows and the currency
 any performance conditions on income
The Project and Award Management system should be regularly updated promptly to
ensure all new awards are captured and the award information is complete.
6.5 Donor Claims, Award Recognition and Receivables Ledgers
1) The Donor Claims ledger is used to recognise receivables by Practical Action,

normally arising from the submission of a cash claim to a donor.
It should only include amounts that have been requested from donors.
In SUN, a donor claim account is set up for all existing award currencies, and they
roll up into category D08 – Donor Claims Receivable.
2) The Award Recognition ledger is used to record award account balance sheet
entries arising from income accruals, confirmed income recognition, double entry of
donor claims and advance income reclassification. Each award will have its own
Award Recognition balance sheet account, with the same QR code as the award.
This account should clear to £nil at the end of the award. It should be used for
grants received in advance and in arrears, so will cover amounts due to and from
donors. It will be set up as a debtor ledger in SUN (although it may have a creditor
balance). It will be used for both charity and PAC accruals. In the balance sheet
the accounts are rolled up into D12 – Accrued Income
3) The Receivables Ledger is used to record income from Practical Action Consulting
and Publishing.
All claims submitted to donors will be tracked by recording a debtor in the accounts to
ensure that the funds are received efficiently.
Each time a claim is sent to a donor directly from the business unit, we must record this
in the accounts in the following way. All claims should be given a sequential
numbering:
Debit Donor claims account (B/S)

38
Credit Award recognition account (B/S) if traditional grant
Or
Credit Restricted income (I/E) if PBR contract or PAC consultancy contract.
Accounting entries related to restricted grant income are as follows:
Note: The transaction currency for all income postings must be in the currency of
award e.g. USD, GBP, EUR, CHF, SEK, etc.
1. On signing an agreement, submitting or meeting the requirement of a donor

claim (Use Journal type IDC)
o Debit: Donor claims e.g. Award currency code DGBP01 in category D08
o Credit: Award QR account code in balance sheet category D12
2. On receipt of payment from the donor (Use journal type IDC?)

o Debit: inter-country or Bank if cash is received in-country
o Credit: Donor claims
Ensure all matched receipts and claims are allocated at month end on the Donor
Claims Ledger.
3. Work in progress / reversible income – (Use journal type INA)

o Credit: Restricted Income (I&E)
o Debit: QR award code in balance sheet category D12
4. On submission of a donor report (use non-reversing Journal type DRT)

o Credit P&L income in award currency at the reported rates.
o Debit: QR award code in balance sheet category D12
After all the above transactions are completed at the end of a reporting period, each
award code balance will be revalued at the closing rate. See details under Foreign
Currency Management (section 4).
5. Balance reclassification: If at the end of the reporting period any of the QR code
balances are in credit, the total balance will be re-classified into liabilities
balance sheet category C15: (Use journal type IND)
Add up all QR account credit balances as relevant in base and 2nd base
currencies only
o Debit one reclassification account code in balance sheet category D12.
Transaction currency is the same as the base amount.
o Credit: One re-classification code in balance sheet category C15.
The above accounting entries are applicable to payments received in advance and in
arrears.
39
6.6 Accounting entries for PAC income and Payment by Results Contracts
1) Where we meet the payment terms of the contract, submit a donor

claim/invoice:
DR Donor Claims Account (B/S)

CR Restricted Income (I&E)
When cash income is received from the donor, accounting entries on the
system would be:
DR Inter-country or Bank (B/S)

CR Donor Claims Account (B/S)
2) We will accrue PAC and PBR income if we achieve the contract milestones but
are not able to submit a donor claim until the milestones are verified by the
donor.
DR Award Recognition Account (B/S) Journal type INA

CR Restricted Income (I&E)
6.7 Accounting entries for donations and unrestricted income
On receipt of cash donation – non-reversing journal

DR Bank (I&E)
Credit Income (I&E)
Where a donation relates to another business unit, it will be transferred to the business
unit through inter-country transactions. See inter-business unit transactions for details.
Donations are recognised in full on receipt of cash income. Donations are therefore not
part of the monthly income accrual process.
See Accounting Examples for detailed examples of how this will work.
6.8 Money Receivables and Bad Debts
At month end we should run an ‘Aged Debtors’ report to review all outstanding claims
and their age.
If there are concerns about the recovery of outstanding debts these should be provided
for.
Before posting the journal below, evidence must be collected to prove that the debt has
problems despite several follow ups.
DR Bad Debt Expense (I&E)

CR Bad Debt Provisions (B/S)
40
6.9 Key Controls
Risk Control
Income is not claimed, or not claimed on Ensure that there is a listing of all
a timely basis income claimable from donors. This
should include all contractual grants,
agreed timings of payments and any
performance conditions. This should be
reconciled monthly to PAMS (Project
and Award Management System), to
ensure that all new income is captured.
Income is not recoverable from the Monthly there should be a review of the
donors, resulting in bad debts ‘Aged Debtors Ledger’ to ensure that
any potential bad debts are identified,
chased and provided for on a timely
basis.
Income is not recorded in the correct Perform a monthly review of all income
period resulting in incorrect financial recorded in the period, apply the
information ‘entitlement, measurement and probable’
criteria and defer income where
appropriate.
Income is not recorded at the correct Record income in line with the foreign
value and financial exchange gains and exchange management policy.
losses are not recorded in line with
Practical Action Policy
6.10 Accounting for traded goods and services
This section provides guidance on traded goods and services.
6.11 Policies and Procedures
 Sales should be normally be made on the basis of advance (or simultaneous)

payment.
 Credit sales should be made based on letter/email/ purchase order from
customer.
 Credit should only be offered to clients where their credit worthiness can be
established, e.g. through review of published accounts, or established payment
history. Our standard terms are 30 days from date of invoice.
 Withheld VAT amount should be deposited before due time.
 For audit purposes invoices held for accounts purposes should be held on a
central file with the supporting documentation to that invoice being attached to
the back of the invoice.
 Sales invoices must be entered onto SUN as part of the month end management
accounts preparation in the month that they are raised. The invoice should be
rubber stamped and initialled (by a Finance assistant) to reflect that it has been
entered into SUN.
 To monitor customer accounts and payment progress, a basic sales ledger
system should be maintained by the Finance department, with monthly aged
debtors reports produced & credit control performed.
41
6.12 Invoicing
Where there are substantial volumes of invoicing and / or there is substantial
complexity an electronic invoicing system should be used.
Where using a paper based system, only one sales invoicing book must be used at any
one time for each office or legal entity. The invoices must be pre-numbered and in
triplicate:
 Original goes to the client / customer paying

 first copy to Accounts
 last is BU copy
The sales invoice should contain the following elements:
- Pre-printed sequential invoice numbering

- Local office contact details (address /email / phone / fax)
- Practical Action logo
- Invoice date
- Customer contact details (address / email / phone / fax)
- Customer contact person / department
- Customer order reference nos.
- P&L account code
- Award code
- Description of product and / or service being sold with Quantity / Unit price
and Net Amount
- Section for country specific taxes (withholding tax, VAT etc.)
- Total invoice amount – clearly stating the currency of the transaction
- Practical Action bank details (for customers to initiate bank transfers)
- Practical Action payment terms
6.13 Accounting entry using SUN

Dr. Sales Ledger (credit sales); Cash (cash sales)
Cr. Income
For cost of sales entries see accounting for stock.
7 Foreign Exchange Management
7.1 Purpose
The purpose of Foreign Currency Management is to ensure consistent management,

accounting and reporting of foreign exchanges across the group.
7.2 Principles
Functional Currency
Practical Action has operations in a number of countries. As per IAS21, it is necessary

to determine the functional currency of each operation. The functional currency is the
currency of the primary economic environment in which the entity operates. Practical
Action refers to the functional currency as the base (or local) currency.
42
The base currencies for Practical Action are as follows:
Business
Office Unit Description Base Currency
BC1 Bangladesh- PAC BDT Bangladeshi Taka
Bangladesh
BP1 Bangladesh- PA BDT Bangladeshi Taka
KP1 Kenya- PA KES Kenyan Shilling
East Africa RP1 Rwanda- PA RWF Rwandan Franc
RC1 Rwanda- PAC RWF Rwandan Franc
BP2 Bolivia- PA BOB Bolivian Boliviano
Latin America PC1 Peru- PAC PEN Peruvian Nuevo Sol
PP1 Peru-PA PEN Peruvian Nuevo Sol
IC1 India- PAC INR Indian Rupee
IF1 India- Foundation INR Indian Rupee
IP1 India PA INR Indian Rupee
South Asia LP1 Sri Lanka- PA KLR Sri Lanka Rupee
NC1 Nepal- PAC NPR Nepalese Rupee
NC2 Nepal PAC NPR Nepalese Rupee
NP1 Nepal- PA NPR Nepalese Rupee
MC1 Malawi- PAC MWK Malawi Kwacha
Southern Africa
ZP1 Zimbabwe PA USD US Dollar
Sudan SP1 Sudan PA SDG Sudanese Pound
UB1 UK PAP GBP Pound Sterling
UB2 UK-PAP (New Structure) GBP Pound Sterling
UK
UC1 UK PAC GBP Pound Sterling
UP1 UK- PA GBP Pound Sterling
Senegal (West Africa)- CFA Franc BCEAO
West Africa SC2 PAC XOF (Senegal)
2nd base currency is the terminology for the group’s reporting currency (GBP).
4th base currency is used by Latin America to report in US dollars.
Transaction currency is the currency that any individual transaction is carried out in. It
may or may not be the same as the base currency.
Practical Action may have additional business units and currencies to the above during
the course of its operation in other countries.
Foreign currency is a currency other than the base currency of the business unit.
Foreign currency may be referred to as transaction, award or donor currency.
All transactions must be entered in SUN using the transaction currency. This will allow
translation to the base currency at the correct rate.
For all transactions involving currency exchanges, the actual exchange rate should be
entered.
43
For all other transactions, the period system rate in SUN will be used.
In SUN this amount should be entered in the ‘Transaction currency’ field (highlighted in
yellow below). It will then be converted to the base currency at the period rate, or can
be overwritten if necessary.
At the end of each reporting period, foreign currency monetary items should be
translated using the period end rate in the SUN system (see exchange rate section
below for further details). The period end rates will be uploaded by Head Office and
will be the period rate in force for the following month.
Exchange differences arising on translation of foreign currencies are treated as

charges/credits to the P&L account code (but not to the award code) for which the
currency is held.
Any foreign exchange gains/losses will be posted to the foreign exchange account in
the I&E account, during the revaluation procedure at the month end.
7.4 Translation to the Presentation/Reporting Currency
Practical Action’s presentation or reporting currency is GBP Sterling (2nd base).
Each business unit’s balance sheet will be revalued at the period end from transaction
currency into the reporting currency (GBP).
1. Assets and liabilities for each statement of financial position presented (i.e.
including comparatives) shall be translated at the end of period rate in SUN at
the date of that statement of financial position;
2. For purposes of calculating income accruals, income and expenses shall be
translated at exchange rates at the period rate of the transactions;
3. All resulting exchange differences shall be recognised in the Income and
Expenditure account.
7.5 Hyper Inflationary Economies
The economies in some of the countries we work in can be prone to hyperinflation. It is

the responsibility of the finance manager in country to notify head office if they believe
the economy in which they operate is hyperinflationary.
IAS29 Financial Reporting in Hyperinflationary Economies applies where a

business unit base currency is that of a hyperinflationary economy. This standard
requires that the financial statements of business units (and comparative periods) be
restated for changes in the general pricing power of the functional currency.
44
Indicators that the economy is in hyperinflation include but are not limited to:
 Cumulative inflation over 3-year period is near or greater than 100%
 The general population prefers to keep wealth in non-monetary assets
 The general population regards monetary amounts in terms of a relatively
stable foreign currency
 Interest rates, wages, and prices are linked to a price index
 Amounts of local currency held are immediately invested to maintain purchasing
power.
The above list is not exhaustive. If a hyperinflationary economy is suspected the

business unit will contact Head Office to agree a course of actions.
7.6 Official Exchange Rate Site
Currently this is http://www.xe.com
If the rate on the official site is materially different (2%) from the in country prevailing
rate, please contact Head Office for further advice and approval of rate.
Official exchange rates should be monitored monthly against the rates obtained. We
want to ensure that the standard rate of exchange quoted by a bureau is equivalent to
the market rate of exchange.
Situations where this may apply are where local rates of exchange are different to
international currency market rates, particularly for Sudan and Latin American
countries.
7.7 Exchange Rates

The group policy is to use period exchange rates in SUN, taken from the official site.
The rates on the last working day of the period will be used:
 to revalue the period end balances
 for all transactions in the following period
o except for transactions involving currency exchange, where the actual
rate must be used
The period rates in the SUN system will be updated monthly by Head Office.
It is the responsibility of business unit Head of Finance to check the bank exchange
rates and whether their banks are providing competitive rates or not while transferring
the funds.
The group policy is to monitor foreign exchange movements and where possible avoid
exposure to foreign exchange volatility, utilising the following methods:
 Eliminating the foreign exchange risk to Practical Action where possible through
having local currency contracts with Donors or building in foreign exchange
provisions within such contracts.
 Keeping only minimal operational amounts in high risk currencies.
 Regularly reviewing cash flow forecasts and bank accounts and maintain
natural hedging where possible.
An example of natural hedging is to only convert amounts into local currency as
they are needed.
45
It is against Practical Action’s policy to enter into foreign exchange rate contracts with
third party suppliers.
7.8 Foreign Currency Fund Transfers

The group regularly reviews its foreign currency transfer provider to ensure that we are
receiving a competitive market rate and will use different providers if necessary.
The providers must be authorised in accordance with the local statutory and legal
requirements of that specific region/country.
Risk Control
Exchange rates updates are not restricted in SUN Practical Action Group updates applicable exchange rates in SUN on a
resulting in inconsistent rates applied by business monthly basis. This update is performed by Head Office in order to
units and difficulty in reporting consistently. ensure consistency across the group.
Unplanned foreign exchange loss Business unit level monitoring control and reporting on foreign
exchange position.
Theft/unauthorised use of monies as a result of All money exchange providers must comply with the local statutory
using an unregulated money provider requirements of the region/country office e.g. FCA in the UK
Balance sheet reclassification accounts, multi- All accounts which in transact in more than one currency must be
currency balance sheet accounts accidently removed from the revaluation tool. This is controlled by selected non-
revalued suppressed accounts in the selection field of the balance sheet extract
form. On SUN, all chart of accounts codes which are to be excluded
from revaluation must be marked by ticking the ‘suppress revaluation’
box in the currency tab
The amount posted to the income and expenditure statement must be

sense checked as part of the monthly review. The checks should
ensure that no balance sheet accounts were revalued by mistake.
Movements in foreign exchange must be explained in the management
accounts commentary, based on the main drivers (e.g. if the cause is
high cash balances, movement in rates between reporting currency and
base or 2nd base, high partner balances, etc.
Incorrect exchange rates used to convert income, The accuracy of exchange rates used should be checked by the
expenditure or donor claims in the balance sheet Business unit Finance Manager at the point of posting the transaction
as part of the posting process.
Any odd balances within the revaluation template must be invested by

the business unit Finance Manager and corrected before the
revaluation is posted
7.9 Local Currency Reserves
No provision is made against balances held which could not readily be converted to
sterling as these are only held to be used in the short term in that country.
CONTROLS
 All invoices received are posted in transaction currency
 Only Relevant balance sheet accounts are revalued at month end- see risks
below
46
The revaluation template must be updated in full, including the dates, the forex
account, currency codes, and monthly rates before the routine is run to revalue the
balance sheet
Business Unit BC1 (Bangladesh- PAC) purchases 1 solar panel for €1,000.
Invoice dated 15th September.
Payment settled on 18th October.
Exchange Rate applying 1st September: €1=BDT 86.3 (applies to transactions

through September)
September Period End Rate in SUN: €1=BDT 86.1 (also applies to transactions
through October)
Exchange Rate on 18th October: €1=BDT 84.6
1) On receipt of the invoice 15th September:

DR Expense (I&E): €1,000 BDT 86,300
CR Payables (B/S): €1,000 BDT 86,300
2) At the period end 30th September, the balance sheet payable is revalued to
86,100, creating an unrealised gain of 200 BDT
DR Payables (B/S): 200
CR Exchange loss/gain (I&E): 200
3) On settlement of the invoice of €1,000 on the 18th October, pay 84,600 BDT
CR Cash (B/S): €1,000 BDT 84,600
DR Payables (B/S): €1,000 BDT 84,600
4) At the period end 31st October, the balance sheet payable is due to exchange
rate differences and is cleared as below:
DR Payables (B/s): 1,500
CR Exchange loss/gain (I&E Award): 1,500
7.11 Currency revaluation at the month end
1. Head Office will input the new currency exchange rates at the beginning of the
month using the official website or as agreed with the business unit Head of
Finance in case of currency devaluation
2. Open Fin Form 004: Revaluation Template and follow the instructions
3. The revaluation journal is run for balance sheet items only. Do not revalue the
I&E account.
4. A balance sheet account shall only be revalued if all its transactions are
denominated in a single currency. If a debtor or creditor holds balances in more
than one currency then a separate account must be created for each currency.
The exception to this is the business unit’s main bank account, which for
purposes of revaluation is assumed to be denominated in base currency. The
main bank account’s base balance shall be revalued into the reporting currency
(GBP).
5. Typically reclassification accounts, inter-business unit accounts and reserve
accounts must not be revalued and should be tagged as ‘suppress revaluation’
in the chart of accounts.
6. Material staff advance balances will not revalued on a monthly basis. The
materiality level should be assessed at the end of each month.
47
8 Inter Business Unit Transactions
8.1 Income and Expenditure transfer
Interco funding transactions relate to transactions that are transferred between

business units and run through the BS and P&L. Each BU is expected to invoice
another BU with copies of documents and receipts within the time scales outlined
under the month end timetable. There are 2 main scenarios to consider:
1. When one BU procures something on behalf of another BU which retains the

budgetary control and authorisation. In this case, we should treat as a procurement on
behalf of another BU. The paying BU CR bank, DR Interco funding account. In BU
bearing (and controlling) costs CR interco funding account, DR expenditure code in
relevant budget centre (and award code etc). Expenditure IS NOT RECORDED in unit
that facilitates the procurement.
2. When one BU provides funds/budget but where the expenditure IS CONTROLLED

by another BU. In this case the interco funding postings take the form of an
intercompany grant. In the funding BU, DR budget cost centre with the grant (spend
cost code 5585) CR interco funding with income (income code 1135). In BU receiving
the grant, DR interco funding income (income code 1135) CR budget centre income
(income code 1135) which they can now spend against and keep control of.
This does, however, result in double accounting for expenditure and income:
BU providing funds records:
CR Income (original source)
DR 5585 Expenditure (grant to another BU – CR income 1135 to interco funding

account)
BU receiving the funds records:
CR 1135 Income (DR income 1135 to interco funding account)
DR Expenditure (as funds being spent against various cost codes)
Therefore, a consolidation adjustment needs to be made to eliminate the double

accounting. By using the above coding this can be automatically captured by using the
interco coding as follows:
Code 5585 for intercompany grants
Code 1135 for intercompany income
In principle, the income and expenditure interco-funding accounts for one BU should
have opposite and matching interco-funding accounts with the other BU it relates to. At
month end these should reconcile so that on consolidation these accounts have NET
balances of zero However, NET balances of individual BU will represent funds owing
from one to another BU in order to clear down the interco funding accounts. Best
practice is for these balances to be cleared to zero at quarter end.
48
The below is the current practice however it will require some further re-engineering to
the structure of these accounts which will be revised during 2019-20 and updated at
that point.
There are a number of different types of transaction exchanges currently taking place
between BU and currently these transactions must be identified using interco funding
accounts.
All business units will hold the following accounts with other business units it trades
with:
 Inter-business unit purchases accounts (13**P) record expenditure occurred in

one business unit which is to be charged to a budget/award code in another
business unit, these can be costs recharged from the HO or between RCO’s
e.g. Nepal to Kenya and includes income from country office to country office.
 Inter-business unit (13**U) records expenditure incurred by RCO’s and
recharged to HO only, and includes where the award income is held in the HO
e.g. When accruing for income held in UK such as agreed co-funding, this
account should be used to record the debit side of the income.
 Inter-business unit income accounts (13**I) records income received by one
business unit against the donor currency. This should be income from HO only,
if a county office needs to recharge income to another RCO, then it should go
into the (13**P) account.
o If UK receives income on behalf of another business unit they would

credit the inter-business unit account and the other business unit would
debit the same inter-business unit account.
Income must be recognised in Donor Currency in the relevant business
unit as per the Income Recognition policy.
Inter-business unit Transfer account (13**T) records physical cash transfers between
business units. Where cash transfers are made, the recipient country should be
informed of the amount immediately and the local finance staff should post the receipt
to the accounts system when received. However, if we have a situation where cash
has left one country and not yet been credited in the other at month end or year-end
then an adjustment will need to be posted please seek advice by HO.
 The exchange rate used to record the transaction will be the system rate,
unless currency has been exchanged, in which case it will be the bank rate -
see section on accounting below for more details.
 Inter-business unit Unrestricted grants/allocation account (13**A) records the

transfers between one business unit and the other e.g., Head Office to RCO or
Country (Charity) to RCO (PAC).
In addition each business unit will have one inter-business unit account with other
business unit (these will be opened as required on request to Head Office). This will be
coded using the structure above until revised structure introduced
Amounts in these accounts must be recorded in transaction currency which may give
rise to foreign exchange differences. Foreign exchange movements should be moved
to the foreign exchange account after balances reconciled.
Practical Action Consulting

49
The PAC inter business units process operates in exactly the same way. The inter-
business accounts start with a 2 and all supporting documentation should be sent to
the recipient country with the listing.
It is the responsibility of the business unit Finance Manager to:
 Identify all inter-business unit transactions.

It is recommended that a control listing is held for each business unit of
standard inter-business transactions to help ensure that all inter-business
transactions are identified.
 Ensure that all inter-business transactions are reconciled in accordance with the
month-end timetable deadlines.
 Contact the appropriate business unit finance manager to resolve any reconciling
items.
 It is the responsibility of the receiving business unit to accept the charge.
 If the business unit accepting the recharges does not agree with the inter-business
unit recharge it is the responsibility of the business unit of the submitting entity to
reclassify the charges into an account labelled ‘Returned Inter-business unit
Recharges’ on the I&E.
If a transaction is disputed then the corresponding offices must try to resolve this, it
must however be posted to the recipients accounts in the month of receipt, if it is
not accepted it will be recharged back to the originating office on the (13**P)
account or in the case of returning costs to HO (13**U)
The recipient country office budget holder will have opportunity to review the costs
when they receive their budget holder report. They then have an approximate 3
week window to resolve queries or to recharge rejected costs back to the sending
office in the following month’s accounts.
 Provide back up documentation for all PAC inter-business unit accounts (with
plans to roll out the same for the charity).
Summary
Accounts ending in “A” unrestricted allocations for HO use only
Accounts ending in “I” Income from HO, for HO use only
Account ending in “P” expenditure from HO or cross charges of both income and
expenditure between business units
Accounts ending in “T” physical cash transfer between business unit bank accounts
Accounts ending in “U” recharges of expenditure or income to HO
Dos and Don’ts
 Do understand the difference between inter-business unit transactions that go

through the BS and those that need to go through the P&L.
 Do record all inter-business unit transactions monthly
 Do keep a listing of all common inter-business unit recharges
 Do forward the inter-business unit transaction with debit/credit advice to the
concerned business unit
 Do ensure that month end deadlines are met in relation to inter-business unit
transactions
50
 Do ensure that inter-business unit income is recorded in the donor currency in
case of donor funds
 Do ensure that all supporting paper work is available and sent with the listing if
requested (this applies to all PAC entities and pending implementation for the
charity)
 Do reconcile the BS and P&L inter-business transactions on a monthly basis.
 Don’t post transactions to the Inter–business unit account in the current period,
after it has been sent to the receiving office, unless it is agreed and a revised
list is sent
8.2 Controls
Risks Controls
Inter-business unit transactions are not Keep a control listing of standard inter-
identified and eliminated on business transactions to help ensure
consolidation that all inter-business transactions are
identified.
Postings are made to inter-business Consolidated inter-company balances
unit after the accounts have been reconcile at month end
reconciled causing differences at
month end.
8.3 Accounting for interco transactions when one BU procures for another BU
The following example provides an illustration of the double entry required to post inter-
business unit transactions. Assume in this example that the UK Business Unit (UP1)
receives £1000 income for Project X. This project is carried out in Bangladesh by
Business Unit BP1.
1. Income is received by the UK.

UP1 ledger has the following transaction:
DR Bank (B/S): £1,000

CR Income Payable (13**I) BP1: £1,000 (relevant income code & award code)
2. Bangladesh BP1 will post the following transaction in GBP:
DR Income Receivable (13**I) UP1: £1,000 BDT 100,000

(relevant income code & award code)
CR Award Recognition (B/S): £1,000 BDT 100,000
(Previously, the credit would have been to the P&L/income)
The system will convert the £1,000 into Bangladeshi Taka at the exchange rate
prevailing for that period. In this example the rate was £1: 100 Taka
8.4 Accounting for where one BU transfers funds (grants) to be spent and
controlled by another BU
The following SPECIFIC inter-company income and cost codes apply.
1135 Inter-company income

5585 Inter-company expenditure
51
For example, UK lead on an award and transfer part of the budget to another office/BU.
UK BU will:
DR P&L expenditure cost code 5585 (grants) and
CR RCO income interco funding account with income code 1135
RCO BU will:
DR income interco funding account with income code 1135 and
CR budget centre income code 1135/award etc
In this example inter-company will net to zero.
Across all business units the total on cost codes 1135 PLUS 5585 should equal nil.
8.5 Inter Business Unit Monthly Timetable
In order for month end to run smoothly across all BU, it’s important for all offices to
work to the agreed month end timetable. The monthly process for these accounts is as
follows:-
Step Working Action Responsibility

Day
1 WD6 HO finalise inter-business unit ledger postings Head Office Group
and send to the recipient country along with Accountant
supporting documentation when required
2 WD7 Country office finalise inter-business unit ledger Business Unit Finance
postings and send to the recipient country along Manager
with supporting documentation when required
3 WD10 No further postings to the inter business account Business Unit Finance
should be made. Recipients of the intercountry Manager
account to seek clarification of or point out errors
and omissions but only from their side
4 WD11 Head office runs the inter-business unit Head Office Group
reconciliation report for all BU and will contact the Accountant &
relevant business unit finance teams when there Business Unit Finance
is a discrepancy. All corrections/adjustment Manager
postings to be completed by WD15.
5 WD15 Inter –business accounts are final with full month Head Office Group
end reconciliation complete. Accountant &
Business Unit Finance
Manager
8.6 Funds transfer between Business Units
Head Office will actively manage the group cash flow position. It is the responsibility of
each RCO to manage its own cash flow in the interest of the Group as a whole.
52
To help ensure the effective management of cash flow of the group, each business unit
is required to submit a monthly cash flow request and a similar process should be in
place for RCO providing cash transfer to partners or field offices.
8.7 Controls
Risks Controls
The business unit/group as a whole Each BU ensuring there is sufficient cash
does not have enough cash to carry flow for monthly operations
out its operations
Foreign exchange risk associated Minimum and maximum cash flow
with currency holdings holdings are agreed by business units
Specific market risks in country such Minimum and maximum cash flow
as theft of cash holdings are agreed by business units
Business units are spending beyond Cash flow monitoring against secured
their secured budgets budgets
8.8 Accounting
The accounting for cash transfers will depend on whether the cash is converted to
another currency.
1. Transfer of £10,000 from the UK to Bangladesh.
a) Cash transfer to Bangladesh from UK.

DR Fund transfer (13*0T) BP1: £10,000

CR Bank (B/S): £10,000
b) Bangladesh BP1 will post the following transaction:
DR Bank (B/S): £10,000 BDT 1,000,000

CR Fund transfer (13*0T) UP1: £10,000 BDT 1,000,000
The system will convert the £10,000 transaction into Bangladeshi Taka at the
exchange rate prevailing for that period. In this period the rate was £1: 100 Taka.
2. Transfer of £10,000 from the UK to Bangladeshi Taka in Bangladesh.
a) Cash transfer to Bangladesh from UK.

DR Fund transfer (13*0T) BP1: £10,000

CR Bank (B/S): £10,000
b) Bangladesh BP1 will post the actual number of Taki received:
DR Bank (B/S): £10,000 BDT 999,000

CR Fund transfer (13*0T) UP1: £10,000 BDT 999,000
53
8.9 Procedure
The procedure for fund transfers is as follows:
Step Action Responsibility
Fund transfers will be made by the UK to RCO on receipt of Business Unit Finance
1
a cash request based on local cash flow requirements. Manager
The cash request form must be filled out by the country

office and signed off by the Business Unit Finance Manager Business Unit Finance
2
and the Country Director in line with delegated levels of Manager
authority.
The approved form is emailed to Head Office along with the Business Unit Finance
3 appropriate approvals/sign offs.
Manager
The approved form must be received by WD5 and WD15 of

the month to ensure that it is processed by WD10 and
Business Unit Finance
4 WD20 respectively of the month.
Manager
Any ad hoc/urgent requests will be dealt with on an ad hoc
basis.
The UK finance team will review the most appropriate
5 transfer agent. UK Finance Assistant
The cash request will be transferred on WD10 and WD20

6 respectively. UK Finance Assistant
Step Action Responsibility
Outstanding Debtors and Debit award Balances (Awards in

which we have spent more than we have received) will
continue to be reviewed through the month end process
with the intention of resolving them in country. Unresolved
7 issues in this area will be will referred to International Head Office Finance
Director for management action and the Finance Director
will decide when it is appropriate to limit the level of future
cash transfers.
In this instance, the £10,000 transaction needs to be converted to the actual

Bangladeshi Taka at the exchange rate charged by the bank. In this example the rate
was £1: 99.9 Taka.
8.10 Remittances from Country/Regional Head Offices to Field Offices

intra region transfers
Country / Regional Head offices should implement similar procedures to those above in
relation to transfers to field offices to ensure proper controls over cash transfers are in
place.
54
9 Award Budgeting, Monitoring and Reporting
An award is a discrete funding commitment from a donor or group of donors which
carries obligations on the part of Practical Action.
Awards may take the form of grants, contracts or donations. An award may cover a
single whole project, a part of a project/projects or cover many projects.
The purpose of this section is to ensure that costs are adequately covered in award
budgets, can be tracked, monitored and reported on in a transparent way.
This section covers:
 Preparation, review and approval of award budgets

 Award codes and expenditure tracking
 Balance sheet transactions for awards
 Accounting for multi-funded work such as co-funding and joint funding
Appropriate and consistent approaches are required for timely preparation, review and
approval of proposal budgets and to ensure that all attributable costs are fully covered
in funding applications.
Proposal budgets will be reviewed and approved through the Projects and Awards
Management System (PAMS).
Details of all elements of the decision gates for funding applications are contained in
the PAM guidelines. The decision levels include
4. Go/No-go Decision Before any substantial work is done on developing a donor

proposal, we must assess whether or not to go ahead[GP9][AK10]. A quick
assessment of the viability of the funding application such as cost coverage
donor rules should be taken into account at this stage.
5. Proposal Quality Assessment (PQA): A budget should be developed and
reviewed at this stage.
 Costs should be calculated and allocated in the proposal budget on a
proportionate basis and in line with donor rules. Scope for further
adjustments to the budget should be prudently assessed.
 The Proposal Quality Approval (PQA) form in PAMS must be signed off
in all cases. This requires ALL proposals to be approved by the
Business Unit director, programme lead and country Head of Finance.
 Review and approval by the UK prior to submission is required for all
proposals in line delegated authority and sign off thresholds.
6. Award Approval stage (AA): Final budget revisions may be made at this stage.
Reporting requirements, line flexibility.
 All contracts must be signed in accordance with the Delegation of
Authorities Limits.
Budgets underpinning Donor Proposals are fundamental to Practical Action’s ability to

meet its financial commitments.
55
Every Proposal/Award budget should:
 Be fully costed. Award budgets must be prepared on the basis of fair share
contribution to all direct and shared costs.
 Specify the currency of the award and budgeted exchange rate
 Checked for line item and/or total budget flexibility.
 Checked for donor rules about foreign currency rates to be used, and how gains
and losses will be managed. If no specific rules are expected Practical Action’s
approach will be applied.
 Checked for reporting frequency to assess the opportunity costs of signing up to

the award.
 Checked for payment terms and the billing schedule (advance payments/ arrears
/ periodic schedule/ mix) to enable efficient working capital management.
 Ensure inflation and cola is adequately budgeted.
 Must not present staff or any shared costs as co-funding contribution by Practical
Action
It is the accountant’s role to satisfy themselves that:
 all appropriate costs have been included in the proposals

 the phasing of the budget is appropriate and agreed with the project manager
 the proposals and budgets have been prepared taking into account the value-for-
money elements
Detailed guidance on preparing award budgets is set out as part of the guidance pack
for PAM.
9.3 Award Codes
Following approval of award contracts on PAMS, a notification is sent to the Finance

Systems Manager to set up an award code. The award code is created in the relevant
Business Unit and the UK charity.
Award codes must not be created by staff in other business units.
5. Primary award codes: An award code must be created for all Primary or lead
awards who have specific reporting and other compliance requirements.
(QR0****)
6. A co-funding award is created to collect funds from various donors to provide a
contractual contribution to a main award. A co-funding award to a business unit
must be managed in the same way as a restricted award. (QR90***)
7. A wrapper award is a funding package which is created and underwritten by UK
charity for specific agreed work. Wrapper funds must be managed in the same
way as restricted awards with specified reporting back to UK (may be QR95***
or QU*****)
8. Unrestricted awards where we want to monitor expenditure (QU*****)
56
Generally, an award code will need to be created if:
 A donation is significant c£100k and the donor has distinct reporting

requirements which vary to that of the primary donor.
 An award requires balance sheet transactions (managing debtors or creditors)
 A contract has to be signed in order to receive money or
 any reporting is required or
 Funds need to be tracked
Award codes are set up in two broad categories, corresponding to income type.
Including 5 digits (NNNNN) ranging from 00001 to 99999, the format of award codes is
as follows;
3. Restricted (QRNNNNN). These are set up through PAMS and it replaced the
old funder code R****
4. Unrestricted (QUNNNNN). Unrestricted awards will be created in number bands

to help with reporting. See 8.3.2.1 (unrestricted awards) below
a) The old unrestricted funder codes (UC***) were replaced as shown below:
 UC001General Fund (Funding allocation)individual unrestricted award codes
(Country allocations)
 UC002General Fund (Funding Gap)individual restricted award codes (Co-
Funding Wrapper)
 UC003General Fund (Investment)individual unrestricted award codes
(Investment)
 UC004General Fund (Fund pots)individual unrestricted award codes
(Thematic wrapper)
 #UnallocatedQU# for unrestricted funds or
 #Unallocated QR# for restricted funds
b) Thematic Wrappers and investment funds

Each thematic award has a unique unrestricted award code, which is created in the
UK. Numeric 5 digit range prefixed with 3.
 Energy QU30000
 Food and Agriculture QU30100
 Urban Water and Waste QU30200
 DRR QU30300
 One-off wrappers (e.g. prizes). These start at QU30500 e.g. Zayed QU30500
 Investment. Each investment amount allocated is assigned a unique

unrestricted award code starting at: QU40000
57
c) Country allocation (General unrestricted grant)
Each Business Unit has a unique unrestricted award code to be used to record
unrestricted income and expenditure. Numeric 5 digit range prefixed with 1 for Charity
or 2 for PAC.
UC001 is replaced by:
Business
Office Unit Charity PAC
UC1 QU20000
UK UP1 QU10000
BC1 QU20100
Bangladesh
BP1 QU10100
KP1 QU10200
East Africa RP1 QU11000
RC1 QU21000
BP2 QU10300
Latin America PC1 QU20400
PP1 QU10400
IC1 QU20500
IF1 QU10550
IP1 QU10500
South Asia LP1 QU10600
NC1 QU20700
NC2 QU20750
NP1 QU10700
MC1 QU21100
Southern Africa
ZP1 QU10800
Sudan SP1 QU10900
West Africa SC2 QU21200
The award code in SUN is created using Customer Accounts.
Setting up the Customer Account (or Customer Code) automatically creates the related
award transaction analysis code, in the format specified in section 8.2.3 below. If a
customer code is needed for purposes other than award management (e.g. for sales of
assets or training courses), an award code will also be created. It is very important not
to create these customers with a code beginning with Q.
Using award codes enables transactions to be assigned to the specific contractual

agreement, allowing different funding agreements from the same donor to be
distinguished.
The award code should be used against both income and expenditure and balance
sheet postings
58
The Customer Analysis screen captures 12 pieces of information about the award that
can be used in Q&A reports:
These are:
15. Income Type (see Income Recognition Policy for further explanation)
a. DONATION
b. GRANT
c. RESULTS BASED- generally PAC
d. TRADING- e.g. sale of asset
16. Donor Name (*)
17. Ultimate (or originating) donor (*)
18. Donor Type (*)
19. Funder (previous SUN funder code if available)
a. RXNNN
b. UXNNN
20. Award Amount
59
21. Award currency
22. Income/cost code
a. 1110 Government
b. 1120 NGO
c. 1130 Other
d. 1140 Legacies
e. 1150 Donations
f. 1210 Other income
g. 1220 Sales of materials
h. 1230 External Consultancy Fees- generally PAC
i. 1250 Internal Consultancy
23. Co-funding link-(probably a PIN number). This will aid linking award codes
across multi BU’s that require co-funding so that we can run better/meaningful
co-funding reports.
24. RE Fund (Raisers Edge Fund code). This is the link between SUN and Raisers
Edge.
25. Spare
26. Total Co-funding – the amount to be underwritten.
27. Start Date – the date the award contract starts

28. End Date – the date the award contract ends
The transaction analysis dimensions for Award Customer accounts are set as
prohibited.
The General screen also allows for additional free text to be recorded in the ‘Comment’
box, which can be used for any further relevant information. For example in the case of
co-funding wrapper awards this can show the principle award code.
Note: Award code in the Chart of Accounts: The award Customer Code is also
created as an Account Code in the Chart of Accounts to allow transactions to be
posted correctly.
10 Monitoring Award balances on the Balance Sheet
For each award a new “Customer Account Code”, to be known as an Award

Recognition Account, is set up in Sun in the format specified in the section above (so it
is identical to the award transaction code).
This Award Recognition account has the following features:
60
 It is used to report the income accruals generated each month, and crystallised
income, regardless of whether money is received in advance or in arrears.
 Contains a mix of debtors and creditors depending on the terms of the award.
 Clears to £nil at the end of the award.
 Is a debtors ledger with any creditors being reclassified at the period end
1. Donor claims accounts are used to record all claims to donors, except co-
funding wrapper claims to Head Office. The accounts are set up by currency
and must be selected based upon the donor currency.
E.g.: DEUR01 for Euro claims

DLOC01 for local currency claims, DGBP01 for GBP claims
 These accounts must only be used to record amounts requested from the donor
for the relevant award.
 Any claims requested must be tagged with the award code against which the
claim is being made.
 Any amounts received from the donor must be credited to:
o the Donor Claims account if a debtor has been created
o the Award Recognition account if the donor claim had not been recorded
 The award code must be included on the journal posting to the donor claim
account.
Claims for payments should always be made as soon as these conditions are met. On
receipt of payment from the donor, reconcile income and expenses with donor funds
received.
The management of these claims is set out in the Cash Claims and Managing the
Debtors Ledger section of this manual.
2. Co-funding wrapper awards are claimed through an inter-country account at

the time when the main donor report is submitted.
 Debit inter-country –tag the relevant QR9 code in main award currency-
Journal type DRT
 Credit Restricted income (I&E) income code 1150
 Work in-progress co-funding award income is accrued to inter-country income
Journal type CIN
 Debit inter-country income –tag the relevant QR9 code in dimension 2
 Credit Restricted income (I&E)
61
A grant for € 1m is received in arrears.
Account code Award code Country
(T2) Dr Cr
€'000 €'000
On winning award, start work:
Expenditure (I&E) XXXNNNNN QRnnnnn 300
Bank (B/S) 14** n/a 300
Country accrues for income at month end:

Award Recognition account (B/S) QRnnnnn QRnnnnn 300
Restricted income project (I&E) XXXNNNNN QRnnnnn 300
By end of contract:
Work has been completed:

Expenditure (I&E) XXXNNNNN QRnnnnn 1,000
Bank (B/S) 14** n/a 1,000
Country claims grant:

Donor Claims account (B/S) DEUR01 QRnnnnn 1,000
Restricted income project (I&E) XXXNNNNN QRnnnnn 1,000
Note: For traditional grants, donor claims can only be posted to restricted income (I&E) if the
amount claimed is the same as the amount reported to the donor. If the two are different, two
different journals are posted. One journal credits restricted income (I&E) with the amount
reported to the donor, and debits the award recognition account (B/S). The second journal
credits the award recognition account (B/S) and the double entry debits donor claims (B/S).
We will not track cash by award code for the time being, though it is expected this will
be introduced in time. By tracking debtors, creditors, income and expenditure by award
there is enough information needed to record award income and expenditure
effectively.
Where required by donors we will continue to use separate bank accounts to ring fence
donor funds (but we should normally be able to negotiate out of this requirement).
Where we must monitor interest accrued on donor funds, this can be inferred by
applying bank interest rates to the sum of debtor balances on an award and posted as
income to the award.
Once final negotiations are complete and the contract is signed:

 The budget should be reviewed if necessary to take into account any results of
final negotiations or long lead time to signing the contract, and the phasing of
activities.
 The budget, itemising expenditure by donor budget line, must then be loaded in
the working budget ledger for the entire period of the contract. This should be
before any expenditure is made.
 Check that the uploaded budget reconciles to the contract value.
62
 If any revisions are agreed with the donor the system budget must be updated
accordingly.
If allowed by the donor, we may be able to re-allocate a percentage of costs between

budget lines according to the level of flexibility permitted by the donor. Before adjusting
an award budget,
4. Ensure that written approval is obtained from the donor before re-allocating
funds between budget lines if:
a. The re-allocation is above the allowable budget line flexibility or
b. there is no advice within a contract
5. The budget must be updated in SUN and saved in PAMS, along with the
approval for the change
a. if we have reallocated across budget lines or
b. a donor has agreed to increase a budget line item
6. If the change is within our own discretionary limits:
d. the budget must not be updated in SUN, so it can continue to be used to
report to the donor
e. a separate forecast should be held offline to track the changes we have
approved
f. the reason for change (including reference to the contract clause
allowing the change), must be written into the “Reason for Update”
worksheet in the updated budget file saved in PAMS.
All expenditure must be carefully considered against the award’s terms and conditions,
including the approved budget lines. See also Award Codes.
 All expenditure charged to the award must be eligible according to the donor
rules
 Costs booked to an award must not include those funded by other awards.
 Award expenditure must be managed to ensure it does not exceed the amount
allowed by the donor. Over-spends on award budgets can put pressure on
unrestricted funding therefore they should be avoided where possible or
approved by the business unit Director if essential.
 Donor financial reports are generated using the award code
 The approved award budget must be uploaded on PAMS, as well as all future
revisions. Suffix the approved budgets with a sequential number code. Initial
budget is Budget v00.xlsm, next Budget v01.xlsm etc.
Note that actual expenditure should always be coded to the correct cost code
regardless of whether there is budget availability or not.
The purpose of this section is to ensure Practical Action can differentiate transactions
against a specific award in order to meet individual donor reporting requirements.
We recognise two different types of funding by multiple donors against a project:

63
3. Co-funding:
where part of an award we are obliged to contribute further funding either in
cash or in-kind.
Typically the award will require us to report back on total outputs and spending
including co-funding contributions.
4. Joint funding:
Where there is no contractual obligation for Practical Action to make a
contribution, but we choose to source funding from multiple donors for a project
or program of work. We would usually report back to each donor on their funded
outputs/outcomes using the relevant award code.
10.8 Co Funding
A co-funding wrapper award in the range starting QR90XXX is set up for each primary
award that needs co-funding. Any co-funding that does not require specific reporting
will be part of award code QR90XXX.
 Co-funding income is accrued on a monthly basis,

o Credited income code 1150 and
o Debit the relevant inter-country code
 A claim for co-funding is submitted at the same time as a donor report by
posting a non-reversing journal to
o Credit income code 1150
o Debit the relevant inter-country account
 The UK business unit will post the donations for QR9 awards as income and
recognise expenditure through inter-country.
 The RCO inter-country income will contra with UK expenditure on the same
account
 When the co-funding claim is received by UK, the donations held in UP1 will be
transferred to the Business Unit along with any unrestricted amounts required to
make up the balance.
 Unrestricted income may be replaced at a later date with income donated
directly to this award.
A restricted award code in the range starting QR00XXX must be set up for each
contributing award with different reporting requirements. The balance on the co-
funding wrapper will be reduced by an equivalent amount.
Each contributing award must be included when reporting to the principal donor as they
are interested in the total expenditure, including co-funding.
We must be able to track expenditure against each contributing award as some donors
may wish to see their contribution to the project.
Co-funding awards (QR9***) are treated as restricted income and expenditure within
Business Units. See Co-funding for further information
10.9 Joint Funding
Where more than one award funds a project/program and the donors only wish to see
their portion of the costs, donor reporting is based on their respective award code only.
64
If a cost centre is funded by more than one award then costs should be allocated to the
correct funder at least every month end.
a. Shared cost allocation to awards

 Post the transactions (such as salaries) to a QU code
 Then re-allocate the costs to relevant awards, using the amounts
specified in the award budget.
 Do not re-charge costs from one P&L account code to another. The re-
allocation process is only applicable to the award code
b. Splitting costs to various awards as part of co-funding:
 Scenario one: If the main award contributes most of the funding and others
make up a percentage of the total costs;
o Post 100% of the costs to the lead award in the course of the month
o At month end, re-allocate the costs to co-funding awards on the basis of
their relevant percentage contribution. Use cost code 9999 on both the
debit and credit sides of the journal
 Scenario two: Co-funding is assigned to specific lines (cherry picked). This

should happen in rare circumstances
o Assign the relevant transactions to the co-funding award as and when
they occur.
o Invoices relating to joint-funded or co-funded projects where allocations
to awards are more complex have always been posted at a detailed
level to the relevant award codes, as determined by the budget holder,
ensuring no entries are made to the unallocated Award Codes (QR# or
QU#).
o
 Scenario three: A mix of scenario 1 and 2. This should be rare
o Assign costs to the main funder except those which were ‘cherry-picked’
by a co-funding award
o Calculate the percentages at the month end and re-allocate the
remaining costs as relevant.
Accurate and up to date accounting records and budgets must be maintained in order
to extract all reports from the accounting system, including those intended for donors.
All accounting entries, reconciliations and reports should be completed promptly at the
end of a defined reporting period and always within the timescale agreed with the
donor.
We should ensure that

 We report accurately in the formats provided by the donor if these are available and
 We are consistent in reporting to donors who have no pre-defined reporting formats
65
Restricted awards have varying levels of compliance, reporting formats and
requirements which must be complied with. The format of the reporting required will be
agreed at the time the contract is signed.
Example:
DG ECHO.
Details on how to produce a final report are at http://dgecho-partners-
helpdesk.eu/final_report/start
Reports for co-funded programs involve additional allocation routines as opposed to

those that are funded by one award.
The principal donor is interested in:
 the total costs their contribution and all other all co-funding awards
 the amount of their contribution (their award)
The information extracted from SUN should include all project costs split by award.
A simple example is as follows:

P&L codes
funded by the
combination of SDN12345
co-funding SDN23456
awards SDN34567 75% 25% 100%
Restricted Funds
Principal Donor Total
Award CF Wrap Award 3 Award 4
Balance Sheet
Fixed Assets 100 20 50 100 270

Other Assets 400 - - 400
Liabilities (500) (20) (50) (100) (670)
Total Net Assets - - - - -
Expenditure
Income 7,500 300 200 2,000 10,000

Income &
Expenditure Salaries (2,000) (100) (200) (500) (2,800)

Office (1,000) (1,000)
Materials (4,500) (200) (1,500) (6,200)
Profit & Loss - - - - -
11 No Co-Funding
If the donor does not wish to see other components of a co-funded project then the
donor report will be generated using the relevant award code.

For all donor reports consider:
 Award currency
66
 The correct exchange rate must be used to convert the expenditure into award
currency. Check the terms and conditions of the award for rules about the
exchange rate, otherwise use internal system rates
 Whether accruals can be included
 Budget Holder Reports should be issued in donor format and award currency
12 Expenditure
12.1 Payroll
To ensure that:
 all employees of Practical Action are remunerated accurately and on-time

 employee costs are correctly charged to budgets with auditable back-up that
satisfies donor requirements
 local labour laws are always followed and all employment taxes are paid on
time.
12.2 Organisation related policies – refer to NetConsent

12.3 Procedures
 The Regional/Country Remuneration Committee is responsible for setting
salary rates in line with the Global Remuneration Policy
 HR are responsible for preparing the monthly payroll including calculating any
other deductions required by local law
 HR are responsible for ensuring all staff are paid correctly and on time
 HR must provide all payroll data to finance who will process payments (posted
to control accounts), post the salary journals and reconcile the control accounts
 If an employee’s salary costs are charged to awards then this must be
supported by signed timesheets
 Salaries are confidential and access to this information must be strictly
controlled.
 All employees should be paid in accordance with their contract and entitlement.
12.4 Accounting
Staff salaries must be posted to SUN through control accounts as follows:
Cr Tax and Social Security accounts & any other providers e.g. Pension,
student loans etc. (BS Trade creditor)
Cr Bank account - with net pay
Dr Gross Pay to the salary control account (Balance Sheet)
When charging out salaries….
Cr Gross Pay to salary control account (Balance Sheet)
Dr P&L account and Award code with salary costs @ contracted rate per
timesheets
(P&L Account code XXX; Cost Code 7500; Award XXX; Item Staff
number)
Cr/Dr P&L account and Unrestricted Funds with mark-up / mark-down on
payroll rate
(P&L Account code XXX; Cost Code 7500; Award - staff under/over
recovery; Item Staff number)
67
Payment to Tax authorities
Dr Tax and Social Security accounts (BS Trade creditor)

Cr Bank account – with payroll taxes deducted
12.5 Using SUN
Journal Type: PYR when posting salaries and when making corrections or adjustments
related to payroll entries (this will aid automatic reconciliations between SUN and
payroll reports). This will save a lot of time and improve efficiencies during audits.
In order to preserve confidentiality as much as possible, post salary charges as totals

and avoid posting an individual’s salary to the accounts.
But if this is required, do not include names but instead tag the transaction to an item
code (with staff identifier).
12.6 The Dos and Don’ts
Do
 Ensure confidentiality with payroll data (with whoever has access and uses for
processing)
 Do ensure payroll reviewed, signed off and approved prior to processing salaries
 Collect and process timesheets monthly to reflect actual time spent on an award in
the right period.
 Charge time to awards based on the contracted or donor agreed rate (this will
usually be payroll rate but may be different) x number of hours/days recorded on
timesheet.
The donor agreed rate is not necessarily the budget rate as donors may allow
some flexibility for pay increases, or may require us to report at actual rates of pay
even where these are lower than the budgeted rate.
 Ensure timesheets are signed off by staff and line manager or budget holder
 Ensure as much as possible that there is sufficient segregation of duties between
the person preparing the payroll and the person checking it.
 Ensure any ex-gratia payment is authorised by the HR Manager and Finance
Manager
 Deduct any agreed staff advances
 Deduct any agreed loan repayments
 Save payroll and timesheet data in a secure location and delete off emails to
comply with GDPR regulations
Don’t
 Discuss an individual’s pay or other payroll issues with anyone other the individual
concerned or those authorised by the HR Manager to have access to Payroll
information.
 Hold payroll or timesheet data on emails.
 Process salary payments without appropriate approval
Net Pay control account to be reconciled each month – this should have a zero
balance.
68
Or
Total postings in any one month to the project’s & award cost code 7500 should
reconcile to the HR report
13 Staff Expenses, Loans and Advances

13.1 Principles, Aims and Accounting Practices
Staff members are entitled to reclaim any work-related expenses that they incur as part
of their job.
The nature of reclaimable expenses is explained in the local expenses policy.
Expenses should be claimed promptly to ensure accurate reporting when charging
costs to awards.
13.2 Organisation Policies – refer to NetConsent
Refer to Local Expenses Policy
13.3 Staff Expenses Approval
All expense claims must be signed off as approved and verified by the line manager.
Those expenses may need to be countersigned by the award budget holder a more
senior manager if the line manager does not have the delegated authority to approve
reimbursement of expenditure.
In the absence of the line manager, an expense claim can be signed off as approved
by the person deputising for the line manager and if that is the same person as making
the claim then the superior in line of that line manager would be required to approve
the expenses.
For Regional and Country Directors (RCOs), the same policy is applicable i.e. RCO’s
need to have their expense claims signed off as approved and verified by their line
manager. Based on the current organisational structure this would be the International
Director.
13.4 Staff Work Float
Staff Work floats are issued on request from a staff member who needs the funds for
project expenditure or for business travel. This request needs to be signed off by the
line manager as a fair request.
 These are only issued for anticipated work expenses in order to avoid the
employee paying out-of-pocket. Usually these are travel, accommodation costs or
project activities incurred during the course of business.
 Work floats must not be used for personal expenses, e.g. gifts.
 Funds returned unspent should be returned as soon as possible.
 Staff members taking work floats are expected to take reasonable precautions to
safeguard the money. Negligence with or misuse of floats will be considered a
disciplinary offense.
 A work float request form must be completed by the individual who needs the
advance and signed by the budget holder and/or line manager.
 The reason/s for the expenditure should be detailed.
69
 The budget holder is responsible for ensuring that the request is reasonable and
there is adequate and appropriate budget to cover the float.
 There should be only one staff work advance account per employee - if there is an
existing balance on the individual’s work float account when a second advance is
requested then this should be rejected unless authorised by the responsible
director and Head of Finance.
 An employee has a maximum of 10 working days from the date the individual
returns to the office to submit their expenses and return any unspent float– see
staff expenses below.
 Employees should try to keep to a minimum expenses paid from their own pocket.
 An employee will receive a monthly statement of their account or can request one
at any time if they don’t receive one.
Accounting entries – paying the advance
Dr Staff work float account (BS)

Cr Bank
The transaction and debtor should be denominated in the currency in which the
advance is taken.
13.5 Staff Expenses
 All expenses must be in-line with the Local Expenses Policy.

 An expense claim must be signed by the employee and their line manager and may
need counter signing by the budget holder if different.
 The line manager is responsible for checking the accuracy and authenticity of the
claim prior to signing off.
 The staff member is responsible for ensuring that the claim is coded correctly.
 All travel expense claims must be supported by details of and reason for travel.
 All receipts/invoices must be attached and every effort must be made to obtain a
receipt. If these cannot be supplied then the reason for this must be stated on the
claim.
 If the authorised expense claim is higher in value than the outstanding balance on
the employee’s work float account then Practical Action will reimburse the
employee for the difference.
Posting the expense claim:
Dr P&L account with expense and Award code

Cr Staff work float account (BS)
13.6 Staff Salary Advance
 In some countries it is practice or a statutory right to provide staff salary advances.

If this is the case:
o Ensure the advance is within a maximum of 50% of the individual’s monthly
salary.
o This advance must be repaid within the same calendar month
o Advances can only be given in the currency in which the staff member is
paid.
70
 There is a set date when finance will accept salary advance requests and these will
be set locally but no later than the 10 working days before pay day.
 Advances are charged to the individual’s staff advance account which is a separate
account to the staff work float account. For reference see SUN Accounts structure
(Appendix B)
Accounting entries
For advance:
Dr Staff loan account

Cr Bank
For repayment of advance:
Dr Bank
Cr Staff loan account
13.7 Personal Staff Loan
Practical Action is not set up to provide financial services, such as loans, to its
employees. Such services may be subject to a range of standards, regulations and
laws. Because of this, their administration is likely to be costly. Personal staff loans
can be provided to staff ONLY on very exceptional occasions and must be authorised
by the reporting Director and the Director of Finance and Services:
 In emergency or special circumstances only

 The total balance of all outstanding Staff Loans must not exceed 30% of the
business unit’s monthly salary costs
 The loan must not exceed three times the individual’s monthly gross pay
 There should only be one staff loan account per employee
 The loan must be repaid in full in the currency of issue including interest charges
within one year
 Agreement of the loan must be formally documented and accepted by both parties
 To ensure that Practical Action does not lose out on interest that it could have
earned from the funds, the loan must always have interest applied that is the higher
of:
o The bank base rate at the point the loan is requested
o The rate set by the local tax authority that avoids any tax liability relating to
the loan
 Staff loans are charged to the individual’s staff loan account which is a separate
account to the staff work float account. For reference see SUN Accounts structure
(Appendix B)
Permitted Derogation where Islamic banking is mandatory, then interest cannot be

applied to the loan.
Accounting entries:
For loan:

Cr Bank
For repayment of loan:

71
Dr Bank
Cr Staff loan account
For monthly interest:

Cr Interest received (I&E)
All transactions and the debtor should be denominated in the currency in which the
loan is taken.
13.8 Using SUN
Journal Type: PIN for all expenses to aid comparisons across the Group.
13.9 Dos and Don’ts

Do
 Ensure staff loans and advances issued for exceptional circumstances only!
 Ensure Director approval at the right level has been obtained
 Make sure interest is calculated correctly and charged on a monthly basis
 Ensure supporting documentation is in place
Don’t
 Combine staff floats with loans and salary advances

 Provide staff floats, loans or advances without approval
 All staff expenses, loans and advance accounts must be reconciled each
month.
 An “Aged Analysis Statement” should be prepared for all floats and advances
on a monthly basis to monitor the status of such loans and advances.
 This statement will reflect the amount outstanding as well as the number of
days or months for which these are remaining un-recovered.
 Line managers and staff must be given a statement of any outstanding
balances each month so that they can follow up and ensure late returns are
submitted
14 Purchasing and Payment of Suppliers

Our procurement practices are designed to ensure integrity and transparency in all
Practical Action’s procurement activities, consistency across the organisation and to
ensure compliance with local legislation.
Key principles include:
 Best Value for money is the overriding principle taking into account both cost
and non-cost related factors.
 Budget Holders are responsible for procurement.
72
 The Unit Head of Finance will arbitrate where necessary if the policy is unclear.
 Commitment and payment authorisation are in-line with the delegated authority
limits – see delegated authorities policy on NetConsent.
 We will be transparent as to the value and supplier of all purchases however
any supplier information that may be considered commercially sensitive should
be considered confidential.
 Suppliers must adhere to the highest ethical standards.
 For large procurements, suppliers should be vetted and go through a tender
process.
Refer to NetConsent.
Delegated authorities policy
Conflict of interest policy
14.3 Principles of Procurement
 Suitable vendors must be identified using a criteria scorecard relevant to the

procurement.
 The conflict of interest policy must be followed (refer to NetConsent)
 If a staff member, their friends or family have any connection with the supplier then
the staff member must declare it and remove themselves from the selection
committee.
 Donor procurement policies must be adhered to – where there is a conflict with our
practice the donor’s policy must be followed.
 Practical Action’s policies and those of our donors apply to sub awardees. If the
partner’s policy conflicts with the donor’s policy then they must follow the donor’s
policy.
 Preferred suppliers on the Preferred Suppliers List (PSL) are given preference.
 For bulk orders the authority for the total value of the order must be in-line with the
Delegated authority policy limits (refer to NetConsent), it is not the value of the
individual draw-downs of that order that need authorisation.
I is against our policy to engage with any organisation that is known to have unethical
labour practices, and take into consideration the environment practices and impact of
suppliers.
14.4 Procedure
When Practical Action makes any commitment to expenditure then a purchase

notification must be sent to Finance.
For all procurements over £1,000 a purchase requisition must be raised and authorised
before a purchase order is raised and the expenditure committed.
The financial limits below provide a group standard. Units may alter these limits
to reflect the local risk environment subject to approval by the Director of
Finance and Services.
Procurement Type Process Comments

£0 - £500 No quotation needed  Aim to use suppliers on PSL
73
£501 - £1,000 One independent  Aim to use suppliers on PSL
quote  Aim to share the purchases
between the suppliers on the
PSL
£1,001 - £10,000 Minimum of 3  Aim to use PSL
Independent quotes  Documentary evidence of
quotation requests is essential
 Document reason for accepting a
quote
£10,001 - £50,000 Invitation to tender  Applies to a single transaction or
offer of contract
 At least 3 candidates
 At least one candidate not on
PSL
£50,001 - £100,000 Open Tender  Request for tenders to be
published in local journals and/or
on www.PracticalAction.org.uk
 Tender committee formed to
evaluate bids.
 Tender committee formed from
any department and must include
a member from Finance
 Minimum of 3 persons from at
least 2 departments on Tender
committee
 Conflicts of Interest to be
declared by Tender committee
members
£100,000+ Open Tender  Request for tender to be
published in International
publications.
 If there are fewer than 4 potential
suppliers in the country then it is
published in Regional
publications
14.5 Preferred Suppliers List (PSL)
In order to have the most competitive rate, reduced transaction costs and obtain a
reliable and timely service a preferred supplier list should be established for the
business unit.
The supplier list should be split into categories of supply e.g. Computer & IT, Stationery
and consumables, finance and legal, printing and publishing, travel.
We should aim to have at least three suppliers in each category.
Ensure due diligence not only while selecting a preferred supplier but also while using
an established preferred supplier. For example get a quote from more than one PS.
A supplier should not remain on the PSL for longer than 2 years without being reviewed
by an assembled panel of at least 3 people who have knowledge of the product and no
conflict of interest.
74
14.6 Purchase Ledger
(All offices are expected to comply with this section in time, when the purchase
ledger is launched as our standard approach)
Aim: To recognise the liabilities of the business unit and ensure that the P&L accounts
budgets are showing all costs including all commitments.
Key principles include:
 A purchase ledger account is set-up for every supplier.

 All purchase invoices are posted to the purchase ledger on receipt by finance.
 All invoices to be matched to the purchase order/purchase notification.
 No invoices to be paid without receipt of a GRN or confirmation that the good or
service has been delivered.
 Invoice can only be passed for payment after being signed by two authorised
signatories’ in-line with Delegated authority policy limits (refer to NetConsent).
 Cheques and BACS payments must be signed by the authorised bank
signatories.
 Post all invoices to the Purchase Ledger.
 Payment runs must be performed regularly.
 Postings to the P&L account should be as per the coding on the purchase order.
 The supplier profile should be set-up correctly on the accounting system.
 Confirm there is adequate cash flow before making the payment.
 Invoices must not be paid if they do not have matched GRN or where delivery has
not been confirmed.
 Payments must only be made on receipt of adequate back-up and authorisation.
14.7 Accounting Entries
To post the invoice:
DR. P&L account (I&E)
CR. Supplier account (Purchase Ledger)
To pay the invoice:
DR. Supplier account (trade creditor)
CR. Bank
Using SUN
To create a supplier account:
 Chart of Account
 Address Set-up
 Bank Detail Set-up
Purchase Ledger account coding convention Paaann (aaa=first 3 letters of the supplier
name, nnn=sequential number)
75
Payment Profile needs to be set-up for each type of payment for example BACS and
Cheque. Please seek further guidance from the Finance Systems Manager at HO.
14.8 Key Controls and Reconciliations
 Aged creditors report to be run each month and reviewed by the Finance
Manager.
 Debit balances to be investigated and necessary actions taken.
 Creditors over 60 days to be investigated and highlighted in management
reporting.
 Supplier statements to be reconciled against their purchase ledger account.
Any differences to be investigated and resolved.
 Ensure ledger maintenance and that transactions are allocated off regularly.
15 Managing and Accounting for Stock
Principles, aims and accounting policies
Purpose: This section provides guidelines for monitoring and managing the amount
of stock within the organisation to ensure that there are suitable levels of stock
available to staff/project at all times. This policy covers stock in store, stock taking,
stock valuation, stock control and year-end process.
If the value of stock held is very low, e.g. low value stationery items or materials for
projects/wards used within short time period, then the below stock procedures do not
need to be followed. Judgement on materiality must be made by the Unit Head of
Finance. Generally Practical Action do not hold significant amounts of stock and
therefore, this section is only for guidance if and when this becomes relevant for any
BU’s.
Principles: As an organization controls should be in place to ensure our stocks are

managed in a transparent way and give a consolidated view to management to take
appropriate decisions.
Stock should be considered as those items which are purchased for use but not
immediately issued.
The natures of items held under stock are mainly:
(i) Stationery
(ii) Manufactured items for the program
(iii) Materials for construction projects
(iv) Saleable Books
(v) Research Related Publications sold to outsiders from time to time.
Except where stock is for resale and is of material net realisable value it should be
expensed (i.e. booked directly to expenditure). Stock for resale should be recognised
on the balance sheet and valued at the lower of cost or net realisable value.
76
General stock held in main offices
Goods shall be received by the department(s) responsible for logistics (normally the
Administration Department) through receipts for payment or delivery supported by the
bills and full particulars of the goods in it. Goods will then be expensed to a specific P&L
code and then recharged via requisitions.
All issues from the store shall be made through requisitions duly authorised by the
relevant Budget Holder or their Line Manager.
At the time receiving delivery of goods from the store the person receiving such delivery
must sign on the document (requisition) as an acknowledgement of receipt of those
deliveries.
All movement (incoming and outgoing) shall be documented and the “Store Ledger” shall
be kept up to date.
All stock shall be valued on an average method. The cost price of stationery, consumable
supplies and manufactured items shall be considered as the value of those items.
Stock held in the field site offices must be expensed to projects and awards as soon as
it is locally purchased or issued from the central stock to the field office. Field Office in-
charge/field Accountant shall maintain a memorandum record of stock and all assets
held at the field office and their movement. A list shall be prepared by the field in-charge
on a monthly basis and sent to Country / Regional Head Office for verification.
Construction inventory
When Practical Action is involved in implementing capital intensive or construction based

contracts, stock should be managed with reference to the bill of quantity prepared for the
project.
The bill of quantity would have been prepared at the proposal stage by an approved
quantity surveyor and should itemise the cost and value of work to be carried out. This
document can therefore be used as a monitoring and evaluation mechanism.
During the project implementation, Practical Action may have to provide the partner
organisations and communities with equipment, assets and materials support. This is the
responsibility of concerned staff to ensure that these materials, equipment and assets
are used for the purpose intended and handled with due care.
Inventory procedures for recurring items
The field consumables or recurring items or construction materials should be recorded,

reported and handled with due care. Staff member designated for the field activities at
project sites will have to establish or facilitate to establish the system through the Partner
Organisation or Community Groups. If the equipment/tools etc. are for the Practical
Action office to be used on project work these should be included in inventory items being
managed under General Stock and kept separately.
Saleable Publications and other traded products

(mainly applicable to Practical Action Publishing)
In case of saleable publications the cost of printing including materials of those

publications shall be considered as the value of those publications.
77
When selling publications the sale value should be accounted for as income (usually
unrestricted).
The cost, charged to the relevant account & product code, should be treated as a cost
of sale. There may thus be a profit (gross margin) or loss (subsidy) on the sale of
publications.
Physical stock control
The stock shall be kept under the control of the responsible department(s) under secure
and appropriate storage facilities.
The custodian of the store shall be responsible for maintaining documentation for
recording the stock in the store and their movements.
Reconciliations of stock quantities in all holding locations (including overseas), shall be

made on a quarterly basis by the custodian of the store and produce an inventory list
(with ISBN, Title, Format, Quantity) to the Finance Department.
At the end of the financial year, a sample of physical inventory shall be made by the
person other than the custodian of UK holding facilities store. Such person shall be
assigned by the Finance Manager.
Obsolete, damaged and slow- moving stock
Damaged stock should be listed by the custodian of holding facilities and produced for
the Publishing Managing Director for further action. All damages must be returned to
Publishing office, Rugby for assessment. Damaged stock shall be investigated by a
person authorised by the Head of Finance. Any action shall be taken on the
recommendation by the Head of Finance based on the investigation made and approval
obtained from the RCO Director.
Slow moving items should be investigated by the Finance Department and reasons given
for this status. Alternative use of these items should also be considered by consultation
with the Publishing Managing Director Disposal if necessary shall only be made upon
approval of the Publishing Managing Director.
A provision (liability of uncertain timing and/or amount) is posted in SUN at year end to
account for slow moving stock.
Economic Management of Stock
In order to maintain stock economically and most cost effectively a few techniques
like “Safety Stock Level”, “ Re-Order level” and “Economic Order Quantity” etc. should
be adopted.
“Safely Stock Level” represents the minimum stock level, which should be maintained to
cover the standard consumption rate until the new stock arrives. “Re-order level”
represents the level of stock at which order should be placed and fresh supply received
before the present stock is exhausted. “Economic Order Quantity” represents the most
78
economic and cost effective purchase order where capital shall not be unnecessarily
blocked and on the other hand operation of the project shall also not be hampered due
to shortage of stock.
Further guidance on using methods of stock management can be found through

searching the internet.
General Management of Stock
Purchase of Stock
 Identify core stock and ensure that appropriate levels are held at all times.
 Monitor all stock levels.
 For fast-moving stock utilise existing drop-shipping facilities and/ or ‘print on
demand’ where possible.
 Regularly review sales budgets and order necessary stock in line with budgets.
 Negotiate with suppliers for best price, quality, delivery methods and returns
policy.
 Order all stock as required.
 Maintain a “preferred suppliers” list.
Purchase of all stock must be authorised by the responsible manager or budget holder.
All stock purchases must be requested by using a purchase order form and adhere to
the Group purchasing procedure.
Receiving Stock
Review delivered items to delivery docket, including quantity, quality and
completeness of order
Match delivery to the purchase order
Store the stock securely and in appropriate area
Update all stock records for receipt of goods
Inform supplier of any under/over supply or damaged goods
Managing Stock
It is the responsible manager’s responsibility to:
Identify core stock and ensure that appropriate levels are held at all times
Monitor all stock levels
Understand each stock item – which items are the fast and slow moving stock
Monitor re-order levels and ensure orders are placed in adequate time to reduce
non-availability of core or necessary stock items
Ensure that all staff are aware of new product, price changes and procedures
for accurate recording of all stock movements
Keep up to date with stock pricing and new products
Ensure that all stock records are kept accurately
Ensure that all stock is securely stored to minimise theft and wastage
Organise and oversee physical stock take and match records of stock take to
administrative and financial records.
16 Managing Sub-award Partner Expenses

16.1 Sub-Award Partnership Principles
Refer to the Sub-Award Management Policy on NetConsent.
79
16.2 Budgeting to work with Sub-award Partners
Working with partners is a key part of Practical Action’s approach to achieving impact
at scale. Partners have varying capabilities and ways of working. Working with partners
requires additional capabilities and resources within Practical Action. These are
outlined in the SAM guidelines. When reviewing an award budget at Proposal Quality
Approval stage, finance teams should ensure that:
 The sub-award budget is shown separately from Practical Action’s budget.

Each sub-awardee should have a separate budget.
 Practical Action’s budget clearly includes budget lines for partner assessment,
monitoring, inception workshop and partner capacity building including staff
time, travel and any other resources required.
 That sub-award partner budgets are adequately resourced to enable the sub-
award partner to deliver on finance management, procurement, HR, safety &
security, fleet management, safeguarding and other operational requirements.
 Be clear on split of ICC between Practical Action and sub-awardee.
16.3 Sub-Award Partner Assessment
Refer to Sub-Award Management Policy on NetConsent and to Sub-Award

Management Guidelines on the PAM SharePoint site. Initial assessment of sub-
awardees would normally take place prior to their inclusion in the bid to ensure they
meet the minimum donor requirements as a sub-awardee. Further in-depth
assessment may be required by the donor after the award has been secured and prior
to issuing the sub-award agreement. Assessments should be completed jointly by
finance and programme teams, integrating award managers where they are in post. As
a minimum it is expected that all sub-award partners would meet the following criteria:
Be legally registered in the country of operation or have a legal right to operate in it
16.4 Sub-Award Partner Agreement
Refer to Sub-Award Management Policy on NetConsent and to Sub-Award

Management Guidelines on the PAM SharePoint site. Practical Action uses a standard
Sub-Award Agreement format which must be used for all sub-awards. Part A of the
format must not be changed unless explicitly authorised to do so by the International
Director based in the UK. Parts B and C will be dependent on the specificity of the
prime award from the donor.
All sub-award agreements should be reviewed by finance teams to ensure that:
 Only the sub-award budget is included and the sub-award partner is clear about
their budget responsibilities
 The sub-award budget is consistent with the overall donor budget
 That the correct type of agreement is used. If the prime award from the head
donor is a contract, it is most likely that the sub-award would also be a contract.
If the prime award from the head donor is a grant, it is likely that the sub-award
would also be a grant. Finance teams should ensure
 That exchange rate rules are clearly indicated in the sub-award budget and
correspond to the donor budget approved exchange rates
 That financial reporting ….
 Monitoring visits are clearly indicated in the sub-award agreement.
 Audits
80
 Line item flexibility
 Procurement rules
 Asset disposal
 Timesheets
 Total value vs. committed/obligated amount
Sub-award agreements are subject to Delegated Authority. All sub-award agreements

must be posted, reviewed and approved on PAMS. Where the total value of the sub-
award (for the entire period not only the initial obligation) exceeds delegated authority
in the country office, these need to be escalated for approval in the UK.
16.5 Sub-Award Partner Orientation
Per the sub-award management guidelines on SharePoint, it is expected that an initial

inception workshop will be completed within 1 month of the award to Practical Action.
Sub-award partners will participate in the inception workshop. Please see guidelines for
the workshop and note specific role for finance / award team:
 Orientation on the budget

 Orientation on all donor rules including … above
16.6 Sub-Award Partner Monitoring
All sub-award partners should be monitored by finance and programme teams, jointly,
at least on a quarterly basis. It is expected finance and programme teams would agree
together the approach to monitoring and would triangulate their findings, debriefing
together to ensure that expenditure and implementation are aligned. Any discrepancies
should be clarified or resolved with the partner and, where necessary, appropriate
actions taken to escalate.
Specifically, finance teams should include the following within quarterly monitoring:
 Review of all supporting documents for reported expenditure

 Spot check the reconciliations, cash controls, stock (if material)
 Check relevant documentation is in place as required in the award agreement
 Obtain copies of receipts and invoices if this is required by the donor or
stamp/mark them as ‘reviewed’ for future reference
17 Sub-Award Partnership Management

Please refer to Sub-Award Partner Management Guidelines on SP. Partnership
management is the responsibility of the project manager, supported by finance and
award managers, where they are in post.
17.1 Sub-award Partner Capacity Building
What? How? Ensuring there is budget in the prime budget for doing this. May want to
put up front at the top
Key principles:
 Applies to all working relationships with Partners

 These form the minimum required standards of operation when working with
Partners. Offices can choose to apply tighter regulations or may be required to
81
seek a derogation from this policy in order to be compliant with local statutory
requirements but when doing so appropriate approval should be taken.
 This policy is not applicable when working with consultancies (see below).
 The Project Manager has overall responsibility in delivering the required
outcomes from the partnership and will be supported by the local office Finance
Manager in financial matters relating to the partnership.
 The independence of local partner organisations must be respected. However
certain procedures must be in place to enable adequate reporting and
monitoring of Practical Action funds.
 The local office Finance Manager is responsible for ensuring that the minimum
financial controls are in place within the partner organisation before funds are
released.
 The relevant Practical Action staff should provide relevant support to partners to
enable them to meet their contractual requirements. Contracts should not be
signed unless we are confident the partner will be able to deliver and fully
comply.
Working relationships with suppliers, contractors and consultants are covered under
the Procurement sections and under the Consultancy Policy
17.2 Organisational policies (Refer to NetConsent)
Sub-award agreements - where we are transferring restricted funding to another

organisation and will also be used by PAC, but not for contracting individual
consultants.
17.3 Procedure
 Assess all potential partners with the Partner Assessment Questionnaire.

 Formalise the partnership with a sub-award agreement as a minimum requirement
or a contract.
 Hold a project inception meeting with the partners to formally decide how the grant
agreement will be implemented. This should address the reporting requirements of
the agreement and any compliance issues
 All partners must be visited by a member of the Practical Action staff at least every
six months.
 Monthly transaction reports must be received with supporting documentation for
each transaction together with bank reconciliations.
17.4 Accounting
Partners funded by Practical Action
Partner advances should be recorded on the balance sheet against ‘Partner Advance
Accounts’. However, before a further advance is sent it must be confirmed that at least
80% of the previous tranche has been spent by the partner.
Further advances must not be issued until the previous period accounts have been
submitted and expenditure accounted for.
Partners should submit monthly accounts on a standard template together with bank
reconciliations, supporting documentation and a cash flow request.
82
17.5 Using SUN
Naming Convention for Partner Accounts XAAANNd by 2 sequential numbers.
Balance sheet category for Partner Accounts = D06C
When advancing funds to Partners accounting entries should be as follows:
DR Partner advance account (XAAANN account in balance sheet category

D06C)
CR Bank
When posting Partner Expenditure from their returns:
In the Actuals (in the income and expenditure ledger)….
CR Partner advance (XAAANN) account - Total amount reported, in the currency

reported
DR Project/ cost centre expenditure – Transactional - assign the relevant award and
partner analysis codes
o All Partner transactions to be posted on SUN to the project/cost centre

using the Partner Cost Code range 54nn and Partner analysis code
XAAANN (this is the same as the Partner account code)
o At the year end, unreported partner expenditure must by accrued – provided
the related activities are completed. The accrued expenditure reverses out
the following period. Accrued expenditure must be explained in the
management commentary, including an outline of the related activities
which were completed but remained unreported at the time of closing the
books in the year.
Partners that are Co-funding a Project
Our preferred position is that the partner sends us the funds for the co-funding.
However, in circumstances where the partner is not forwarding us the funds for co-
financing then they will send us details of all the matching expenditure.
We will book the expenditure in detail and match that expenditure with a credit in
income on the same award. The Co-funding will be set up as a separate award.
18 Common Procedures[JL11]
18.1 Risk Assessment of potential partners[JL12]

18.2 Minimum standards of potential partners
There is a base line requirement for all potential partners.
If any of the minimum criteria (referenced below) are not in place at the partner
organisation, then Practical Action must not go ahead with the partnership UNLESS
Practical Action has the capacity to support the partner to meet these criteria in the first
year.
If Practical Action does work with a partner that does not meet all of the minimum
criteria, then only small amounts of funding (less than £10,000 (or equivalent) in total)
83
can be given to the partner until all of the criteria are all met. This enables Practical
Action to monitor how well the partner manages a small project at the beginning of an
agreement. This checklist can also be used to assess the capacity of existing partners,
especially if there is a significant increase in the budget for that partner [Insert link to
Checklist[AK13]]
The minimum standards to enter in to a sub- award agreement are:
1. An agreed project budget

2. A work plan schedule
3. The partner must keep at least a cash book and a bank book and perform
monthly reconciliations to the cash balance and bank statement.
4. A fixed asset register
5. If stock is held then an adequate stock control system must be in place.
6. The partner must commit to send returns to Practical Action on a monthly basis,
showing expenditure in sufficient detail to enable it to be incorporated in
Practical Actions’ accounting records. Expenditure must be easily traceable
back to the prime accounting records held at the partner’s office.
7. The partner will allow unrestricted access to all expenditure records relating to
Practical Action funds (where this is in compliance with local regulations).
8. The partner will accept that a project audit will take place annually
9. [Asian offices only] The partner has to be locally registered as an NGO (or
private organisation)
10. [Asian offices only] Partners need to use a local accounting system in
compliance with the requirements of the NGO Bureau (or equivalent regulatory
authority) in the country of operation.
18.3 Risk assessment for established larger Partners and

Partners that may be reappointed
If Practical Action is planning to work with established partners such as International

NGOs or large National NGOs with a proven track record in project delivery, a risk
assessment is still required.
18.4 Partners in the Private sector
Specific guidelines apply if the potential partner is a private sector. These are
referenced in The Guidelines[AK14] for Working with Large Scale Private Sector
Companies document
18.5 Memorandum of Understanding (MoU)
When there is an intention to work with a partner in future then a MoU should be
drawn-up and agreed with the 3rd party. This is a loose agreement that outlines the
broad principles of the relationship.
18.6 Contingent Agreement
During process of compiling a Donor Proposal then the relationship with the partner is
firmed up with a Contingent agreement. This agreement formalises the relationship
between Practical Action and the partner and stipulates the terms and conditions on
how the partners co-funding is to be handled.
84
18.7 Contract[JL15]
Our sub-award agreement (Contract) has greater detail than an MOU or Contingent
Agreement and should be in place for all Partnership agreements. This has more detail
and would need to identify:
a. Activities / Costs within the project that are funded by Practical Action and
fulfilled by the Partner and activities that are funded by the Partner and fulfilled
by the Partner. This should be outlined in a budget that is a subset of the overall
project budget and in the same form as the donor budget.
b. At least quarterly but ideally monthly reporting from the donor would need to
identify project costs incurred by donor reporting code and identify who funded
those costs (Partner or Practical Action)
c. Practical Action would need the right to be able to review the Partner’s Financial
system and audit project costs funded by the Partner
d. The contract will have a condition that states the contract will be reviewed
annually.
18.8 Letter of Agreement (LOA[JL16])
The Nepal office has a supplementary agreement to the MoU which is issued on an
annual basis referred to as a Letter of Agreement (LOA). The agreement is a more
tightly worded operation plan of actions that will happen during the term of the LOA.
18.9 Partner Monitoring
All partners must be visited by a member of the Finance and Q&A at least every six
months. Typically most visits will be made by programme staff. It is also important to
ensure that Practical Action Finance staff are involved in any partner visits to assess
the financial controls in place. Ideally this should be conducted by a project staff
member and / or finance staff member in person but can be conducted by phone.
Costs for these visits must be built into the donor budget.
The Partnership monitoring tool checklist should be used for monitoring [Insert Link –
this document may need review].
18.10 Partners that are co-funding a project
In this situation Practical Action is working with other partners to a mutually agreed
outcome with the partner funding their own activities (as opposed to Practical Action
funding those activities).
Contract: Our
Sub-award agreement (Contract) with that Partner would need to identify:
1. Activities / Costs within the project that are funded by Practical Action and
fulfilled by the Partner and activities that are funded by the Partner and fulfilled
by the Partner. This should be outlined in a budget that is a subset of the overall
project budget and in the same form as the donor budget.
2. Quarterly or Monthly Financial reporting from the donor would need to identify
project costs incurred by donor reporting code and identify who funded those
costs (Partner or Practical Action)
85
3. Practical Action would need the right to be able to review the Partner’s Financial
system and audit project costs funded by the Partner
Costs that are funded directly by the Partner should not be recorded in the A (Actuals)
ledger of Practical Action but should be recorded as a memorandum in the P (Partner
ledger). They are costs incurred for the project but are not costs incurred by Practical
Action. However, depending on donor requirements, Practical Action may need to
report this expenditure as part of the overall project report.
Process: Our budget loaded onto SUN B (Budget Ledger) will be the total budgeted
project value less the Total Partner co-funding
a. Total budgeted income will be Total project income less Partner funded income
b. Total budgeted cost will be Total project costs less Partner funded costs
c. Partner funded income will be recorded on the P ledger
d. Partner funded costs will be recorded on the P Ledger
Information sources: The information required above will need to come from financial
reports that are produced by the Partner on a quarterly or monthly frequency as will be
stated in the sub-award agreement. [Insert Link to template]
18.11 Agreements where Practical Action is not the lead partner
In some circumstances, Practical Action will receive funding from a leading partner as
opposed to the main donor in a project. In this situation it is likely that the lead partner
will apply partnership agreements with any sub partners.
If the Lead Partner has their own partnership or sub-award agreement then this should
be reviewed by Practical Action prior to document signature. The agreement should be
reviewed against the donor guidelines and our own agreement for reasonableness.
If the Lead Partner does not have their own form of partnership agreement, then
Practical Action should volunteer to apply their own sub-award agreement.
Practical Action should not enter into any working agreement without some form of
written document to support the nature of the work agreed.
18.12 Using SUN
Ensure the Partner journal type is used when posting partner transactions
Post partner spend (not match funding) to the A Actuals Ledger
Post partner co-funding to the P Partner Ledger
Practical Action Budget including Partner budget (excluding match funding) to be

posted to the B Budget Ledger
Partner co-funding budget to be posted to the Q Co-funding budget ledger

Before releasing a second tranche of funds to the partner, ensure that 80% of the
previous tranche has been accounted for and posted to the SUN system
All backup invoices to be reconciled and agreed to the partner transaction listing
86
Periodically (at least twice a year) our partner account should be agreed with the
Partner’s own balance according to their accounts.
Confirmation of receipt of funds must be obtained from the Partner and this
confirmation filed [Standard form to be developed}
All partners to have a separate bank account for Practical Action funds unless they can
demonstrate that they have a robust accounting system that can track the funds
When a Declaration of expenditure has been received:
1. It must be checked by finance to ensure accuracy

2. A recognition of expenditure must then be sent to the Partner either accepting
or rejecting their declaration. If it is rejecting then reasons for this must be
detailed. [A standard form needs to be developed]
18.14 Organisational Policies

Sub-award Policy. Please refer to NetConsent.
19 Expense Accruals and Prepayments
Please note for income recognition/accruals please refer to section on Income

Management Expenditure is accounted for on an accruals basis and is recognised
when there is a legal or constructive obligation to pay i.e. after the delivery of goods
and services.
Expenses should be accounted for in the period in which it was actually incurred so
that it can be reported in the appropriate period.
The budget/award expenditure code is debited to record the accrued expenditure whilst
a corresponding payable account in the balance sheet is credited to record the liability.
Accrued expenditure should be prepared on a self-reversing journal type (journal type

ACRUE)
Dr: Expenditure code (I&E)
Cr: Accrual – Expense payable (balance sheet with award tagged to the
transaction)
Prepayments
Payments made for goods and services not yet received shall not be charged to the
Income and Expenditure account until such a time as such services have been delivered.
Payments made in advance shall be debited to a balance sheet prepayment account

from which they will then be amortised based on the consumption each month.
Upon payment, the following entries shall be made for the ‘total’ cost;
Dr: Prepayment (balance sheet with award tagged to the transaction) XXX
Cr: Bank XXX
87
As the services are being consumed, the following entries shall be made for each
relevant period; (Please note the costs do not have to be made each month, these can
forward post into future periods in one go)
Dr: Expenditure (I&E) XXX
Cr: Prepayments (balance sheet with award tagged to the transaction) XXX
20 Fixed Assets
The purpose of this policy is to prescribe guidelines for the treatment of property, plant
and equipment acquired by the Group through purchase, receipt as donations or other
means that ascribe ownership. The policy will apply to fixed assets that are acquired
from both restricted and unrestricted resources.
Generally, all assets whose individual value is above £500.00 shall, together with
expenses incidental to the purchase, be capitalised and categorised under the four
respective categories which are motor vehicles, furniture & fittings, computer equipment
and freehold property.
Current practice is to capitalise all fixed assets and expense to the P&L for both
unrestricted and restricted and to maintain a fixed asset register offline which includes
all the details listed below plus depreciation etc. However, for significant capital
expenditure e.g. office move, this should be posted to the balance sheet as a fixed asset
and then charged/expensed to the P&L over the appropriate number of years.
The intention is to implement the below for all offices over time and once implemented,
full compliance will be expected.
Assets Purchased from Unrestricted Funds
Assets purchased from unrestricted funds shall, upon purchase be capitalised and
remain on the balance sheet until they are disposed of or derecognised. Such asset
shall be subject to depreciation, impairment testing and revaluation where necessary.
Assets from Restricted Funds
Assets purchased from restricted funds shall, upon acquisition be expensed to the P&L.
Such assets shall not be subject to depreciation, impairment or revaluation until and
unless they are donated to the office in which case a further entry shall be made where
a debit is made to fixed assets credit to expenditure. These entries shall be for purposes
of allowing fixed assets to be recorded and tracked.
Principles covered under this policy will include the following;
i. Recognition criteria,
ii. Carrying amounts of the asset,
iii. Depreciation,
88
iv. Impairment, and
v. Disposal and/or Derecognition.
20.3 Recognition Criteria
The group shall recognise an item of property plant and equipment when it becomes
entitled to it and it is certain that economic benefit from the asset will flow to the Group
for periods spanning over one year and where measurement of the asset value is certain.
Entries to be made in relation to the purchase of fixed assets are;
Dr: Fixed Assets XXX
Cr: Bank XXX
In the case of a donation in kind (fixed assets), the following entry shall be made;
Cr: Other Income (I&E) XXX
The value at which a donated asset is recognised shall be the market value of that
particular asset. In the event that the donated asset had been previously purchased by
restricted fund and is handed over at the end of the same restricted project, the value at
which it will be recognised shall be the market or replacement value.
20.4 Carrying Amount
The Cost Model cost less depreciation shall be used in recording assets values in the
ledger and at no time shall assets be carried at more than their net realisable value. In
cases where a business unit is operating in a hyperinflationary environment, the
Revaluation Model shall be used. A decision as to whether an economy is a
hyperinflationary shall be made by a country’s monetary and fiscal policy authority or
other similar authority. Inflation data shall be that published by the national Central
Statistics Office or similar.
20.5 Revaluation Model
Where a decision has been made to revalue an asset, the valuation shall be done by a
recognised valuation expert in the relevant category area. Once a single item in the
category of property plan and equipment has been revalued, all assets in that class
should also be revalued.
The following are the entries to be made;
Scenario.
An asset whose carrying amount is £100,000 has appreciated in value so that it now has
a net realisable value of £120,000
Initial Revaluation
Dr: Property Plant & Equipment £20,000
Cr: Revaluation Reserves £20,000
89
Subsequent Revaluation
In the following year, the same asset has been valued at £100,000
Dr: Revaluation Reserves £20,000
Cr: Property Plan and Equipment £20,000
Revaluation Dos
The fixed assets register should be amended to account for revaluation changes.
20.6 Depreciation Policy
All property plant and equipment shall be depreciated on a systematic basis over the
asset’s useful life. Unless there are country/jurisdiction specific requirements
precluding the use of the Group wide depreciation rates, all business units shall use the
following rates;
Motor vehicles 33.3% per annum (straight line basis)
Computer equipment 33.3% per annum (straight line basis)
Fixtures and fittings 20.0% per annum (straight line basis)
Freehold property 100 years
Entries;
Dr: I&E (depreciation expense) XXX
Cr: Balance sheet (accumulated depreciation) XXX
Entries shall be made using a standing journal which will only be amended in the event
of changes to fixed assets from acquisition, disposal/Derecognition and/or revaluation.
Do:
Notify Group FD regarding any national requirements that preclude the business unit
from using the group wide depreciation rates and advise of the rates then used.
Remember to adjust standing journals following changes to fixed assets.
Don’t:
Use depreciation rates that have not been agreed.
20.7 Impairment
Impairments tests shall be done as necessary to ensure that the carrying value of
assets are not higher than their cost or net realisable value.
If an asset is found to be impaired, an adjustment shall me made to correct the carrying

amount. The following are the entries to be made:
90
Dr: I&E XXX
Cr: Fixed Assets XXX
Assets purchased from restricted funding shall not be subject to impairment.
20.8 Disposal and Derecognition
Disposal
Fixed assets which have become excess to requirements or which are in poor
condition and thus expensive to maintain can be disposed.
Before disposal, the disposing unit should record these in a disposal form and approval
obtained from the business unit’s Director before the disposal.
Disposal can be made through auction among the staff or both staff and the outsiders
wherever necessary. For assets estimated at over £4000 shall require open auction,
particularly in the case of valuable assets like vehicles, tender should be invited from
outsiders (Staff can also participate) through advertisement in the newspaper. The asset
shall then be disposed to the highest bidder.
Entries in relation to disposal shall be as follows;
Dr: Cash/Bank XXX
Dr: B/Sheet (Accumulated depreciation) XXX
Cr: Fixed assets (carrying amount) XXX
Cr: Gain on disposal of fixed assets XXX
For restricted projects, conditions of the grant document must be followed. If there is
any restriction on sale or otherwise instruction for disposal of assets then their
instruction should be adhered to.
Written approval from the Business Unit director must be obtained approval prior to
starting such process.
Derecognition
Where assets have been damaged or can no longer be located after investigation,
such asset shall be derecognised from the records. The business unit head shall seek
authority from the Group Finance Director to derecognise the assets.
Accounting for disposal / Derecognition of Fixed Assets
At the time of disposal or Derecognition, the cost as well as the value of the
accumulated depreciation shall be taken out of the ledger.
In case of sale if the sale value is higher than the carrying amount of the asset than the
difference between the sale value and the carrying amount shall be treated in the
accounts as “Profit on Disposal of Fixed Asset”.
91
In case of sale if the sale value of the asset is less than the carrying amount than the
difference between the sale value and the carrying amount shall be treated as “Loss on
disposal of Fixed Assets”.
In case of Derecognition the carrying amount of the asset shall be charged to the
Revenue as “Loss on Disposal of Fixed Asset” in the accounts.
Dr: I&E XXX
Dr: B/Sheet (Accumulated depreciation) XXX
Cr: Fixed assets (carrying amount) XXX
20.9 Title (Ownership) of the Assets
Title (Ownership) of the asset must be clearly identified. Acquisition of all assets must
be made in the name of the business unit unless otherwise stated in the grant
agreement.
In case of purchase of vehicles it should be carefully noticed that such vehicles are
purchased in the name of the business unit.
20.10 Fixed Assets Register
A Fixed Assets Register should be maintained to record particulars of all fixed assets
(originally) costing £500 and above. The register should give details of each asset as
follows:
1. Asset ID Number
2. Asset Category
3. Date of Acquisition.
4. Sales invoice no/date
5. Description of assets (Including Serial Number on the assets wherever
applicable)
6. Unit
7. Cost per unit.
8. Total Value (Cost) of the Asset.
9. Annual Depreciation amount.
10. Accumulated Depreciation (Depreciation to date).
11. Disposal value
12. Profit / Loss on Disposal
13. NPV
14. Payment Reference - Voucher Number, P&L Account Code/ Award etc.
15. Sales/Transfer/Adjustment
16. Location of the Asset
17. Condition
18. Physical verification date/by whom
19. Other relevant comments Remarks.
20.11 Assets Identification Numbers
When an asset is purchased it should be given a unique asset serial number (ID
Number) which should be physically marked on the asset and held in the Fixed Asset
Register.
92
This ID number is the identification mark provided by the business unit. Such ID mark
should be written on the assets in such a way that it could be easily noticed and is not
easily removable
In case an asset is purchased in the sub office, then the sub office must communicate
to the main business unit which will then allocate an ID number for that asset.
20.12 Acquisition of Assets
A plan for the acquisition of assets should be incorporated into the annual budget and
only approved fixed assets are purchased.
The procedure for acquiring a fixed asset should include the following steps (this
process excludes UK or any other offices where capital expenditure is centralised and
falls within remit of the IT Unit):
i. The user shall raise a “Requisition Form” describing full particulars of the asset
and the justification of purchase of such asset.
ii. The “Requisition Form” should be duly authenticated by the budget holder/ line
manager describing the appropriate budget line item for it.
iii. The Accounts Department shall check that it is in conformity with the policy,
plans and budgeted for and advise accordingly.
iv. Upon approval by the relevant approver, the administration/procurement staff
shall follow the procedures outlined in the Procurement section.
20.13 Accounting for Donated Assets
Where functional fixed assets have been donated, they should be included in the
statement of financial position at their current market value at the date of the gift.
The donated assets shall, from the date of recognition become subject to policies and
procedures governing fixed assets.
Entries to be made upon receipt of a donation are as follows;
Cr: Donations (Income statement) XXX
20.14 Fixed Assets Verification
Ideally, verification of fixed assets should be done twice a year or at a minimum by the
end of the financial year.
20.15 Assets Movement
Physical Movement or transfer of an asset

Before assets can be moved between physical locations, a “Transfer of Custody” form
needs to be completed (or similar document) by the transferring unit. The custody form
should contain details of the asset being transferred, specifically;
i. Full description,
ii. Serial number, if vehicle, include registration number
iii. Condition, if vehicle include mileage
93
iv. Any other information you may consider important
Movement where values will be transferred

Where an asset is transferred physically the BU shall, in addition to the above, post
entries in the books of accounts transferring the values out the books. This scenario
may happen for example, between Charity and PAC (where there is separate legal
registration). The following are the entries to make;
In the books of the transferring BU
Dr: Inter-account (Receiving BU) XXX
Dr: Accumulated Depreciation XXX
Cr: Fixed Assets (carrying amount) XXX
In the books of the receiving BU
Cr: Inter-account (transferring BU) XXX
All asset transfer shall be done at carrying value.
20.16 Intangible Assets
Definition: Intangible assets include operational assets that lack physical substance,
such as patents, software, digital books and knowledge documents etc.
Definition as per IFRS: An intangible asset is an identifiable non-monetary asset

without physical substance.
List of intangible assets
Patented technology
Digital publishing
Computer software
Databases
Audio visual material
Beneficiary lists
Licensing
Specific technical knowledge (PMSD) apply for PAC
Valuation
These are accounted for at their historical cost / cost of acquisition / Value paid for
asset. However all intangible assets should be tested for its impairment loss/profit.
Amortisation of Intangible Asset (Limited useful life)
Certain intangible assets have limited use full life. So these types of assets should be
amortise yearly basis over its useful life.
Example: Software license, Patent etc.
94
It is Practical Action policy that all receipts will be deposited into a bank account and
payments as far as possible will be made by cheque or bank transfer.
In all countries of operation, the number of Practical Action bank accounts opened will
be kept to a minimum, this is to reduce the administrative requirements of managing
multiple accounts. Practical Action is able to track the flow of funds from different
donors through tagging income and expenditure on their accounting system (‘award
tagging’). Donor specific bank accounts therefore may be opened if it is mandatory
from restricted donor subject to prior approval.
Reserves and Investment policy – refer to NetConsent
Delegations policy – refer to NetConsent
20.19 Authority to open Bank Accounts

Bank accounts may only be opened on the authority of the Regional/Country Director
who in turn must obtain approval from the Practical Action Board of Trustees/Chief
Executive in the United Kingdom.
This approval must be in writing.
A central list of all bank accounts of Practical Action is maintained by UK HO finance so

they require notification of all new bank accounts and/or subsequent amendments
along with the equivalent SUN account balance sheet code immediately after the
account has been opened
20.20 Names of Accounts

All bank accounts must contain the name Practical Action or Practical Action
Consulting, as appropriate. A description designating the function, donor or type of
account may be added if necessary.
20.21 Signatories
All Practical Action accounts will be operated by at least two people. The
Regional/Country Director will be the mandatory signatory for all main accounts.
The Head of Finance/Manager and any other staff from the Finance department should
NOT be a signatory to any of the bank accounts but they have to ensure Head Office’s
access and control to the accounts. In case of field offices under Regional/country
office, Director/Senior Manager(s) should have access and control in the field office
bank account(s). The country/regional office(s) where the country laws doesn’t allow
foreign nationals as bank signatory(s), need to obtain additional approval from Head
Office.
In the account held in regional/country offices bank signatories will be as follows:
Group AA There must be one UK Director in

this group
95
Group AB Regional/Country Director &
Business Unit SMT member(s)
Group BB There must be one UK Director in
this group and two/three local
Business Unit members
For bank accounts held in field offices, bank signatories will be as follows:
Group AA There must be one

Regional/Country Director in this
group
Group AB Coordinator/Manager/Officer
based in the field office
Group BB There must be one from
regional/country office and others
from field offices
20.22 Bank Statements
Bank statements should be received on a monthly basis from the bank and
retained/filed with bank posting journals. Statements held online are an acceptable
alternative if those statements are accessible in perpetuity. If online statements will not
be available in perpetuity, then copies should be printed off and retained.
20.23 Bank Reconciliation
Bank reconciliations must be done monthly, copies of the reconciliation once verified by
the Finance Manager along with a copy of the bank statement showing the closing
balance should be submitted to Head Office on a monthly basis in accordance with the
agreed month end timetable.
Where Bank reconciliations are completed in currencies that are not the Practical
Action reporting currency (GBP) or Country office local currency (LC), then the bank
balance should be revalued in SUN in both GBP and LC to ensure that the month end
exchange rate between GBP / LC and Bank account currency is correct.
20.24 Cheque Books/Digital Banking Gadgets

All cheque books should be in the custody of the Finance Manager or a delegated
person and should be kept locked in the safe when not in use. All authorised staff using
digital banking gadgets should ensure the security of the gadgets and should surrender
upon the separation from the organisation.
20.25 Cheque Book Requisition
All chequebook requisitions should be authorised by the Regional/Country Director and

any other cheque signatory.
20.26 Inter Bank Transfers
All transfers between Practical Action bank accounts should be by cheques or by bank
transfer.
96
Bank account transfers need to be implemented by use of a letter or internally
authorised online transfer. This process should be verified by the Finance Manager and
authorised by a bank accounts signatory.
20.27 Bank Transfers to Others
All bank transfers to others (including partners, staff in the field) will be confirmed on
Practical Action letterhead and be accompanied by a signed cheque payable to the
bank or print out of the online confirmation of the transaction.
The cheque number or online transaction reference will be quoted on the letter and for
cheque payments, the payees details noted on the back of the cheque.
20.28 Currency Accounts
Income received in foreign currency should be kept in that currency to reduce

exchange rate risk where possible.
DO:
 Ensure appropriate approval upon opening/amendments and closure of bank

accounts.
 Ensure monthly bank reconciliations are performed and submitted in line with
monthly reporting timetable.
 Ensure cheque books/digital gadgets are locked in a secure location when not
in use.

ACCOUNTING
Not applicable
CONTROLS
Risk Control
Theft/Fraud Approval controls around
opening/changes to bank
accounts
Misappropriation of Monthly bank reconciliation
liquid assets
20.29 Petty cash
Background to Petty cash procedures
Petty cash shall be managed by following the Imprest Petty Cash System. Petty cash
must be held in a lockable box and a safe must be installed in each office for secure
storage of key assets and documents.
Keys to the petty cash box and the safe should be given only to authorised individuals
who will be responsible for maintaining and recording all cash transactions.
Cash payments shall be made for small items required for day to day office
maintenance. Payment of such petty/ small items shall be made by cash up to a limit of
97
no more than £500 or equivalent local currency. The locally agreed amount for each
transaction can be decided by the Regional/Country Management within the maximum
limit.
Cheque payment or bank transfer should be used for all other procurement. However,
there can be exceptions in very special circumstances and in such cases approval
must be received from the Regional/Country Director for making cash payments under
such circumstances.
The petty cash account shall be updated daily to record all receipts and payments
made in cash. All receipts and payments must be supported by adequate documents.
The closing balance should be checked on monthly basis which should not exceed the
agreed limit. The closing balance shall be verified by a person other than the petty cash
holder. The Head of Finance/Manager shall also monitor the operation from time to
time.
The petty cash account should be reconciled monthly but Head of Finance/Manager or
designated person can random spot checks to ensure effective control system in place.
20.30 Documentation and Approval
All payments must be supported by original/signed copies of invoices,

acknowledgement of goods or services received and authorisation by the respective
Budget Holders. No payment shall be made on duplicate copy or photocopy of the bill
other than its original copy.
Petty Cash transactions must be approved by the budget holder or the Head of
Finance/Manager before such payments are made. Petty Cash Vouchers shall be
completed and authorised as mentioned above prior to payment.
20.31 Petty Cash Holding Limit
It is important to try to keep cash holding limit to a minimum as funds held in cash are
generally less secured than funds held in the bank accounts. An upper limit of such
petty cash holding shall be set by Regional/Country Management to cover contingent
costs. In addition to petty cash the Senior Management can decide on cash reserve to
address emergency cash need. This type of cash should not be mixed up with normal
petty cash.
It must be ensured that at the end of the day the petty cash balance has not exceeded
the limit. It must also be ensured that such cash amount in safe is adequately insured.
20.32 Monies Received
Cash receipts from any sources shall be accounted for and deposited into bank
promptly ideally within the same working day. Where such cash is received after the
banking hour is over than such cash can be retained in the safe with a note in the Petty
Cash statement and this amount should be deposited into the bank in the next 24
hours of bank opening.
Only one receipt book will have used at any one time for a single office. The receipts
should be pre-numbered and in triplicate. A second receipt book can be used in parallel
in special circumstances e.g. staff requires in another location and if required then
ensure the sequential receipts have been accounted for on a monthly basis. Original
98
goes to the person paying, first copy to Accounts and the last being book copy. A
duplicate bank slip is used to bank the money with the bank acknowledging receipt of
money by stamping one of the paying in slips which is retained by the Country office
and is filed sequentially along with the batch of the receipts whose total constituted the
amount banked.
20.33 Petty cash box operation for multiple currencies
Small amounts of foreign currency can be held within Finance for staff members use
when travelling overseas and should be recorded through the foreign currency account.
When advancing the currency obtain the rate(s) of exchange by using an official
website (Oanda). The same rate applies to the returned currency and expenses
relating to that trip.
Charge/debit the advance to the staff member’s advance account and credit the
Foreign Currency Account. Post the transactions showing the amounts in the currency
(transaction currency and transaction amount), and your local/base currency, as
appropriate.
Follow the same procedure for returned currency.
Post the advance/ returned currency into SUN.
20.34 Monthly Reconciliation
At the end of each month count and record your currency in hand. This should agree
to what you recorded in the Foreign Currency account on SUN.
Revalue the foreign exchange account against each currency held.
DO:
 Ensure appropriate approval around issuing petty cash.

 Ensure appropriate controls around handover and takeover of petty cash and
documentation.
 Ensure monthly petty cash reconciliations are performed and submitted in line
with monthly reporting timetable.
 Ensure petty cash is locked in a secure location when not in use.
CONTROLS
Risk Control
Theft/Fraud Approval controls around petty
cash
Misappropriation of Monthly petty cash
liquid assets reconciliation
21 Document Management
99
21.2 Definition of document management
Document management involves the day-to-day capture, storage, modification and

sharing of physical and/or digital files within an organisation. Practical Action will have
to securely document the followings but not limited to:
 Donor’s contract with proposal, budget, log frame, work plan and other
submissions at time of application and any revision
 Sub-Award agreements , LoA, budget and work plan with partner(s) with any
revision
 Progress and financial report(s) submitted to donor on periodic basis
 Evaluation report(s)- mid-term, final and other others
 Audit reports
 Vouchers, bill/invoices, receipts and supporting received from partners and
Practical Action itself
 Procurement process and decisions
 HR files, employment contract, JD, advertisement, testimonials, recruitment
process and decisions
 Time sheets
 Procurement and tendering documentation
Document management focuses on:
 Reducing lost and misfiled documents which can lead to disallowed costs and
liabilities.
 Providing faster search and retrieval of documents during audits which saves
time.
 Helping to better organise existing documents for internal use
 Improving general work processes and organisational efficiency.
 Reducing the amount of physical space used to store documents, such as file
cabinets, boxes and shelving.
 To comply with statutory and legal requirements.
All accounting records should be kept for a period of 11 years (* see explanation
below). If local country regulations require a longer period for archiving, then this
should be applied as the minimum standard.
Accounting records should be held in a secure location filed sequentially where

environmental risks are minimised. Examples of such risks are fire, damp, insect
damage, theft. It is preferable for the long term archiving facility to be held securely off
site i.e. not in a Practical Action office.
The location of the archived documents does not need to be on organisation premises
but should be accessible upon approval by finance staff to the programme staff,
external parties such as award auditors and so on.
The system should offer an easy-to-use file structure that makes sense to users, such
as a cabinet-drawer-folder approach.
The system should allow for restriction on who can see specific folders and files and be
able to set access permissions by finance.
100
Archived documentation should be filed in document reference number and date order
and clearly marked to ease retrieval of information.
Any documents retrieved from the Archive should be signed for and dated in a
designated book by the person collecting the same. Documents returned should also
be signed in in the same book.
21.3 Do
 Keep all files safe and secure
 Keep all documents for maximum 11 years
 Comply with all statutory and donor reporting requirements
21.4 Controls
Risk Controls
Non-compliance with Keep all documents in line with legal
legal regulations requirements
Destruction of required Ensure that all documents are filed in a
documents secure location
* Explanation for time duration
The basis of this figure relates to the archiving requirement of the EC. They require all
‘supporting documents for the accounts, accounting documents and any other
document relevant to the financing of the Action’ to be held ‘up to 5 years after the
payment of the balance’.
An EC contract has a maximum duration of 5 years. Payment of the award balance

after the contract end date can take up to 1 year.
Pre contract documentation: pre-financing / signed contract – 3 months
Contract duration – up to 5 years
Payment of balance: subject to audit and donor queries – up to 1 year
Archiving after final balance payment – 5 years
If the contract period is shorter than above total documentation period will be reduced
accordingly.
22 Micro-finance/Revolving funds/ Guarantee funds
 Practical Action should acquire capacity in micro finance either through

employees or consultants.
 Lenders should be vetted adequately before engagement.
 Cash loans must be minimised. Alternative options such as asset finance
should be used where practical.
 The finance loans must be robustly monitored over the project period or until
the refunds are obtained.
 Lending must be made to organised groups and not to individuals
101
23 Tax and Tax Accounting
Practical Action is a registered charity and as such is potentially exempt from taxation
of its income and gains to the extent that they fall within the local charity exemptions
Acts[JL17].
Practical Action always seeks to honour its tax obligations globally and never seeks to
avoid or evade taxes.
Irrecoverable VAT is chargeable to the projects.
23.3 Accounting & Procedure
This section outlines tax accounting guidance to be applied at group level. This will
ensure that we meet the requirements of the donors and enable Practical Action to
recover certain tax costs from the donor and also meet the local taxation requirements.
All business units to comply with local taxation, legislation and returns and avoid any
penalties for late submission or noncompliance.
23.4 Purchase Taxes
Trading
- For trading purpose all business unit should register under VAT
- VAT amount to be withhold and return filing for trading as per local rule and
regulations.
Vat Exemption
USAID Funding
 VAT is not an allowable cost under USAID guidelines. If it is possible for an NGO
to claim an exemption in the country of operation then that exemption should be
applied for.
 This can be administratively painful in countries such as Kenya where VAT
exemptions are claimed on a transaction by transaction basis.
 If the NGO is showing a ‘best effort’ to claim this VAT exemption, then USAID
may treat the best effort as sufficient to enable the VAT element of a purchase
be treated as allowable cost.
Europe Aid (EC)

102
 This advice is only applicable for contracts signed after Jan 2011.
 Taxation on purchases (such as VAT, IGV)
 VAT is not a cost which is eligible for reimbursement under most Europe Aid
funding instruments. Exceptions are EC Food facility, Water facility, Energy
facility and Local delegation funding
 If it is possible for an NGO to claim an exemption in the country of operation then
that exemption should be applied for.
 This can be administratively painful in countries such as Kenya where VAT
exemptions are claimed on a transaction by transaction basis.
 If the NGO is showing a ‘best effort’ to claim this VAT exemption, then may treat
the best effort as sufficient to enable the VAT element of a purchase be treated
as allowable cost.
 Eligible costs outside of the implementation period of the agreement
 In addition to the cost for producing final reports and expenditure verification
(project audit); evaluation of the Action is now an eligible cost for reimburse if
incurred after the project implementation period.
23.5 Income Tax
 All charitable entities required to get income tax exemption for all their grants and
donations.
 All entities required to register with income tax to withhold income tax from
employee
Do
- Adhere with all local tax requirement

- Do deduct and deposit tax on time to avoid penalties
- Do register your entity for VAT exemption in your country
Don’t
- Incur penalties for late submissions or non-compliance
23.6 Using SUN
Where VAT is being claimed, the following entries shall be made;
i) Upon spending
DR P&L account exp. (less VAT) XXX

DR: Balance sheet (VAT Refundable) XXX
CR: Bank XXX
ii) Upon submitting refund claim to the Revenue Authority

No entries are to be made in the books of account.
iii) Upon Receipt of VAT
DR: Bank XXX

CR: Balance Sheet (VAT refundable) XXX
103
iv) Upon Rejection of claim
Sometimes claims may be rejected due to administrative errors. When this
occurs, resubmit the claims after corrections.
24 Monthly Routines and Year End Closure

24.1 Principles, Aims and Accounting Policies
Financial records should be accurate, transparent, complete, and up to date. The

transactions must have been prepared on an accruals basis in line with Practical Action
detailed guidance and should represent the complete view of the business unit.
Reported income and expenditure must be based on actuals rather than planned. Where
co-funding is to be provided by unrestricted funding it should be charged in proportion to
the obligation arising from the expenditure on the main grant and coded correctly.
Reported co-funding expenditure must not be manually entered into reports.
Financial budget and expenditure reports must be extracted from the accounting system
and must have a clear audit trail. The budgeted income and expenditure must be
uploaded on the system for the entire award period and adjusted annually for carried
over balances.
Expenditure reported should also be incurred within the agreed funding period unless
prior approval is obtained from the donor to include expenditure outside the funding
period.
Budget savings or underspends cannot be used to pay for work which was not in the
donor budget or in the operational plan without appropriate prior approval by the donor
or the management line.
All RCOs must complete their month-end routine as follow:

WD10 soft close with all postings complete including bank reconciliations, inter-
company transactions, ICC postings, timesheets etc. Budget holder
reports issued.
WD15 HARD CLOSE – all final adjustments posted, ALL balance sheet
reconciled, reviewed and signed off with relevant aged reports
produced. Management reporting packs and Audit packs completed.
Final monthly management packs completed and issued.
WD 20 Group consolidation and senior management and Board reports

produced.
It is very important to meet the above dates which will allow the group finance
function to produce consolidated accounts efficiently and on time.
Completeness reviews:
The following reviews must be performed on a monthly basis as a minimum.
o All integrity errors reviewed and corrected i.e. missing codes, balance sheet
must balance etc.
104
o All transactions are coded correctly and that there are no missing codes. At no
point should actual expenditure/income be allocated to the wrong budget line
because that budget has availability, whereas the correct budget line does not. It
is important for management purposes that expenditure is allocated to the right
codes and variances explained than to have no variances but incorrect
information in the accounts.
o Ensure budgets updated for completeness.
o Timesheets posted (timesheets must be signed off by staff member and line
manager/budget holder).
o ICC and co-funding reviewed and relevant postings complete.
o Bank reconciliations complete, reviewed and signed off and copies submitted to
HO
o Staff advance and expense account reconciliations complete
o Payroll control accounts reconciled and signed off.
o Partner accounts reconciled to partner bank/income statements. As a minimum
partner accounts for the prior reporting period must be reconciled by the next
period. If the business unit is completing the accounts for August for example,
partner accounts for July must be reconciled by this time. The only exception is
when the reporting period coincides with the end of a donor’s reporting timeline
or with Practical Action’s year end. At this time partner reports must be
reconciled for the entire reporting period including the month in review.
o Donor accounts and claims ledger up to date and reviewed for completeness
and any late claims followed up.
o Inter business unit accounts reconciled with HO sign off.
o Income recognition complete.
o Movement on prepayments and accrued income accounts reviewed and
reconciled.
o Forex revaluation complete.
o All remaining balance sheet accounts reconciled, reviewed and signed off.
24.2 Month-end reporting
Principles, Aims and policies:
Month end management packs to be completed for local SMT and HO use. A narrative
report must be part of the monthly reports. Commentary must be obtained from the
budget holders and SMT and should represent the business unit’s view rather than
only those of the finance team; the reasons for the key variances, implications such as
risks and opportunities, actions taken to manage risks or to utilise opportunities, the
potential impact on the annual forecast expenditure and the delivery of restricted
funded work over the lifetime of the award.
A standard checklist will be used by all BU’s and forms part of the formal sign off of the
monthly accounts. The primary purpose of the month end checklist is to provide
assurance to the Finance manager and the RCO director that financial accounts are
complete and controls are operating appropriately.
Issues arising from the review must be documented as well as any actions to be taken.
These should be re-visited the following month until they are resolved.
The checklist will include a task list for all members of the finance team and the
timelines for completion. This will be used to inform the Key Performance Indicators to
identify strengths and weaknesses in the monthly reporting cycle. The report will be
used to support improvements and to manage performance.
105
24.3 Content for monthly reporting
Process:
The checklist/high level KPI will be submitted to the business unit Director for review
prior to submission to UK. This is to provide assurance to the senior leadership of the
business unit that all controls are functioning appropriately.
The following reports must be submitted to the business unit’s senior management
team alongside the monthly checklist/operational KPI reporting.
Monthly Management reporting pack which includes:

o Consolidated income and expenditure report for the business unit or for the
region
o Balance sheet with supporting schedules
o Income and expenditure summary for
 Restricted funding,
 PAC and PAP (where applicable)
 Unrestricted funding
o Award expenditure vs budget to track and monitor progress
o Cost coverage information
o Forecast expenditure with a commentary
o Top awards analysis
o Updated Co-funding status. All co-funding information for working budgets and
actual expenditure must be system generated based on transactions posted to
the correct coding.
o Pipeline report; generated from PAMS
The monthly management accounts will be submitted to HO on a monthly basis.
Key Narrative Sections of Management reports:

Section 1: Director's Executive summary: Political and Economic factors
Section 2: Year to date performance, overview and top awards.
Section 3: PAC performance if applicable to the BU
Section 4: Unrestricted Reserves (surplus / deficit)
Section 5: Quantified full year forecast and commentary
Section 6: Balance Sheet (notes on the balance sheet schedules)
Section 8: Pipeline news on strategically or financially important proposals developed
or submitted
Section 7: HR
106
24.4 Management reporting Roles & Responsibilities
Between Finance and Programme staff
Finance Programmes
Provide comments on any material variances between
budget and actual expenditure.
Provide accurate & complete information on expenses and income
Perform Balance Sheet reviews & reconciliations, donor claims, bank reconciliations,
control accounts, loan accounts, debtors Review & respond to budget holder’s report on a timely basis
Review the report in full, including all transactions, and
inform Finance of any errors or issues.
Provide budget holders report. The principal we work to is that a budget holder When the Project Manager is happy with all the information
should be provided with a monthly financial report that is in the format they need to in the report, with any errors corrected, the report should be
manage in. signed off.
 Unrestricted budget holder reports are run for the financial year in the
internal format For RBC provide finance with full information to produce the
 Unrestricted investment funds are run for the financial year in the internal invoice for the client OR for donor reports work with finance
format but also providing a cumulative section to show life of the to complete the financial donor report which must be aligned
investment. with the narrative reporting and ensuring donor rules are
 Restricted budget holder reports would show the report in the same format complied with.
as the ‘contract/grant’ in donor currency and run for the contract/grant
years
Where it is anticipated that there will be a material

difference between actual expenditure and budgeted
expenditure for the full financial year, the budget holder
must provide a full year forecast.
Any underspends must be discussed and agreed with the

donor or for unrestricted with senior management.
Any contractual changes to budget whether internal or

external must be updated on the accounting system and
therefore a revised budget will need to be submitted to
finance.
Maintain oversight & manage unrestricted and restricted reserves

- Monitor budget in contract currency
- Confirm the reports are in contract currency
- Confirm reporting periods are accurate
- Review the periodic expenditure and check
variances align with progress on the ground
- Review the transaction details to ensure coding
correct
- Compare and agree the expenditure with the
activities accomplished
- Identify potential re-alignment of current budgets
(as per flexibility limit of donor)
Provide donor reports in contract currency (these should be the same as the budget - Sign off report as approved and save in central
holder report) shared location
- Submit the report on time
Highlight any potential issues or observations.
107
24.5 Monthly review process
Each month end local Finance Managers and SMT are required to review the month
end accounts in detail – refer to Appendix 6 for template and checklist.
This will aid local Finance Managers and senior management teams to understand the
finance position and help with the right decisions and actions being take.
24.6 Guide to Monthly Review of Key schedules
This guide is to assist the non-finance Managers in a business unit to understand the
accounts which are produced by the Finance team.
Accounts group and where to Review guide

find them (Balance sheet or
income and expenditure
account)
 Finance produce the balance sheet reconciliation below
Total donor claims and/or advance income – Donor report amount – month end income accrual = Balance in award
Accruals-Income or work in code
Progress income/unreported  Donor claim amounts should reconcile with invoice to the donor and to the donor ledger. Advance cash
income from the donor should be traceable to the bank
 Donor report amount should reconcile to the donor report (award component. I.e. excluding co-funding)
 Balance sheet :  Month end accrual amount is the unreported expenditure as at the end of the month
category D12  If award balance is more than the amount reported and accrued, it forms part of the amount differed – see
 Income and Differed income below.
Expenditure account :  Remaining Balance in accrued income category D12 should be positive
Total award income –  Always revalue the balance in the QR balance sheet code before adding up the amounts to be differed.
total award
expenditure
Deferred Income (Income  Obtain balance sheet reconciliation schedule from Finance
received in advance but not yet  Reclassified balance for differed income in balance sheet category C15 should be negative
earned/spent)
Balance sheet: Category C15
Donor claims Ledger  Check that donor claims have been posted – Reporting and claim dates can be extracted from PAMS
Balance sheet: Category D08  Check for long outstanding balances
Reserves  Movement in unrestricted reserves should be the same as the deficit or surplus on the unrestricted
Balance sheet: R categories schedule
 Movement in restricted reserves – usually expected to be zero but sometimes we make profits or losses on
PAC/Payment by results contracts.
 If the country office only delivers on grants then the movement in restricted reserves may be due to
incomplete income recognition
Suspense (account 1700)  Must always be zero
Balance sheet
Bank Accounts  Confirm bank reconciliations have been prepared

Balance sheet category B  Review outstanding items on the reconciliation
 Confirm that bank accounts with balances are still open and for closed accounts request for transfer of
balances held
Intercountry  Confirm that purchases have been authorised by relevant budget holders
Balance sheet: Category I  Obtain reconciliation for cash transfers to the donor claims ledger
Prepayments  Should have a Debit balance (positive)
Balance sheet category D  If there are credits in the reporting period check if anything has been transferred to expenses
 Confirm is movements are within reasonable expectation
 Where closing balance is a Credit, obtain reasons from the Finance Manager
Petty Cash  Confirm ledger balance agrees to month end cash count
Balance sheet  Confirm cash counts during the month have been documented
Accruals-Expenditure  Review supporting schedule
Balance sheet:  Confirm that movements within the month are reasonable
Gratuity Provision  Check gratuity schedule
Balance sheet  Spot check length of time served by employees & confirms payroll rate used is correct % applied is correct
Other Provisions  Ask for supporting schedule
Balance sheet  Follow up on material movements or lack of movements
108
Salaries Control  Should be nil balance otherwise ask why (obtain schedule)
Balance Sheet
Staff Accounts  Check each staff member has one account.
Balance sheet  Follow up
 Check advances are being cleared down.
 Check that balances do not exceed max limits.
 Loan advances are not mixed with work float advances.
 Staff loans have “L” accounts & being covered through payroll
Profit & Loss (balance sheet  Check that the explanations from program staff for the Variance analysis is reasonable
cat 999)  Risk & opportunities arising from variances are adequately assessed and documented with action plans in
place.
 Financial forecasts are completed on the basis of revised activity plan.
 Check unrestricted reserves for deficit & surplus
 Check the foreign exchange gain or loss account. Does the gain or loss look reasonable?
 Obtain confirmation from the finance manager that the correct balance sheet accounts were revalued and in
the correct currency.
Other Schedules  Top awards report. Review that the list still represents the top risks
 Sense commentary for reported variances on top awards. Should represent the view of the SMT
 Check completeness of the pipeline reports (from PAMS?)
This section provides guidelines for carrying out yearend routines which are important
in order to close the financial year end efficiently and to a high standard ready for local
and group statutory audits.
The group financial year ends 31 March of each year.
The yearend timetable will be issued by HO but will follow closely in line with the month
end routine as per the above section) but with a few additional requirements for
statutory purposes e.g. holiday provision, fixed asset register, operating lease etc. and
various other audit schedules etc. All offices are expected to follow the same year end
timetable taking into account working days for each office.
The yearend process will include an interim audit for all offices where certain areas of
the audit will be completed in advance. The more that can be covered during the
interim audit, then less pressure will be felt during the main audit (when Q1 accounts
will be due).
Common Procedures:
Each office will need to produce an audit file as part of the interim audit and on
completion of year end for statutory reporting. The Audit packs and audit deliverables
shared by the auditors will form the contents of this file.
If there are any local requirements that are different to group purposes then the local
statutory accounts should be adjusted offline and NOT through the SUN accounts
system. If there are instances of this then they should be discussed with the Head of
Group Finance prior to the year end and audit.
The checklist below provides a list of the contents of the file with each audit pack
standardised and issued by HO. This packs could vary slightly in the future but covers
majority of the audit deliverables required for both Group and local statutory reporting.
109
AUDIT PACK #1
Audit timetable
Partner Schedule
Lease Note
Bank Accounts
Bank Guarantees
Gifts in Kind
AUDIT PACK #2
Audit Costs
Trial Balance
SOFA
P&L Cost Code Balances
Balance Sheet
Expenditure Accruals Reconciliation
Expenditure Prepayments Reconciliation
Other Income
Debtors & Creditors
Aged Creditors
Aged Debtors
Bad Debts & Write-offs
Provisions
FOREX
AUDIT PACK #3
Live Contracts
Deferred Income Reconciliation
Accrued Income Reconciliation
Movement Commentary
Audit Pack - HR
Staff List
Staff Schedule
Payroll Reconciliation
Leave Provision
Gratuity Provision
Additional schedules that will be required for audit purposes will include:
 Year end management accounts

 Year end foreign exchange revaluation schedule
 Financial Policies as requested
 Bank statements and reconciliations
 Post audit bank statements (April & May)
 Fixed Asset Registers
 Stock count (if applicable)
 Registration documents
 Award contracts
 Contact details of banks, lawyers, solicitors etc.
 Board minutes
 List of approved signatories
110
 Update on previous management points
 Grant audits taken place during the year
 Internal audit reports (only to be shared with group auditors)
 Legality questionnaire
 Fraud reports ((only to be shared with group auditors)

 Related party transactions
 Approved budgets for the new financial year
24.7 Using SUN

Audit packs issued by HO – some parts will be automatically extracted from SUN with
integrity checks built in.
Yearend management accounts to be completed to high standard and with full

commentary. Most parts will be automatically extracted from SUN with integrity checks
built in.
Controls and Reconciliations
Ensure prior year clear downs all completed.
Ensure inter-company reconciled with relevant BU entities.
Ensure any inter-company transactions are coded correctly where they may need
eliminating on consolidation otherwise this will result in double counting (if unsure seek
further guidance from group finance).
Ensure checklist under month end accounting above is complete.
Ensure audit accruals and provisions posted.
Ensure TB balances and that prior c/f balance and agree to prior year statutory
accounts
High standard and completeness of audit packs and management accounts
25 Commissioning and Managing Audits
The purpose of the policy is to provide guidance on the appointment and management
of local, grant and group auditors.
A statutory audit is a legally required review of the accuracy of the charity or a company's
financial records. It is a systematic and independent examination of books, accounts,
statutory records, documents and vouchers of an organisation to ascertain how far the
financial statements as well as non-financial disclosures present a true and fair view of
the organisation. It also attempts to ensure that the books of accounts are properly
maintained by the organisation as required by IFRS.
A financial audit is conducted to provide an opinion whether "financial statements"

(the information being verified) are stated in accordance with specified criteria.
Normally, the criteria are in line with donor contracts/requirements. In providing an
111
opinion whether financial statements are fairly stated the auditor gathers evidence to
determine whether the statements contain material errors or other misstatements.
Sharing audit reports & Management letters
It is Practical Action’s policy to work in the spirit of openness and transparency

with all our donors. However we do not share information or documents where
this would be harmful to our ability to function as an effective organisation or
break confidentiality obligations to employees, other donors and third parties.
Regarding financial information:
We will provide our annual accounts and organisational external audit reports.
We will share our high level organisational budget with donors or prospective donors.
We will provide regular reports on the use of donor funds on an open book basis and in
a format agreed with the donor.
We will agree to external audit on the use of a donors funds on a mutually agreed
basis, providing this is funded by the donor.
We will share key policies and any information requested on our control frameworks
(such as internal audit).
We will not share documents where this practice would compromise our financial
control framework. These include:
External audit management letters. These are written specifically to aid internal
governance and are not intended for external parties. The auditors will accept no duty
or responsibility to external parties for the content, accuracy or completeness of the
letter. As such there is a danger that the content of the letter could be compromised,
under pressure from management, if it were believed that this might impact our ability
to secure future funding. We therefore believe that a practice of making these
available to donors would pose a risk to their integrity. We consider that an open,
direct and uncompromising management letter provides an important mechanism of
financial oversight for senior management and trustees. As such we have a policy of
not making these letters available to donors or other external parties.
Internal audit reports. These are written for a limited internal audience and are not
intended for external parties. Our internal audit function is independent of
management but is responsible to the board of trustees. It is not therefore wholly
independent of the organisation. As such there is a danger that the content of reports
could be compromised if it were believed that this might impact our ability to secure
future funding. We therefore believe that a practice of making these available to
donors would pose a risk to their integrity. We consider that open, direct and
uncompromising internal reports provide an important part of our governance and
control framework. As such we have a policy of not making these letters available to
donors or other external parties.
25.2 Organisation Policies
112
25.3 Statutory audits
Principles
Each office is responsible for complying with local statutory laws with regards to
meeting the external audit requirements. The accuracy and timeliness of accounting
information should be as per the accounting policies laid out within this Group Finance
Manual. Directors of each office are required to ensure that the office has sufficient
skills and resources to fulfil this requirement.
Each office will be audited annually by a local firm of auditors under the overall
direction of the group auditors appointed by Trustees. These auditors are primarily
interested in the group’s statutory accounts under UK charity law and accounting
standards. However, they will also deal with local accounts and reporting requirements
where appropriate and acceptable under local government law.
The Group audit will take place at the same time as the country / regional audits.
When appointing new auditors, the Head of Group Finance should be notified and the
selection process should be carried out in line with the guidance under ‘audit
tender/appointing auditors’.
Procedure
 Review HO group audit timetable and ensure it confirm if it can be delivered
(you should draft the audit timetable and agree with your local team to ensure
delivery with no issues).
 Ensure you have sufficient resources to deliver the audit efficiently.
 Hold a planning meeting with the local auditors prior to the audit taking place
and ensure you receive an audit deliverables schedule.
 Agree the fee in advance and sign off the engagement letter.
 Agree the timing of the interim audit and main audit and ensure resources are
available to deliver and manage the audits smoothly.
 Complete as much as possible during the interim audit which means there will
be less to do during the main audit.
 Review all documentation prior to the audit commencing and have a full audit
file ready at the start of the audit.
 Contact auditors as soon as possible if any delays or problems are anticipated
 Respond promptly to local and group audit queries.
 Engage with the auditors regularly to ensure that there are no delays during the
audit.
 Meet with the auditors before the end of the audit to discuss and agree any
management issues.
 Finalise any outstanding items and respond to management points promptly.
Share draft report and management points with responses with HO group
function.
 Review the audit report with the local management team and sign off.
 Share the final signed off audit report with HO group function.
113
25.4 External Audit: Financial audit
Financial audits can be in the form of award/grant audits or organisational audits.
Award/grant audits are required either contractually or requested by the donors whilst
‘organisational’ audits are initiated by the donor and where they often appoint their own
auditors.
For grant audits, the auditors appointed must be as stated on the contract. Any
changes to auditors must be approved in writing with the donor.
When signing contracts with donors and where possible, the named auditors should be
the same as the local auditors where possible.
25.5 Accounting and Procedure -same as above under ‘statutory audits’
Do Don’t
Understand the full requirements Wait until audit starts
Do ensure you are fully prepared in advance Prepare during the audit
Do review and reconcile all documents and reports Pass information to auditors
without reviewing and
reconciling
Do review any previous management letter and update Pass previous management
letter without review
Submit audit report to HO Share report externally

without prior approval from
Head of Group Finance or
Director of Finance and
Services
Provide terms of audit as per the contract
25.6 Organisational audits

Do Don’t
Hold a planning meeting with the auditors Wait until audit starts
Understand the full requirements Assume standard audit

requirements apply
Do ensure you are fully prepared Prepare during the audit
Do review and reconcile all documents and reports Pass information to auditors
without reviewing and
reconciling.
Share report externally without
prior approval from Head of
Group Finance or Director of
Finance and Services
114
25.7 Audit tender/appointing auditors
A full competitive audit tender should be conducted at least every 10 years in the UK
office and according to legal requirements in the countries where we work.
To mitigate the continuity risk of employing the same auditors for a longer term, our
Finance, Audit and Risk (FAR) committee will review the service provided by external
auditors on an annual basis. Audit costs will be benchmarked against other
organisations using numbers published in annual accounts. In the event that no tender
is triggered by the annual service review and cost benchmarking, the auditors will be
retained. In the annual engagement documents with external auditors, there will be a
section addressing how any long association risk will be mitigated.
We should remain mindful that recent research indicates that there is a greater risk of
undetected fraud at the point when new external auditors start working than during an
extended period with established auditors.
Audit scope is approved by the FAR committee. This is a sub-committee of the Board
of Trustees.
Do Don’t
Review auditor tender according to local regulation Select same auditors within
past 3 years
Consult HO finance when changing auditors and Appoint auditors without

going
Seek approval. Through an audit tender
Negotiate on fee quote and get a formal quote Agree fee verbally
For further guidance on audit tender approach and templates please seek further
guidance from the Head of Group Finance.
26 Financial Crime: Fraud, Bribery and Money Laundering
Refer to NetConsent for policy which is available in a number of languages. It will

require compulsory sign off by all employees and forms part of the induction process.
Everyone has a personal responsibility to protect PA. The policy provides guidance on
identifying, reporting and investigating financial crime.
If you suspect financial crime of any sort or significant weakness in financial

control: REPORT IT TO THE FRAUD TEAM IMMEDIATELY WHO WILL ADVISE
ON APPROACH FOR NEXT STEPS (Director of Finance & Services, International
Director, Head of Group Finance, Head of Internal Audit)!
DO NOT share any information on fraud cases to any external bodies including
auditors and donors may request fraud reports or statements. Contact the Head of
Group Finance or Director of Finance and Services for communication on this.
115
27 Appendices to Group Financial Manual
Appendix 1 – Group Organogram Legal Structure
116
Appendix 2 – SUN Accounts Structure
1. INTRODUCTION
This document is a detailed guide to the coding conventions used in the SUN accounts system.
All the information in this document must be fully understood by all users of SUN and Vision.
2. LEDGERS (ACTUAL AND BUDGET)

The SUN database is made up 4 ledgers, each with identical coding and structures
Ledger Description
Actuals (A) This is where all actual transactions are entered.
Budgets (B) This ledger holds internal budgets for all project and bedrock
accounts. Internal budgets should reflect the monthly activity
plan and should be based on actual payroll rates and current
expectation of income and expenditure. For further
information please consult the finance manual budget section.
Contract Budget (C) This ledger records the budget as agreed in the donor contract.
Approved Budget (F) This ledger holds board approved budgets which are confirmed
in the budget approval letter. The budget includes a funding
gap which makes up the fundraising target for that business
unit for that financial year. Not yet operational.
3. CHART OF ACCOUNTS
The chart of accounts is made up of Balance sheet accounts, sub ledger accounts and
project (budget) codes. These are all account codes.
3.1. Balance Sheet Account Codes

All account codes should fall within the following ranges:
1000 – 1089 Fixed Assets 1550 – 1569 Deposit Covenants

1090 – 1109 Investments 1600 – 1609 Accruals/Provisions
1110 – 1199 Control 1610 – 1649 Salaries/Pensions
1200 – 1209 Prepayments 1650 – 1699 Tax
1210 – 1249 Inter-company 1700 – 1709 Suspense
1250 – 1299 Companies 1710 – 1799 Funds/Grants/Trusts
1300 – 1399 Inter-country 1800 – 1899 [Undefined]
1400 – 1539 Bank 1900 – 1999 Reserves
1540 – 1549 Petty Cash
HO must approve all changes to balance sheet accounts.

117
3.2. Sub Ledgers
With some exceptions, the Sub Ledger account codes are of the structure #***$$.
# is a letter representing the sub-ledger the account is a part of

*** is a three-letter code which should be an abbreviation of the account name
$$ is a number between 00 and 99 to allow for the same abbreviation to be used for
many accounts (e.g. PBRI01 = British Telecom, PBRI02 = British Gas)
The main exception is for the sub ledger for Award codes. It follows a different naming
convention so that it can integrate with PAMS and Raisers Edge:
Q X NNNNN
Q is a pre-fix for award codes

X is for the income type, so will be R (restricted) or U (unrestricted)
NNNNN - 5 digits ranging from 00001 to 99999
There are six standard sub ledgers although not all will be used in each country.
A Advances ledger. This ledger is used to record staff advances for travel or for
project cash floats and the expenses relating to them.
C or D Donor Claims ledger. This ledger is used to record claims submitted to donors
and the receipts of money from donors. Sub ledger D was created after the
introduction of award codes to ensure that donor claims are entered in the
correct currency. The same accounts have been created in all Business Units.
L Loans ledger. This ledger records personal loans to staff members.
S Sales ledger. This ledger records sales invoices and receipts from trade
debtors.
P Purchase ledger. This ledger records supplier invoices and payments to trade
creditors.
Q Award codes. This ledger records accrued income for each award.
X Partner ledger. Used to record cash advances to partners (sub-contractors).
Other ledgers may be established for similar groupings of debtors or creditors (e.g. loans
to beneficiaries, loans for medical expenses). Head Office Finance should be consulted
before creation of additional sub ledgers and an appropriate initial letter will be
assigned.
Sub ledger accounts for existing sub ledgers may be set up without HO approval.
118
3.3. Budget/Project Codes
3.3.1. Budget/Project Code Structure
These codes are also known as (SUN) account codes. An example format is ‘SDN12345’
Country code (3 letters) Numeric code (5 digits)
SDN 12345
Country codes for SUN Project codes are as follows:
BGD Bangladesh MAL Malawi

PER Peru ZWE Zimbabwe
SDN Sudan NPL Nepal
KEN Eastern Africa BOL Bolivia
IND India RWA Rwanda
GBR UK SNG West Africa
ITC UK PAC
The Numeric code is a unique identifier of the project.
3.3.2. Budget/Project Code Maintenance

The local Finance Manager must approve the creation and closure of all
project/budget codes, HO and QA must be informed of all changes to these codes.
A budget must be completed and authorized by the finance manager before a budget
code can be opened on SUN.
Budget codes should be suspended as soon as project expenditure finishes. QA should

be notified. Suspended accounts must be reviewed on a monthly basis.
Budget codes must be closed as soon as all related work is complete and the final
donor invoice is issued. All restricted balances should be cleared, either through
invoicing the donor where this is applicable or to unrestricted if the project is over
spent. Clearing to unrestricted funds will make up part of the unrestricted reserves so
it may increase the deficit.
Local QA should be notified so the project can be closed on the project monitoring
systems (Project and Award Management System (PAMS))
119
4. CHART OF ACCOUNT ANALYSIS CODES
There are 10 available analysis codes for the Chart of Accounts. This section only
includes the codes currently used group wide, some offices may use additional codes –
please consult your local coding documentation.
The table below shows which analysis codes apply to each section of the chart of
accounts:
Analysis Code Balance Sheet Sub-ledger Project/Budget

Account Account Code
PIN NO NO YES
Business Type NO NO YES
Theme/Goal NO NO YES
Area NO NO YES
Unit NO NO/YES YES
B/S category YES YES YES
4.1. Project Identification Number (PIN)

PINs are currently assigned to all projects/proposals registered on the Projects and
Funding Database. In SUN this code is used to match budget codes back to the Projects
and Funding Database. The terminology in SUN is Project Monitoring Evaluation.
If the project/budget code does not relate to project activities, or is too small to be
registered on the Projects and Funding database system please enter one of the
following;
Core budget – For all bedrock budget codes
Not registered – If project account is not registered on PME system
With the introduction of the Award system and PAMS, the PIN has become irrelevant
and is no longer used in SUN for new projects.
120
4.2. Business Type
This identifies which business area the project falls under:
PA Charity project
PAC Consultancy project
PAP Publishing project
4.3. Theme/Goal
Goal codes (also referred to as ‘Themes’) are the main forms of categorisation of
expenditure. The main goals to be used for projects are as follows:
FA Food and Agriculture

ENERGY Energy Access
UW Urban Water and Waste
DRR Disaster Risk Reduction
If a project is composed of several goals i.e. Food and Agriculture and DRR, then the
project should be categorized according to the dominant goal of that project.
The cross cutting goals should only be used for budgets /projects which cannot be
assigned to the 4 main goals.
CC Climate Change
MARKETS Market Systems Development
KC Knowledge and Communication (or Knowledge Broking)
OTHER Project/Consultancy outside scope of other themes
CORE Support department costs (Finance, IT, HR for example)
FUND Fundraising departments and business development expenditure
121
4.4. Area Code
Area codes are used to further structure budget codes.
For Regional Offices this field should be used to identify a geographic location linked to
the budget code. This may be a district, sub region, city or municipality. This code is
particularly helpful where funding for the budget is linked to a specific geographic
location. This code should be completed for all project codes. Where a project code
spans several geographic locations the sub-office or the main regional offices should be
used;
e.g. Sudan: KHA – Khartoum, DAR – Darfur, KAS – Kassala, DAM – Damazin
In the UK and Sudan this code is currently used to categorise departments (CEO,
Finance, and Policy for example).
4.5. Unit Code

There is no strict advice regarding how this field is used. Some business units use this for
sub analysis of departments.
4.6. Balance Sheet Category

The Balance Sheet and Sub ledger accounts are structured using the Balance Sheet Type
The list of available categories is shown below:
Balance Sheet Category Description

999 Profit And Loss Category
Fixed Assets
F01 Freehold Property
F02 Leasehold Property
F03 Motor vehicles
F04 Equipment
F05 Investments
F06 Intangible assets
Bank and cash
B01 Local currency current a/c
B02 Hard currency current a/c
B03 Local currency deposit a/c
B04 Hard currency deposit a/c
B05 Donor required a/c
B06 Investment a/c
B07 Local currency petty cash
B08 Hard currency petty cash
122
Debtors
D01 Trade Debtors
D02 Loans To Beneficiaries
D03 Staff Personal Loans
D03 Staff salary advances
D04 Staff Medical Loans
D05 Staff Travel Loans
D06 Staff Work Advances
D06C Partner Advances
D07 Project floats
D08 Donor claims receivable
D08A Donor Claims Arrears
D08B Donor Claims Advance
D09 Taxes recoverable
D10 Other debtors
D11 Prepayments
D12 Accrued income
Creditors
C01 Trade creditors
C02 Taxes payable
C03 Accruals
C04 Control accounts
C05 Suspense
C06 Gratuity provision
C07 Loans from supporters
C08 Unallocated restricted income
C09 Bank loans
C10 Other creditors
C11 Provisions
C12 Other long term creditors
C13 Pension provision
C14 Pension liability
C15 Payments received in advance
Intercompany accounts
I01 Intercompany investment
I02 Intercompany loans
I03 Intercompany trading
I04 Intercompany provisions
Long term creditors
LC1 Bank loans > 1 year
LC2 Refundable Deposits
LC3 Provisions > 1 year
Reserves
R01 Unrestricted fund reserves
123
R02 Intercountry
R03 Designated funds
5. LEDGER ENTRY
5.1. Journal Types
All transactions are entered using a journal type. The following journal types are
compulsory and must be used by all offices for the specified purpose. Further journal
types may be used at the discretion of the local finance manager
Journal Group/Code Name Use

BUD Budget Journal For loading and amending budgets to
the ‘B’ ledger
CPU Intercountry Transactions For all Intercountry transactions
received from another country
ACRUE Accrual (Reversing) To accrue expenditure -reverses next
period
GJP Prepayment (Reversing) To prepay expenditure -reverses next
period
INA Income Accrual (Reversing) To accrue income due from donors
but not yet claimed
IND Income Deferral To defer income received but not
(Reversing) recognised
IDC Donor Claims To account for income claimed from
donors
OTS Timesheets For posting staff recharges from
timesheets
FORZZ Revaluation For posting exchange differences
ORC Overhead recovery Used for posting overheads recovery

that are being recovered from
restricted funded projects.
PAS Payroll journal To aid reconciliations between
payroll and SUN
PAX Payroll amendment When there is an adjustment which
isn’t in-line with payroll reports.
GJN General Journal All journals that do not fit into any of
the above categories
5.2. General Transaction details

Transaction Reference – locally defined, see local finance manual
Description – description of the nature of the item of income or expenditure, which

would be meaningful to the budget holder. For travel the description must include the
124
name of the person travelling, to and from locations (use airport codes for flights) and
the date of the outbound journey.
Accounting Period – The financial period to which the transaction relates. Once a
period has been closed transactions should not be back posted to prior periods except
in exceptional cases, in which case the finance manager should approve the journal
and HO must be notified.
Transaction Date – The date on the supporting documentation, e.g. invoice date, date
on bank statement, this should not be confused with entry date is automatically
recorded separately
Transaction Amount & Currency – All transactions must be entered in the actual
currency of the transaction. For example if you receive 100k Euros from the EC, you
must use transaction currency EUR, and enter the transaction amount in Euros. This
will automatically calculate the base and reporting amounts using the system
exchange rates for the period.
Base Amount – This is the local currency of each office. This amount will be
automatically calculated from the transaction amount; however the rate can be
updated if the standard system rate does not apply to the specific transaction
2nd base / Reporting Amount – This is the Sterling value of the transaction; it is
automatically calculated from the base amount
4th Currency – This currency is only used by Peru and Bolivia to record the USD value of
each transaction
Journal Number – Sequential number automatically created by SUN each time a

journal is posted using ledger entry, and each time a journal import (Q&A Data Send),
is attempted. Note: a journal number is also created for failed ledger imports
125
5.3. Carbon Monitoring
The following types of expenditure transactions must include measures to calculate
carbon emissions:
 On site Power Generation litres

 Practical Action Vehicles/ Staff vehicles litres (UK- miles)
 Electricity kWh
 Air Travel km
 Other travel (taxi, rented vehicles, train, bus etc.) km
Note:
1) Taxi vehicle trips of less than 25kms do not need to be recorded for carbon
monitoring purposes
The following cost codes were added to aid carbon use calculations.
Air Travel - 6203 - Flights domestic
6303 - Intl Flight short haul
6304 - Intl Flight long haul
Land transport – 6204 - Bus/Coach
6205 - Rail
6206 - Taxi/ Hire Car
126
5.4. Transaction analysis codes (T codes)
Transaction analysis codes are used during journal entry to assign transactions to specific cost
categories, donor budget lines, staff, partners etc.
5.4.1. Use of Transaction Analysis codes

The required T analysis codes for each account code are specified on set up of that
account. There are three options available for each T code on each account:
Mandatory - forces a valid analysis code to be entered on transactions for this

account. The analysis code is requested during Ledger Entry, regardless of the rules set
in Journal Types.
Prohibit - prevents an analysis code being entered for the dimension on a transaction
for this account. This also overrides any rules set in Journal Types.
Optional – the Journal type specifies whether it must be entered or not. Note that
journal import templates generally fail if the T code is set to optional.
The general rules for each account type are detailed below; however there may be
exceptions:
Account Type Cost Award Partner Cost Activity Item Donor

Coverage Reporting
Budget / Project Codes M M M M M M M
Intercountry Income & Purchase Balance M M M M M M M

Sheet Accounts
Award Recognition Accounts P M M P P P P
Donor Control Accounts P M P P P P P
Other Balance Sheet Accounts P P P P P P P
Sub ledgers P P P P P P P
127
5.4.2. Sequence Code
An automatically generated number that each POSTED transaction is stamped with.
This is different to the journal number because Sun generates a journal number in
Ledger Import (LI) even if a ledger import file has not successfully been posted.
5.4.3. Income/Cost Codes

Income/Cost codes are used to record the type of income or expenditure (e.g.
donations, travel, salary etc.) to which an invoice or transaction relates. All
transactions relating to a project must have a “cost code”
Cost codes are grouped into the following categories;
Code Group Category
1000 – 1389 Income Categories

1390 – 1399 Transfers of funds between projects
1900 – 1999 Overhead Recovery
2100 – 2600 Building Running Costs
3100 – 3600 Communication
4100 – 4300 Printing & Stationery
5110 – 5300 Capital & Equipment
5400 – 5459 Partner Costs
5500 – 5700 Production Costs
6100 – 6700 Travel & Subsistence
7100 – 7700 Staff Costs
8100 – 8110 Consultants
8300 – 8700 Sundries
9100 – 9998 Finance and Legal Costs
9999 Funder Allocation
A full list of all cost codes can be found on the Group Finance SharePoint site
5.4.4. Award Codes
All income and expenditure must be allocated to an award code
Award codes are used to track income and expenditure by individual award from a
donor. They are split between:
 restricted awards (to be managed through PAMS), in the format QRnnnnn

 unrestricted awards for all unrestricted donations, in the format QUnnnnn
See section on ‘Award Management’ in the Group Finance Manual for further
guidance about award codes.
Where a project is fully funded by one award, all items of income and expenditure
should be given the award code, or “tagged” at the time of entry.
If a project is funded by a number of awards, then items of expenditure should be split

between awards at the time of entry. As this may not be practical it is acceptable to
use QR#. At month end a routine will need to be run to allocate the individual entries
to the correct awards. This is currently being developed by Head Office.
Where a project has more complex funding arrangements you should use a
combination of the above two approaches.
5.4.5. Recharge Codes

These codes are currently only used by the UK but there use is now limited and rarely
used.
RECH-I To show that a cost has been recharge into a project
RECH-O To show that a cost has been recharge out of a project/control a/c
5.4.6. Activity Codes

Activity code can be used to assign, group or split budget lines to regions, or activities
e.g. If you wanted to be split out costs for two field offices which are both involved in
delivering a project activity.
5.4.7. Tax
Used for local tax requirements, see local manuals
5.4.8. Item
The main purpose of this analysis code is for tracking staff costs, although it may be
used for other purposes if there is no conflict with its use for monitoring staff costs.
All staff should be assigned an item number, this should be the payroll number
prefixed with S then the first letter of the country office, e.g. for Bangladesh the code
would be SBxxxx, where xxxx is the payroll number.
Timesheet postings must include the staff code.
5.4.9. Donor Reporting Code

This code is used to map costs to the format required in the reports issued to donors.
Project managers (supported by local finance teams) should structure the donor
reporting codes for each of their projects as they want to see budgets and actuals
categorised in their donor reports.
e.g.
2.0 Travel
2.1 International travel
2.1.1 International Programme manager- Monitoring visits
Practical Action Consulting refers this code to as the “Contract Budget Code” (CBC).
5.4.10. Partner codes

Each partner has a unique code (which also is mirrored in the Partner Ledger accounts)
which is used to identify project transactions which have been incurred and
‘recharged’ from the partner.
The code format is Xaaann where ‘X’ is the prefix to denote it as a partner code, ‘aaa’
are the first 3 characters of the partner name and ‘nn’ is a sequential number to
differentiate partners which have the same 3 character identifier.
Transactions which have not been incurred by partners should be coded as XPRA01.
5.4.11. Funder Codes – no longer used

Prior to the use of Award Codes, Funder codes were recorded instead.
Each Funder (or in the case of large donors, each fund) had a unique code. The basic
structure of these codes was #$***, where ‘#’ was U for Unrestricted (including
consultancies), or R for Restricted, $ was a letter defining the type of Funder as listed
below and *** was a number between 000 and 999 allocated in sequential order.
6. ALLOCATION / RECONCILIATION
Allocation markers allow accounts to be easily reconciled and allow reports to
concentrate upon outstanding items only.
130
The available allocation markers are detailed below;
R (Reconciled) should only be used for reconciling bank accounts. There is no

requirement within SUN for a single posting of R markers to balance. It is therefore not
appropriate to use it for marking accounts where reconciling means matching
equivalent debits and credits (e.g. marking where supplier’s invoices have been paid).
All items which have cleared the bank statement should be marked with an R marker.
When this is completed and all items on the bank statement are posted, the difference
between the balance of the account on SUN and the bank statement balance should be
represented by all unallocated transactions on SUN. A report listing these unallocated
transactions can simply be produced.
A (Allocated) should be used for matching transactions on all sub ledger, control and
suspense accounts. SUN will not accept an unbalanced set of A markers to be posted. In
order to allocate a transaction you must select marker ‘Y – to be allocated’ this will
become ‘A – Allocated’ on posting.
S (Split) You enter Split on a transaction where you want to split the amount to record
a part payment or receipt. Split transactions become Allocated after posting
C (Correction) This marker is used to highlight transactions posted in error together with
the reversal of the incorrect transaction. Transactions with Correction markers must
balance before they can be applied. Transactions with this marker may be excluded from
transaction listings.
The following allocation markers are for countries using automated payment run only;
P (Paid) should be used to mark where matching debits and credits have been posted
to an account. For example, where a supplier’s invoice has been paid or where payment
for a sales invoice has been received. SUN will not accept an unbalanced set of P markers
to be posted.
W (Withhold) excludes entries from the payment run even though they are beyond
the due date.
F (Force) identifies transactions to be paid in the next Payment Run regardless of due
date
131
APPENDIX 3 – GROUP STRUCTURE OF BUSINESS UNITS
132
Appendix 4 - Finance Policy Index
Policy Name Version Type

(Location)
Banking and Cash Management Group Finance Manual
Co-Funding Under Review
Conflicts of Interest Net Consent
Consultancy Policy Net Consent
Delegated Authority Limits PA Net Consent
Delegated Authority Limits PAC Net Consent
Depreciation Group Finance Manual
Expenses Net Consent
Finance Audit Under Review
Fixed Asset Group Finance Manual
Foreign Exchange Management Group Finance Manual
Foreign Exchange Rate Group Finance Manual
Anti-bribery and Financial Mismanagement Group Finance Manual
Global Remuneration Group Finance Manual

Fraud / Terrorist Net Consent
Income Recognition Group Finance Manual
Management/Retention (Archiving) Group Finance Manual
Micro Financing Group Finance Manual
MOU Example Net Consent
Opening New Bank Accounts Group Finance Manual
Partnership Policy Net Consent
Reserves and Investments Net Consent
Stock Policy Group Finance Manual
Tax and Tax Accounting Group Finance Manual
Year End Routine Group Finance Manual
133
Appendix 5 - Co-Funding Wrapper Award Process
1. Co-Funding Wrapper Awards

1.1 All restricted awards are initially passed and approved though the PAMS system.
When an award has a co-funding requirement this is also approved via this process.
Any co-funding obligation has to be approved by the Finance & Services Director.
1.2 Co-funding is underwritten by unrestricted funds but there is an expectation that

Marketing will actively pursue restricted funding opportunities to offset our unrestricted
liability.
2. Setting up Co-funding Wrapper Award
2.1 When a restricted award has been fully approved in PAMS finance will receive an
email notification. The email includes a link to the award record in PAMS.
2.2 If there is a co-funding requirement this will be evident in the Financial Information
section on the General Information tab.
Example.
In the above example there is a 12,949,729 BDT (121,776 GBP) co-funding

requirement which Practical Action will underwrite. To monitor spend and income
against this a Co-funding Wrapper award is created.
2.3 To distinguish co-funding wrapper awards from other awards the code is prefixed
QR9.
2.3.1 Although the award has a QR prefix which normally indicates it is restricted
funding it is actually underwritten by unrestricted funds. The QR is intended to signify
that these funds have been allocated by HO to only to be spent on this Award and in
that respect are not unrestricted, however for statutory and management account
purposes they are reported as unrestricted.
2.4 As with the primary award, the wrapper award is set up in both the UK business
unit (UP1) and the business unit/s which are beneficiaries of the award.
134
2.5 The award is set-up in SUN as both a “Customer” account and a transaction code.
The customer account is a balance sheet account which can be either a debtor and
creditor dependant on whether we are receiving funds in advance or arrears. The
transaction code is used in both the I&E ledger and the balance sheet to identify
individual transactions against the award.
2.6 When the award is setup in SUN the award customer record will include the total
value of the co-funding obligation (the target) as well as other information such as
award start and end dates. All this information is taken from the PAMS record.
2.7 The allocation of the actual award codes is controlled in the “Award Log and
Import” excel file. Where the next available award code is taken and details recorded.
2.8 After the award is created in SUN the award code is shared with SSU so that they
can create a fund record on Raiser Edge. Once they have created the Fund record
they will share the Fund code with finance so that the award record in SUN can be
appended. This form the cross-reference between SUN and Raiser Edge.
3. Income
3.1 As income is received it is set against the co-funding wrapper record and retained
in the UK (UP1 business unit) rather than being forwarded to the RCO business unit as
would normally happen with restricted income.
Business Dr Cr Award Cost Code

Unit [Account [Account transaction
code] code] code
UP1 Bank GBR57098 QR9nnnn 1150
3.2 The co-funding report is produced monthly and reviewed to ensure that a surplus
against co-funding wrapper awards is avoided.
3.3 If income is secured from a donor who has specific reporting requirements or
constraints on how the funds can be spent then a view should be taken on whether
these are acceptable balanced against the value of the donation.
3.3.1 If the donation is accepted then it is necessary to create a new award code to
record the income and expenditure separately from the primary award and wrapper
award to enable separate reporting to the donor.
3.3.2 The Co-funding Wrapper award target is reduced in the ‘customer’ record to
account for the donation.
4. Expenditure
135
4.1 Expenditure is posted to the relevant project budget code and apportioned at a
transaction level between the primary and co-funding wrapper awards funding the
project.
Periodically* a ‘claim’ is made to HO by the RCO for the spent co-funding.

code] code] code
RCO Interco I&E Project QR9nnnn 1150
Income budget
Allocation
It is intended in future that a report is produced by the RCO in a prescribed format and
submitted to HO IPM (International Programmes Managers) for approval before the
‘claim’ is accepted, however this process has yet to be formalised.
4.2 The ‘claim’ is posted to the Co-funding account in the UK (UP1 business unit).

code] code] code
UP1 GBR57098 Interco QR9nnnn 1150
Co-funding Income
Allocation
*As a minimum a claim for co-funding will be made at the same time as that of the report/claim to the
primary award donor.
136
Appendix 6
Financial Management – A Country Director’s guide to balance sheet reviews
(P&L at the bottom)
 Obtain this reconciliation from finance
Accruals-Income Total donor claims and/or advance income – Donor

report amount – month end income accrual =
Balance in award code
 Donor claim amounts should reconcile with

invoice to the donor and to the donor ledger.
Advance cash from the donor should be
traceable to the bank
 Donor report amount should reconcile to the
donor report (award component. I.e. excluding
co-funding)
 Month end accrual amount is the unreported
expenditure as at the end of the month
 If award balance is more than the amount
reported and accrued, it forms part of the
amount differed – see Differed income below.
 Remaining Balance in accrued income category
D12 should be positive
 Obtain balance sheet reconciliation schedule

Deferred Income (Income from Finance
received in advance but  Reclassified balance for differed income in
not yet earned/spent) balance sheet category C15 should be negative
Donor claims Ledger  Check that donor claims have been posted –
Reporting and claim dates can be extracted
from PAMS
 Check for long outstanding balances
Reserves  Movement in unrestricted reserves should be
the same as the deficit or surplus on the
unrestricted schedule
 Movement in restricted reserves – usually
expected to be zero but sometimes we make
profits or losses on PAC/Payment by results
contracts.
 If the country office only delivers on grants then
the movement in restricted reserves may be
due to incomplete income recognition
Suspense (account 1700)  Must always be zero
137
 Confirm bank reconciliations have been
prepared
 Review outstanding items on the reconciliation
Bank Accounts  Confirm that bank accounts with balances are
still open and for closed accounts request for
transfer of balances held
Intercountry  Confirm that purchases have been authorised
by relevant budget holders
 Obtain reconciliation for cash transfers to the
donor claims ledger
 Should have a Debit balance (positive)
 If there are credits in the reporting period check
if anything has been transferred to expenses
 Confirm is movements are within reasonable
Prepayments expectation
 Where closing balance is a Credit, obtain
reasons from the Finance Manager
Petty Cash  Confirm ledger balance agrees to month end
cash count
 Confirm cash counts during the month have
been documented
 Review supporting schedule
Accruals-Expenditure  Confirm that movements within the month are
reasonable
 Check gratuity schedule
 Spot check length of time served by employees
Gratuity Provision & confirms payroll rate used is correct %
applied is correct
Other Provisions  Ask for supporting schedule
 Follow up on material movements or lack of
movements
Salaries Control  Should be nil balance otherwise ask why (obtain
schedule)
Staff Accounts  Check each staff member has one account.

 Follow up
 Check advances are being cleared down.
 Check that balances do not exceed max limits.
 Loan advances are not mixed with work float
advances.
 Staff loans have “L” accounts & being covered
through payroll
Profit & Loss (balance  Check that the explanations from program staff
sheet cat 999) for the Variance analysis is reasonable
 Risk & opportunities arising from variances are
adequately assessed and documented with
action plans in place.
138
 Financial forecasts are completed on the basis
of revised activity plan.
 Check unrestricted reserves for deficit & surplus
 Check the foreign exchange gain or loss
account. Does the gain or loss look
reasonable?
 Obtain confirmation from the finance manager
that the correct balance sheet accounts were
revalued and in the correct currency.
Other Schedules  Top awards report. Review that the list still
represents the top risks
 Sense commentary for reported variances on top
awards. Should represent the view of the SMT
 Check completeness of the pipeline reports (from
PAMS?)
139
Question Yes/No
SECTION A FINANCE - To be completed by the Finance Manager
1.1 Management accounts completed on time and discussed with SMT by working day 14 of the next month Y
1.2 PAC management accounts completed, figures complete including accruals and discussed with PAC
Manager/team Y
1.3 SMT shaped the forecast and risk assessment/action plan. RD signed off before submission to UK Y
1.4 Commentary provided by SMT including impact of variance on program work and actions planned to manage
risks Y
1.5 Year end agreed forecast realistic and assumptions clear in the narrative, including those relating to a deficit or
surplus Y
1 Management Accounts
2.1 All budget holders received the monthly budget holder report Y
2.2 Budget holders including PAC checked and signed off monthly budget holder reports Y
2.3 All current budget holders have received training on how to interpret the budget holder report or training
planned for new staff (<3 months in post) Y
2.4 Budget holder reports produced in contract currency (where relevant) and contract reporting years?
Y
2.5All staff with costs charged to more than one budget completed and submitted a timesheet and correctly
charged to projects Y
2 Budget Holder Reports
3.1 Budget holders code their invoices/expenses accurately with budget code, cost code and DR code (>95%
accuracy)
Y
3.2 All transactions are supported by appropriate documentation and authorised according to the local delegation
of authorities
Y
3.3 All advances were either returned or accounted for within 10 days of the staff member returning to their main
working office (unless extension formally granted) Y
3.4 Month end revaluation performed correctly and reviewed Y
3.5 Accounts team accurately record financial transactions (>95% accuracy) Y
3 Financial Processing
4.1 All bank and cash accounts been reconciled, documented and reviewed by the finance manager Y
4.2 All control accounts and misc. supplier/debtor/creditor accounts been reconciled Y
4.3 All donor claims have been posted on SUN in the donor claims ledger. Y
4.4 All balance sheet balances reviewed and corrected (no credits in assets and no debits in creditors). Movement in
reserves equal to balances on P&L. No suspense accounts
Y
4.5 Balance sheet accounts for income have been reconciled (accruals, differed income, donor claims, inter-country
income) Y
4 Balance sheet reconciliations
5.1 All current partners have an active MOU that is compliant with the group partnership policy and donor rules Y
5.2 All current partners have an initial risk assessment and an inception visit by appropriate member of the finance
team. Y
5.3 Do all current partners have monitoring/support visits in the last 6 months? N
5) All current partners submitted monthly/quarterly expenditure reports according to the agreed reporting
deadlines Y
5.5 All partners submitted either originals or certified copies of all documentation to support their monthly report(s) Y
5 Partner accounts
140
6.1 Award budgets are correct and up to date on SUN Y
6.2 All active awards have a budget on SUN before any expenditure is incurred Y
6.3 Award details on SUN are correct. (Start and end date, currency, name and type of donor, etc.) Y
6.4 TOP award list reviewed monthly by SMT who also provide the narrative for the financial performance Y
6.5 Pipeline report broadly aligns with PAMS records Y
6 Budget Total
7.1 All current staff received fraud training Y
7.2 All new staff have received (or have planned for the next 3 months) fraud training as part of their induction Y
7.3 All current partners been given fraud training (If we have been working with them for >3 months) N
7.4 All suspected cases of fraud were reported to the Group Finance Director/International Director/Global Head of
Finance/International Finance manager-Africa Y
7.5 All suspected frauds have been followed up in line with the fraud policy Y
7 Fraud & Bribery
8.1 All proposals that require UK review been submitted on time, with no retrospective budgets submitted after
proposals submitted Y
8.2 The finance team was involved in proposal writing, providing guidance for cost coverage, value for money
analysis and co-financing Y
8.3 Financial risks on donor contracts assessed, communicated appropriately and action plan in place to address
them Y
8.4 All donor claims have been entered onto PFDB and the donor claims ledger Y
8.5 All financial donor reports been sent on time, in the correct format specified by the donor, and with a standard
of commentary accepted by the donor Y
8 Donor budgeting and reporting
9.1 All audit reports completed in the last 12 months have been reviewed and signed off by local management. Y
9.2 All audit reports completed within the last year 12 months date been filed with UK? Y
9.3 Audits reports received were free from disallowed costs Y
9.4 Audit reports received this month have been free from any medium/high level management points relating to
non-compliance that is not specifically covered in the questions above? Y
9.5 Audit recommendations have been implemented and/or action plan is getting addressed by the SMT Y
9 Audit
141

Group Finance Manual-0000.02

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Group Finance Manual-0000.02

Uploaded by

Copyright:

Available Formats

GROUP FINANCE MANUAL

UPDATED MARCH 2019

Manual Owner: Head of Finance March 2019

Responsible Director: Director of Finance and Services

Board approval Not applicable

1.1 All business units must have:

Page 14 2 SUN Accounts Overview

2.1 Dimensions and their use

Page 19 3 Income Management

3.1 Income Types

Page 25 4 Award Budgeting, Monitoring and Reporting

4.1 Award Budgets at different decision gates

Page 31 5 Monitoring Award balances on the Balance Sheet

5.1 Award Recognition (Income Accruals) Account

6.1 Common Procedures

Page 42 7 Foreign Exchange Management

Page 47 Inter Business Unit Transactions

8.1 Income and Expenditure transfer

Page 55 9 Award Budgeting, Monitoring and Reporting

9.1 Award Budgets at different decision gates

Page 60 10 Monitoring Award balances on the Balance Sheet

10.1 Award Recognition (Income Accruals) Account

11.1 Common Procedures

Page 69 13 Staff Expenses, Loans and Advances

13.1 Principles, Aims and Accounting Practices

14.1 Principles, aims and accounting policies

Page 76 15 Managing and Accounting for Stock

Page 79 16 Managing Sub-award Partner Expenses

16.1 Sub-Award Partnership Principles

Page 81 17 Sub-Award Partnership Management

17.1 Sub-award Partner Capacity Building

Page 83 18 Common Procedures[JL1]

18.1 Risk Assessment of potential partners[JL2]

Page 87 19 Expense Accruals and Prepayments

19.1 Principles, aims and accounting policies

Page 88 20 Fixed Assets

20.1 Principles, aims and accounting policies

Page 99 21 Document Management

21.1 Organisational policies

Page 101 22 Micro-finance/Revolving funds/ Guarantee funds

22.1 Principles, aims and accounting policies

Page 102 23 Tax and Tax Accounting

23.1 Principles, aims and accounting policies

Page 104 24 Monthly Routines and Year End Closure

24.1 Principles, Aims and Accounting Policies

25.1 Principles, aims and accounting policies

Page 115 26 Financial Crime: Fraud, Bribery and Money Laundering

26.1 Principles, aims and accounting policies

Page 116 27 Appendices to Group Financial Manual

Appendix 1 Group Organogram Legal Structure

 This allows us to consolidate, either by statutory entity, or by country of

1.1 All business units must have:

Income, expenditure, surplus or deficit.

This way of accounting is usually referred to as fund accounting and enables

Total Net Assets 2,600 500 1,000 4,100

Funds b/f 2,700 500 - 3,200

1.2 Strategic Business Plan and Approved Budget

1.4 Unrestricted Allocations from central resources

Unrestricted funding is intended to support business development, fund risky or strategic

Unrestricted funding should be allocated to budget holders and managed accordingly.

Unrestricted funding may be made conditional on a certain programme or on

1.5 Financial planning Roles & Responsibilities

1.6 Global accounting, internationals standards and local reporting

1.7 Funds, Reserves and Investments