Finance Manual

Purpose of the Finance Manual

This manual describes the policies and procedures used by HUMANITARIAN ORGANIZATION OF SULIMANGHAR CULTURAL ASSOCIATION (HOSCA) to manage Financial.

Disclaimer

The policies described in this manual are the general policies that have been adopted by HUMANITARIAN ORGANIZATION OF SULIMANGHAR CULTURAL ASSOCIATION (HOSCA). If HUMANITARIAN ORGANIZATION OF SULIMANGHAR CULTURAL ASSOCIATION (HOSCA) works with donors then in many cases would be agreed to follow specific policies and procedures related to the programs and projects that the NGO administers on its partners’ behalf. These specific policies and procedures will be outlined in the memorandum of understanding (“MOUs”) negotiated with (HOSCA)’s donors who are maintained by the Finance and Administration Department. Where there is a conflict between the policies and procedures described in this manual and those outlined in a specific MOU, those agreed upon in the MOU take precedence.

Maintenance of the Finance Manual

This manual is to be updated on an annual basis to ensure that it accurately reflects the policies and procedures in use by (HOSCA) as the institution grows and evolves. The Administration/Finance Manager along with DIRECTOR GENERAL each in their separate roles has the overall responsibilities for ensuring that the manual is updated each year.

Operating policy and internal control

Risk management The management and protection of financial resources are HOSCA’s primary concerns. A financial loss can have tremendous impact on any institution. Therefore, it is of utmost importance that appropriate measures are in place to protect HOSCA against any potential financial loss. Internal controls and other risk management procedures can help reduce the chances of financial loss.

Documents and records All documents related to the financial management of HOSCA shall be retained for a minimum of 3 years in both hard copy and electronic form. Records will be destroyed only after receiving approval from the DIRECTOR GENERAL.

Physical control HOSCA has relatively few physical assets; however, they are controlled carefully. The small amount of cash that HOSCA handles in its day-to-day operations is kept in a safe in HOSCA’s offices.

Independent verification HOSCA will undergo an external audit by an audit firm on an annual basis. A new external audit firm will be chosen every year. In addition to the annual external audit which it contracts, HOSCA is subject to additional audits by donors and the government of Afghanistan on an as-demanded basis.

Accounting standards HOSCA’s primary financial accounting objective is to ensure the integrity of its financial systems and data. HOSCA will achieve this objective by adopting accounting policies that conform to International Financial Reporting Standards (“IFRS”). An annual external audit is conducted by an audit firm to ensure that HOSCA is complying with its own policies and with IFRS.

Financial Standards and Procedures

Financial year HOSCA’s financial year begins September 1st and ends March 31st.

Budget All department heads are responsible to prepare their annual and Monthly operational budget and convey the same to the Head of Finance, who is responsible for the compilation and management of HOSCA’s annual budget. The budget must be approved by the DIRECTOR GENERAL.

Bank reconciliation Monthly bank reconciliation reports are prepared by the designated Finance Manager and are reviewed and signed by the DIRECTOR GENERAL.

Financial reporting HOSCA prepares a number of financial reports on daily, weekly, monthly, quarterly and annual bases for both internal and external audiences. The Head of Finance is responsible for the management of the financial reporting process and the accuracy of the financial reports themselves.

Currency conversion When HOSCA must convert currency in an amount greater than equivalent to USD 100, three cost quotes must be obtained prior to choosing a money changer. If the conversion takes place at a bank, no quotes are required.

Expensed items An item is expensed if it is consumable or costs less than USD 100. Stock sheets are maintained and used to monitor usage of consumables.

Fixed assets An item is classified as a fixed asset if it costs more than USD 100 and/or has a service life of more than 1 year. Exceptions to these fixed asset guidelines are mobile phones and calculators, which are expensed regardless of cost or expected service life.

Inventory An inventory list of all fixed assets is maintained by Head of Finance and Head of Administration. Inventory is taken on a quarterly basis. All inventory items shall be coded properly and assigned a serial number for identification. All staffs utilizing inventory items are personally responsible for exercising proper care of the items.

Depreciation and Amortization

Method Intangible Assets is amortized based on straight line method; tangible assets are depreciated using the straight line method as well. Depreciation shall be charged upon acquisition of item and updated quarterly.

Disposal An asset may be approved to be sold by the DIRECTOR GENERAL when fully depreciated or upon replacement. The Head of Administration and Head of Finance are responsible for documenting the reason an item should be sold and for ensuring that the item is removed from the inventory list once it has been sold. Receipts from the sale of an asset are deposited into one of HOSCA’s operating accounts.

Advances

Employee advances The Finance Department is responsible for administering HOSCA’s advance policies for both travel and salary advances in conjunction with the HR Department.

Supplier advances It is the policy of HOSCA to discourage the provision of advances to suppliers. However, if an item is not available in the local market and orders must be placed with off-shore vendors, the DIRECTOR GENERAL may approve an advance to a supplier based on the standard business practices.

Travel All travel requests within Afghanistan or overseas must be approved by the DIRECTOR GENERAL prior to travel dates. Travel expenses related to HOSCA work are reimbursable as outlined under the HOSCA HR Policy. After completion of work-related travel, employees must submit travel and expense reports to their department head who will sign them before submitting them to the Finance Department for processing of reimbursement.

Payroll

Payroll shall be prepared by the 25th of each month and staff shall be paid by the 30th of the month for the same month. In the case of EID staff may be paid earlier than the 30th subject to the approval of the DIRECTOR GENERAL. The HR staff prepares payroll calculations for all HOSCA staff and provides them to the Finance Department for processing. Payroll is processed and paid to the employees on monthly basis. Bank charges assessed to maintain personal bank accounts are the personal responsibility of individual staff members. The Head of Finance is responsible for adjusting the salary for terminated employees.

Tax Deduction at Source

HOSCA ORGANIZATION is a non Profit afghan based NGO hence Tax Deduction is imposed according tax law of Afghanistan on the activities specified on the official gazettes from government of Afghanistan for institutions and so for their activities.