News and Updates from the Family

Issue 18 | June 8, 2022

Best Practice (BP):

Best practices are specific, discrete ministry activities that measurably increase program scale, effectiveness, and/or efficiency, and can be replicated by other National Ministries. Best practices should be supported by evidence (data).

Finance Policy Development

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Developing a written financial policy is a necessary step in establishing your ministry as both accountable and trustworthy.

Financial policies clarify the roles, authority and responsibilities for essential financial management activities and decisions. Without a finance policy, the organization is left to operate under a “what seems best to me” mindset that may be insufficient or even damaging to the organization.

Building a complete financial management system requires both an accounting system and an administrative system made up of financial policies.

A financial policy has many different functions:

  • An organizational reference document – explaining how things will be done.
  • Building a control environment (eliminating fraud and theft).
  • Guiding organizational decision-making.
  • Enhancing credibility with donors and partners.
  • Helping with fundraising.
  • Providing accountability to donors.
  • Use as a training aide.
  • Supporting documentation for a financial audit.

Planning Considerations

  • Identify the purpose of a finance policy for your organization.
    • Some essentials to the purpose are:
      • Conforming to sound accounting principles and practices.
      • Enabling management to obtain accurate and timely financial reports whichpromotes sound financial management.
      • Ensuring correct and accountable use of funds and resources.
  • Conduct a needs assessment with your finance and executive committee.
  • Identify roles and responsibilities.
  • Conduct an informal risk assessment.
  • Draft the financial policy.
    • Suggested areas for a finance policy:
      • Philosophy
      • Authority
      • Roles and Responsibilities
      • Conflict of Interest
      • Budgeting
      • Gifts
      • Organizational Financial Processes
  • Review, discuss and document feedback from staff and board leadership.
  • Present the final version to the board for approval.
  • Train staff on the financial policy.
  • Review the policy regularly (recommend every six months).

Required Resources

1. Human Resources

  • Someone will need to lead the development of the policy.
  • Someone will need to document the policy discussions and decisions.
  • Someone will need to gather feedback from stakeholders.
  • Someone will need write the policy.
  • Someone will need to conduct training.
  • Someone will need to lead regular policy review.

2. Collateral

  • Document the draft(s) and final approved policy.

3. Time

  • Time to conduct a needs assessment.
  • Time to meet with stakeholders.
  • Time to write draft policy and make changes.
  • Time for the board to meet to approve the policy.
  • Time to train staff and volunteers on the policy.
  • Time to review the policy regularly.

4. Space

  • Space to hold meetings and to conduct training.

5. Cost

  • The cost varies.
  • Considerations include meeting/travel expenses and types of communication (email, phone, text).

NM with Demonstrated Experience in this BP

South Africa