Financial management in emergencies involves planning, organizing, controlling, and reporting on an organization's financial resources to achieve its goals. It helps manage risks and resources strategically. Key challenges include maintaining accounting records and cash flow in difficult environments, following procurement procedures when markets are devastated, exercising budgetary control when pressures to spend are high and situations change rapidly, and satisfying the different requirements of multiple donors funding one project. Achieving good practice requires robust yet practical financial systems, accountability, transparency, and skilled staff that integrate financial management into program delivery.
Financial Leverage Definition, Advantages, and Disadvantages
Mango Financial Management
1. LSTM – DHA 2009Financial Management in Emergencies With: Sareta Thomas Mango
2. 2 Learning Objectives Clarify the role of financial management in humanitarian programme management Identify good practice in the field Identify key issues affecting financial management in emergency humanitarian responses
4. What is Financial Management? A working definition: ‘Planning, organising, controlling and reporting on the organisation’s financial resources to achieve its goals.’ It’s a management function Looking after the financial health of an organisation Managing the financial aspects of an NGO’s work to make best use of resources 4
5. Financial Management in Practice Managing risk Internal risk E.g. theft, fire External risk E.g. economic instability, change in donor policy Managing strategically Keeping an eye on the wider picture Managing by objectives The ‘plan, do, review’ project cycle 5
6. Financial Management in Practice 6 Set budgets Build in learning and take action Implement plans – spend & receive funds Monitor Budgets
7. What is Financial Control? Financial control occurs when systems and procedures are set up to make sure that financial resourcesare being used ‘properly’ (ie to maximum effect). 7
9. Who is Accountable? 9 Governing body Day-to-day authority delegated to managers to implement policy ? Managers Ultimately accountable in law All staff In practice, anyone who works to achieve project aims
11. Two Golden Rules NGOs have to maintain a respectful dialogue with the people they aim to help. NGOs depend on their front line staff and have to help them to make good judgements (and check whether they do). 11
12. 12 Achieving Good Practice Robust financial systems Proper records, policies and procedures Designed to suit the NGO and its working environment Open and accountable systems Including reports to all stakeholders, beneficiaries included Skilled staff Financial management is fully integrated in programme management
18. 19 Internal Control It’s how we manage internal risk Commonsense, practical procedures designed to safeguard assets & protect staff E.g. Authorisation rules, vehicle policy Common control problems: Presentation of false receipts Collusion with suppliers Use of vehicles for private use Loss of cash or stocks kept on premises Un-budgeted expenditure
19. What is Fraud? “Fraud happens when somebody uses deception to obtain goods, services or money.” [UK Home Office] ...bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation and collusion... It is a deliberate act Often involves falsification of records 20
20. What is Corruption? “Corruption is the misuse of entrusted power for private gain.”[Transparency International ] ... Bribery, fraud, extortion, embezzlement, nepotism, cronyism... Complex Money is not always involved 21
21. 22 Summary: Minimum Requirements A valid supporting document for every transaction A Cashbook for every account held A practical accounts coding structure Budgets covering all operations Clear delegation of authority rules who can authorise what and within what limits? Annual financial statements (audited) To meet statutory requirements Regular budget monitoring
23. 24 Issues for Humanitarian Projects Accountability vs. ‘saving lives’ People do come first But someone, somewhere, has to account for the use of public funds If we fail to account properly, funds could be withdrawn, credibility is lost…
24. 25 Issues for Humanitarian Projects Keeping accounting records Field accountants not always provided Difficult to get receipts and quotations Payments made in different places by different people, so difficult to capture all transactions in a timely way
25. 26 Issues for Humanitarian Projects Cash management High dependence on cash for purchasing Programmes involve huge sums of money, spent very quickly Cashflow issues – is the money there when it is needed? Banking infrastructure may be limited Different currencies in use Cash security – in transit and on site
26. 27 Issues for Humanitarian Projects Procurement Purchasing procedures difficult to follow in a devastated market e.g. quotations, approved suppliers Logistical problem of acquiring huge quantities of project materials Authority to spend often unclear Opportunities for fraud Control of stocks Storage , transportation and security issues
27. 28 Issues for Humanitarian Projects Budgetary control Pressure to spend funds on time Budgets often change during a programme Prices shoot up when aid workers are in town! Restricted vs. unrestricted funds HO vs. field office expenditures Difficult to monitor ‘committed’ expenditure made away from project office Managers need weekly reports to monitor budgets, but not always available
28. 29 Issues for Humanitarian Projects One project, several donors Complicated funding picture, often unclear Each donor has its own set of rules to follow Donors’ rules include: What they will/will not fund Moving funds between budget items When they will make payments The records they require you to keep The financial reports they require