FINANCIAL MANAGEMENT FOR NON FINANCE MANAGERS Training Slides for Higher Local Governments

FINANCIAL MANAGEMENT FOR NON FINANCE

MANAGERSTraining Slides for Higher Local Governments

Financial Management: Non-Finance Managers

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Non Finance Managers: Course Objectives

At the end of the course, participants should be able to:

• Explain the meaning of FM;

• Understand and explain the purpose of local government budgets;

• Explain the key component of LG budgets;

• Understand and explain the key steps and stages in budget preparation;

• Carry out good prioritisation;

• Compile annual workplans;

• Supervise budget implementation;

• Analyse and understand budget implementation reports;

• Prepare timely accountability reports;

• Interpret accounting reports correctly;

• Follow-up audit reports.


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Module One: Session One: Overview of Financial Management

What is Financial Management?

Financial Management comprises of processes and actions taken by political and administrative leaders of a LG to acquire funds, allocate them over different activities and time periods and use them in the most economical, efficient and effective manner, with a view to achieving the goals and objectives of LG.

Purposes of Financial Management

• To ensure LG has enough revenue.• To ensure that Financial Resources are utilised in accordance with LG’s priorities.• To Provide adequate financial information.


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Module One: Session One: Overview of Financial Management

Key elements of Financial Management

• Planning and Budgeting

• Mobilisation of Revenue

• Value for Money

• Good cashflow management

• Budgetary Control

• Accountability


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Module One: Session Two: The Framework for LG Budgets

What is a Budget?A Local Government Budget is a detailed annual plan of how a local government intends to spend its financial resources in line with its objectives, needs and priorities.

What is Budgeting?This is the process of allocating a Local Government’s scarce resources between its needs and priorities. This process goes hand in hand with the planning process.

Why Budget?• To allocate scarce resources.• Budgets are legal requirements.• To identify and disclose source of funds.


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Module One: Session Two: Reasons for Preparing Budgets and Legal Background

Why Budget (continued) • To cost projects for implementation.• As a basis for financial requisition.• To give an overview of past financial

and output performance.• To control implementation of projects.• It is a requirement of good governance

as well as a political tool.• It is an information/communication tool

for both central government and donors.Key players and stakeholders include:• LG Budget Committee;• MOFPED;• Line Ministries;• Uganda Local Government

Associations.

The Local Government Act, 1997• Section 78 (1): Local Governments shall

have the right and obligation to formulate, approve and execute their budgets and plans provided the budgets are balanced.

The Local Governments Financial and Accounting Regulations, 1998• Make up the principal financial management

framework for local governments.The Poverty Eradication Action Plan• Is the overall national planning framework

for development.• Central Government ensures that national

priorities are reflected in LG Budgets through allocation and transfer of conditional grants to LGs .

,


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Module One: Session Three: The Structure of LG Budgets

Overall Structure• All Local Governments will operate a

uniform recurrent and development budget structure with a new chart of accounts that has been harmonised with that of Central Government.

Link between Revenue and Expenditure• The recurrent and development budgets

provide the link between Local Government revenue and expenditure budgets.

Output Oriented Budgeting and ROM• Sectors set output targets and priorities

for the financial year. The analysis of direct output from a sector programme will show how much outputs have contributed towards the set outcomes/objectives.

Performance Indicators and Budgets• The Budget Structure contains a

hierarchy of performance indicators; outcomes, outputs, processes and inputs.

• Under the ROM, the relationships should be translated into a clear line of responsibilities within the Local Government

• These relationships are classified in terms of :

– Economy: Fewer inputs used to carry out a specific activity.

– Efficiency: Activities required to get an output.

– Effectiveness: Extent to which an output leads towards achievement of outcomes.


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Module One: Session Four: FDS and its Implications

What is the Fiscal Decentralisation Strategy (FDS)?• This is a strategy approved by Cabinet whose aim is to increase

Local Government autonomy and flexibility in implementing national sector policies.

• FDS brings the fiscal activities of Government in line with existing legislation such as the LGA, 1997 that requires line Ministries to implement national policies via Local Governments.

Why FDS?Current conditional grants undermine autonomous LGs and are inconsistent with the laws of Uganda.

In addition to increasing autonomy and flexibility, the FDS also seeks to streamline and transfer modalities to enhance efficiency and effectiveness of LG programmes. The overall aim is to achieve PEAP goals in a transparent and accountable framework.


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Module One: Session Five: The LG Budgeting Process

A Successful Budgeting Process: Pre-requisites• Consultative and participatory approach to ensure

ownership of both the process and the approved budget.• A systematic prioritisation based on informed choices.• Realistic and achievable outputs, activities and

expenditure allocations..• Council should avoid monopolised and biased

prioritisation.• Sufficient time for dialogue among stakeholders.• Relevant background materials for the budget must be

availed to Councillors in time.• There should be clear linkages between plans and

budgets.• Provide possible scenarios and consequences of

different choices as a basis for political discussion and decision-making.


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Module One: Session Five: Steps in the Budgeting Process

Stage 1: Preparing for the Budgeting Process. This includes determining the timing, the activities to be undertaken, the responsibility centre and agreed outputs.

Stage 2: Preparing the LGBFPs Stage 3: Finalisation and approval of the

annual workplan and budgetTools in Budgeting:• The District Development Plan (DDP) that

constitutes the overall integrated planning framework for the LG.

• The LG Budget Framework – articulates the 3-year Budget Strategy of the LG.

• The Annual Workplan – showing the expected annual performance and financial plan for the coming financial year.


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Module One: Session Five: LG Budget Call

The Budget Call is prepared by the budget desk which is a subset of the Local Government Technical Planning Committee and consists of the officers responsible for planning and facilitating the process. It includes:• The timing of events in the planning and budgeting

process;• The inputs required from other stakeholders by the budget

desk;• Any other information required by stakeholders to enable

them prepare their inputs.Functions of the Budget Call:Informs departments and lower LGs; communicates with stakeholders; provides indicative sector ceilings; provides minimum sector grant, recurrent grant allocations to departments; indicates areas for flexibility, cuts and cost Savings.


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Module One: Session Six: LG Budget Framework Paper

Functions of the LGBFP• Gives a profile of the Local Government.• Provides performance records of past years as

well as projections for the next 3 years.• Shows previous financial years against set

targets.• Provides indicative allocations and sector

objectives.• Shows sectors not funded and any re-

allocations.• Provides the draft annual workplan and budget

estimates.• Provides information and monitoring tool to

Central Government.• Provides decision makers in the LG with the

information required for decision making.

• Guides Councillors through the prioritisation process during the budget conference.

Structure of the LGBFP• Executive Summary• Chapter 1: Review of Revenue

Performance and Medium Term Revenue Projections

• Chapter 2: Sector Performance• Chapter 3: Medium Term

Objectives, Outputs and Allocations

• Chapter 4: Sector Un-funded Priorities

• Chapter 5: Draft Annual Workplan and Budgets


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Module One:Session Six: The Budget Framework Paper

The Budget Framework Paper: Guides the

Council through the budget discussions. It

contains;

1. Review of previous years’ expenditures and output performance;Review of previous years’ revenues and revenue projections.

2. A presentation of the Development Plan.

3. Prioritisation and ranking of recurrent and development activities.

4. Medium-term objectives and performance targets.

5. Allocation according to priorities and development projects agreed upon.

Prior to the Budget Conference, a meeting of the Executive, Chairpersons of Sector Committees and Head of Departments (HoDs) is convened to review and discuss the draft Budget Framework Paper.

To facilitate the prioritisation process, the Budget Desk should put all possible sector reductions on flip charts enabling Councillors get an overview of the prioritisation options.

When the prioritisation is over, it would be helpful to show the politicians un-funded priorities not catered for in the Budget.

It is advisable to try and reach an agreement by bargaining, where all parties get some of their priorities in return for giving up other priorities, possibly by postponing them to the next year.


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Module One: Session Seven: Review of Sector Performance

• Comparison of Expenditure performance and set output targets

• Output oriented budgeting

• The major outputs/achievements of sector

• Output analysis for recurrent and development budgets

• The major constraints for each sector

• Analysis of performance against the workplan

• Economy

• Efficiency

• Effectiveness


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Module One: Session Seven: Review of Sector Performance

Objective of the Review: To establish whether failure to meet set targets can be explained in terms of unrealistic targets, insufficient resource allocations, shortage of human resources, private sector incapacity, or other reasons. The review will in addition, establish the reasons for major input achievements.

Tools for Performance Analysis:• Overall sector/department expenditure and output

analysis;• Output analysis;• Key achievements;• Major constraints;• Analysis of performance against workplan.


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Module One: Session Eight: Establishment of Objectives, Priorities, Outputs and Expenditure

Allocations Sector Objectives should fall within the four overall

objectives set out in the PEAP and those in the District or Urban Authority Development Plan.

On the basis of sector objectives, the sectors will establish a set of expenditure priorities, and output targets for the achievement of these objectives.

To facilitate the compilation of Budgets for sector allocations, standard formats are used. These are given in the sector budgeting guidelines.

The Budget Desk ensures that a clear distinction is made between sub-sectors in the budget, the allocations are consistent with sector grant allocations, minimum grant allocations have not been breached, allocations of equalisation grants fall within PAF areas, and, that planned overall development outputs are consistent with the DDPs.


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Module One: Session Eight: Compilation of Sector Inputs

Points to note when the Budget Desk compiles sector inputs: Expenditure priorities should balance planned outputs. Priorities and targets are consistent with PEAP/National targets. Regional disparities have been taken into account. Administrative costs does not exceed 5% of non-wage

allocations. Co-financing requirements for development activities are met Investment servicing costs are not greater than 10% of the

budget for physical investments. Guidelines from sectors and the LGDP are adhered to. Output targets are realistic, that is, estimates match expected

outputs and the capacity to implement the associated activities are in place.

Recurrent costs implications of any proposed capital project are captured, indicated and explained.


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Module One:Session Nine: Identifying Sector Un-funded Priorities and Cost Reductions

Identification of areas for budget cuts:• Bear in mind both the past performance of programmes

and the overall objectives;• Ensure that the cut arises from efficiency savings

which does not directly affect the achievement of sector output targets;

• The cut should not have a negative impact on the performance of a key sector. As a general rule, those areas which have minimal impact in terms of output should be the lowest priority;

• It is prudent for a sector to limit itself to 3 or 4 well justified cases for additional funding than to approach the Budget Desk with a shopping list of activities that are never likely to receive funding.


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Module One: Session Ten: The Political Prioritisation Process

The Budget Conference (BC): Structured in accordance with the Budget Framework Paper, the BC takes place in mid or late January.Purposes of the Budget Conference: • Inform the full Council about the previous year’s financial

performance.• Inform the full Council of the previous year’s

achievements and shortcomings.• Present and discuss sector objectives, development

programmes, and associated budget implications.• Review the prioritised interventions.• Reach a consensus about the objectives, priorities and

budget allocations to enable the Budget Desk prepare a final draft Budget.


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Module One: Session Eleven: Preparing Annual Work Plans

HoDs provide inputs to the Annual Work plan, which in turn forms part of the Budget Framework Paper. Standard Formats are used to ensure uniform presentation.

3 Principles pursued in the Budget Formats:1. They link outcomes, outputs and activities to budget

allocations.2. They take into consideration the principles of OOB:

inputs lead to activities, activities lead to outputs (results), and outputs lead to outcomes (achievement of objectives).

3. They identify the responsible officers at each level in order to make it clear who is responsible for achieving results at each level.


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Module One: Session Eleven: Compiling the Budget Estimates

• The Budget Desk when aggregating budget estimates from HoDs will apply the new chart of accounts prepared for the Integrated Financial Management System (IFMS), and the new budget structure for districts/municipalities.(refer to Mod.2)

• It is the responsibility of the Budget Desk to prepare the revenue budget after consultations with other stakeholders.

• The Recurrent and Development Transfer Budgets are the link between the Local Government Budget and the Expenditure Budget. They illustrate how specific revenue resources are allocated to sectors in line with their conditions.


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Module One: Session Twelve: Finalising and Approval of Budgets

The last stage in budget preparation is the finalisation of theWork Plan and budget estimates, its presentation to, and approval by the Council. The steps include:1. Review of LG Budget Framework Paper and Draft

Budget.2. Review of LGP allocations and MTEF, BFP submitted

to Cabinet for approval.3. Review of budget framework paper and draft budgets

after receiving the final budget ceiling.4. Review of final draft annual work plan and budget

estimates.5. Finalising work plans and budget estimates6. Reading and approval of budget estimates by Council

before 15th June.


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Module One: Session Thirteen: Budget Implementation

• Budget implementation refers to the constant comparison of actual activities and achievements against set targets and timing within the Annual Work Plan.

• Remedial action is taken on a timely basis to ensure the achievement of policy objectives.

• Pre-requisites and controls include:– Clear identification of responsibilities;– Timely, and reliable feed back to decision – makers;– Delegation of authority to sectors or departments to

avoid unnecessary delays in implementation;• Budget reporting is necessary for:

- Provision of feedback information for decision making;

- Giving accountability to citizens, political leadership and Central Government.


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Module One: Session Thirteen: Budget Reporting

What do we report on?• Outputs• Activities and Progress• InputsTypes of (monthly) Report• Internal reports within the LG to

provide information to managers• External reports to Council and

Central Government

Reports submitted to the Executive, Council and Central Government by the 20th day of the month:• A descriptive progress report• Key department output performance

• Financial Statement• Bank reconciliation statements

supported by copies of bank statements

Corrective action may include:• Cautioning those responsible for

unsatisfactory performance• Reducing planned service levels• Postponing start of capital

investment projects• Freezing staff variances• Approving only such expenditures

considered urgent and necessary• Staff retrenchment


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Module Two: Session One: Accounting Information Systems

• Financial Accounting is the process of producing financial reports about the financial activities of an entity (the LG) and presenting them to users.

• The term accountable refers to the requirement to give a report or explanation of one’s actions in order for such action to be evaluated.

• Accountability is used to denote the explanations given by those who are accountable. It is always supported by documentary evidence.

• An information system is defined as ‘a system in which defined data is collected, processed, analysed and communicated to assist those responsible for the use of resources in decision-making’. It encompasses data capture, processing, communication and storage.


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Module Two: Session Two: Final Records and Books

• An account is a record in a ledger form summarising all the transactions that have taken place in a particular event, or activity, or asset to which the ledger account relates. Examples are personal accounts, real or property accounts and nominal accounts.

• The double entry principle in bookkeeping is that every transaction that results in a transfer of money or monies involves the giving of a benefit and the receiving of that benefit.

• A Journal is a book where transaction entries to be recorded are first prescribed for certifying and naming of the ledger accounts. The General Journal is for recording transactions of a general nature, and specialised transactions are recorded in special Journals, e.g. Cash receipts Journal and Cash Payment Journal.

• A Cashbook is part of the principal book, the ledger. It comprises both cash and bank accounts taken out of the ledger and maintained separately for the sake of greater care and attention.


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Module Two: Session Three: Banking and Bank Reconciliation

Preparing a bank reconciliation means determining those items which make up the difference between the balance appearing on the bank statement, and the balance shown by the council’s cashbook (bank column) as at the same date - usually end of the month.Possible causes of differences:• Cash deposited with the bank late in

the day may be posted to the statement the following working day.

• Uncleared effects (cheques drawn on other banks) may not be credited until the proceeds are realised.

• Unpaid cheques (those returned dishonoured by the drawee bank) are debited to the customer’s account well before he/she is advised.

• Errors of casting especially in the cashbook and, at times, on the bank statement.

• Bank charges especially on up-country cheques are levied before the customer is notified.

• Standing orders may be effected at times when the customer concerned has not taken note of it.

• Direct payments to the bank account by the debtor who had earlier been advised to pay.


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Module One: Session Four: Cash Flow Management

Cash flow management refers to the systems, procedures and management decisions by which managers ensure that: The LG has sufficient cash to meet approved expenditures. Payments are made according to the plan (cash budget). Serious decline in cash balances is avoided.Lack of adequate cash flow management may lead to:• Bottlenecks and administrative inefficiency.• Creation of domestic arrears.• Dissatisfaction among employees, the public, contractors and

suppliers.• Under- utilisation of tangible (fixed) Assets.Steps:1. Analyse the cash flow pattern and formulate an annual cash flow

budget.2. Conduct routine activities like collecting planned revenues and

making payments according to the cash flow budget.3. Update the quarterly and monthly cash flow projections in light of

emerging situations.


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Module Two: Session Five: Preparing Financial Reports

• Section 87: LGA, 1997 and Reg. 150: LGFAR, 1998; All G Councils and Administrative Units shall produce financial statements. These are mandatory and intended to enforce accountability to the stakeholders.

Properties of Good Financial Statements:• Level of aggregation: Too much, too scanty details avoided.• Classification: affect the comparability of LG accounts.• Structure: Items are given correct prominence.• Articulation: Reflects the way different aspects of the same

transaction are shown in the different finance statements.LG financial statements include: Revenue Account; Balance Sheet: Trial Balance; Revenue and Expenditure Summary; Detailed Statements of Revenue and Expenditure and Notes to the Account.


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Module Two: Session Five: Financial Reports

Paragraph 5.31; Chapter 5, LGFAR requires the CFO to produce the following financial statements every month, and to forward them to the Executive Committee:• A Trial Balance;• A Revenue Account for the month;• A Balance Sheet at the end of the

month;The new reporting requirements introduced under the FDS:• Reports of service delivery unit on

revenues and expenditures to section heads.

• Reports by section Heads to the HoD on section outputs and activities and financial report.

• Reports on commitments and bills• The monthly Council Report.• A consolidated financial statement

for all recurrent and development revenues and expenditures of the council.

• Bank reconciliation statements and supporting copies of bank statements.

• Descriptive Progress reports and Key Department output Performance Reports.


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Module Two: Session Six: Interpretation of Financial Reports

Sources of Financial Information• The annual financial reports of the LG.• Interim reports of the Local Council.• Others, e.g Revenue Returns, Creditors and Debtors

Schedules, Project Progress Reports, etc.• Government Statistics, e.g national standards of

financial performance on health and education.

Methods of Analysis/Interpretation• Financial Ratio analysis (the main tool).• Trend Analysis (for the same LG over time). • Cross-sectional analysis (compare with other LGs,

national standards of financial performance).• Budget performance analysis.


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Module Two: Session Seven: Publication of Financial Reports

Why Publish?

• To encourage community involvement

• Accountability to taxpayers

• To enhance transparency

• To promote community monitoring

• As a means of enhancing revenue collection

• To inform taxpayers, and others about LG activities

• To enable comparisons

• To help Councilors judge their performance

What to Publish?

• Budgets and Work plans

• Government grants e.g LGDP grants, conditional grants, equalisation grants, etc.

• Monthly, quarterly and annual accounts

• Tender Board minutes

• Financial decisions of the Council

• Internal and external audit reports

• Reports of investigations

• Reports of LGPAC

• List of approved suppliers and contractors

How to Publish?

• Notice Boards

• Local Press

• Local Radio Programmes

• Documents to NGOs, CBOs, LCs, Community Leaders, etc

• Regular meetings with stakeholders


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Module Two: Session Eight: Assets Management

• Acquisition of Assets

• Maintenance of Assets

• Capital Management

• Activity scheduling techniques

• Assets management/Records

• Debt Collection policies

• Storage costs

• Stock models.


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Module Three: Session One:Overview of Auditing

Internal Control is a management function whose roleit is to restrict, limit, or regulate the performance of an activity. In the management of the affairs of Lower Local Governments,Internal controls refer to:-1. The orderly conduct of designated tasks;2. Safeguard of assets;3. The keeping of accurate and reliable records.Accounting Controls ensure that:-• Transactions are properly authorized.• Access to assets and records is only with authority.• All events/transactions are promptly and correctly • Recorded.• The assets that appear in the records physically exist and

their whereabouts are known at any given time


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Module Three: Session Two: Roles of Internal and External Auditors

• Audit assets to ensure efficient use and proper custody

• Review the adequacy of internal controls

• Value- for- money audits• Audit sub-counties and divisions• On- the- spot cash checks• Special investigations

The Auditor General• Expresses expert, independent

opinion• Reliability of underlying records

• Possibility of fraud, errors, and irregularities

• Advise on internal controls• Compliance auditing• Certifies completed annual

accounts of local governments

Other Relevant Organs• The Inspector General of

Government• PAC of the Local Government• MOLG Inspectors• MOFPED Inspectorate• Line Ministries • The Press


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Module Three: Session Three: Audit Reports

Three types of Internal Audit Reports(1) Routine; (2) Quarterly; and (3) SpecialInvestigations and Good writing skills required for all. This requires more than just good knowledge of auditing and Accounting. In addition:-• The writer has to demonstrate skills in gathering facts,

arranging them and presenting the conclusions correctly, comprehensively, and yet in simple language.

• Routine reports use previous reports as their starting point

• Plan the structure, contents and recommendations of the report appropriately.

• Draft the contents during the actual audit when details are still fresh


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Module Three: Session Three: Characteristics of Good Reports

Characteristics of Good reports• Objectivity

– Unbiased conclusions• Clarity - the reader has little or

no accounting knowledge• Tone -sincere expressions

supported by documented facts. Be courteous

• Title - explicit but brief• Brevity – avoid excessive detail• Accuracy• Layout -list of contents

• Purpose• Scope• result (findings) may include

management views

- Opinion of Auditor- Recommendations- Acknowledgement of good

performance and corrective action- Appendices

• Confidentiality -If, print on face• Materiality -give prominence to

significant items• Acknowledgement- of information from

other sources• Completeness• Signature- by CIA, dated• Timely- late reports are useless• May include graphs, charts, tables,

percentages as these are powerful in driving messages home


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Module Three: Session Three: Audit Report Follow- up

Audit reports have to be read and their recommendations implemented. In addition: • Council and the administration should react to

decisions taken; • The CIA should follow –up to ensure reports are

acted upon. This helps to avoid repeating the same recommendations again and again.

Bodies to follow- up audit reports:1. The LG Public Accounts Committee- examines

reports on behalf of the council and may request councilors/officers to submit/explain a report and to act on it;

2. The Executive Committee receives quarterly IA reports from the LGPAC and reports to council; follows-up special investigations.


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Module Three: Session Four: Value for Money Investigations

Value means the worth of something compared to the price paid for it.Users of a service are the best judges of its value

VFM is important in Local Governments because success

cannot be measured in terms of profits

VALUE FOR MONEY ELEMENTS

• Outcomes or Objectives

» EFFECTIVENESS

• Outputs (physical results

» EFFICIENCY

• Activities

» ECONOMY

• Inputs (resources)


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Module Three: Session Four: Why Perform VFM Audits?

VFM Audits are carried out by looking

for • instances of spending where too

much money is spent on certain items, activities, or services than justified (economy)

• Whether too many resources have been used to achieve an output (Efficiency)

• Whether resources are spent for no objectives achieved (Effectiveness)

Why perform VFM audits?• To identify procedures more costly

than justified;• Detect work done but no objectives

achieved;• Identify duplication of efforts;• Identify assets misuse and under

utilization;• Instances of over-staffing• Where the cost of collecting revenue

far exceeds amount collected• Identify market improvements in

outcome• Recommend ways to improve VFM in

LGs


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Module Three: Session Five: Fraud in Local Governments

Fraud is deception to make one obtain goods/services illegally, or present a false picture of the local government financial position.

• It includes embezzlement, forgery, falsification of documents, defalcation and corruption.

• Fraud is normally perpetrated by trusted council employees’.

• Two broad categories of fraud:– Manipulation of financial records/ accounts;– Stealing council funds and other assets.


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Module Three: Session Five: Theft of Council Funds/Assets

Some of the common methods include:• Double payments;• Fictitious employees;• Use of wrong pay scales for employees;• Forging supporting documents to steal cash;• Teeming and lading;• Carbon slipping;• Wrong tax assessments;• Printing own receipts;• Forging signatures on cheques;• Paying suppliers/contractors for no work done;• Stealing stores;• Intentional errors in book casting.In terms of amounts, payments to suppliers and contactors constitute the major avenue for stealing funds.


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Module Three: Session Five: Fraud Prevention and Detection

• Management and the Executive Committee should consider well in advance fraud prevention measures. Once cash, or any other assets are lost, it is not easy to get them back.

Preventive mechanisms include:-• Strong internal control systems- especially

segregation of duties and authorization of transactions;

• Employee rotation within the council and mandatory annual leave for all employees;

• Creation of internal audit departments;• Regular independent bank reconciliations;• Regular assets and stores inspections;• Use of carbonized receipts; Stringent

deterrent penalties; Time accountability;

Tests to detect cash frauds:• Count cash immediately and reconcile

the cashbook;• Cast and vouch the cashbook,

scrutinize the CB against bank statements;

• Obtain bank confirmation directly;• Compare payees with details in CB;• Trace employees fro payroll to

personnel records;• Confirm debtors by circularization;• Account for all vouchers;• Note any irregular cash payments;• Trace purchase invoices to CB,

ensure no double payments;• Circularize creditors.


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Module Three: Session Six: Internal Controls

Administrative Controls ensure that:-• Management instruction/ policies and

directives are complied with;• Activities are carried out in a manner that

reduces waste and duplication of efforts.

Characteristics of Internal Controls• Honest, competent employees;• Clear chain of command and levels of

authority;• Suitable documents and Forms;• Segregation of duties;• Independent verifications;• Limitation of access to assets and accounting

records.