NOTE TO ANYONE WHO USES THESE GUIDELINES 08/12/00

These guidelines have been posted to PNGDEV as of 08/12/00 however they are still in draft form and generally untested in terms of their comprehensiveness or usefulness. If you have comments please post them to the author at <cusopng@global.net.pg>. Plans are in place for further refinements in 2001 with a possible workshop. Again please contact CUSO PNG, Gabrielle Appleford if you are interested in further information.

Introduction
The following guidelines on NGO Financial Management are broken down into three different sections. The first section, introduces basic concepts and components of financial management. The second section provides practical steps and considerations for setting up a financial management system. Examples are done using Excel and Quicken (Quickbooks) software. The third section provides additional information on further financial management considerations again using direct examples from Quickbooks.

Basic Concepts and Components of Financial Management
All NGOs require a financial management system, however, many NGOs may only have an accounting or bookkeeping system. Accounting or bookkeeping are a subset of financial management (diagramme 1).

Financial management systems can be broken down into administrative systems and accounting systems:

Administrative systems assist all NGO managers in decision-making, planning, communicating, controlling and evaluating.

Accounting is concerned with identifying financial information, expressing the information in numeric terms and communicating this information to interested parties. An accounting system provides the framework for this to happen.

Administrative and accounting systems may be required to change over time in relation to changes within the NGO and changing information needs.

Financial Information
Financial management is generally the responsibility of the finance manager however all section managers should contribute to and benefit from a financial management system. The role of the finance manager is a key role within an organisation. This individual must act as an 'interpreter' of information. Information can be in three different forms:

• Problem-solving information
• Attention-directing information
• Score-card information

Examples of these include:

Problem-solving information: An NGO would like to host a workshop. This workshop will be funded through donor funds, income earned from the sale of workshop books and by charging a small participants' fee. The finance manager can provide information to management on how much funds exist currently for the workshop and how much money would be required to be raised by additional fees.

Attention-directing information: The finance manager provides reports to activity or section managers on actual expenditures to budget. S/he further highlights the areas where there are considerable over or under expenditures. This information directs the activity manager to investigate or justify delays in implementation or unforeseen expenditures.

Score-card information: A donor requires a report on their funds twice yearly in order access if planned activities are on track or if there are any deviations noted. The numbers laid out in the financial report comparing actual expenditures to budget provide a 'score card' on how the NGO is progressing with their proposed activities. The written report will further support the story that the numbers tell.

Qualities of a Financial Manager
In addition to acting as the NGO's 'interpreter' of accounting information, the finance manager must also be able to manage and administrate. This implies that the finance manager must have the 'technical' accounting skills but also the more qualitative 'softer' skills of a good manager.

The first principal of successful management [this applies equally to the financial management as well as management within other sections of an organisation] is the importance of competent staff. No matter who performs the work, the manager will be responsible for the result. Therefore the finance manager must be:

• Adaptable: able to serve as teacher, disciplinarian as well decision-maker;
• Strong leader: person capable of maintaining authority;
• Diplomatic: able to communicate constructively (objective, tactful, cooperative and firm without being overbearing);

The major causes of managerial failure include:

• Inability to maintain competent staff (this could be due to poor selection of candidates or by not providing an environment that motivates and satisfies staff);
• Reluctance to delegate responsibilities and assign tasks: being the do-er versus the co-ordinator of tasks. [Finance] managers must rely on staff capabilities which requires patience and understanding;
• Inability to make effective decisions.

The Finance manager must remain aware of the pitfalls to his/her management role and constantly monitor or check how s/he is doing in relation to these. Technical skills are not enough to avoid managerial failure.

Strategic Planning
The financial manager must also be able to maintain perspective so that activity and administrative objectives are directed towards achieving organisational goals. The finance manager is in a position to have a bird's eye view of the day-to-day operations of the organisation and will be able to see trends, strengths, weaknesses and opportunities for improvement. This unique position allows the finance manager to play an active role in strategic planning. Strategic planning focuses on the long-term goals and objectives of the NGO and should, at a minimum, include the Board of Directors and the key management staff of the organisation.

Internal Controls
Accounting and Administrative systems should not be looked at as static or unchanging; they need to be responsive and flexible but at the same time provide strong and consistent internal control mechanisms.

Internal controls can be broken down into two types: accounting and administrative controls.

Administrative controls are techniques that aid in achieving organisational management goals and promote operational efficiency and adherence to organisational policies. These can include budgets and quotas, check lists, sign out sheets, etc.

Accounting controls assist in the preparation of fair and honest reports and the safeguarding of assets. Controls can include insurance, compliance with generally accepted accounting principles, vouchers systems, dual cheque signing, double approval for large expenditures, etc.

Internal controls can be built into the organisation in the following ways:

Organise structure and responsibility
Examples: staff duties segmented so that no one person has complete control over one section of the information flow, custodian responsibility of assets separated from accounting for the assets.

Mechanical devices
Examples: pre-numbered forms and cheques;regularly accounting for all forms and cheques.

Procedures
Examples: Double signatures, double approval, payment vouchers, stock take (if an organisation has stock), bank reconciliation, and employee annual holidays (ie: covering for absent employee may bring up any inconsistencies or irregularities)

Qualified personnel
Examples: ensure that employee responsibilities are consistent with their qualifications; employees must fully understand the purpose of internal control procedures if these procedures are to be most effective. Control systems need flexibility in order to respond appropriately to demands for change. It is inevitable that as an NGO matures, policies will need to be reviewed and the goals and values of the systems kept up-to-date. In particular, the accounting information system needs to be examined continuously to ensure that it is as efficient and accurate as possible and meets the needs of the users in terms of both the information provided and the manner of presentation.

Budgeting
An important internal control is the operating and activity budget of an NGO. This is the 'master budget' and should include all monies approved in donor proposals and all activities planned for a given period of time (preferably the fiscal year of an organisation). The line items in the budget should coincide with chart of account line items so that expenses can easily be tagged to budget. The budget can be set up in Excel but ideally will be inputted into an organisation's accounting software (ie: accounting package used for entering all deposits and disbursements) so that performance reports can easily be generated.

An example of a master budget is included below:

Account number and description	Donor: ICCO	Donor: SCF	Donor: GEF	Total
700 Education officer	5,000	6,000	0	11,000
750 Education supplies	500	1,000	3,000	4,500
760 Education workshops	2,000	1,000	5,000	8,000
770 Edn housing subsidy	3,000	2,000	0	5,000
800 Community awareness	2,000	0	2,000	4,000
810 Foot patrols	3,090	400	0	3,490
820 Theatre performances	0	1,000	2,000	3,000

A master budget is an important method of communicating plans to all levels of the organisation; can assist in guiding and coordinating activities and is an important cash flow planning tool. Although the above budget does not indicate time frames for expenditure, this budget can be entered into the accounting system on a monthly basis and will provide a projection of funds needed for a given time period.

The more that key people are involved in the discussions and decisions that result in a finalised 'master budget' the more receptive and cooperative their attitude towards the budget will be. This will add meaning to the budget, which can then assume the role of an achievement indicator for the NGO's performance.

This involvement of key people forms the basis for participative management. Participative management broadens the perspective of activity managers from a narrow concern with day-to-day implementation issues to a consideration of overall organisational objectives and plans. Activity managers can see how their particular responsibilities fit into the overall operation of the organisation and consequently of the necessity for inter-departmental cooperation.

The financial manager has a lot of responsibility in the budgeting process.; His/her responsibilities include pre-planning, budget layout, education of fellow employees and the coordination, compilation and interpretation of budget information.

Performance Reports
Without performance reports, the meaning and purpose of the budget would be lost. Performance reports allow activity managers to remain accountable to the budget and can be designed specifically to facilitate internal management control. Different reports can be designed for the various levels of management. For example, the Board of Directors of the NGO may only need a summary report. Activity managers will require more detailed information.

Basic Guidelines for Performance Reports

• Design reports to fit organisational structure;
• Report periodically in a standard format;
• The report(s) can be designed to implement the exception principle [ie: report highlights areas in need of most attention];
• Taylor reports to meet the needs of the users;
• Keep reports simple and understandable report only essential information;
• Report actual to budget;
• Measure performance in achieving goals and objectives with a focus on what the manager can control [ie: there may be very good reasons for being off budget that are out of the control of the manager].

Financial Reporting
NGOs are generally expected to produce financial reports for various interested parties including the Board of Directors, the NGOs appointed auditor and donors. These reports generally include a Balance Sheet and a Statement of Receipts and Disbursements. The Statement of Receipts and Disbursements is the equivalent of a Profit and Loss Statement for companies.

The balance sheet provides a picture of the assets, liabilities and capital reserves of an NGO at a given point in time. The Statement of Receipts and Payments shows the amount of money coming into an organisation, how this money was paid out and any leftover money for a given period of time (ie: three months, one year, etc). These two reports in combination with more frequently generated performance reports can form the basis of financial reporting for NGOs.

Cash Flow
It is not necessary for an NGO to have all of its grant monies in a chequing account (ie: its operating account). Cash on hand does not earn a return for the NGO. It may be more prudent to invest some grant monies in interest-bearing accounts or to keep portions in hard currency (ie: USD) so that funds can maintain their value [please refer to section three for further discussion on this topic]. However, it is important that adequate funds are available and planned for from which to cover operating expenses. This is called cash flow planning.

What is the appropriate level of cash to have on hand? There is no set formula for this and depends largely on what the finance and general managers of the organisation deem appropriate. Many NGOs try to have from a month to six weeks of projected operating expenses available at any given time. The bank balance needs to be continually monitored to assure that this level of funding is available. In addition, the projected monthly budget, if fairly accurate, can be used as a cash flow projection.

Step one: Choose an accounting software package
Look for an accounting package that is clear and concise and easy to operate and maintain. Be aware that all software packages are designed for businesses and may have more functions than are required by an NGO. Choose a package that suits your needs in some instances a powerful package with lots of additional functions can 'confuse' NGO reporting and accounting needs. In this section and the following sections, Quickbooks and Quicken have been referred to and practical examples provided.

It may be necessary to export information from your accounting system into Excel for formatting purposes. Donors often have specific formats in which they require their financial information. IN addition, the Board of Directors will require reports (ie: balance sheet and statement of receipts and payments) that may be better or more 'cleanly' presented in Excel.

A part from formatting in Excel, all cash entries and disbursements and adjustments should be reflected in the one accounting programme.

Step two: clarify purpose of organisation (if required) and have this reflected in a clear and concise chart of accounts

Chart of accounts
It is important that a chart of accounts reflect all of the major functions of the organisation. The following lists the benefits of investing time into this process:

• Clarity in purpose/activities of the organisation and subsequently in each of the activities themselves;
• More accurate view of activity costs as all direct costs are grouped under their respective activities;
• More accurate accounting due to a simplification in the chart of accounts;
• Improved ability to identify funding needs (activity and core funding);
• Improved ability to report to donors and to justify costs in proposals;
• Activity budgets will encourage further accountability for each activity;
• Improved ability to incorporate monitoring of activity objectives by better utilising the accounting system as a management information system as well.

If reorganisation is required to produce a chart of accounts that incorporates the above, the Director or General Manager (and other managers) should be briefed and/or provide feedback on proposed changes. In addition, the Board may need to see a mock-up of the proposed reporting format before proceeding. If major changes to the chart of accounts are deemed necessary this should be done at fiscal year-end in order that current year reporting remain consistent. Changes may also affect the ability for year comparisons however if changes are done well the first time, then additional changes should not be required. The chart of accounts should be set up with the ability to ìgrowî with the organisation (ie: accommodate changes to the organisation such as new activities or new sections, etc).

Example:

NEW NGO is and environmental NGO which has several activities including conservation education workshops for teachers, a conservation and development project, newsletter, landowner educational tours, water supply, school fee subsidies, annual landowner meeting, quarterly DEC advisory committee meetings, etc. NEW NGO has all of these activities lumped under the conservation and development project however many of these activities occur outside of the project area and in fact are done on a national or regional scale. The general manager and finance manager together with NGO staff examine their activities and decide that in fact the NGO actually has two major activities in addition to its administrative support.

These are defined as:

Conservation Education Programme

• conservation education workshops for teachers
• newsletter quarterly
• DEC advisory committee meetings

Conservation and Development Project

• landowner educational tours
• annual landowner meeting
• water supply
• school fee subsidies

With this greater clarification of what NEW NGO does, the finance manager is able to set up a chart of accounts that reflects the major sections of the organisation. A mock up has been provided below:

Expanding and collapsing accounts
The chart of accounts can be set up to expand and collapse.

A collapsed report may be more useful for Board members or donors as it will provide a clear 'snap shot' of all major expense areas and by section if necessary. It can also indicate all receipts by donor and if appropriate a total for income generated by the organisation itself.

NEW NGO: Performance Report Conservation & Development Project <collapsed>
Conservation & Development Project

	Conservation & Development Project	ACTUAL	BUDGET
610	Field Staff Salaries	20,000	22,000
620	Project Housing	16,000	16,000
630	Water Supply	14,000	10,000
640	Landowner Education	5,000	10,000
660	School Fee Subsidies	2,000	2,000
670	Project Travel	3,000	2,000
680	Project materials & supplies	4,000	7,000
	Total Conservation & Development Project	64,000	73,000

This report could be further collapsed to the total only for the project.

An expanded report is more useful for section heads who may want to see line-by-line how they are performing compared to budget. They may also want to more detailed information on receipts in order to access which activities are profitable or self-sustainable.

NEW NGO: Performance Report Conservation & Development Project <expanded>
Conservation & Development Project

	Conservation & Development Project	ACTUAL	BUDGET
610	Field Staff Salaries	20,000	22,000
611	Project Manager Salary	8,000	8,000
612	Field Staff 1	6,000	6,000
613	Field Staff 2	6,000	8,000
620	Project Housing	16,000	16,000
621	Project Manager Housing Subsidy	9,000	8,000
622	Field Staff 1	4,000	4,000
623	Field Staff 2	3,000	4,000
630	Water Supply	14,000	10,000
640	Landowner education	5,000	10,000
641	Landowner meetings	2,000	6,000
642	Landowner Study tours	3,000	4,000
660	School Fee Subsidies	2,000	2,000
670	Project Travel	3,000	2,000
680	Project Materials & Supplies	4,000	7,000
	Total Conservation &Development Project	64,000	73,000

Sub-classes
Chart of accounts are one way in which to clarify reporting and allow for section reporting. Another way to make your programming respond to your needs is to set up sub classes for reporting. The above example is further used top show sub-classes for donors. When entering an account payable, receivable or doing payroll, the screen will allow the user to indicate a 'class'. Classes can be set up for all donors. As long as all expenses (and payments) are tagged to a donor (ie: assigned a class), then a report can be generated to show all receipts and payments for one donor. If the system is set up like this, it is important that everything is tagged or the consolidated report will not add up to the sum of its parts (ie: all donors). In addition, if the organisation generates income itself, then this can be tagged to the organisation.

NEW NGO: Performance Report Conservation & Development Project by Class (Donor)

Conservation & Development Project		ICCO ACTUAL	ICCO BUDGET	SCF ACTUAL	SCF BUDGET	GEF ACTUAL	GEF BUDGET
610	Field Staff Salaries	8,000	10,000	8,000	8,000	4,000	4,000
620	Project Housing	6,000	6,000	5,000	5,000	5,000	5,000
630	Water Supply	5,000	3,000	5,000	4,000	4,000	3,000
640	Landowner Education	2,000	2,000	3,000	5,000	0	3,000
660	School Fee Subsidies	2,000	2,000	0	0	0	0
670	Project Travel	0	0	2,000	1,000	1,000	1,000
680	Project materials & supplies	2,000	2,000	2,000	2,000	0	3,000
	Total Conservation & Development Project	25,000	25,000	25,000	25,000	14,000	19,000

Step three: accustom management and the Board of Directors to format of financial reports

Monthly score cards
NOTE: Monthly has been chosen here but another suitable time period could also easily be used. Managers should receive a performance report at the end of every month. These should be reviewed preferably with the director (general manager) and the finance manager. The report will indicate where budget has been spent and where it has not. This will tell the manager(s) if an activity is proceeding according to plan or alert manager(s) to problems related to implementation. In addition, the manager should refer to this report when approving cheques. Preferably there is a cheque writing form where the manager can approve a payment and indicate from which line item (and which donor) the expense should come from. This report will allow management to remain accountable to their budget(s) and also assist in future planning and budgeting. These reports can be set up in Quickbooks as 'memorised' reports so that formatting is uniform and they are easy to generate.

Reporting for the Board
Reporting for the Board should be done quarterly (or as required). This reporting should include a Balance Sheet and a Statement of Receipts and Payments. This will entail accounting for all funds (ie: including USD funds if the organisation has these). A uniform and consistent format should be used. It may be easier to do this in Excel as this provides a cleaner, clearer report than what is generated from accounting packages such as Quickbooks. This is also the report that should be provided to auditors and used in the annual report (if the organisation has one).

Reporting for donors
Donors have their own reporting requirements and specifications and an NGO should attempt to meet these as much as possible. Conversely, if donors are amenable, a generic format may be agreeable. All donor files should be kept in the finance department and contain donor reporting specifications and the person to whom reports should be directed. Donor reports, where possible, should be submitted no more than one month after the close of the accounting period being reported upon. This will ensure timely receipt of funds from the donor, which is often pending these reports. A donor tracking schedule can be set up to monitor due dates and for work planning purposes.

Fundraising is a direct function of the Finance Department in conjunction with the organisation and project/section management. It forms part of the budgeting cycle, and medium and long-term strategic planning process. Narrative reports should mirror what a financial report indicates. For example, if only one out of four water supplies have been installed, the narrative can explain any delays or reasons for not spending funds as specified; the financial report will also indicate that a large variance exists in planned and actual expenditures. More information is provided on fundraising in section three.

Step four: Assist managers in 'interpreting' and analysis of reports
Using the following performance report, the project manager can provide an analysis of project expenditures to date. For example:

Field staff salaries: Field staff 2 was recently hired and is on three month probation and is expected to receive full benefits after passing the probation.
Water supply is over budget due to the introduction of VAT.
Study tour cancelled due to a tribal fight; budget will be reallocated to next quarter when the tour has been rescheduled. Air travel over budget due to VAT and the introduction of a 5% increase in flights.
Iron roofing not purchased for the project as it was out of stock.

Conservation & Development Project

Conservation & Development Project		ICCO ACTUAL	ICCO BUDGET	SCF ACTUAL	SCF BUDGET	GEF ACTUAL	GEF BUDGET
610	Field Staff Salaries	8,000	10,000	8,000	8,000	4,000	4,000
620	Project Housing	6,000	6,000	5,000	5,000	5,000	5,000
630	Water Supply	5,000	3,000	5,000	4,000	4,000	3,000
640	Landowner Education	2,000	2,000	3,000	5,000	0	3,000
660	School Fee Subsidies	2,000	2,000	0	0	0	0
670	Project Travel	0	0	2,000	1,000	1,000	1,000
680	Project materials & supplies	2,000	2,000	2,000	2,000	0	3,000
	Total Conservation & Development Project	25,000	25,000	25,000	25,000	14,000	19,000

More steps to come....

Multiple Currency Reporting
Quickbooks can be set up to report on multiple currencies. The example provided here uses USD and Kina. Two 'companies' can be set up using file names such as Kina.data and USD.data. The two sets of 'company' data combined make up the complete set of records for an NGO. All operating expenses would be handled from the Kina books. The USD bank account acts as a holding account; the USD data in Quickbooks reflects this.

An NGO might want to keep two currency bank accounts as it may be prudent to keep funds in another currency due to currency fluctuations. This is discussed further under investment strategies.

Setting up the Chart of Accounts
The US Dollar 'Company' in Quickbooks is used to track in-flows and outflows from the US bank account and to assign donors accordingly to these cash movements. In order to do this, the data file must first be set up. A chart of accounts would have to be set up which includes accounts for the bank (to show deposits and withdrawals) and the corresponding affects on Grantor Funds Available (liability account). These can have sub-accounts for the various donors that an NGO has. An example of a chart of accounts is provided below:

100	USD Holding Account
101	USD Holding - ICCO
102	USD Holding - SCF
103	USD Holding - GEF
200	Kina Operating Account
201	Kina Interest Bearing Account
202	Etc (whatever kina bank accounts are reflected in the Kina chart of accounts)
300	Grantor Funds Available
301	Grantor Funds Available - ICCO
302	Grantor Funds Available - SCF
302	Grantor Funds Available - GEF
400	Grantor Funds Transferred
401	Grantor Funds Transferred - ICCO
402	Grantor Funds Transferred - SCF
403	Grantor Funds Transferred - GEF

These types of accounts (ie: asset bank accounts and liability grant accounts) are the only accounts that would be required in the USD chart of accounts for entering deposits.

Entering Deposits and Transfers in the US Dollar 'Company'
Example: ICCO has sent a wire transfer for USD $50, 000 to the UDS bank account in Port Moresby. This money needs to be recorded in the accounting system. The following are the steps that would be required in order to do this:

• Open the US data file in Quickbooks
• Under activities, choose 'make deposits' (use 'make deposit whether it is a wire transfer or an actual cheque deposit)
• Deposit to 101 USD Holding - ICCO
• Enter the date of the wire transfer from the bank statement
• Under received from, enter donor name and the amount
• Under 'from account', enter 201 Grantor Funds Available ñ ICCO

Entering transfers from USD Account into Kina Operating Account
Example: Based upon cash flow needs, the finance and general managers decide that USD $25, 000 of ICCO funds will be transferred into the Kina operating account (with the remaining $25, 000 to stay in USD). The following steps would be required in order to do this:

• Open the US data file in Quickbooks
• Under activities, select 'make transfer'
• For 'from account' choose 101 USD Holding - ICCO.
• For 'to account' select the Kina operating account (whichever is appropriate)
• A separate journal entry would be required to reflect the transfer in Grantor Funds Available:

DB	Grantor Funds Available	$25, 000
CR	Grantor Funds Transferred	$25, 000

These entries will show $25, 000 withdrawal from the ICCO Holding Account and a balance of $25, 000 remaining in Grantor Funds Available. In addition, the accounts will show $25, 000 transfer to the Kina account as well as in Grantor Funds Transferred.

• Next close the USD Company and open the Kina Company on Quickbooks
• Choose 'make deposit' from activities
• For 'Deposit To' select the Kina operating account
• For 'Received from' type in USD Account
• For 'From Account' enter Grant Funds Available - ICCO in the Kina chart of accounts
• For 'Payment Method' write in TT (so that the auditors don't go looking for a deposit that was actually a transfer).

NOTE: The transfer from USD to Kina cannot be entered as such but rather must be entered as a deposit as Quickbooks cannot operate in duel currencies in the same company. That is the reason for the separate 'companies' in Quickbooks and for the need to make a deposit from USD to Kina rather than a TT.

Including the USD on the Kina Reports
The USD monies would need to be included on the Kina balance sheet when this is generated for official purposes (ie: for the Board, the auditor or donors). This can be done by taking a Kina approximation [using the most recent exchange rate] of the USD. This amount would be added to the Cash Available under Assets and the Grantor Funds Available under the Liabilities section of the balance sheet. The example below highlights these additions in italics:

Current Assets

Cash on Hand	K100, 000
Kina Operating Account	K30, 000
USD Holding Account ($35, 000 converted at .5 on xx/xx/xx)	K70, 000
Fixed Assets	K75, 000
Total Assets	K175, 000

Liabilities, Capital & Reserves

Grantor Funds Available	K100, 000
Grantor Funds Available - ICCO	10, 000
Grantor Funds Available - SCF	10, 000
Grantor Funds Available - GEF	10, 000
Grantor Funds Available - in USD	70, 000
Other Liabilities	60, 000
Capital and Reserves	15, 000
Total Liabilities, Capital & Reserves	K175, 000

Investment strategies for donor funds
Part of an NGO's responsibility to donors is to manage their funds well. This normally includes spending the money on agreed upon activities or items in an agreed upon time frame, and acquitting those expenses per the requirements of the donor. In addition, it is the NGO's responsibility to manage donor funds to guarantee their value over time (especially in situations of high inflation).

As donor funds are generally given in lump payments in advance, the NGO must safeguard these funds (i.e. deposit them in the bank) for future use. As well, it is generally expected that those funds should be deposited in interest bearing accounts, so that they will in fact be productive assets while they await expenditure. Some donors make a provision in their reporting so that interest gained can be itemised. Generally speaking, an interest bearing account would be the financial instrument of choice for donors and their money because they are:

1. Easily accessed
2. Secure (rather than other forms of investment which may be riskier in both terms of capital and income potential).

This kind of financial policy is especially important to NGOs in PNG due to the instability of the kina and the related high rate of inflation. Although the letter of a donor contract may specify that their money be placed in an interest bearing deposit (IBD) account that may not be the most prudent course for an organisation given the context in PNG. However, an NGO can easily adhere to the spirit of that policy and in fact manage that money better if it capitalises on other alternatives.

For example, an organisation may choose to hedge against devaluations by keeping funds in non-interest bearing USD accounts, and placing the remainder of the funds in IBD's (term and on-call). Term IBDs mean that you can not access the funds until after a specified period of time (ie: 90 days); on-call IBDs allow access to funds at any time but do not give as high a return. Both of these instruments are easily accessed and secure. This same approach can be used with Treasury Bills with the Bank of PNG. Investing in term IDBs and T-bills effectively 'locks up' money for a set period (1-3 months for example). These investment strategies must consider an organisation's cash-flow needs in order to be effective.

Treasury Bills
Treasury bills operate as follows:
There are two ways in which to purchase T-bills. One way is the auction process (occurs every Wednesday) in which you are allowed to bid on a rate of return (this averages between 17 and 19 per cent). The other method is the return market (open every day) in which you are offered the average weekly rate of return. Bids are available through invitations. The invitation gives the average rate for the previous week. As well, T-bill returns are published in The Independent every Friday.
An example of the four different terms on offer for this week:

28 days	17.03%
63 days	18.53%
91 days	19.63%
182 days	19.43%

Contact on 322-7200. Note, it is difficult for investors outside of POM but telegraphic transfers through the banks are one option to consider.

While this financial policy may not conform to the letter of a contract, it certainly does in spirit. Furthermore, interest from savings accounts in PNG is significantly lower than inflation, so in fact, to conform to the letter of the contract would mean that an organisation would loose 15% p.a. of the funds in real terms! (interest on savings accounts is approx: 5% p.a. and inflation is about 20% p.a.).

Another issue is income realised from investments (FOREX gains and interest). The economic situation in PNG and prudent financial management may allow for significant FOREX and interest income. So, while an investment strategy may be sound and consistent with the spirit prescribed by donors it creates a new dilema: how do you apply gains? This is certainly a grey zone. Gains can generally be spent on items agreed to within the grant. This is certainly reasonable as inflation raises costs significantly, even with in a single year.

Examples of donor wording in this regard are below:

...and income earned thereon, not expended or committed for the purposes of the grant will be returned to the Foundation.

'forex and interest on XXX funds...have to be utiised within the framework of the Agreement and the objectives of the project, and may not be added to the general funds of the Organization. The way that the Organizations uses these gains is subject to approval by XXX donor.

It appears that with the donors' permission, an organisation can expect to apply gains against similar line items to those agreed to in the grant. For funding to activities other than those specified in the grant agreement or to an endowment fund, it may be permissible but only at the funder's discretion.

Fundraising
It is important to remember that proposals are only one step in the fundraising cycle, which is integral to running an organisation. Firstly, an organisation must be very clear in its purpose and the activities it wishes to undertake to realise that purpose. Secondly, based on an analysis of the funds required to undertake those activities, a fundraising strategy will be developed.

Good fundraising is not realising half way through the year, 'Hey, yumi nidim niupela computa. Yu go aut na kisim sompela funding long em' Instead, it is the outcome of serious forward planning.

Below is a list of how fundraising can fit inside the normal planning process of an organisation:

Identifying needs Developing Goals, Strategies, Activities, Budgets Financial Planning Developing Relationships With Funders Proposal writing skills Implementing Monitoring and evaluating funding and projects Reporting to funders on the outcome of the project or activity funded.

Myths about Proposal Writing

Myth 1:Proposal writing = fundraising

Fundraising includes strategies to secure funds (who will you ask, building relationships with those funders/people, how and what will be presented to those funders, and for what period of time, etc.), ongoing relationships and reporting to those funders.

A proposal, is the document presented to a funder to request funds based on the organisation's planning and funding strategy.

Myth 2:Proposal writing takes too much time away from my real job.

Proposal writing can be a powerful tool for:

• Project Management
• Consensus-building
• Communication

Myth 3: Proposal writers write proposals.

Everyone involved in a project should have input into the proposal; input should be co-ordinated by a designated person, but that person is not officially known as the 'proposal writer'.

Main Components of a Proposal

• Cover letter
• Executive Summary
• Text
• Budget
• Attachments

Generally donors will provide proposal guidelines which should be followed. Often these guidelines will indicate how long a section should be. The 'attachments' section can be used to present information that you feel is useful or relevant, but does not 'fit' into the body of the proposal.

What is the Purpose of an Executive Summary? An Executive Summary should clearly define the following: What you want funded Why it is important Why your organisation should be selected How much money you need and when After the covering letter, the Executive Summary is what the donor will read (if you managed to get their attention in the covering letter!) Donors often do not read past the Executive Summary so make you summary count for you! How do you know that your Executive Summary does this? An Executive Summary should include: First sentence of every section in the proposal What you are trying to do in your project Brief history The 'essence' of the proposal The request for money (ie: how much) 'Snap shot' of the project Why it's important Something about your organisation

How to Involve Your Donor

• Inform them
• Take them into the 'field'
• Meet them where they are located (i.e.: hand deliver reports when possible)
• Ask for help and ideas (and, of course, money!)
• Tell them how their funds are being used
• Share successes and challenges

How to Write a Bad Proposal

• Send your first draft
• Proposal does not meet donors criteria or 'funding scheme'
• Proposal does not reflect the mission of your organisation
• Too long; too short
• Miss the deadline
• Too general, not specific
• Too detailed
• Executive Summary not clear
• Donor format not followed
• Unrealistic budget

10 Steps to Writing a Successful Proposal

	Step 1:	Clarify Who You are, What You Want to Be, Why Is That Important, What Do You Want To Do, & What Will It Cost
	Step 2:	State your measures of success(explained in a later section)
	Step 3:	Get to know your donor (The people here know their donor very well.)..look at any donor relationship as a potential partnership
	Step 4:	Decide what should be included in the proposal and draw up an outline, work plan, and budget for it
	Step 5:	Write a strong Executive Summary
	Step 6:	Clearly describe the activities that you want funded
	Step 7:	Tell a good story (beginning, middle, end)
	Step 8:	Review, review and refine (consensus)
	Step 9:	Get donor attention in the cover letter
	Step 10:	Plan ahead for reports

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