Karonga Diocese Finance Policy and Procedures Manual
Read and Download PDF Karonga Diocese Finance Policy and Procedures Manual
PURPOSE OF THE FINANCE AND PROCEDURES MANUAL
The purpose of this Manual is to provide diocesan Departments and affiliated Units with direction and guidance in connection with those accounting transactions, procedures, and reports that should be uniform throughout the various Departments and Units of the Diocese.
Since the Diocese of Karonga’s Departments and affiliated Units that frequently deal with international agencies, financial information must be recorded on a consistent basis and in accordance with IFRS (International Financial Reporting Standards).
Except as otherwise provided, the policies and procedures contained in this Manual are binding. Requests for exceptions should be made to the Bishop.
The Manual is subject to change with prevailing conditions and economic environment.
ORGANISATION OF THE MANUAL
The Table of Contents is divided into 15 areas each highlighting finance implications.
The Diocesan Accountant (DA) and the Director of Finance, Investment and Administration (DOFIA) are committed to making the guidelines as clear and useful as possible and they are responsible for providing proper interpretations of articles of the Manual.
All staff members are able to access the Manual, which is available on the website of the Diocese. A hard copy is also available in the Accounts Department.
Departments and affiliated Units: Refers to Departments of the Diocese and their sub-sections or administration branches.
Karonga Diocesan Finance Council (KDFC): Refers to the Finance Council of the Diocese of Karonga, chaired by the Bishop or his delegate, which is charged with the responsibility of providing policy oversight and strategic direction to the Diocese regarding the administration of finances and other temporal goods of the Diocese in accordance with both the civil law and the Canon Law.
Diocesan Curia: Refers to the Secretariat of the Diocese of Karonga
Accounts Office: The Accounts office of the Diocese of Karonga headed by the Diocesan Account as Head of Department.
TABLE OF CONTENTS
Section 1 Introduction
Section 2 Authorization of Transactions
Section 3 Budgets – Overview, Preparation and Role of Units
Section 4 Cash Management
Section 5 Maintenance of Accounting Records
Section 6 Revenue Procedures
Section 7 Expenditure Accounting
Section 8 Purchasing Procedures
Section 9 Fixed Asset Policy
Section 10 Investments
Section 11 Taxation
Section 12 Financial Audits
Section 13 Miscellaneous
Section 14 Accounting Documents
Section 15 Conclusion
1.1 The Curia is the administrative centre through which the Diocese of Karonga implements and co-ordinates various pastoral and developmental programmes as well as undertaking all those responsibilities which express its mission as a Catholic Diocese.
1.2 Diocese’s Financial year
a. The Diocese’s financial year is from 1st December to 30th November.
b. To facilitate the closing of the books all the financial transactions will be finalized by 15th November of each year
c. The Budget Year is identical with the Financial Year.
1.3.1 The Curia attaches great importance to its financial responsibilities. This consists essentially of:
a. Budgeting and budgetary controls
b. Control over income
c. Control over expenditure
d. Control over assets
e. Recording procedures
f. Financial reporting
g. Financial audits
1.3.2 Operation of sound financial management by the Curia implies:
a. There are adequate funds for carrying out the activities i.e. budgeting and fund development and that funds are used as planned (i.e. budgetary controls).
b. There are designed internal control mechanisms providing checks and,
c. Defined authorization of transactions are adhered to.
1.4 Stewardship and accountability are core values of the Curia and entail:
a. The Curia is committed to ensuring that resources at its disposal are used with care and a high sense of responsibility.
b. It is required that all designated funds be deployed to only the services for which they are intended.
c. Honesty and integrity are basic essential qualities demanded of all personnel dealing with finance.
d. Transparent, accurate recording and reporting of financial transactions, with full disclosure and clear explanations are basic accountability requirements.
e. As fundamental components of accountability, every expense must have resulted from appropriate prior authorization and must be backed up with acceptable supporting documents.
f. Timeliness of financial reporting is essential. This depends on prompt returns from expenditure-centres as well as promptness on the part of the collating Units.
1.5 Key staff in the Accounts Department and their qualifications:
Besides the DOFIA as the Head of the Directorate of Finance, Investment and Administration, the Accounts Office shall always have the following properly trained, experienced and competent technical staff [for details please cf. HR Manual]:
a. The Diocesan Accountant [DA] as the Head of Department,
c. Procurement Officer,
d. Internal Auditor,
e. Stores Clerk, and
1.5.1 Should need arise the Bishop may appoint an Assistant DOFIA who is to work immediately below the DOFIA or Senior Diocesan Accountant who shall work immediately above the Diocesan Accountant. These two shall always be technical people in Business Administration and Accounting respectively. Since the position of DOFIA encompasses administrative activities in the entire Diocese, the DOFIA is required to be more of a competent administrator and not an accountant as such. Hence the preferred qualification for the DOFIA is an MBA or its equivalent and with the ability to pull together and lead, support and guide all diocesan staff in the Curia and all diocesan institutions and projects. And should be someone beyond justifiable reproach in all aspects.
The Canon Law, Book V – The Temporal Goods of the Church, CC 1254 – 1310 clearly describes the Church’s position regarding acquisition, retaining, administering and alienation of temporal goods of the Church.
‘Temporal goods’ is the term used in Canon Law for church property. ‘Temporal goods’ are distinguished from those goods designated as its ‘spiritual’ goods. The temporal goods include all non-spiritual assets, tangible or intangible, that are instrumental in fulfilling the mission of the Church. These include: land, buildings, furnishings, liturgical vessels and vestments, works of art, vehicles, securities, cash, and other categories of real or personal property. They are described as being ‘of the Church’ because they are used for the work of the Church.
Temporal goods are held by the Church to be used for:
a. Divine worship;
b. The provision of fitting support for the clergy and other ministers;
c. The carrying out of works of the sacred apostolate e.g. education, health, justice and peace and development; and
d. Works of charity, especially for the poor.
The Church owns property so that it can fulfil its mission. It is a means to the end, not the end itself. The following articles of the Canon Law are of particular importance:
Canon 1276 –
a. Responsibility of the authority [Bishop] to supervise carefully the administering of goods.
b. The Authority to see the organisation of the entire administration of Ecclesiastical goods by issuing special instructions.
Canon 1284 –
a. All administrators are bound to fulfil their office with the diligence of a good house holder.
b. Seek accurately and at the proper time the income and produce of goods, guard them securely and expend them in accordance with the wishes of the founder or lawful norms.
c. Keep accurate records of income and expenditure.
d. Draw up an account of their administration at the end of each year.
e. It is earnestly recommended that administrators draw up each year a budget of income and expenditure. However, it is left to particular law to make this an obligation and to determine more precisely how it is to be presented.
1.5 Diocesan Finance Council:
A Responsibilities of the Diocesan Finance Council
Notwithstanding the fact that the ultimate responsibility of administering a diocese vests in the diocesan Bishop, Church law strongly recommends that the diocesan Bishop carries out his responsibilities in collabolation with others. This is particularly so regarding the Church’s temporal goods. To this effect every diocesan Bishop is asked to institute a Diocesan Finance Council which should be consulted by the Bishop for various administrative decisions of a financial character, especially but not exclusively specified in Canon law provisions regarding the Church’s temporal goods (c.493). The Bishop must consult the Finance Council in the following matters:
a. Appointment and removal of the Finance Officer (c.494.1-2).
b. Before asking the Christian faithful to give in cash or kind for the needs of the Diocese e.g. projects or celebrations (c.1263). In this particular case he must also consult the Diocesan Council of Priests.
c. Before embarking on major and expensive diocesan projects (c.1277). In this particular case he must also consult the College of Consultors (Advisors).
d. Before placing restrictions on church institutions regarding projects that they can venture in (c.1281.2).
e. Before approving an investment by the Diocese (c.1305).
f. Before allowing, for example, a church institution such as Lusubilo Community Care that was founded to look after orphans free of charge to start charging some kind of fees (c.1310.2).
The diocesan Bishop must obtain consent of the Finance Council in the following matters:
a. Before embarking on major and expensive diocesan projects (c.1277).
b. Before allowing a church institution to give away or sell its property at prices determined by the Episcopal Conference of Malawi which is required to set such prices (c.1292.1).
c. Before giving away or selling diocesan property (c.1292.1).
Every diocesan Bishop is obliged by Church law to form a diocesan Finance Council (c.492.1) which shall be presided over by the diocesan Bishop or his delegate.
C. Qualifications of Members of the Finance Council:
It is required that there be at least three Christian faithful in the Finance Council. It is further required that members of the Finance Council, whether clerics or laypersons be skilled in financial matters and civil law; outstanding in character; not related to the Diocesan Bishop lesser than fourth degree (c.492.1,3).
D. Duration of Office:
The Finance Council is to be named for a five-year term, which may be renewed for other quinquennia – meaning he can be named after other five-year terms (c.492.2).
AUTHORISATION OF TRANSACTIONS
The following gives guidance on approval limits of transactions at all times:
a. Commitment of expenditure and approval for extra ordinary expenses up to US $ 5,000 by the Bishop with the advice of the Finance Officer.
b. Commitment of expenditure and approval of extra ordinary expenses ranging from US $ 5000 to US $ 20,000. Such transactions must be approved by the Bishop with the advice of the Curia.
c. Commitment of expenditure and approval of extra ordinary expenses above US $ 20,000. Such transactions must be approved by the KDFC.
d. Salaries and wages as per the Diocese’s Staff Policy.
e. The Bishop shall be a signatory to all Curia accounts.
f. All Curia accounts must have the following signatories: the Bishop, the Vicar General, the DOFIA, the Bishop’s Secretary, and the Caritas Secretary.
a. All cheques should be authorized by two signatories.
b. This excludes approvals for motor vehicle purchases, construction contracts and purchases of property which should be approved by the KDFC.
c. All monetary limits are VAT inclusive.
BUDGETS – OVERVIEW, PREPARATION AND ROLE OF UNITS
A Budget Committee will be set up consisting of the Bishop, the Vicar General, the DOFIA (Budget holder), the DA, the Pastoral Secretary, the Caritas Secretary, the Resource Mobilization and Investment Officer and the Human Resource Officer (HRO).
3.1 THE BUDGETING PROCESS
3.1.2 The process of budgeting is a collective responsibility. The DOFIA (or his/her delegate) serves as the technical advisor and the coordinator for the final production of the Draft Budget.
3.1.3 The Curia’s Budget is based on consolidation and harmonization of the separate budgets of the respective Departments and affiliated Units.
a. Four and a half months before the commencement of the budget year i.e. by 15th July of every year, the Accounts Office shall issue a formal request to each of the Departments and affiliated Units to submit its budget estimates.
b. Each unit shall submit to the Accounts Office its budget for each year, at least three months before commencement of the budget implementation period i.e. by 31st August every year.
c. The Accounts Office shall study the budget estimates received from the various Departments and affiliated Units and compile them into the Master Budget Draft.
d. Given that the Curia’s finances and prevailing economic conditions may not meet the Departments’ budget estimates, adjustments on the respective budget proposals may be required.
e. The Master Budget Draft shall be presented to the Heads of Department and affiliated Units for their comments not later than two months before the budget year i.e. by 1st October of every year.
f. The Master Budget Draft shall be presented to the Curia for scrutiny no later than one and a half months before the budget year commences i.e. by 15th November every year.
g. The DOFIA will present the Master Draft Budget to the KDFC for approval and authorization by 1st December every year.
h. For any inter-unit programmes or any activity required to be implemented jointly by two or more Units, each party will include its share of the funding obligation in its own budget.
3.1.4 The following features must be reflected in each budget:
a. Each budget should be supported by explanatory notes giving full details of how budget figures have been arrived at.
b. Each budget should be balanced and, if possible, have a reasonable surplus.
c. To ease the budget review and sound financial management, each budget should be broken down into monthly cash flows.
3.1.5 Upon the budget authorization, the Accounts Office will advise each unit and administrative unit of the approved Master Budget in writing, drawing attention to their own particular portion of it and that they should ensure that they operate within the approved budget.
3.1.6 Once a budget is authorized revision can be done only if there are material external factors.
a. If the need for un-budgeted expenditure of amounts less than $10,000 arises, the situation must be brought to the attention of the Chairman of the KDFC who can authorize in consultation with the Budget Committee.
b. Un-budgeted expenses amounting to more than $10,000 must be brought to the attention of the Chairman of the KDFC who can authorize in consultation with the members of the KDFC.
3.2 BUDGETARY CONTROLS
3.2.1 Monitoring of implementation of the budget is a collective responsibility, just like the preparation of the budget.
3.2.2 The Accounts Office shall provide each unit with monthly financial reports with respect to their portion of the approved budget to enable them play their part in budget monitoring. The DA is specifically responsible for ensuring that this policy guideline is adhered to at all times and without exception or excuse.
3.2.3 The Budget Committee shall receive quarterly financial reports and shall review the Budget performance. The Budget Committee shall make periodic reports to the KDFC through the DOFIA.
3.2.4 Over-expenditure is a practice to be avoided. It may translate to either waste, uncontrolled use of resources or poor budgeting.
4.1 PETTY CASH
The amount of float to be set up as petty cash fund is determined by the DOFIA with the advice of the Diocesan Accountant.
Petty cash transactions are posted to the system by the DA.
Petty cash can only be made for the purpose for which funds were authorized and must be supported by receipts, which should contain the following:
a. Date of purchase or payment,
b. Name of vendor or other payee,
c Positive evidence that a payment was made,
d. Amount paid,
e. Description of the expense, and
f. Signature indicating receipt of purchase or services.
Reimbursement of funds
Schedules shall be forwarded to the DOFIA who shall vouch and confirm expense allocations. On confirmation of vouchers, the petty cash fund shall be replenished.
When not in use the funds must be kept by the Cashier in a securely locked place.
4.2 EMERGENCY FLOAT
There shall be an emergency cash float that will be maintained by the Accounts Office concerning large amounts of funds to be disbursed.
A funds requisition form shall be filled by the relevant unit and forwarded to the DOFIA who shall prepare a cheque request and maintain the form as an IOU until all required vouchers are received.
An IOU report shall be sent to relevant Heads of Department and affiliated Units for action on any overdue analysis.
The emergency float is a float to be maintained in the event of emergencies e.g. when life is in danger and not for normal operations.
4.3 DEPARTMENTS AND AFFILIATED UNIT FLOATS
A petty cash fund may be established in a Department or affiliated unit when it can be demonstrated that a continuing cash advance should be kept on hand to permit the purchase of low value supplies and services that cannot be purchased via account or are not deemed viable to do so. The amount of float to be set up as petty cash fund is determined by the DOFIA.
The DOFIA will expect a monthly or if possible, weekly operations schedule from the Units highlighting the projects, date funds required, amount and any relevant information.
Schedules shall be forwarded to the DOFIA who shall vouch and confirm expense allocations. On confirmation of vouchers, the petty cash fund shall be replenished.
4.4 SURPRISE CASH COUNTS
The DA, or his/her delegate, shall carry out impromptu cash counts to ensure proper controls over cash. Such surprise counts should be carried out for all floats maintained at least once every two months. The total of receipts plus the cash on hand must equal the specified amount of the petty cash fund at all times.
MAINTENANCE OF ACCOUNTING RECORDS
5.1 COMPUTER BASED ACCOUNTING
QuickBooks accounting software has been selected by the Curia to meet both the greater accounting demands in full and also to supply all operations in the Curia.
The QuickBooks system shall account for all properties and provide a network based system within the Curia with facilities for access control and authorized entries. QuickBooks also has facilities for Multi currency thus enabling maintenance of accounts in foreign denominations.
Payroll shall run via the QuickBooks software based programme accommodating all Malawian statutory deductions, with reporting options for Departments’ all purposes. It will be managed by the DA.
The DOFIA shall ensure that proper accounting records are maintained to keep track of Curia finances, fixed assets, and other financial transactions to enable preparation of the required reports.
The following reports must be maintained up to date by the Accounts Office at all times:
a. Donor reports for projects,
b. Bank reconciliations,
c. Projected cash flow reports,
d. Income & Expenditure accounts,
e. Balance sheet, and
f. Cash flow statement.
All accounts should be presented to the Curia monthly and to the KDFC on a quarterly basis.
Curia accounts should also be presented by the first Presbyterium (all priests of the Diocese) meeting of the year.
Income is the forefront arm of the Diocese’s survival. Income receivable must be identified, income sources well established and time lags or coordination points controlled so as to avoid the delay of funds.
All Departments and affiliated Units have a key role to fundraise for programmes. Heads of Department are specifically responsible for this and their appraisal shall take this into serious consideration.
6.2.1 Records and books of accounts to be maintained include:
a. Receipt books
b. Bank deposits slips
c. Register of cheques, money orders and postal orders
d. Rent property statements of account
6.2.2 A receipt must be issued for all sums received as income, including grants, rents, donations, ‘performance bonus’ for technical consultancy services – all sums received in whichever form, whether in cash, cheque, bankers cheque, money orders, postal orders etc.
6.2.3 If an error is made while preparing a receipt, the receipt must be cancelled by writing the word ‘cancelled’ across the face of the original and the copy.
6.2.4 For security reasons, receipt books whether partly or wholly used must be kept under lock and key by the DA.
6.2.5 Completed receipt books must be securely preserved for audit.
6.2.6 All receipts of monies whether in form of cash, cheque, telegraphic transfers, money orders or postal orders must be entered in the cashbook.
6.2.7 The money received, in whichever form, must be deposited with the bank within 24 hours.
6.2.8 When cash, cheque, money orders and postal orders are paid into the bank, a duplicate copy of the bank pay-in slip should be filed in the bank slips file for records and audit purpose.
6.2.9 It is the specific duty of the DA to ensure that all payments made in favour of suppliers or MRA are verified on a weekly basis.
Maximization of resource utilization is the main objective of any organisation. Cost control is key to day to day operations, and is significant to the organization’s running life blood – cash flow.
The expense structure should be governed by the authorization limits.
7.1.1 The fact that an item is listed in the approved budget does not imply automatic authorisation to incur expenditure on it. Each particular spending depends on availability of money at the particular time.
7.1.2 Heads of Department are responsible for the adherence to the programme budgets. The Head of Department is the primary expenditure-authorising officer in the Department and its affiliated Units.
7.1.3 On receiving an invoice from a supplier, the Accounts Office shall prepare the payment voucher. The Head of Department shall certify the payment voucher. The Head of Department shall, in consequence, be held responsible to ensure that:
a. The expense-item had been budgeted for,
b. The services specified have been duly performed,
c. The prices charged are either according to contracts or approved sales or are fairly reasonable according to the current local rates,
d. The computations and costing have been verified and are authentically correct,
e. Adequate funds are available for the vote-heads to which the payments are charged, and
f. The payment is correctly allocated to the right vote-head.
7.1.4 Upon the approval of the payment voucher by the Head of Department and affiliated Units, the Accounts Office shall present the payment voucher together with the supporting documents to the Bishop through the DOFIA for authorisation. Authorization is reserved to the Bishop and/or whoever is acting in that capacity.
7.1.5 Before issuing any cheque for the Bishop to sign, the DA shall ensure that the out-going cheque is in order and that there is sufficient money in the bank to cover the amount specified.
7.1.6 Cheques shall not under any circumstances be pre-signed. There shall be no exceptions to this.
7.1.7 The cheque signatories shall check and confirm the following before signing any cheques:
a. Payment voucher is correctly completed using indelible/permanent ink.
b. The payment is supported by valid vouchers for services provided or goods delivered to the Diocese and that the date, the pricing, the quantities, the costing, are correct/valid, the invoice is authorised/approved for payment, if attached, the invoice agrees to the delivery note and the original order.
c. Payment is supported by properly authorised supporting documents in case of travel or salary advances to staff.
d. Requisition forms should carry names of officers in case of funds being requested for field work or meetings and not simply state that the required funds are for 5 or 7 etc. officers.
e. The account/budget codes are correct for the payment being made
f. Ensure that the cheque is made out to the correct payee and must always be to a named payee (as opposed to a blank cheque).
g. The cheque is filled out properly and correctly.
h. Confirm reason for requesting an open cheque if for cash and countersign the crossing.
i. Sign both the cheque and the payment voucher.
7.1.8 The account shall remain in credit. If there are no more funds on the account, all cheque payments will be suspended until the situation is rectified. At all cost an overdraft is discouraged.
7.1.9 All payments shall be supported by correct and valid documentation. A chronologically pre-numbered payment voucher shall be used for authorisation and when filled should show the following details among others:
a. The date,
b. The payee and the cheque number,
c. The amount,
d. The reason for the payment, and
e. The budget account code allocation.
7.2 Signed cheques shall then be sent back to the relevant Department for dispatch. The covering letters for the out-going cheques are to be copied to Accounts Office. For payments over half a million Malawian Kwacha, a copy of the cheque should be attached as well.
7.2.1 After payment has been made, all the payment vouchers shall be stamped “PAID” and the date, cheque number and amount entered thereon.
7.3 ALLOWANCES TO UNITS
7.3.1 Before release of monthly allowance and advances, the money previously granted must be accounted for, with acceptable documentary evidences, in accordance with laid-down policies.
7.3.2 No officer, under any circumstance, shall have his/her request for funds attended to if he/she has not liquidated the funds previously given to him/her. It is the specific duty of the DA to ensure that this policy is adhered to at all times and without fear or favour.
7.4 Certification of expenditure documentation and control measures
All expenses incurred shall be accompanied with required vouchers before cheques requests can be prepared. Some expenses require extra control measures. These include:
Have to be authorised by the Bishop.
These costs shall WHOLLY AND EXCLUSIVELY be for Curia purposes. Authorization must be limited to the approval procedures provided for in this Manual.
The Accounts Office shall ensure measures to hedge against losses including driving forward rates, currency overdrafts etc. The Diocese shall open a foreign currency account to counter exchange rate fluctuations.
Unnecessary consumptions where possible should be avoided, the Accounts Office will monitor any abuse of these through the budgets.
Vehicle running costs
Fleet management shall be under the Transport Officer whomust ensure controls on fleet movement, fuel monitoring, repairs and maintenance and vehicle safety measures with the assistance of the DOFIA.
Printing and stationery
The DOFIA shall ensure stationery registers are maintained.
Property repairs and maintenance
The DOFIA shall devise policies to ensure property is maintained at highest levels of hygiene and safety, and develop procedures on reporting repairs, causes and actions taken.
Phone management shall be monitored by the Accounts Office on usage and curb any abuse e.g. ban of private phone calls unless deemed urgent, call restrictions, international calls. A recommended approach would be via a call logging software.
Guidelines on travelling allowances are per Conditions of Service of the Diocese.
The DOFIA shall ensure staff performance matches pay levels. Loss of pay, annual leave, sick leave, and other allowances must be balanced and coordinated by the DOFIA with the assistance of the HRO and the DA.
7.4.2 Creditors and settlements of accounts
Heads of Department and affiliated Units shall ensure maximum payment terms on all purchases and commitments, and forward all vouchers not less than 48 hours to Accounts Office with all relevant details.
Payments shall be made on the 25th of every month and statements from all creditors must be received by the 17th of every month to ensure timely payments.
7.4.3 Payment Methods
Cheque payments are the most preferred payment methods. All payments exceeding Two Thousand Malawian Kwacha shall be paid by cheque. In special cases, e.g. duties, banker’s cheques requests must be presented at least 24 hours earlier.
Electronic Fund Transfers, and standing orders can be prepared on a ‘as required basis’, and must be approved by the Bishop and executed by him or the DOFIA.
Risk management approach in payment processing must be exercised via the above control measures, and the Accounts Office must go further in performing internal checks for correct documentation, duplication of payments and surprise cash checks etc.
7.4.4 Payments contras/Offsetting of balances
The Curia must refrain from offsetting balances with debtors or creditors unless absolutely necessary. For such transactions, the Bishop must give consent in consultation with the DOFIA.
7.4.5 Prepayments / Stop payments
Payments in advance must be authorized by Bishop. This also applies to instances where payments to supplier have to be withdrawn.
8.1 Local Procurement Procedures
The DOFIA, through the Procurement Officer [PO] and the Stores Clerk, is directly responsible for procurement of goods and for the management of Central Stores.
The overall purpose of procurement regulations is to ensure that the Diocese always gets the highest quality of desired goods and services at the best prices possible.
These regulations are aimed at streamlining the process of procurement while maintaining adequate controls.
These procurement procedures apply to all staff involved in the procurement process, including (but not restricted to) originators of purchase requisitions, Project and Department Heads, procurement and finance staff and those with the task of receiving goods.
8 .2 TYPES OF PROCUREMENT
In the Curia there are three broad categories of procurement:
a. Department implemented procurement of certain types of programme specific supplies, under the direction of Head of Department with the advice of the Head of Section, that is, the Pastoral Secretary or the Caritas Secretary or the DOFIA;
b. Central procurement of an agreed set of major supplies, under the direction of the DOFIA; and
c. Capital Development and Investments consisting essentially of major construction works and investment undertakings, under the direction of the Bishop with advice/approval from/of the KDFC.
8.3 THE PROCUREMENT AND TENDER COMMITTEE
There shall be a Procurement and Tender Committee (PTC) shall be part of the Directorate of Finance, Investment and Administration and is appointed by the Bishop. The PTC shall provide procurement and tendering services to the Curia, Radio Tuntufye and Lusubilo Community Care.
Heads of Department shall forward written submissions to the PTC on specific matters.
Whenever the PTC is to deliberate on procurement of item[s] which require a lot of technical knowledge, Heads of the user-Departments shall be required to be in attendance at the meeting so that they can provide technical information to the PTC during its deliberations. But HoDs have no vote in the PTC meeting.
Key terms of reference for the PTC shall be:
a. To award tenders either open, restricted, requested for proposals or direct procurement.
b. To approve orders.
c. To award contracts through open tender or quotations for renting, hiring, letting or subletting of facilities by the organization.
d. To approve variation of contract conditions previously awarded by the Committee.
8.4 SEPARATION OF DUTIES
There shall be proper separation of duties between:
a. The person who orders a particular purchase from a vendor,
b. The person who certifies that the goods supplied are satisfactory,
c. The person who accepts the goods into the store, and
d. The person who authorizes payment and issues Cheques.
8.5 ROCUREMENT PLANNING
8.5.1 Planning of procurement requirements is part of the annual budgeting process. This is done through the Annual Procurement Plan [APP]. Each Project and Department Head is responsible for planning their project’s estimated procurement needs on an annual basis through the use of APP. The APP shall indicate the items to be bought in different quarters. This means that some items will be bought in the first quarter and others in the second quarter and so on. The PTC will use the APP to plan and at times for prodding the projects for requisition.
8.5.2 Heads of Department are required to prepare draft Annual Procurement Plan for each coming Financial Year, early in the Calendar year [latest being 31st October]. The draft shall be reviewed by the DOFIAwith the assistance of respective Heads of Department. The final APP shall be signed by DOFIA and relevant officers as approved procurement plans. This will serve as the basic approval document during the financial year, subject to donor remittance of expected funds. Note that procurement against APP may not be undertaken until DOFIA approves corresponding adjustment for the projects in question. Some bilateral and multilateral donor agencies [e.g. USAID, DFID] may require prior approval before purchase.
8.5.3 Procurement staff will use draft copies of APP until the final document is approved. However, once it has been approved the Requisitioning Projects/Departments will be responsible for attaching it to the Procurement Requisition [PR].
8.5.4 If items on the APP [especially the major ones like vehicles, computers, photocopiers etc] are described with detailed requirements, specifications and procurement dates, then the PO will be able to identify sources and to collect quotes for the required items while waiting for the Procurement Requisition. However, in many cases, managers may prefer to describe the items in general terms on the APP, with details to follow later in the year on Requisition Forms. For example, a general heading of ‘Stationery’ with no further details, together with an overall budget value, could suffice on the APP for approval purposes. In such cases, to actually effect procurement, a procurement requisition form with specific listing of items must be submitted to the Accounts Office. If sufficient information is available the Accounts Office shall then identify sources and collect quotes awaiting the requisition that will trigger the actual procurement.
8.5.5 It should be noted that since partners don’t approve projects at the same time, the APP cannot at the beginning of the Financial Year contain a list of all items to be purchased by a particular Department or Unit. However, every purchase that can reasonably be foreseen at the beginning of the Financial Year has to be indicated in the APP.
8.5.6 The planning of replenishing of Central Stores is done by establishing Central Stores levels i.e. order levels, re-order levels, maximum and minimum stock levels.
8.6 PROCUREMENT REQUISITION [PR]
8.6.1 Each procurement process will be initiated by a procurement requisition [PR] to the Accounts Office from the requesting Project or Department.
8.6.2 Procurement requisitions, which will trigger procurement, should include detailed specifications and requirements. They should also indicate that the item is budgeted for.
PRs provide the Project or Department Head with flexibility within overall annual plans regarding specifications, exact quantities, delivery dates, etc. Requisitions will also be used if un-planned or emergency procurement is required.
8.6.3 The PR format should include details of: the items required, quantities, delivery dates and locations, accounting information, whether the procurement is within the APP/Budget or emergency or unplanned and signatures of the preparing person, the Project or Department Head.
8.6.4 Some donors prescribe some conditions or restrictions required to be observed in the course of procurement pertaining to the project they fund. It is the responsibility of each Department Head to ensure that donor requirements and restrictions are observed in the procurement of goods and services. To facilitate this, notes on any special requirements e.g. source of goods, should be indicated on the procurement requisition.
8.6.5 All requisitions must be signed by the Project or Department Head or designate, who should ensure that the item [s] are in the APP or should seek authority to procure as per policy. Any person designated to authorize requisitions in an acting capacity must have the authority given in writing clearly stating the period authorized.
8.6.6 The authorization of requisitions should adhere to the limits of authorizing transaction as stipulated in section 2 above.
8.7 CONTROLS ON PROCUREMENT
8.7.1 Goods and services shall only be procured within approved budgets and no goods/services that are not covered within the existing budgets shall be procured unless the purchase has specifically been approved by minutes of the Curia Meeting.
8.7.2 In addition to being responsible for preparing the APP/Budget, the Heads of Department should ensure that actual procurement throughout the year remains within the budget. They will not need to resubmit complete APPs to the Accounts Office with each requisition but must indicate that item[s] recorded shall be attached to the procurement requisition.
8.7.3 Documentation in the cheque request process should disclose that competitive bids for purchases are solicited and received. At least three quotations will suffice.
8.7.4 The Accounts Office will assist the PTC in conducting periodic checks on procurement activities to ensure their conformity with APPs, donor procurement requirements and Curia policies and procedures.
8.7.5 It is the responsibility of the DOFIA to ensure that no purchase orders are issued which are not covered within the existing budgets. For individual funding partner projects the responsibility is normally delegated to the Head of Department. Departments will have to countersign to confirm that there are funds for such purchases.
8.7.6 It is the responsibility of the person who signed the LPO to verify that the following have been done whether or not s/he actually collects the goods concerned:
a. That the correct quantity has been received and signed for.
b. That the quality and price of the goods is as agreed.
c. That all goods delivered have been securely stored and inventory records appropriately updated and in case of fixed assets that the serial numbers and descriptions have been noted in assets register and insurance portfolio updated.
d. That the signed and checked delivery note is forwarded to the Accounts Office to wait for invoice.
8.7.7 Blank LPOs MUST be kept by the DOFIA in a locked place to ensure adequate security.
8.7.8 Any errors on LPOs are to be cancelled by drawing a line across the error and counter signed. White out is never to be used on LPOs whenever an LPO is cancelled. LPOs should be cancelled by the issuing officer and countersigned by the person who has authorized the LPO and filed. At the very least, a letter should be written to a vendor formalizing the cancellation of an LPO.
8.7.9 Purchases under petty cash must not exceed the maximum amount established by this policy currently up to and including K20,000 [twenty thousand Kwacha]. All purchases exceeding this amount must be the subject of an LPO, unless in exceptional conditions where authority for a larger purchase is required. The copy of the LPO quotation should be attached to the requisition form.
8.7.10 Procurement staff and all members of the PTC will be required to sign a ‘Conflict of Interest’ document stating that they will not purchase goods or services from a company in which they have a vested interest.
8.8 THE PROCUREMENT PROCESS REPORT
8.8.1 Upon receipt of requisitions, the PO will first verify that the requisition is properly approved according to the signing authority in effect at that time and then enter the requisition details into the procurement report worksheet. After this, the PO will begin the process of sourcing for the goods.
8.8.2 The procurement report worksheet is updated to reflect requisitions as they are received. It also includes information on the status of each procurement requisition, complete with expected delivery date. This is to be submitted to Projects on a monthly basis.
8.8.3 The DA is required to present a monthly financial and narrative report to the Bishop through the DOFIA.
8.9 PROCUREMENT TURN AROUND PERIOD
8.9.1 In case of local procurement where tendering is not required, Projects and Departments should normally allow up to 21 working days from receipt of the requisition by the Accounts Office for the procurement to be complete. For international procurement and any procurement requiring tendering, up to 3 months should normally be allowed.
For this reason, it is in the best interests of Projects and Departments to initiate the procurement process as early as possible.
8.9.2 Heads of Department should understand that emergency procurement requests necessitate that the procurement office delays other normal procurement activities in order to complete emergency procurement. The PO will attempt to undertake such procurement in the shortest possible time if the requisition is approved as ‘emergency’ by the Head of Department, depending on value.
8.9.3 For all office supplies and other items that are commonly used by all Projects and Departments and which are kept in Central Stores, the PO will pass the requisition to the Central Stores. In such cases, Central Stores will be responsible for maintaining stock levels and requisitioning additional items for replenishment as necessary
8.10 VENDORS SELECTION FOR THE VENDORS LIST
8.10.1 Careful selection of vendors helps to ensure that best possible price, quality and delivery time available within the market is obtained. A list of suitable vendors, the list of pre-qualified vendors, for each type of goods and services based on letters of introduction and past performance should be maintained. This will make the process of vendor identification much faster. The vendors list shall be reviewed and updated periodically to ensure that current known factors are taken into consideration. Once the previous year’s list of vendors has been updated and approved by the PTC, procurement of goods and services can be effected.
8.10.2 Vendor selection for inclusion on the list of pre-qualified vendors will take place once per year through an advertised and open tender based on the categories of materials that the Curia procures. Vendor selection to update the vendors list for goods that are not catered for on the list may be undertaken by one of the following three different methods depending on the value of the procurement in question.
8.10.3 The standard vendor selection procedures described below will be followed for all procurement except where particular donor requirements differ from the standard Curia procedures. In such exceptional cases, the vendor’s selection requirements prescribed by the donor will take precedence.
a. Vendor Selection without Quotes:
For procurements of up to US $200 in value [or as may be stated in the signing authority in force], at least one written quotation is required. In the interest of time effectiveness the best price, quality and delivery time for the goods and services may be obtained by verbal/telephone enquiry and a fax copy of quotation.
b. Vendor Selection with Quotes:
For procurements of between US $201 to $5,000 in value, at least three quotes should be obtained. The only exception to this requirement would be if less than three suppliers of the goods and services exist, or if prices for the goods and services are controlled by the government.
c. Vendor Selection by Tender:
For procurement of more than US $5,000 in value, sealed tenders must be obtained.
The only exceptions to this requirement are where only one supplier [including overseas suppliers] of the goods or services exists, or if prices for the goods and services are controlled by the government.
8.11 VENDOR SELECTION CRITERIA
The following set of criteria is essential for deciding on the choice of vendor:
b. Quality of good/services such a justification must be verifiable,
c. Availability of goods/services within the required delivery time,
d. After sale services, including availability of parts/supplies,
e. Bidder’s previous record of performance and service,
f. Ability of bidder to render satisfactory service in this instance,
g. Financial stability of the vendor,
h. Availability of bidder’s representatives to call upon and consult with the using unit,
i. Quality and conformance to specifications,
j. Payment terms,
k. Warranty offered, and
l. Ability to provide samples.
8.12 PROCEDURE FOR TENDER
8.12.1 The Accounts Office and Heads of the respective Departments, Administrative Units and Projects may recommend potential vendors but the selection of those invited to tender will be left to the discretion of the PTC.
8.12.2 The Accounts Office will send an invitation to tender to each supplier listed to be invited. The vendors will pick up the Tender document from the Reception Desk of Curia offices, specifying the goods and details of any relevant information needed to get accurate bids.
All suppliers must receive the same information. The request must clearly specify the deadline date and time for sealed bids to be deposited into the Tender Box. The Tender Box is kept in the reception area for ease of drop off.
8.12.3 The Tender Box will be opened by the PTC in an open area. All unsealed bids will be rejected. The bid details will then be summarized on a Comparative Quotation Chart [CQC] as per summary of vendor selection procedures above and selection of best vendor done as per comparative quotation chart and summary of vendor selection criteria above. All Committee members will initial all bids received, indicating the selected vendor and the reason for selection.
8.12.4 All unsuccessful bidders will be notified and the successful bidder will receive a contract of Purchase (Purchase Order)
8.12.5 In case where there is only one supplier/vendor who is capable of bidding (sole-source non- competitive) or only one qualified bid response, the successful bidder must sign Fair Price Declaration. This declaration by the vendor indicates that the price quote offered to the Curia is the lowest price offered for similar products and services under like conditions offered by the vendors’ most favoured supplier. The declaration gives the Curia the legal opportunity to audit the vendor’s records if requested at no charge to justify the bid price submitted.
8.12.6 Comparative Quotation Chart (CQC)
a. The Accounts Office will ensure that the quotations received state the specifications of the goods and services, the price validity, guarantee/warranty on equipment together with delivery details. Quotations received will then be summarized on a Comparative Quotation Chart (CQC). This Chart is useful for comparing the prices, specifications and delivery time of the different potential vendors.
b. The Accounts Office will make a written recommendation on the CQC, on which vendor is preferred and for what reasons. Valid reasons or vendor selections are as summarized below:
8.12.7 In some cases, it may prove cost-effective to split a large order between several vendors who may quote the best for different parts of the order. The decision to split an order should balance the price gains against the additional paperwork that would be required and a sensible judgment should be made
8.12.8 The CQC must be approved by a different person from the person making the recommendations. Approval levels for vendor selections should follow the guidelines on the Signing Authority.
8.13 INTERNATIONAL PROCUREMENT
Where time allows and where significant cost savings may be realized, the Curia may seek quotations or tender bids from suppliers outside Malawi. International suppliers may be contracted directly by the Curia.
8.14 USE OF DEALERS, SOLE SUPPLIERS & SUPERMARKETS
a. In the interest of ensuring quality, reliability and timelines, the PO may establish purchase agreements, Standing Offer Agreement or contracts with main dealers of regularly purchased goods. Where possible, the agreement should bear set prices but where that is not possible due to other factors, and then the procurement office will negotiate rates and discounts with the supplier or a method to determine price for invoice justification.
b. In such situations, the PO will not be required to prepare a comparative quotation chart for each purchase. Examples of such dealers are vehicle part dealers.
c. These agreements and prices [net of discount] should be reviewed annually to ensure that they are competitive.
d. For general suppliers like beverages, cleaning detergents and other low cash value standard suppliers, Departments may buy from the main supermarkets or other smaller supermarkets with similar prices – through the PO.
8.15 CONTRACT WITH VENDORS
a. In order to protect Curia’s and its donors’ interests it is imperative that legally binding contracts are signed between the Curia and vendors for all procurements of significant value. Contracts serve to confirm all details of business transaction between the Curia and vendors.
b. Contracts should include all information regarding the goods and services being procured as well as standard terms of delivery, payment and arbitration of significant value. If contracts are precise and clear, possibilities of disputes will be reduced and the Curia will stand a far greater chance of receiving the goods and services as expected.
Upon selection of a vendor, a contract or work order should be drawn-up for the goods and services in question. The standard contracting procedures described below should be followed for all procurements except where particular donor requirements differ from the standard set procedures. In such exceptional cases, the donor’s contracting requirements should take precedence.
8.15.3 Contracts by Contract Purchase Orders:
a. Contract Purchase Order [CPO] will be used as a legally binding contract that must be signed by both parties prior to procurement and which contains all terms of procurement, payment, delivery and arbitration.
b. In preparation of CPOs it is important that as many details as possible should be included. Detailed specifications, quantities, unit prices, total prices, delivery deadlines, locations and payment schedules must be specified.
c. The CPO is one of the most important documents. In addition to including information on specification, quantities and prices, the CPO should have spaces for project and accounting information, vendor names and addresses, delivery information and signatures by both the vendor and the Curia.
8.15.4 Contracts by LPOs
a. LPO is a document that is used to confirm procurement intent to vendors. It is only signed by the Curia and contains basic information on price, specifications and delivery. The LPO provides an important auditable record of the transaction.
b. LPOs are serially numbered and are printed in the quadruplicate of different colours, with distribution as follows:
i. Copy 1 [white] for the vendor
ii. Copy 2 [pink] returned to Curia by the vendor with delivery notes and invoices.
iii. Copy 3 [green] to the Accounts Office for their suspense file of commitments.
iv. Copy 4 [blue] to the sequentially numbered LPO master file.
a. The LPO and CPO can be computer generated with the use of an appropriate package in place.
b. The original copy of the local purchase order [duly signed and stamped] should be sent to the supplier while the duplicate copy should be retained in the accounts office.
8.15.5 Lease & Services Contracts
For special procurement items such as property leases, telephone line lease, etc. vendors may require contractual documents that differ from the Curia’s standards. This is acceptable although not advisable where Curia interests are not adequately covered by the documents in question. Legal consultations should be considered where the Vendors Terms and conditions of the Contract are not fully understood.
8.16 ORDER FOR RECURRING REQUISITION
8.16.1 For any procurement of a recurrent nature, i.e. where the same goods and services may be used several times a year, one vendor may be selected for a period of up to one year. It is suggested that the Curia financial year should be the normal period for such vendor selection.
8.16.2 In some cases, particularly for services, contracts for the goods or services can be drawn up once, which may then be referenced every time those goods or services are required without requiring separate quotations and contracts on each occasion.
In other cases, particularly for regularly purchased goods, vendors can be selected once, but separate contracts drawn up on each occasion the vendors are used. The limitation of these arrangements is that the prices and other terms of the quotations and contracts must remain the same in order that the same quotation or contract may be used on different occasions. The Curia should also impose a maximum period i.e.; one year for contracts and “quotations to remain valid.”
[Note: In some cases it might not be possible for the quotations to remain valid due to changes after the National Budget has been read in July every year]
8.16.3 Good judgment is to be exercised to separate the purchase of small office supplies where competitive bids may not be cost-effective from large purchases where such bids are mandatory.
- CERTIFYING DELIVERY OF GOODS AND SERVICES
8.17.1 Purpose of the Delivery Certification Procedure
a. The procurement process cannot be completed without certification that the goods and services procured have been received entirely to the Curia’s satisfaction, in particular to the satisfaction of the Requisitioning Departments. The procedure for receiving goods and services is, therefore, important in ensuring that vendors have entirely met their obligations. Once the Curia has certified that goods and services have been received to its satisfaction, it has little further recourse to complain about a vendor’s performance; and payment can then be made.
b. In all cases, the certification of receipt of goods and services is a pre-requisite to the Curia’s payment to vendors. And it is the specific duty of the PO and the DA that this policy guideline is adhered to at all times.
8.17.2 Delivery – taking Procedures
a. The Accounts Office is responsible for ensuring that goods and services are checked against contracts, waybills, invoices or delivery notes. These documents will be verified by the Accounts Office when processing payment. The Accounts Office will avail the CPO or LPO to the Requisitioning Department at the time of delivery which will facilitate the receiving and checking of goods and services whereby the receiving person will have to sign the delivery notes or any other documents during delivery. Physical checking should be done by the Requisitioning Department and not by the Accounting staff.
b. In some cases, receiving of goods and physical checking of goods or services may be delegated to other Curia officers who are authorized by the DOFIA. Such might include cases where goods or services are delivered directly to a project field location or where specialist technical certification is required.
c. Any differences between document and physical checks should be noted on the documentation concerned. All procurements must be checked and certified by the Accounts Office or its designate prior to forwarding the goods or services to their destination. The responsibility for preparing payment lies with Accounts Office. However, the PO should verify that the goods and services have been received to the Curia’s satisfaction before the documents are forwarded to Accounts Office to effect payment. The value of the goods should not differ from the amount on the CPO or LPO.
d. In cases where the value of goods differ from the amount on the CPO or LPO, an explanation in writing by PO should be attached to the payment processing documents and counter-signed by the Head of the Requisitioning Department and any other respective senior officers as applicable
8.17.3 Payment- processing procedure
a. The recipient Department is responsible for filling the Cheque Request Form, which it then forwards to the PO for checking. The document is then forwarded to the Accounts Office for further checking and necessary approval and authority to pay.
b. Vendors should be paid for the goods and services they provide in a manner that best protects the Curia’s interests. As far as possible, the Curia should pay a vendor when all goods and services have been received. This protects the Curia from loss caused by possibility of low quality/quantity of goods.
c. Pre-paying vendors [Prior to complete receipt of goods/services] is strongly discouraged and the normal Curia procurement terms should be payment within specified period of say thirty days after delivery of the goods or services. In such cases, where the vendor’s case is justified, the Accounts Office should negotiate for the best possible terms. This might include partial pre-payment upon presentation of a vendor’s proforma invoice and then signed CPO, with final payment reserved after all the goods or services have been received.
d. The CPO must clearly state the payment terms for all goods and services. Vendors who frequently supply the Curia should be asked to provide credit terms and encouraged to submit invoices along with goods [or other appropriate period e.g. monthly].
e. All Cheque Requests, except those for pre-payments should be accompanied with original Delivery Notes and Invoices and the correct copies of CPOs and LPOs. The Accounts Office will audit the Cheque request form and its attached documentation for accuracy and conformity with procurement and accounting procedures and budgets, etc. The Accounts Office should prepare an accompanying form to the cheque: fill-in the cheque number, date and bank account information and sign as ‘Audited’ the cheque request. The cheque should be dispatched to the vendor with an accompanying receipt form for return to the respective department.
f. The following documents are required in the process of procuring and receiving of goods and services by the Curia, and they should be finally filed by the Accounts Office:
a. Procurement requisition [PR] duly approved as per the authority level. It should show the estimated amount for the goods and the fund code, project name or title to be charged,
b. Quotation [s],
c. Comparative quotation chart [CQC],
d. Contract Purchase Order [CPO],
e. Delivery note which shows the list of goods received,
f. Invoices, which list of items or goods and their prices as per the CPO.
8.17.4 Business principles
The Curia insists on honesty, integrity and fairness in all aspects of the business relationships with all suppliers. Direct or indirect offer, payment, soliciting and acceptance of kickbacks /bribes in any form are unacceptable practices.
a. All Curia staff as well as those working for various Units and Projects of the Dioceses shall sign the Anti-Fraud Policy of the Diocese of Karonga.
FIXED ASSETS POLICY
The Diocese invests in various assets to meet its operational requirements. These assets are in the form of land and buildings, motor vehicles, Information Technology software, hardware, communication equipment, office equipment, furniture, fixtures etc.
Given the high value of these investments it is necessary to have a fixed asset policy, which governs the recognition, procurement, disposal, maintenance, custody and accounting of the organisation’s fixed assets.
Any fixed asset item which is acquired at a cost exceeding US $ 10,000 should be capitalised and held as a fixed asset. Any item whose cost is below US$ 1000 should be expensed off in the year it is purchased, even if it is expected to be used for a period of more than a year.
Each unit should review and assess the condition of the various assets held at the end of every financial year. The Units should also take cognisance of any new programmes planned for the New Year and the material resources required to implement those programmes.
Assets that need to be purchased are then identified and budgeted for. Once the KDFC has approved the budget; the Accounts Office should communicate the approved budget, including capital expenditure, to the Units entitling them to arrange such procurements.
In case of unbudgeted procurements, approval must be obtained as indicated in the budgetary controls section.
When making procurements of fixed asset items all Units of the Curia should ensure that:
a. Wherever applicable procurements are made from authorised dealers. As far as possible the Accounts Office is involved in negotiating procurement and after sales service terms.
b. All procurements are supported by at least 3 quotations. In exceptional cases only such as specialised or limited vendors will less than 3 quotes be acceptable.
c. The authority to commit and incur expenditure should be in accordance with the limits set out in Section 2.
d. Final decisions will be made by the PTC.
e. All procurements should adhere to the laid down procurement policies and procedures at all times.
f. Annual maintenance contracts should be negotiated at the time of procurements.
Wherever appropriate or possible, adequate warranties should be obtained for items purchased.
Sale of assets can be approved as per authority chart (not including land & buildings).
Disposals exceeding US $10,000 should be acceptable for sale only after enough publicity has been accorded to it. Disposal value should be maximised where possible.
Valuations must be performed from professional valuers where applicable.
Where disposals have been made the DOFIA shall ensure insurance and maintenance contracts are cancelled.
9.1.5 Maintenance and custody
All original security documents of title including land Title Deeds must in the custody of the Bishop while motor vehicle log books must be in the custody of the DOFIA.
It is the responsibility of the Accounts Office to ensure that fixed assets are adequately and regularly maintained. The KDFC shall also ensure that all fixed assets are adequately insured.
The Accounts Office shall maintain a fixed asset register that agrees to the books of account at all times.
The DOFIA shall ensure a physical inventory at least once every financial year.
All Units shall ensure that intra-office transfer of fixed asset items are properly controlled, recorded and co-ordinated.
In accounting for fixed assets of the Curia, cognisance should be taken of the requirements set out in International Financial Reporting Standards (IFRS).
In particular, references have been made to IFRS 40 on Investment property, IFRS 16 on property, plant and equipment and IFRS 4 on depreciation accounting.
For all major investment undertakings, the Curia shall seek the advice of experts through the KDFC.
The experts will be expected to advise the Council not only on future investments but also on the sustainability of existing assets.
Risk is an important factor in investment decision-making. The KDFC shall, therefore, ensure that investments not only focus on returns but also the risk involved.
11.1 TAXATION BY CURIA
11.1.1 Value Added Tax
VAT is a consumption tax levied on virtually all goods and services supplied by businesses in Malawi.
The tax is administered under Act 7 of 2005 and businesses that qualify under the Act are registered and become known as taxable persons. At the time of writing these policies VAT is 16.5 %.
Heads of Department must fill in the relevant documents seeking VAT exemption for the applicable purchases.
The above is a salary tax. All persons earning above K45,000 are liable to pay. Tax will be deducted together with statutory deductions as per prescribed tax rates. All Departments must inquire from the Accounts Office if in doubt.
11.1.3 Corporation Tax
Corporation Tax currently stands at 30%.
To compute the tax certain expenses are excluded including, interest rate restrictions on foreign debt, depreciation etc. Donations, entertainment, office expenses and professional fees that do not relate to the business are also excluded.
The Diocese is exempt from corporation tax.
11.1.4 Withholding tax
This is advance tax deducted from all payments to professionals and professional organisation.
The tax framework also includes withholding tax where any CONTRACTED party providing services to us are liable to be deducted at source. The rates range from 4% for contractors and 10% for consultancy services. Different rates are applicable for non resident services.
11.1.5 Tax Remittance
The Accounts Office must ensure that taxes and statutory deductions are remitted in accordance with the tax legislation.
a) The HRO shall ensure that all statutory deductions are complied with every month.
b) The DA shall ensure that all taxes and statutory deductions are remitted every month. He/she is specifically responsible for ensuring that this policy guideline is adhered to.
12.1 INTERNAL AUDIT
12.1.1 There shall have an Internal Auditor responsible for the Internal Audit Function who although part of the Accounts Office shall report to the Bishop and the DOFIA depending on the gravity of matter at hand.
12.1.2 The Internal Audit Reports shall go directly to the Chairman of the Finance Council with a copy to the DOFIA.
12.1.3 The Internal Auditor of the Curia has the duty and authority to:
a. Carry out survey of cash and stores in any office of the Curia and to ensure that all the assets are well safeguarded.
b. Access any documents which he/she may consider necessary to examine with respect to information on cash, fixed assets or any financial decisions or financial transactions
c. Ask for information or clarification or raise queries with any personnel of the Curia in any rank with respect to his/her observations.
12.1.4 Correspondences from the Internal Auditor with personnel in the role of Internal Auditor shall be marked as “Internal Audit”.
12.1.5 It is mandatory that any Internal Audit correspondence, report, or query received from the Internal Auditor which requires a reply should be dealt with promptly and a reply furnished without delay. Where a final reply could not be given to each of the points raised, the reply should be made as quickly as possible giving information on those items that can be dealt with at once, and followed by the complete answers as soon as possible.
a. It is a serious professional misconduct to prevent or obstruct or ignore the Internal Auditor from carrying out his/her responsibilities and such misconduct shall attract disciplinary action.
12.2 EXTERNAL AUDIT
12.2.1 It is the responsibility of the Bishop through the KDFC to appoint reputable external auditors.
12.2.2 It is the responsibility of the DOFIA in consultation with the DA to arrange with the appointed External Auditor when annual audits should be carried out.
The DOFIA shall ensure that:
- a. All audit schedules as required by the External Auditor are prepared in time.
- b. Accurate and reliable financial statements are prepared.
- c. The External Auditor receives information and explanations necessary for audit.
- d. Corrective actions are taken, where applicable, regarding the Auditor’s coming.
- e. A Management Letter is served to the Management and that a reply to the letter will be prepared in time for discussion by the Curia.
12.2.3 The DOFIA will discuss the Management Letter in detail with the External Auditor and the Bishop and will ensure that corrective actions taken are communicated to the Auditor.
Payroll maintenance will be carried out by Accounts Office.
The payroll should be dispatched by 26th of every month.
All payroll adjustments will have a cut off date of 20th. Payroll will be completed and presented by the 25th of every month.
The DOFIA in collaboration with the HRO will provide all other guidelines with regard to administration of salaries; subject to agreements between the Diocese and its partners where applicable.
All vehicles will be comprehensively insured.
13.1.3 Archive of financial records
All financial records will be at the end of two years, moved from cabinets and securely sealed in cartons. All cartons must be safely kept in the stores. Access to these records must be approved by the Bishop and/or DOFIA. Financial records must be maintained for at least seven years.
13.1.4 Backups and Storage
The Accounts Office will have weekly backups of the accounting records.
All disks for backups will be stored in a physically different location from the Curia offices. The location is to be determined by the KDFC.
The DA in consultation with the DOFIA will develop security policies on data storage.
DEFINITIONS AND EXPLANATORY NOTES ACCOUNTING
Accounting is basically keeping track of financial transactions by recording of:
a. Initiative of the transaction,
b. The progress and,
c. The conclusion of the transaction.
d. The bits of records at each stage of financial transactions have procedures. The procedures are the integral parts of the accounting system.
e. The accounting system is the series of tasks in an institution by which transactions are processed as means of maintaining financial records.
f. The accounting system:
i. Recognizes a transaction,
ii. Posts the transaction,
iii. Summarizes the transaction,
iv. Reports the transaction.
DOCUMENTS COMMONLY USED
This acts as evidence that money has been received. Should be pre-numbered and pre-printed.
Miscellaneous receipt books are unacceptable.
This is evidence that goods have been delivered and received. Any Staff receiving goods must see and inspect before signing acceptance of the goods.
This is a demand to settle.
This indicates the state of account at a given time.
For journal entry to correct/reverse an existing transaction. Debit Note is also sometimes used to charge for services or goods provided to third parties.
Evidence that money has been paid.
N.B.: Vouchers should be pre-numbered and pre-printed.
Petty Cash Payment Voucher:
Evidence that money has been paid out of the petty cash.
Bank Pay-in Slip
Evidence that some money in cash, cheque, money order, etc, has been deposited with the bank.
N.B.: For any post office cheque [in case of money orders] a list of money orders constituting the cheque amount should be attached to the deposit slip.
Bank Statement file:
The statement shows the flow of transactions with the bank.
A sheet showing personal emoluments for the employees, both the earnings and deductions.
Statutory deductions/files – PAYE, NSSF, NHIF.
Files for the different categories of deductions required by government regulations.
Schedule/list of funds received by the organisation. These include:
i. Rental income schedule
ii. N.H.I.F. recovery register
Requesting for supply of goods and services
- Goods Received Note [GRN]
An important document for storekeepers in recording the supplies received.
- Bank Correspondence Files
Showing correspondence between the institution and the bank
- Lease and rental agreements file
A file of all agreements on rentals and leases
- Cheques receipts and money orders register
A record of in-coming cheques and money orders
1. Bank Reconciliation Statement:
This is a statement that explains the difference which occurs between the bank balances shown on the statement issued by the bank at a particular date and the balance shown at the same date in the cash book. Such differences commonly occur due to timing difference in transmission of information from the customer to the bank and vice versa. For example, when a bank customer issues a cheque, the cheque is recorded in his books, the cash book. However, the cheque will only be entered into the bank ledger upon presentation by the payee for a payment at the bank, the customer’s cash book bank column balance, will read different with that of the bank.
The bank reconciliation statements shall be checked every week by the DA. After reviewing a bank statement he/she shall sign and date that it has been so checked.
Importance of the bank reconciliation statement:
a. Check of accuracy: an accountant/bookkeeper can make an error. Bank can also make an error. Preparation of the statement reveals any of such errors.
b. Ensuring completeness: There is an assurance that all transactions are recorded and accounted for. Peculiar entries are also identified.
Negligence in reconciling exposes the customer to the risk of losing money. Such negligence, especially by the DA, and any assigned officer, shall not be tolerated.
It is the singular responsibility of the DOFIA to ensure that the DA keeps reconciliations of Diocese accounts up-to-date at all times.
2. Aged Lists of Debtors and Creditors
Debtors are customers and/or third parties owing some money to the institution. Creditors on the other hand are suppliers and service providers that the institution owes money. Aging is the classification on time basis, of the length in existence. The aging is normally current 1-30 days, 30 – 60 days, and over 90 days.
a. Debtors Age List:
i. The Debtors Age List shows individual debtors, amount owing and the length of time since due. Internal debtors refer to personnel and officers of the organisation with outstanding repayments on loans or advances or outstanding returns on imprest received. This listing is very important particularly in debt collection and credit control.
ii. A customer above 30 days is not worth credit facility.
iii. Poor debt collection is a serious lapse in financial management.
b. Creditors Age List:
i. The Creditors Age List shows individual creditors, amount owing and the length of time since due. The list communicates to the management their efficiency in settling debts and to some extent their strength on working capital base.
ii. It is illegal to hold debts over a period of 90 days.
N.B.: Interest on the debt starts to accrue from 90 days onwards at Central Bank rate.
3. Trial Balance.
This is a list of the balances contained in a complete set of books, showing debit and credit balances in separate columns. The summing to the same total of each set of balances is an important verification of arithmetical accuracy of the records.
The Trial Balance is frequently used as a summary of a set of books from which to prepare the final account. It is important to ensure that the trial balance contains
i. Fixed Assets
ii. Accumulated depreciation
iii. Debtors and Creditors
v. Capital and various funds if any
4. Income and Expenditure Statement
This is the inflow of wealth accruing to the organisation over a period of time. It is taken to be a measure of organisation’s health.
This is the amount of cash/credit disbursement. It is globally categorized into two:
i. Revenue/Recurrent Expenditure
The expenditure incurred in activities to purchase goods and services that are consumed immediately.
ii. Capital Expenditure
Expenditure that is incurred in purchasing assets which give a benefit extending over a number of accounting periods of time in activities of a non-profit-making institution.
- c. Surplus and deficit
The excess of income over expenditure is a surplus while the vise versa is a deficit. It is an important statement in that the management can assess the financial health of the organisation over a period of time.
5. Management Accounts:
a. This is an area of accounting concerned with the provision of information for the use of Management. It is concerned with the performance of small segments of an institution.
b. Management accounts gauge the Management on progression and realization of their plans. It is merely comparison of the budget estimates with the actual performance of a particular vote-head over a certain period of time.
c. For these accounts to be useful, the administrators should facilitate preparation of activity budgets. The activity budgets should then be quantified and a financial budget drawn. Since those activities will not be done all at once, the annual budget should be split into twelve months, with each month providing for activities attached to it.
d. At the end of each month, a statement of income and expenditure shall be prepared. This represents the actual performance. The Budget and actual performance report shall be given to the Bishop.
e. he actual performance should be compared with the budget to establish the extent at which the Management plans are implemented. The difference between the budget and the actual performance are the variances. A variance above 15% on either side [-negative/positive] requires explanatory notes.
f. The importance of this statement is evaluation, through comparison of the budget and actual. A variance signals to the Management of timely appropriate action.
g. Management accounts should be presented to the Curia monthly and to the KDFC quarterly. It is the specific duty of the Diocesan Account to prepare Management accounts and specific responsibility of the DOFIA to ensure that this policy guideline is adhered to at all times.
6. Balance Sheet
a. This is a Financial Statement of position at a specific date. It consists of a list of assets and liabilities including the capital as at a certain date. It is referred to by many as photo image of an institution on a sheet of paper.
b. It is important in that the Management can be able to see the position of the institution in terms of the organization’s strengths and weaknesses on a sheet of paper.
c. It is the specific responsibility of the DA to ensure that the Curia’s balance sheet is produced every month.
7. Projected Cash-flow for the next month
The Projected Cash-flow for the coming month is a statement showing the inflow and outflow of money in the month following the report. This is an important statement especially in short-term investment decisions.
The Management is able to establish any idle cash [that is not in immediate use] and hence can be invested in short-term cash investment.
Bearing in mind that organizations are now heading towards paperless procedures, the Curia hopes that most of the below processes will be automated.
However, as a starting point and to prepare a reliable foundation the manual documents to be maintained include:
a. Petty Cash
b. Cash Payment vouchers
c. Purchase Requisition forms
d. Local Purchasing Order
e. Stores Requisition
f. Goods Received Notes
g. Travel Expense Forms
As mentioned before, the purpose of this Finance Manual is to provide Diocesan Departments and affiliated Units with direction and guidance in connection with those accounting transactions, procedures, and reports that should be uniform throughout the Curia. While all the policies and procedures contained in this manual are binding and of equal importance, some deserve to be repeated here because of their unique importance:
1.3.1 The Curia attaches great importance to the financial function. This consists essentially of:
a. Budgeting and budgetary controls.
b. Control over income.
c. Control over expenditure.
d. Control over assets.
e. Recording procedures.
f. Financial reporting
g. Financial audits.
When making procurements of fixed asset items all Units of the Curia should ensure that:
a. All procurements are supported by at least 3 quotations. In exceptional cases only such as specialised or limited vendors will less than 3 quotes be acceptable.
b. Final decisions will be made by the PTC.
c. All procurements should adhere to the laid down procurement policies and procedures at all times.
8.4 SEPARATION OF DUTIES
There shall be proper separation of duties between:
a. The person who orders a particular purchase from a vendor,
b. The person who certifies that the goods supplied are satisfactory,
c. The person who accepts the goods into the store, and
d. The person who authorizes payment and issues Cheques.