Functional Safeguards - Financial Management
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- Lay down clear financial management policies, procedures and guidelines, and require strict compliance by staff, covering:
- designated authorities and financial limits for approving expenditures (e.g. procurement, maintenance, training), budget variations, payments or cheque signing;
- payment application procedures and required supporting documents; and
- policies governing entertainment expenditure and official overseas trips (e.g. official purpose, per-head limits, allowable expenses, reimbursement procedures and required documentation).
- Establish criteria, procedures and required supporting documents for reimbursement of expenses incurred by Board members and staff on entertainment, overseas visits, etc., to ensure expenses are justified and reasonable
- Segregate duties in financial management as far as practicable (e.g. fee collection, bank statement reconciliation, bookkeeping)
- Appoint independent staff to conduct random checks and internal audits to ensure compliance with financial management procedures
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- Produce at the beginning of each financial year a programme of activities and budget for approval by the Board (or Finance Committee)
- Include in the budget:
- itemised estimates of incomes and expenditures for the coming year, with previous year’s estimates and actual out-turn; and
- breakdown of expenditure estimates covering staff expenses (salaries, MPF, benefits, allowances), administration expenses (rent, utilities), and recurrent and non-recurrent expenditures (e.g. delivery costs, major renovation works)
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- Specify payment methods based on transaction amounts (e.g. by cheque except for petty sums)
- Ensure physical and computer security in the payment process (e.g. secure storage of blank cheques, receipts and official stamps; restricted access to accounting data; confidential passwords for bank account operations, changed regularly and when necessary)
- Set up a mechanism to detect and deter undue delay or double payments
- Control cheque payments by:
- using cross cheques marked "Account Payee Only" signed by at least two authorised signatories;
- requiring signatories to verify cheques against invoices before signing; and
- prohibiting advance signing of blank cheques; issuing cheques in sequence with void cheques stamped "CANCELLED" and retained for audit
- Ensure all payments are:
- supported by invoices with details of goods and services received and amounts payable, plus relevant certified records (e.g. delivery notes, records of short delivery or defective goods, service completion records); and
- checked and confirmed by responsible officers for accuracy; and processed within stipulated timeframes
- Establish a petty cash imprest system with control measures:
- designate a petty cash holder with set limit;
- release cash only upon written request with certified invoice or receipt;
- stamp "PAID" on original documents;
- require claimants to acknowledge receipt by signature and date; and
- disallow cash advances unless approved with proper justification
- Keep payment records and all supporting documents (e.g. purchase orders, invoices, delivery notes) in an orderly manner to facilitate checks and audits
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- Require Accounting or Finance Department to make periodic financial reporting to the Board and/or Finance Committee where applicable
- Review financial reports to ascertain reasonableness of incomes and expenditures (e.g. high-cost purchases compared with market rates) and reasons for significant deviations from budget or prior year; and identify significant changes in the balance sheet and require justifications
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- Appoint an independent internal audit team (permanent or ad hoc, depending on size and need) to conduct independent audits on high-risk operations (e.g. procurement) to ensure compliance with policies, procedures and funding requirements
- Appoint an external auditor approved by the Board or Audit Committee to conduct annual financial audits
- Ensure internal audit team and external auditor have direct access to the Audit Committee or Board
- Take necessary action on audit findings and recommendations, and document actions in minutes
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- Assign supervisors or independent senior staff, where resources permit, to conduct periodic checks on deposit slips and bank statements against cash register records; payment records and supporting documents; and accounting records against payment vouchers, to detect anomalies (e.g. unauthorised payments, irregular expenditures or split orders_
- Compile periodic financial reports on operations showing incomes received and breakdown of expenditures (e.g. staff, administration, procurement, publicity, transportation)
- Digitalise financial management processes where resources permit (e.g. financial information management system with workflow controls such as approval for budget variations, and security safeguards such as unique user accounts with password protection and audit trails)
