Bangladesh Mahila Parishad - Norad

48RecommendationFund transferred to branches should be booked as an advance. Branch office willcontinue to maintain cash book and ledger. Every quarter it will send its usualstatement to Head Office. Head Office accounts will book expenses based onreports from branches and adjust advance to branch. As expenses are booked on thebasis of branch reports, financial statements would be more accurate and reflect trueexpenses of the project. Head office will also be able to monitor advance withbranches and keep only enough money in the bank to continue activities for a givenperiod.Cash Basis of Accounting instead of Accrual BasisIt has been observed that when a transaction takes place, it is not recorded in thebooks of accounts until the payment for transaction is processed. In other words,books of accounts are updated on cash receipts and payments basis rather than onaccrual basis. Accrual basis requires that a transaction is recorded on an ongoingbasis. For example, when procurement takes place and the item procured is receivedand all conditions regarding quality of the item is fulfilled, the organization mustrecognize its obligation to pay and book the amount payable as liability. Similarly,accounts receivable or assets procured would also be recognized as soon as the righton the assets has been established. Without accrual basis, financial statements do notrepresent fairly all assets and liabilities of an organization at a given date. At BMP,accruals are made only on annual basis at the time of annual audit. This is alsoreferred to as periodic accrual. Periodic accruals recognize assets and liabilities at theend of a period. It does not help management to make important financial decisionon an ongoing basis.RecommendationIn our opinion, BMP should operate on full accrual basis and book all expenses andliabilities as soon as the transactions take place. Similarly, income and receivableshould also be booked when an amount becomes due from another person or body.Full accrual basis of accounting will allow BMP to generate a financial statement atany given time, which is true, fair and reflect all assets, liabilities, income andexpenditure of the organization.One of the arguments in favor of cash basis is, reporting requirement of NGOAB.One must understand that even if accrual method is followed for general bookkeepingfunctions, it is quite simple to report expenses in cash basis.6.1.3 Control ProcedureWe have examined different control procedures of BMP and found specificguidelines for financial authority and responsibility. There is adequate segregation ofresponsibility between recording, authorizing, custody and execution of transactions.BMP ensures safeguards over access to assets and records, independent evaluationon performance and adequate documents and records. BMP’s financial managementmanual and HR policy was developed by external consultants in 2007. BMP is