1 / 38

ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1). Decentralisation and De-concentration: Financial Management for Externally Financial Decentralized and De-concentrated Project in Kingdom of Cambodia.

minna
Download Presentation

ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Decentralisation and De-concentration: Financial Management for Externally Financial Decentralized and De-concentrated Project in Kingdom of Cambodia Day 2: Oct. 25, 2010: Bank Accounts, Petty Cash & Advances

  2. Day 2 CASH AND BANK ACCOUNTS Content ADB Grant No.0133-CAM/Component 1: PFMRD

  3. BANK ACCOUNTS ADB Grant No.0133-CAM/Component 1: PFMRD 3

  4. 1. Bank Account Operations For donor funded projects and programs, such as those funded by the ADB and WB, separate bank accounts are maintained for the ADB/WB Loan/Credit/Grant funds and for the RGC Counterpart Funds. Names of bank accounts: : : ADB Grant No.0133-CAM/Component 1: PFMRD 4

  5. 1. Bank Account Operations (cont’d) ADB Grant No.0133-CAM/Component 1: PFMRD 5

  6. 2. Imprest/Special Accounts • Loan/Credit/Grant funds from the ADB/WB must be held in Imprest/Special Accounts, and these accounts must be used exclusively for the payment of project expenditures, as defined in the Loan/Credit and Grant Agreements. • Under no circumstances should funds from the Imprest/Special accounts be used to pay for expenditures that should be paid by the Government or other donors. • The Imprest/Special Accounts must be maintained at the National Bank of Cambodia (NBC), or other approved financial institution, in the name of the borrower (usually the MEF of the RGC). • The MEF may then delegate authority to the EA/IA to carry out transactions covering project expenditures. ADB Grant No.0133-CAM/Component 1: PFMRD 6

  7. 2. Imprest/Special Accounts (cont’d) • The Imprest/Special Account will have an authorised allocation/ceiling, and an initial withdrawal advance, which are set out in the Loan/Credit/or Grant Agreements of the project. • The total amount of funds held in the Imprest/Special Account must not exceed the authorised allocation/ceiling. • All expenditures from the Imprest/Special Account must be by bank transfer or cheque, and may be in local or foreign currencies. • Cash disbursements are not allowed. • Project payments to a supplier for amounts in excess of what is stipulated in the Loan/Credit or Grant Agreement cannot be made from the Imprest/Special Accounts – Direct Payment procedures must be used in such cases. ADB Grant No.0133-CAM/Component 1: PFMRD 7

  8. 2. Imprest/Special Accounts (cont’d) • Applications to replenish the Imprest/Special Account must be submitted to the ADB/WB regularly, preferably monthly (but at least quarterly), or when the amounts withdrawn equal 20 percent of the initial advance, whichever comes first. • The policies and procedures for the replenishment of the Imprest/Special Account and for Commitment and Direct Payment procedures are set out in the Loan/Credit /Grant Withdrawal Chapter as well as in the ADB/WB Disbursement Handbooks. ADB Grant No.0133-CAM/Component 1: PFMRD 8

  9. 3. Second Generation Imprest / Special Accounts • Second Generation Imprest/Special Accounts may be opened with MEF’s prior approval at approved financial institutions to facilitate access to funds for projects which have geographically disbursed activities or activities/project components being undertaken by various agencies. • SGAs are widely used for decentralised and de-concentrated projects at the provincial level. • The conditions for setting up and operating Second Generation Accounts are set out in the Loan/Credit/Grant Agreements of the project. • Second Generation Accounts are funded from the main project Imprest/Special Account. ADB Grant No.0133-CAM/Component 1: PFMRD 9

  10. 4. Counterpart Funds/Project Bank Accounts • The Counterpart Funds/Project Bank Accounts must be maintained by the EA/ IA at the NBC, or other approved financial institution. • Replenishment and withdrawal applications are made direct to the MEF by the EA/IA, when approved funds are transferred from the Government's National Budget to the project’s Counterpart Funds/Project Bank Account. ADB Grant No.0133-CAM/Component 1: PFMRD 10

  11. 5. Authorised Signatories • All bank accounts opened to facilitate the implementation of decentralized and de-concentrated projects must have authorised signatories, who are approved by the MEF. • All cheques drawn on a bank account must be jointly signed by at least two cheque signatories. • In cases where ADB/WB funding is involved, the terms and conditions for the opening and operating of Project Bank Accounts shall be acceptable to the ADB/WB. ADB Grant No.0133-CAM/Component 1: PFMRD 11

  12. 5. Authorised Signatories (cont’d) • The authenticated specimen signatures of the authorized signatories are required to be submitted to the ADB/WB before any disbursements shall take place. • If there are changes to authorized signatories, the EA/IA and the Project Team has the responsibility of informing the ADB/WB of the changes, and must provide updated specimen signatures together with the relevant approvals for the change in authorized signatories. ADB Grant No.0133-CAM/Component 1: PFMRD 12

  13. 6. BANK RECONCILIATIONS ADB Grant No.0133-CAM/Component 1: PFMRD 13

  14. 6.1 Bank Reconciliations: Overview • Bank reconciliations involve reconciling the accounting record balance of a bank account as recorded in the project ledger, to the balance of the bank account as shown on the bank statements provided by the relevant financial institution. • In a few audit management letters of decentralised/de-concentrated projects, auditors have noted that at the provincial level, bank reconciliations are not performed on a regular basis. This is a serious lapse in control, which must be avoided. ADB Grant No.0133-CAM/Component 1: PFMRD 14

  15. 6.2 Bank Reconciliations: Key Internal Controls • Reconciliations must be conducted at least monthly for each bank account of the project. • Bank statements should be received at least once a month from the relevant financial institution. • Officers responsible for Project Bank Accounts must ensure that the monthly reconciliation of each account occurs within two weeks of the end of each month. • Each reconciliation must be checked and approved by one of the authorised signatories of the bank account, or the accountant of the project. • Reconciliations and supporting documents must be retained for management control and audit purposes. ADB Grant No.0133-CAM/Component 1: PFMRD 15

  16. 6.2 Bank Recs: Key Internal Controls (cont’d) • The Project Team/EA/IA must forward the approved monthly reconciliations to the EF/PDOF after the end of each month, together with copies of relevant bank statements and cashbooks. • Reconciliations must reconcile the bank statement closing balance to the ledger account or ledger/cashbook closing balance for the bank account, as at the end of the month. • All transactions shown on the bank statement must be traced back to the relevant cash transactions in the project’s accounting ledgers. ADB Grant No.0133-CAM/Component 1: PFMRD 16

  17. 6.2 Bank Recs: Key Internal Controls (cont’d) • Any differences between the two balances or in transaction amounts or items (e.g. unknown deposits or withdrawals) must be promptly followed up, and action taken to resolve the treatment of these differences. • Unknown transactions should be promptly reported to the relevant financial institutions for explanation and/or correction. ADB Grant No.0133-CAM/Component 1: PFMRD 17

  18. Bank Statement It is common practice for banks to send monthly statements to customers showing the transactions undertaken during the month. Bank statements can also be requested for a particular period. A bank statement is sent by a bank to itscustomers detailing: • The amount of cash (or overdraft) at the beginning of the month • Deposit made by the customer and on his behalf by others (i.e. credit transfers) • Withdrawals from the account by the customers and others he has authorized to take money (direct debits), standing orders given by the bank to pay certain amounts to specified peoples and bank charges and interests. • The amount of cash in the account at the end of the month. ADB Grant No.0133-CAM/Component 1: PFMRD 18

  19. Sample of Bank Statement ADB Grant No.0133-CAM/Component 1: PFMRD 19

  20. Sample of Bank Statement ADB Grant No.0133-CAM/Component 1: PFMRD 20

  21. Example of Bank Reconciliation Dollar, an accountant employed by the Sams Co. , is responsible for preparing the monthly bank reconciliation. The bank statement shows an ending balance for 30 September 2005 of $1,112.30, whereas the debit cash book balance was $805.15. In preparing the reconciliation Dollar investigates the difference of the two sums, the following items were discovered: • The cash book had been undercast by $90.00 on the debit side • Cheques paid in not yet credited by the bank amount to $208.20 • Cheques drawn mot yet presented to the bank amounted to $425.35 We need to show the correction to the bank book and show a statement reconciling the balance per the bank statement to the balance in the cash book. ADB Grant No.0133-CAM/Component 1: PFMRD 21

  22. Preparing a Bank Reconciliation ADB Grant No.0133-CAM/Component 1: PFMRD 22

  23. Cause of Differences Between the Balance on the Bank Statement and the Balance in the Cash Book ADB Grant No.0133-CAM/Component 1: PFMRD 23

  24. Petty Cash ADB Grant No.0133-CAM/Component 1: PFMRD 24

  25. Key Internal Control • This section deals with all aspects of petty cash management: • Limitation and authorization process for petty cash • What kind of expenses may be paid out of petty cash • Key internal control features in a good petty cash system • Setting up a petty cash advance • Actual use of petty cash. • Replenishing petty cash • Advances made out of petty cash and its treatment. • Timely liquidation of advances and closure of petty cash on Project completion. ADB Grant No.0133-CAM/Component 1: PFMRD 25

  26. Setting Up a Petty Cash Fund The petty cash fund is established by transferring a small amount of cash from the checking account, say $1,000.00, in the form of currency, to a person who is designated to be responsible for it – the petty cashier. The petty cash fund is set up by a check made payable to Petty Cash. The accounting entry to establish the petty cash fund is as follows: ------------------------------------------------------------------------------------------------------------------------------------------------------------------ Petty Cash ………………………………………... 1,000.00 Imprest/Special Account …………………………... 1,000.00 To establish a petty cash fund. • ------------------------------------------------------------------------------------------------------------------------------------------------------------------ Payments from the petty cash fund can be made only with authorization in writing. This writing authorization is called a Voucher. ADB Grant No.0133-CAM/Component 1: PFMRD 26

  27. Example: Replenishing the Petty Cash Fund Whenever the money in petty cash fund runs low, the petty cashier presents the vouchers to the manager who has the authority to replenish it. Assume that the following vouchers are presented for replenishment: ADB Grant No.0133-CAM/Component 1: PFMRD 27

  28. Example: Utilization of Petty Cash A check would be made out to Petty Cash for $301.90 and the various expenses represented by each of ADB Grant No.0133-CAM/Component 1: PFMRD 28

  29. Recording Petty Cash Transactions and Payments • The petty cashier must record and analyze all payments from the petty cash, using the vouchers and the supporting receipts. • The Petty Cash Payment Vouchers are documents upon which the petty cash book is written up. The vouchers will normally be given their sequential number in order of payment. • When money is received into the petty cash the amount entered as debit and when payments are made the total amount paid are entered as credits. ADB Grant No.0133-CAM/Component 1: PFMRD 29

  30. Ministry_____________________ Kingdom of Cambodia Project ID __________________ Nation Religion King Project Name _________________ EA _________________________ PCB/ _ _ _ _ PETTY CASH BOOK Debit ledger Petty cash Petty cash Petty cash Petty cash Date Ref no. Description balance debit credit acc. no. acc. no. acc. no. acc. no. acc. no. acc. no. advances 1 2 3 4 5 6 7 8 9 10 11 12 13 Balance brought forward Balance carry forward Total - transfer to ledger account at month end Petty Cash Book ADB Grant No.0133-CAM/Component 1: PFMRD 30

  31. Petty Cash Maintenance ADB Grant No.0133-CAM/Component 1: PFMRD 31

  32. ADVANCES • This section deals with cash advances that may be made from Project funds. • Cash advances are made from time to time out of project funds in situations where payments cannot be made through contracts or invoices. • Whenever cash advances are made, there must be good internal controls in place to ensure that funds are properly authorized and that advances are used for the purposes intended and that the advances are liquidated without delay. • The section also deals with procedures to be followed for advances to be made. • Timely liquidation of advances made out of project funds are critical. • The section provides examples of the sorts of advances and their treatment. ADB Grant No.0133-CAM/Component 1: PFMRD 32

  33. Cash Advances • It may be necessary to advance cash amounts to sub projects or PMU/PIU staff for required expenditure. • Details of the advance is recorded in the PCB/Imprest/Special Account based on the CPV/DV. • The entry is posted to the ledger accounts as follows: Dr. Project Advances 500 Cr. Imprest/Special Acc/Petty Cash 500 ADB Grant No.0133-CAM/Component 1: PFMRD 33

  34. Liquidate the Advance • To liquidate the advance, the Applicant must complete the Reconciliation of Amount of Advance (RAA) and attach any necessary supporting documentation (receipts, cash book). • The Accountant will prepare a GJ to liquidate the advance. • If the advance is over If the expenses incurred amount of expenditure: over amount of advance: Dr. Expenditure Account Dr. Expenditure Account Dr. Cash Account Cr. Cash Account Cr. Project Advance Cr. Project Advance ADB Grant No.0133-CAM/Component 1: PFMRD 34

  35. Liquidate the Advance ADB Grant No.0133-CAM/Component 1: PFMRD 35

  36. Example Liquidate the Advance • If the advance is over amount of expenditure: • Assume that for a $500 advance, vouchers are presented for liquidation for advance for $450 and $50 is returned. The applicant presented the liquidation of amounts advanced, of which the remaining $50 is deposited into the bank account. • The entry to liquidate the advance is posted to the ledger accounts as follows: • Dr PCB/Imprest/special account 50 • Dr Expenditure 450 • Cr Project Advance 500 ADB Grant No.0133-CAM/Component 1: PFMRD 36

  37. Example Liquidate the Advance • If the expenses incurred over amount of advance: • Assume that for a $500 advance, vouchers are presented for liquidation for advance for $550 and $50 is additional disbursement. The applicant presented the liquidation of amounts advanced, of which the paid more $50 from Petty Cash or the bank account. • The entry to liquidate the advance is posted to the ledger accounts as follows: • Cr PCB/Imprest/special account 50 • Dr Expenditure 550 • Cr Project Advance 500 ADB Grant No.0133-CAM/Component 1: PFMRD 37

  38. Cash Advances Cycle ADB Grant No.0133-CAM/Component 1: PFMRD 38

More Related