Developed on: November 2023

Approved by Executive director

Table of Contents                                                                                                              pages

1.      INTRODUCTION.. 4

2.      Vision. 4

3.      Mission. 4

4.      Values. 4

5.      Policy introduction. 4

6.      Policy scope. 5

OBJECTIVES. 5

FINANCIAL OPERATIONS & REPORTING REQUIREMENTS. 5

ACCOUNTING SYSTEM.. 6

7.1. CHART OF ACCOUNTS. 6

7.2. ANNUAL BUDGETING. 6

INTERIM BUDGET REVIEW.. 6

ACCOUNTING SOFTWARE. 6

FINANCIAL REPORTING. 6

DOCUMENTATION AND RECORD KEEPING STANDARDS. 7

ANNUAL AUDIT. 7

INTERNAL CONTROLS OVER FINANCIAL SYSTEM.. 7

INDEPENDENT REVIEWS. 8

BANK ACCOUNT. 9

NEW BANK ACCOUNT. 9

FIELD OFFICE BANK ACCOUNT. 9

BANK SIGNATORIES. 9

BANK FILE. 9

BANK RECONCILIATION.. 10

BANK RECEIPTS. 10

BANK PAYMENTS. 10

CASH. 10

GENERAL PRINCIPLES. 10

CASH COUNT. 11

TRANSFER OF CASH TO MAIN AND SUB OFFICESS. 11

CASH PAYMENTS AT MAIN AND SUB OFFICES. 12

CONTROL OVER MAIN AND SUB OFFICES CASH. 12

CASH TRANSACTION REGISTERS. 12

FOREIGN CURRENCY EXCHANGE. 12

ADVANCES. 12

PERSONAL ADVANCE OR ADVANCE AGAINST SALARY. 13

OFFICIAL ADVANCE FOR PROCUREMENTS AND TRAVELING. 13

PAYROLL. 13

Procurement 15

1.      Introduction. 15

Best value for money. 15

FAIRNESS, INTEGRITY, AND TRANSPARENCY. 16

ECONOMY AND EFFECTIVENESS. 16

Interest of Organization. 16

2.      Methods of Procurement 16

3.      Procedures for Procuring. 17

4.      Purchasing. 18

5.      Purchase Mechanism.. 20

Inventory. 23

1. INVENTORY. 23

2. THE purpose of inventory. 23

1.      Types of Inventory. 23

4. ORSTW property. 23

5   Stock (Expendable Inventory) 25

1.     INTRODUCTION

Organization for Research and Skills Training for Women (ORSTW) is a non-Profit, non-government and non-Political Organization working in Afghanistan since 2011 in field of research and skills training for women and men to build the capacity of men and women and shine their skills in different fields, (ORSTW) registered with Ministry of economic under registration number 2424.

2.      Vision  

To build a society free of discrimination, violence & corruption-where every inhabitant (male/ female) lives a promoted and peaceful life.

3.     Mission

To find out the social problems through a wide variety of researches, address the solutions, and eliminate all kinds of violence and discrimination to pave the way for a healthy society, and peaceful life and to improve the products, and vocational skills of the people.

4.     Values

 The following principles are valuable, trustworthy, and applicable to the organization, in addition, the organization suggest others to apply them:

Respect to human dignity

Honesty

Faithfulness

Hatred to all kinds of discrimination

Enthusiasm to peaceful life

Professionalism

Respect to organized laws and policies and Afghanistan

Transparency and accountability

Priority to youths and women

Assigning right people for duties coordination

5.     Policy introduction

The Organization’s Financial Management Policy describes the accounting policies, systems and procedures to be used by the organization. The Policy will cover the input, processing, output, control and distribution of financial data. It has been developed to set out the accounting policies and procedures that will:

• Ensure that the organization’s books of accounts are prepared to conform to sound accounting principles and practices.
•  Enable the management to obtain accurate and timely financial reports on monthly basis, thereby promoting sound financial management.
• Ensure correct and accountable use of funds and other resources. The approach used is in line with generally accepted accounting principles and organizations best practice reporting requirements.

6.     Policy scope

This Manual should be used across the organization to guide the handling of finance functions. It provides guidance on all financial procedures and reporting requirements.

The usefulness of any manual is in its applicability to provide guidance.  As the transactions of PREVENT evolve, diverse and increase, this Manual must remain relevant, therefore it is critical that management ANNUALLY review and revise this manual as needed.

7.     OBJECTIVES

ORSTW has the following objectives of on accounting system:

1.  To record and classify all transactions accurately and completely and in timely manner
2.  To maintain a complete record of all:

·        Revenues

·        Expenditures

·        Assets

·        Liabilities

3.  To report to donors on all required financial information as per their given requirements.

8.     FINANCIAL OPERATIONS & REPORTING REQUIREMENTS

One of the key principles underlying the work of the organization is that of accountability to donors. It should be the organization’s policy to maintain good accounting records based on Generally Accepted Accounting Principles (GAAP) for non-profit organizations, subject to different donor guidelines. The Executive Director and Finance Manager must be responsible for carrying out and implementing the policy.

Specifically, the Executive Director will adhere to the following internal controls:

• Written internal control procedures and systems used for day-to-day finance/accounting activities, travel and procurement processes, asset control, hiring/evaluation, etc. are required in each field office.
• All finance staff must have copies of policy and procedures, and any program or administrative staff affected by the policy & procedures must be oriented in their importance.
• The Executive Director must formally delegate (in writing) finance responsibilities and functions to finance staff to ensure segregation of duties and communicate (in writing) these delegations to staff in the office.

As a result of the funding structure and reporting requirements, there are multiple reporting requirements. Fundamentally, records must be maintained in a way to accommodate both (a) donor reporting and (b) organization’s reporting.

9.     ACCOUNTING SYSTEM

ORSTW is using the double entry accounting system for recording its transactions to reflect both the aspects of a transaction. Generally Accrual Basis of Accounting and Cash Basis is followed as well as the donor requirement has been followed by the Finance Department. Sometimes, a hybrid of both the bases is followed.

Fund Accounting Basis is also seen to be used in some organizations which imply that funds or grant income should be recognized as revenue to the extent of grant expenses incurred in given fiscal period and expenses should be recorded on Cash & Accrual basis. Thus, there will be no surplus and deficit policy applied while preparing the annual accounts.

All accounting transactions are recorded against specific fund (grant). The regulations in respect to allowable expenditures and financial reporting are specified by the individual donor agencies. Finance staff has a responsibility to ensure expenditures are recorded and reported in accordance with the specific donor regulations.

9.1. CHART OF ACCOUNTS

   ORSTW is developing a standard Chart of Accounts (COA) system suitable to its size and in line with its program activities. The standard chart of accounts is the foundation for general ledger, and therefore, the basis for the ORSTW accounting and financial reporting system. For the purpose of consistency the chart of accounts was developed by organization’s Main and Sub Offices in Jalalabad and all field office and Central office maintains the same chart of accounts. Any change to the chart of accounts is required to be approved by the head of finance department at the Main and Sub Offices.

9.2. ANNUAL BUDGETING

ORSTW is developing every year operating budget for its operational activities in line with the standard chart of accounts. The operating budget should be developed by incorporating budgeted figures from each section or department of the organization for relevant activities. After finalizing and combining departmental budgets into one operating budget the management should get it approved from the Board of Directors.

New project budgets has been approved by the head of finance in consultation with program department keeping in view the annual budget figures and finally sent with the proposal after green signal from the top management.

9.3 INTERIM BUDGET REVIEW

The finance manager or head of finance of ORSTW is reviewing the operating budget on periodical basis at least quarterly and update it for any new project budget(s). The review should cover the comparisons of first budgeted figures with funds raised and any portion which needs more fund raising.

9.4 ACCOUNTING SOFTWARE

ORSTW is using Excel spreadsheet up now but is trying to find a donor who would like to fund us in buying QuickBooks software for our organization.

9.5 FINANCIAL REPORTING

ORSTW management set a financial reporting calendar or schedule which has been followed up on regular basis. The schedule includes deadlines for monthly reporting from Main and Sub Offices, consolidation of all financial reports and monthly Budget vs. Actual (BvA) reports to top management of the organization. This internal reporting will facilitate in meeting reporting deadlines set by different donors as well as work as decision making tool for the management.

9.6 DOCUMENTATION AND RECORD KEEPING STANDARDS

ORSTW financial activities and transactions are clearly and appropriately documented and recorded. Because ORSTW is responsible to donor for the management of its funds and assets so it has to keep evidence of all the transactions carried out. ORSTW designed a proper filing system to keep the original invoices pertaining to each transaction.

The filling system is as following:

-        Audit file

-        Bank statement

-        Budgets

-        Ministry of Finance (Taxes of Income and withholding )

-        Ministry of Economy (Reports , Letters , License )

-        Financial Reports

-        Salaries (Payroll , Pay slip )

-        Project Agreement

9.7 ANNUAL AUDIT

ORSTW has conducted annual audit of its accounts at the end of its fiscal year. It is the responsibility of the Board of Directors to appoint auditors who have relevant qualification and repute in the field of accounting and finance. The Board of Directors should also take remedial actions on any deficiency highlighted by the auditors during their work.

The external auditors are not responsible for the preparation of financial statements rather they only express opinion on the financial statements prepared by the management of the organization. Therefore, organization’s head of finance should ensure that preparation has taken place before the execution of audit. This preparation may include availability of:

·        Finally approved and/or submitted financial reports.

·        Final accounts including Balance Sheet, Income & Expenditure Account.

·        Detail of exchange gain and loss adjusted during the fiscal year.

·        Details of cash and balances, cash count sheets, bank statements and bank reconciliation statements.

·        Details of advances, receivables and prepayments.

·        Details of accrued expenses, provisions and other current liabilities.

·        Details of receivables from or payables to donors.

·        Inter-offices receivables and payables detail.

·        Vehicles and other lease documents.

·        Detail and copies of tax withholding and deposit thereof to Govt. treasury.

·        Detail of any income earned and/or received during the fiscal year.

9.8 INTERNAL CONTROLS OVER FINANCIAL SYSTEM

A system of internal controls consists of all measures used by an organization to safeguard its resources and ensure accuracy, efficiency and reliability in accounting and operating information. It is the responsibility of the organization’s higher management to design and implementing sufficient controls.

10. SEGREGATION OF DUTIES

Segregation of duties is the most important internal control that management can implement to safeguard its resources. Every financial transaction should involve five steps:

1. Request i.e., purchase request.
2. Approval i.e., authorized personnel approve request.
3. Authorization i.e., approval to purchase.
4. Execution i.e., purchasing, receiving and payment.
5. Recording i.e., accounting.

11. AUTHORITY LEVELS

Board of Directories designed the authorization level accorded to ORSTW staff. There should be two authorization schedules pertinent to approval of expenditure and payment:

·        The first schedule authorizes specified officers to make expense commitment for the purpose of approval of expenditure.

·        The second schedule authorizes specified officers to make, or approve cash or bank disbursements.

In order to safeguard “checks and balances”, the organization’s employee will only be authorized in one of the two schedule, i.e., commitment or disbursement. The organization authorization schedule defines the monetary level of authorization delegated by the organization to named organization’s staff members. This schedule covers all expenditure. The schedule may not be circumvented in any way. Purchases or payment may not be split or delayed to avoid obtaining the correct level of approval.

12. STANDARD AUTHORIZATION SCHEDULE

(The amount in table below is an example, the organization may change and alter the table and amount according to their own requirement)

Authority levels should be incorporated into the organizational chart. It is important to recognize that this is not static document but changes as new positions are added and as the size and scope of operations change. Employees assigned the authority to approve and/or authorize commitments or expenditures must;

• Be given written notification of their authority levels and limits. (This may be included in their job description).
• Be fully conversant with the required procedures and documentation that is required before approval can be given to commitments or expenditures.
• Depending on authority level, is knowledgeable of any specific donor conditions related to procurement or expenditures.

13. INDEPENDENT REVIEWS

The control features are all used in day-to-day processing of activities and accounting system. However, regardless of how good a system is, errors may occur and circumstances will change that may require changes in the control system.

To ensure timely identification of errors and the need for changes to the system, measures need to be taken in form of periodic independent reviews. For example:

• Head of finance should carry out visits of Main and Sub Offices finance sections to check whether main and sub- finance staff is familiar with financial policy and procedures and comply with all internal controls.
• Management should review monthly Budget Vs Actual Analysis (BVA) for analytical purpose.
• Annual performance evaluations should be carried out for all staff, utilizing a standard format and review process.
• On annual basis a formal review of financial policy & procedures should take place.
• Update policy & procedures manuals for any change brought into the systems.

14. BANK ACCOUNT

ORSTW open bank account for the funds it receives from its donors.

ORSTW management ensures proper controls over operation of such bank accounts to secure the organizational financial resources. Proper accounting controls will apply to ensure that the balances on the bank statements are reconciled with the relevant accounts in the General Ledger on a regular basis. In some cases the donor requires separate bank account for the management of its funds which the organization’s management should comply with. In the absence of any stipulation by the donor for separate bank account, the number of bank accounts should be limited to the minimum required to operate efficiently. An excessive number of accounts un-necessarily increase the work load of accounting. If the organization has any income generating activity then it should have a separate account for it.

14.1 NEW BANK ACCOUNT

The Executive Director should have authority to take the decision to open new bank accounts and such authority should be given by the Board of Directors in writing. The Head of finance will obtain and retain on files such a letter. The Managing Director should notify the Board at the next available meeting that an account has been opened, the bank at which it is held and the purpose of the account.

14.2 FIELD OFFICE BANK ACCOUNT

ORSTW has individual Field offices should be encouraged to utilize the local banking system to minimize the use of cash. The field office bank account should be opened after having due consultation with the head of finance in Main and Sub Offices (Jalalabad office).

14.3 BANK SIGNATORIES

The signatories of the bank account should be approved by the management. For each bank account there should be more than one signatory out of which one must be compulsory. Two people have authorization to withdrawal the cash from bank:

-        Director of ORSTW

-        Deputy Director

14.4 BANK FILE

The finance department should maintain separate file to keep bank statements for all the bank accounts. The file should also contain all the correspondence with respective bank.

14.5 BANK RECONCILIATION

Bank reconciliation statement for all accounts even if the activity in particular account is zero should be prepared on monthly basis by someone who does not have custody of funds. The bank reconciliation statement must be reviewed by supervisor and approved by the head of finance.

The preparer, reviewer and approver should sign the statement. Any discrepancies revealed during the reconciliation will be investigated and corrected promptly.

14.6 BANK RECEIPTS

• Each receipt should be evidenced by a proper deposit slip.
• Cheques received should be immediately deposited in bank.
• Bearer cheques should be crossed before depositing into bank.
• When cheque is received and deposited in bank or an amount is directly received in bank, Finance department should prepare Bank Receipt Voucher “BRV”.
• Photocopy of cheque should be attached with BRV.
• BRV is checked and verified by head of finance.

14.7 BANK PAYMENTS

• Bank payment must not be made before the payment is approved by person authorized as per authorization list.
• Bank Payment Voucher “BPV” is prepared by Finance department for each bank payment.
• Acknowledgement of the payee must be obtained on the face of BPV, or in case of a firm, acknowledgement should be received on that firm’s letterhead.
• Photocopy of each cheque should be attached to BPV along with original invoice.
• Finance assistant stamps as “PAID” all the invoices at the time of payment.
• BPV is then checked and verified by head of finance.

 14.8 CASH

Cash plays a key role in the organization’s operations, since the lack of banking services or the lack of acceptance of checks in certain regions may require that there be a sizeable amount of cash on hand. The Managing Director determines the appropriate division of responsibilities for cash, seeking to maximize the controls over cash given the limited number of staff that might be available to assume some of the duties. ORSTW is keeping a set limit of petty cash up to 5000 USD, if the amount increases than we transfer the amount through bank.

15. GENERAL PRINCIPLES

·        Wherever possible, the use of cash to make payments should be avoided in favor of non-cash method such as cheques or bank transfers.

·        Payments in cash should only be made on the basis of properly approved vouchers authorizing payment. The cashier should therefore need to hold a list of those people authorized to approve payments together with specimens of their signatures. The cashier should only release cash on production of a voucher properly authorized by a person on the list of authorized signatories, which he holds.

·        A signature (or thumb or finger print) should always be obtained from a person to whom cash is paid to evidence the fact that the disbursement has been discharged.

·        Similarly, where cash is being transferred from one location or department to another, a signature must always be obtained from the recipient when the cash is handed over to acknowledge responsibility for the cash transferred.

·        All offices should have an office safe. The safe must be kept in the office with one of the people with a key/knowledge of the combination (keys are preferred); the office door where the safe is kept must be locked and kept locked when not in use. The safe should neither be visible from outside nor kept in an area where there is high traffic.

·        Managing Director, in consultation with the Head of Finance, Administration and the main and sub Director should make an assessment of what the maximum amount of cash that can be kept in the office at any one time should be. The amount should include appropriate reserves for security and evacuation needs.

·        Whenever possible, payments should be made by cheque, not cash.

·        Cash disbursements for any reason must be disbursed by a single finance employee (a Cashier) formally authorized with that duty. In his/her absence, the Managing Director or Head of Finance may designate an alternate staff person to perform the disbursements.

·        Cash transactions should be limited to specified hours during the workday. Should the Cashier need to be out of the office for a day or more at a time, the Cashier’s keys must then be left with the Acting Cashier (a designate of the Managing Director). On the Cashier’s departure and return, cash counts must be conducted and signed by the Cashier, Acting Cashier, and the Managing Director or Head of Finance.

·        Petty cash expenses should be reconciled to cash either weekly or every other week.

16. CASH COUNT

ORSTW maintains cash fund in foreign and local currency, as required. The

Managing Director shall keep cash in the office at a minimum without impeding operations. As outlined below, all cash will be regularly counted and reconciled to the General Ledger accounts.

• A cash count must be done whenever money is transferred from one box to another, e.g., from the safe to the petty cash box.
•  Weekly or biweekly cash counts must be conducted at the end of the week’s last cash transaction period and signed by the Accountant and reviewed and approved by Head of finance in the presence of the Cashier.
• Weekly or biweekly cash counts should be performed and signed by the Managing Director in the presence of the Cashier or the accountant. The weekly count and the end of the month count must be carefully reviewed and reconciled to the General Ledger.
• If the volume of cash transactions is large per day then cash counts should take place on daily basis.
• The results of the cash counts must be documented and signed by the Head of Finance.

In addition, the Managing Director should conduct random, unannounced cash counts at least twice per month in the presence of the cashier or other finance staff person.

The Finance Officer (in the presence of the Cashier or accountant) must do the cash count on the last working day of the month. The final monthly cash count should be performed by the Managing Director (in the presence of a finance staff person).

All cash overages and shortages must be investigated, documented, signed by the

Managing Director or Head of Finance and the Cashier or Accountant and resolved as soon as they are discovered.

16.1 TRANSFER OF CASH TO MAIN AND SUB OFFICESS

• There is frequently a need for cash to be available in Main and Sub Offices to meet the needs of the organization’s operations.
• Monthly cash requisition should be sent to Main and Sub Offices, Regional Offices (RO) Finance Department at the beginning of each month. Monthly cash requisition should contain a detailed analysis of the requirements of the Programs or Main and Sub Offices. The requisition should be properly approved by the Program Managers, MAIN AND SUB Managers and head of finance.
• The head of finance before the approval should ensure that no advance shall be extended to the Main and Sub Offices unless the cash payment vouchers prepared at the Main and Sub Offices for expenses of preceding month have been received from the Main and Sub Offices.
• The finance department should try to transfer the amount through bank but if the banking channel is not possible then a cash transfer can be made.
• The RO Finance Department cashier will arrange collection of the required amount from the bank for onward transmission to the Main office. The finance officer will check the amount collected from the bank in the presence of the bank cashier. The cash drawn from the bank will be held in the safe in the Main and Sub Offices Finance Department until it is handed over to employees traveling to the region.
• Upon the receipt of fund, transferred through any of the above mentioned way, the receiving office should immediately confirm Finance and Administration Department/sections about the funds receipt.

16.2 CASH PAYMENTS AT MAIN AND SUB OFFICES

The cashier of Main and Sub Offices should prepare the cash payment voucher for project office expense and should get the approval of such vouchers from Main and Sub offices finance officer or Main and Sub head. At the end of each month all the cash payment vouchers should be transferred to the Regional where the vouchers should be checked and recorded in the system.

16.3 CONTROL OVER MAIN AND SUB OFFICES CASH

Designated person in the finance department should reconcile the cash of Main and Sub Offices against the cash balance in Regional records on quarterly basis and prepare cash reconciliation statement which should be checked and approved by head of finance.

17. CASH TRANSACTION REGISTERS

Separate cash transaction registers should be maintained for each bank account and general cash account. Separate cash transaction register should also be prepared for each currency, where more than one currency is used. Cash transaction registers should be updated daily for all receipts and disbursements. Cash transaction register entries should be supported by properly prepared and approved cash vouchers and documentation.

18. FOREIGN CURRENCY EXCHANGE

As the ORSTW deals with various currencies so it has to prepare exchange policies to be used for accounting purpose. The organization should dignify the reporting currency which in most of the cases is USD. The conversion of currency should be based on the actual exchange rate or monthly average rate (as notified by the central bank of the country or given by the donor).

All the foreign exchange conversions should be supported the following:

• Bank receipt showing US dollar amount and local currency equivalent amount and if possible the exchange rate.

ORSTW prepares detailed policy for accounting exchange differences.

19. ADVANCES

Advances are amounts of funds provided to employees so that they can adequately pay for business expenses. There can be two types of advances:

• Personal advance or advance against salary.
• Official advance for procurement or traveling.

20. PERSONAL ADVANCE OR ADVANCE AGAINST SALARY

This is a type of advance provided to an employee in case of emergency. ORSTW prepared a rule for salary advance. A typical rule can be as follows:

• Under normal circumstances an employee can avail advance to the extent of current period salary due. Such advance is to be deducted from salary of current month. Such advance can be approved by the head of finance within the given limits on simple advance form.
• In case of urgent need, an employee can avail advance 2 times of his/her monthly salary reimbursable on equal partial deductions from his/her monthly salary with in the period specified at the time of sanction of advance. Such advance can only be approved by the MD on a written application mentioning the need.
• During the probation period no employee is allowed to avail advance.

21. OFFICIAL ADVANCE FOR PROCUREMENTS AND TRAVELING

The following procedures are used for official advances:

• The employee who requests for advance fills in the Advance Form. One advance form is used for one currency. If one needs advance in more than one currency, then he/she fills in separate advance forms for each currency required.
• The Advance request form should be submitted to the head of finance. The said form should be accompanied by Budget/break up of amount requested dully approved by the immediate line manager.
• The head of finance shall certify that no previous amount is outstanding and that the activity proposed is within the budget.
• The request form after certification from the head of finance shall be submitted to the Managing Director or the officer assigned as the case may be, for approval.
• Competent authority has the final authority to accept or reject the request.
• The amount so requested shall, after the approval from the competent authority be paid to the employee by the cashier.
• The employee should within seven days of the activity submit the details of adjustment to the head of finance.

22. PAYROLL

The purpose of payroll procedures is to ensure that:

• Employees are paid in accordance with letters of appointment.
• Payments to employees are properly accounted.
• Salary advances are properly accounted for and recovered from salaries.

22.1 PAYROLL POLICY

• The contract should be made with the employees clearly specifying the time period.
• Salary, allowances and other benefits should be paid to employees according to the terms of the contract.
• All the contracts should be signed by the MD.
• Any change in the contract should be approved by the MD
• Tax should be deducted from the employee in accordance with the provisions of income tax law of the country.

22.2 PAYMENT OF SALARY

• The Finance department should prepare the salaries of the employees on the basis of attendance record or time sheets maintained by HR department and duly signed by the line manager of the employees.
• The finance officer should check the casting of the salary sheet and compare it with the budget.
• The finance officer should also check whether any employee have taken advance and then deduct the amount as per the terms of advance.
•  Once the payroll is finalized by the finance office then it should be approved by the head of finance and MD.
•  At the time of payment receipt acknowledgement should be taken on payroll slip from every employee receiving salary
• Tax withheld from the salaries of employees should be deposited in the treasury in accordance with the income tax laws in the country.

In case of payroll for Main and Sub Offices, head of the offices is responsible to send the salary sheet of all employees along with their attendance record to Regional finance department and the rest of the process is same.

23. Procurement

23.1 Introduction

"Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that ORSTW needs or may need to fulfill its strategic objectives".

23.2 Procurement Management

Procurement is one of today's fastest growing management disciplines, in terms of both managerial activity and strategic importance. Transparency and accountability is the major concern while procuring goods and services.

23.3 Objectives

There are four basic principles which should underlie procurement transactions of ORSTW:

1. Best value for money.
2. Fairness, integrity and transparency through competition.
3. Economy and effectiveness.
4. The interest of Organization and its stakeholders.

24. Best value for money

Application of the Best Value for Money” principle in the procurement process means selection of the offer/supplier which presents the optimum combination of factors such as appropriate quality, life-cycle costs and other parameters to best meet defined needs.

It is not necessarily the same as selecting the lowest initial price option, but requires an integrated assessment of technical, organizational, and pricing factors in light of their relative importance. Social, environmental, and strategic objectives defined in the legal agreement with the client should also be taken into account.

The principle of best value for money is applied throughout the procurement process in order to select the offer/product that most effectively meets the stated requirements of the end user. In order to obtain best value for money, one should:

• Maximize competition.
• Minimize the complexity of the tender/bidding process.
• Carefully establish the evaluation criteria.
• Ensure impartial and comprehensive evaluation of offers in a timely manner.

25. FAIRNESS, INTEGRITY, AND TRANSPARENCY

The organization should foster competition in all procurement processes to ensure fairness, integrity and transparency. There may be, however, exceptional circumstances when competition or bidding is not feasible or possible.

As competition is the basis for fair and transparent procurement, no restrictions should be placed on the competitive processes by limiting the pool of potential suppliers unless explicitly mentioned in the legal agreement with the client, or deemed to be in the best interest of organization.

.Fairness- implies being reasonable as well as impartial and treating all suppliers in the same way.

Integrity- relates to aspects of personal and institutional behavior including qualities such as honesty, truthfulness, impartiality, and incorruptibility.

Transparency- the unimpeded visibility and openness in all transactions – ensures that all information on procurement policies, procedures, opportunities and processes are clearly defined and made widely known and available. A transparent system increases the possibility of detecting any deviations from fair and equal treatment, and therefore makes such deviations less likely to occur. Transparency thus protects the integrity of the process and the interest of donors and other stakeholders.

“A transparent system has records open for inspection by internal and external auditors.”

26. ECONOMY AND EFFECTIVENESS

Economy and effectiveness refers to the extent to which the organization is successful in carrying out its procurement operations ensuring the right quantity and quality, at the right time and at the right price, and also the extent to which the overall costs in conducting the procurement process are minimized in the interest of the overall budget of the organization. Through economy implementing partner is protecting the interest of the donor/investor provider of money by ensuring procurement of reasonably priced products.

Effectiveness helps to ensure that the interest of the end user is met in terms of needs fulfillment.

Interest of Organization

Undertaking procurement in the interest of organization, means carrying out procurement operations in the manner that best enables organization to reach the general and specific objectives of the initiatives, as well as contribute to the organization’s overall mandate, without compromising the procurement principles and the Financial Regulations and Rules applicable.

27. Methods of Procurement

Goods or services acquired through one of the following options:

• Direct purchase from a company/supplier. This includes cash transactions, quick orders and cheque payments.
• Written quotation.
• Call for Expressions of Interest

27.1 Direct Purchase

Purchases less than $100 may be purchased to best advantage without quotations subject to the following conditions;

·        Rates should be reasonable and consistent with normal market rates for items of a like nature.

·        Requirements should not be split into components or succession of orders for the same goods or service for the purpose of enabling the goods or service to be obtained under the $500 limit.

·        Procurement should be approved by Finance Manager or MD.

27.2 Written quotation

For purchases greater than $500 at least three written quotations should be obtained subject to the following conditions:

·        Rates should be reasonable and consistent with normal market rates for items of similar nature.

·        Requirements should not be split into components or succession of orders for the same goods or services.

·        For purchases greater than $500 a minimum of two written quotes must be obtained and must be based on a written outline of specifications which has been provided to the suppliers. Purchase of this size should be approved by the head of the Organisation.

27.3 Purchases Over $5000.

Over $5000 consideration should be given to undertaking a Competitive Tendering and contracting process. This should include documentation of a written brief or outline of specifications for the purchase. Such purchases should be approved by the Director General/Managing Director.

28. Procedures for Procuring

For procuring goods first of all there should be a pre-defined value lists. If the value of any goods and materials is more than the normal authority than the goods or materials should be purchase through following procedures.

28.1 Normal Purchase

 When Purchase Value is Less than $500

 All purchases in this category could be obtained at the consent of first line supervisor through proper submission of the requisition and approval.

28.2 When Purchase Values is more than $5000

All purchases in this category should be obtained through following certain procedures. Firstly, requisition would be submitted to the accounts/finance section for the funds availability and verification for the goods and materials. As the requisition is verified by the accounts/finance department then the requisition would be placed to the Program Manager/Program Head/Director for approval. After approval a purchase committee will be formed by at least three members. The members of the committee will collect the price quotation from at least three vendors. Then a comparison statement (bid summary) of the collected quotations would be prepared. The statement would be analyzed for selecting the vendor based on lowest cost bidder and quality & supplementary services offered for the particular products or goods or materials. At this stage the comparison statement (bid summary) would be approved by the Director/Program Head.  After that procurement department would issue work/purchase order to the vendor. One copy would be kept for office maintenance. For following above procedures some forms are needed.

28.3 Emergency Purchases

·        Emergency generally occurs as a result of natural disasters like fire, flood etc or equipment breakdown.

·        There may also be other situations where it is not possible to comply with normal procurement procedures.

·        Emergency purchases require the approval from the director level or above.

29. Purchasing

29.1 Purchasing Controls: It is an objective of ORSTW to fully plan all project activities and procure all necessary materials in advance. Because of the restrictions and complexity of many donors' requirements for procurement, purchases should be done in consultation with the Administration and Logistics and Finance Managers. Purchasing must be done according to the procedures outlined below. Staff authorized to make purchase requests are responsible to plan purchases in advance and make sure that the funding sources are available. Purchase documents are pre-numbered to safeguard against any unauthorized use.

29.2 Capital Asset Purchase Authorization: The Administration and Logistics Manager and Finance Director prior to purchase must approve all capital assets purchases. In order to ensure compliance with all donor's requirements and for purpose of authorization by Director General/Managing Director  a capital asset is defined as having a unit which economic or useful life is more than one year and its cost is more than $.200/- . It should be noted in order to maintain standards and compatibility.

29.3     Revenue expenditures

Any type of expenditure which's utilities are ending within one year is called Revenue expenditure.

29.4     Purchasing in Bulk: In order to procure materials at the most favorable prices, purchasing in bulk quantity is encouraged provided the turnover of the item is predictable and is of high volume.

29.5     Conflict of Interest: No employee can be involved in a business deal with a business concern of his/her spouse, children and other immediate family members, or other household dependents. No employees can accept any kickbacks, commissions or any personal benefit of any nature. Any employee involved in such deals will be dismissed immediately for cause.

29.6     List of Authorized Personnel: For the purpose of smooth and quick purchase, the following personnel are authorized to approve the purchases up to the limit mentioned below: