FINANCIAL

POLICIES AND
PROCEDURES

A practical training
manual
Version 2.0
Financial Policies and Procedures Manual

Distribution:
Name Title

Revision History:
Revision Date Description of Changes Requested By
0 16 December 2009 Initial Release
1 15 February 2010 Modify flow charts MDLF Management
2 24 May 2010 Change management fees MDLF Management

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 Financial Policies and Procedures Manual

Table of Contents

Introduction........................................................................................................................4
Budget and Cash Forecasts.................................................................................................7
Grants Management..........................................................................................................22
Cash Handling..................................................................................................................38
Procurement and Accounts Payable..................................................................................91
Fixed Assets.................................................................................................................... 102
Payroll............................................................................................................................. 126
Closing............................................................................................................................ 141
Reporting........................................................................................................................ 148
Structure and Jobs Descriptions......................................................................................171

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Financial Policies and Procedures Manual

Introduction
Welcome to the MDLF Accounting Manual
Welcome to the MDLF Financial Policies and Procedures Manual. Treat it well and find it
easy to use!
This manual incorporates, to the extent possible, the World Bank’s Financial Management
Guidelines, as agreed with all donors in the appraisal mission and the Memo of
Understand- ing. However, MDLF might use other procedures and arrangements required
by other do- nors if agreed with MDLF.

What is this Manual?

The Manual sets detailed guidelines for the Financial Department and its employees to
assist them in ensuring the orderly and efficient management and control of all program
resources, and to render proper accountability to all stakeholders. It is concerned with ef-
fective financial control over program assets, liabilities, funds, and expenditure together
with the systems required to account for the financial operations of the program. In sum,
the policies and guidelines convey procedures for sound financial management and admin-
istration of the Financial Department’s work. In specific terms, the policies and procedures
are designed to:
• Promote orderly, economic, efficient and effective operations consistent with program
objectives;
• Minimize and attempt to prevent and detect fraud and errors;
• Ensure accuracy and completeness of the accounting records;
• Facilitate timely preparation of financial information and ensure that financial
statements are fairly and accurately presented;
• Safeguard program assets; and
• Ensure compliance with applicable laws, financial policies and regulations.

Who should use this Manual?

Financial Department Staff are expected to be the main users of this Manual. However,
Managing Directors may find it useful when considering the financial implications of
enter- ing into a contract.

Do I have to implement all the procedures in this Manual?

The Manual is a guideline, however generally it is anticipated that users should follow the

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 Financial Policies and Procedures Manual

policies outlined in the manual, unless there is a justified reasons to depart from them. In
case of departure, proper approvals should be obtained and maintained.

How is it set out?

The Manual is clearly set out, with each broad area as a chapter heading. Each chapter
clearly explains its purpose, policy, and procedures followed by process maps in order to
facilitate quick references and understanding of processes.

What are the subjects and areas covered by this Manual?

This Manual covers areas that are deemed necessary for the MDLF Financial Department
in order to run their activities smoothly and properly. These areas are as follows:
• Budget and Cash Forecasts
• Grants Management
• Cash Handling
• Procurement and Accounts Payable
• Fixed Assets
• Payroll
• Closing
• Reporting

Who is responsible for ensuring these procedures are followed?

The Financial Department of MDLF is in charge of implementing this Financial Policies
and Procedures Manual. The Financial and Administrative Manager must review and
approve, if possible, significant deviations from the policies outlined in this Manual. All
employees at the Financial Department are expected to be familiar with and comply with
the policies and procedures set forth in this Manual. Further, they are also expected to be
familiar with the accounting and reporting policies.
The Audit Committee of the Board of Directors might appoint an internal auditor to make
sure that this manual is being complied with, as this is important for the Audit Committee
to discharge their duties.

How often and how will this Manual be updated?

There is no fixed schedule for updating this Manual. Updates will be carried out on an
ad hoc basis, when necessary, rather than on a certain timetable. Any significant revision
proposed to the manual should be approved by the MDLF Board of Directors upon recom-
mendation by the Financial and Administrative Manager to the General Director.

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Financial Policies and Procedures Manual

Can we distribute or share this Manual?

This Manual is for distribution within the MDLF only. Copies should not be made
available to other individuals or parties outside the MDLF without prior approval from the
General Manager and the MDLF Board of Directors.

Where is the Accounting Policies and Reporting Manual?

An Accounting Policies and Reporting Manual has been developed as a separate docu-
ment from this Manual. The Accounting Policies and Reporting Manual sets out the basic
principles of International Financial Reporting Standards (IFRS). It states the standards
and guidance needed to be followed in order to produce financial statements that are in ac-
cordance with IFRS. It also includes the key principles of IFRS and sets out the basis for
the conceptual framework, which should be used as a point of reference by preparers of
financial statements in the absence of specific guidance.

The Organization of the MDLF Financial Department:

The MDLF Financial Department should be organized according to the following structure:

Board of Directors

General Director

General Director
of Operations

Administrative &
Financial Manager

Admin Assistant
Senior Accountant - Budgeting and
Gaza Financial Controller Senior Accountant F ancial Planning
i Specialist
n

Accountants
The structure can also be
found in the Organizational
Structure and Job Descrip-
tions section of this Manual.
Financial Department

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 Financial Policies and Procedures Manual

Budget and Cash Forecasts

The purpose of this section is to set responsibilities and requirements for budgeting and
cash projections in the MDLF.

I. Budget Preparation
Purpose
To have an adequate budget setting process in place, in line with the organization’s needs
and objectives.

Policy
Preparation:
1. Budgetary accounting is a management control technique employed to assist in
control- ling expenditures and in forcing revenue restrictions.
2. The budget shall cover both operating expenditures of the MDLF staff as well as grants
and disbursements.
3. Budgets should be prepared on annual basis but analyzed by quarter.
4. The first step in preparing the budget would be identifying the expected programmes
and disbursements to Local Government Units and the related grants and donations.
Based on that, management should prepare the budgeted revenues. Budgeted revenues
are mainly dependent on the calculated management fees. Accordingly it is based on
the budgeted programmes and the related disbursements to Local Government Units
(“LGUs”). Consequently, this Budget should be initially prepared by the Technical De-
partment in-coordination with the Financial Department.
5. Disbursements to LGUs are budgeted in accordance with the Transfer Mechanism, the
priorities and the needs of the LGUs and with a warrant presented to the MDLF by the
Board of Directors, and sets of the expected revenues from all sources (donors,
Palestin- ian Authority (“PA”) and/or etc…).
6. Disbursements to LGUs are not fully predictable at the time when the budget is
prepared. These disbursements will depend on several factors that will unfold over the
course of the budget year:
•The project proposals made by the LGUs.
•The actions of the MDLF Management for approving or rejecting LGU proposals.
•The decisions of donors, the PA and other contributors as to the amounts they would
provide to the MDLF and other restrictions they may impose on how their contribu-
tions to be used.

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Financial Policies and Procedures Manual

7. Accordingly, the budget for disbursements to the LGUs will need to be adjusted from
time to time during the course of the year.
Responsibilities
1. The Budgeting and Planning Specialist, acting under the direction of the Financial and
Administrative Manager, is responsible for collecting the needs from the department’s
heads for the MDLF operating budget. Further, he is expected to get all the needed
information from the Strategic and Planning Department for the MDLF disbursement
Budget to LGUs. Accordingly, this will enable him to prepare the first draft of the
annual budget.
2. The Budgeting and Planning Specialist is responsible for submitting the initial budget
to the Financial and Administrative Manager.
3. The General Director is responsible for proposing a budget to the Board of Directors.
4. The Board of Directors is responsible for approving the budget.
5. The General Director, with the assistance of the General Director of Operation and the
Financial and Administrative Manager, is responsible for administering the budget and
ensuring that funds are received and disbursed in accordance with the budget.
6. The General Director of Operations and the Financial and Administrative Manager are
responsible for monitoring actual revenues and expenditures by comparing them
against the approved budget.
7. The Financial and Administrative Manager is responsible for submitting the
relationship of actual revenues and expenditures to the budget for the following parties:
the General Director, the General Director of Operations, department heads and staff of
patterns.
8. The Financial and Administrative Manager is responsible for recommending actions
through the General Director to the General Director of Operations and department
heads and staff to ensure compliance with the budget.
9. The General Director is responsible to keep the Board of Directors informed of
patterns of actual revenues and expenditures and their relationship to the budget.
10. The General Director is responsible for recommending actions to the Board of
Directors to ensure compliance with budget or propose modifications if warrants.
11. The Board of Directors is responsible for monitoring compliance with the budget, for
formulating directives to the General Directors to ensure compliance, and for making
modifications, as needed.
Budget analysis
1. Within ten days after the end of each Quarter, a written budget analysis shall be per-
formed consisting of the following elements:
• Actual revenues and expenditures will be compared to budgeted amounts; both for
the current month and for the year-to-date (see formats below).

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 Financial Policies and Procedures Manual

• Significant variances will be noted and their causes determined.

• Recommended actions to ensure budget compliance for the remainder of the year
will be set forth.
2. The General Director will forward the quarterly budget analysis, in whole or in sum-
mary, to the Board of Directors along with recommended actions, if necessary.
Budget modification
The programme budget may require modifications during the course of the year. When
changes take place, the General Director should present a report indicating the significant
changes in the facts or assumptions underlying the current budget. If appropriate, the Gen-
eral Director should propose modifications in the budget to the Board of Directors.
Procedures
1. The Budgeting and Financial Planning Specialist should prepare budget format, tem-
plates and budget procedures.
2. The first step in preparing the budget would be identifying the expected programmes
and disbursements to Local Government Units and the related grants and donations.
Based on that, management should prepare the budgeted revenues. Budgeted revenues
are mainly dependent on the calculated management fees. Accordingly, it is based on
the budgeted programmes and the related disbursements to Local Government Units
(“LGUs”). This Budget should be initially prepared by the Technical Department in-
coordination with the Financial Department.
3. The Technical Department should prepare the programme budget based on approved
proposals submitted by municipalities and other related assumptions and expectations
for the coming year. The budget for each quarter will reflect the detailed specifications
for programme activities, schedules (including procurement plan), and expenditure on
quarterly programme activities. Furthermore, the budget should be prepared using the
Interim Financial Reporting (IFR) forms. Additionally, the Technical Department will
provide its own running cost budget similar to other departments as further detailed in
the next point.
4. The Budgeting and Financial Planning Specialist obtains the programmes’ budget from
the Technical Department and calculates the management fees.
5. The Budgeting and Financial Planning Specialist should prepare the revenues budget
ac- cording to calculated management fees and then he should communicate the
following with all departments:
• Assumptions,
• Budget procedures

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Financial Policies and Procedures Manual

• Budget Formats and templates

• Timetable and Key Dates
• Budget constraints (revenues are already budgeted)
6. Each department head should complete the assumptions and templates within the
stated timetable taking into consideration constrains provided. Each department head
prepare the budget for the department based on assumptions and technical aspects of
that depart- ment. For instance, the Human Resources department should take into
consideration the hiring, firing, and increases in salaries and number of employees.
7. The Budgeting and Financial Planning Specialist should collect the sub-budgets from
different departments. Further, he has to ensure the accuracy and completeness of the
summary budgets. Based on the collected information, the Budgeting and Financial
Planning Specialist should prepare the following detailed budgets:
• Revenues and grants budget,
• MDLF operating budget.
• Programme budget,
• Prepare Capital/investment budget,
8. The Budgeting and Financial Planning Specialist should prepare consolidated budget,
and communicate it to the Financial and Administrative Manager who should:
a. Review summary budgets:
• The Financial and Administrative Manager should review budget and assump-
tions against economic and business constraints;
• Ensure that relationships between grants, programme expenditures, and
operating expenditures are valid;
• Review capital spend and investment and Returns;
• Review growth of base business and new grants;
• Ensure that non financial measures are consistent with financial.
b. Agree accuracy and completeness of detailed budgets:
• Drill down into detailed budgets;
• Determine the major variables by quantity/value;
• Challenge the budget holders assumptions;
• Ensure that proposed investment is not exceeding targets and constraints in
achiev- ing proposed results;
• Amend detailed budgets.
c. Evaluate budget and assumptions against economic and business constraints:
• Review variances with targets and goals;
• Determine cause of variance;

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 Financial Policies and Procedures Manual

• Determine if targets are valid or amendment is required.

9. The Financial and Administrative Manager should provide his comments on the budget
to the Budgeting and Financial Planning Specialist, who should communicate these
com- ments to the department heads and adjust the budget accordingly. At this point
the bud- get owners/departments heads should sign on the detailed budgets and
assumptions,
10. After signing the adjusted budget, the Budgeting and Financial Planning Specialist
should signoff the budget and send it back to the Financial and Administrative
Manager,
11. The Financial and Administrative Manager should review and sign off the budget for
completeness and accuracy and correct consolidation if necessary, and deliver it to the
General Director of Operation for review.
12. The General Director of Operation should review the budget and submit it to the
General Director for approval,
13. The General Director should review and sign the budget before delivering it to the
Board of Directors for final approval.
14. The Board of Directors should discuss and approve the budget. In case the Board of
Di- rectors has any comments on the budget, management should perform the same
above procedure to address the Board of Directors queries.
15. After obtaining the Board of Directors approval, the Budgeting and Financial Planning
Specialist should communicate the approved budget to all departments.
16. The Senior Accountant should prepare monthly comparison between the actual and
bud- geted amount, and submit it to the Budgeting and Financial Planning Specialist,
17. The Budgeting and Financial Planning Specialist should approve the variance report
and submit it to the Financial and Administrative Manager for approval,
18. The Financial and Administrative Manager should :
• Identify key variances against budget and forecasts by comparing actual perfor-
mance reported with budget KPI’s
• Investigate all key variances,
• Substantiate with justifiable reasons,
• Ensure corrective measures in place to bring actual performance in line with finan-
cial targets and/or manage risk.
• Communicate the variance report with the General Director of Operation and the
General Director,
19. The General Director should communicate the variance with stakeholders such as the
Board of Directors and donors.
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Financial Policies and Procedures Manual

II. CASH FORCASTS:

Purpose
To provide guidelines for preparing cash forecast for MDLF request of a manual check.
Policy
1. Cash forecasts should be prepared on consistent basis to monitor and manage borrow-
ings and idle cash.
2. Cash forecasts is the responsibility of the Financial and Administrative Manager, and
should be reviewed by the General Director of Operation and approved by the General
Director.
3. Cash forecasts should be prepared by the Senior Accountant on a quarterly basis i.e.
(three months period), and should be submitted for donors upon request for advance
payments, on a semi-annual basis.
4. The Board of Directors should be updated of the cash status every Board of Directors
meeting, and when the shortage or idle cash is material.
5. All investments and borrowings for any amount should be approved by the Board of
Directors.
Procedures
1. The Accountant should generate from the accounting system all information necessary
to determine and identify cash sources as well as cash collection with due dates. Such
cash sources include accounts receivable collections, donors’ transfers and bank
interest income.
2. The Accountant should generate from the accounting system all information related to
cash requirements and cash payment dates. Such requirements include accounts
payable to vendors, payrolls, and all other payments.
3. The Senior Accountant should compare the information to prepare cash forecasts and
submit it to the Financial Controller,
4. The Financial Controller should verify that the information is internally consistent and
submit the forecast to the Financial and Administrative Manager,
5. The Financial and Administrative Manager should:
•Identify key variances against forecasts by comparing actual performance reported
with budget KPI’s
•Investigate all key variances,
•Substantiate with justifiable reasons,
•Ensure corrective measures in place to bring actual performance in line with finan-

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 Financial Policies and Procedures Manual

cial targets and/or manage risk.

•Communicate the variance report with the General Director of Operation and the
General Director
•Manage cash accordingly
6. The Financial and Administrative Manager in coordination with the Senior Accountant
should manage cash accordingly, as follows:
•Availability of cash when issuing checks,
•Invest idle cash in interest bearing accounts,
•Determine the needs to obtain short or long terms loans,
•Determine the amount of unearned revenue from management fees to be recorded.

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Financial Policies and Procedures Manual

Annexes:
Time Schedule

Actions Person responsible Date

Warrant sets out total revenue and allocations Board of Directors October 1
Prepare budget first draft The Budgeting and Planning October 15
Specialist with the assistance of
other Departments heads
Review budget with General Director The Financial and Administra- October 15
tive Manager/GDO
Submit budget to the Board of Directors The GD November 1
Making the modification needed by the BOD The Financial and Administra- November 15
tive Manager/GDO
Submit final draft to the BOD The GD December 1
Approve budget The BOD December 15

CASH FORCAST TEMPALTE

Cash Flow Forecast - Summary Variance Analysis

Forecast Actual Variance

Opening Cash Balance XXX - XXX
Cash Inflows
Total Cash Inflows Before Borrowings
Cash Outflows
Total Cash Outflows
Financing
Net Financing
Ending Cash Balance
Additional Comments:
Cash Inflows [Insert commentary on key drivers]
Cash Outflows [Insert commentary on key drivers]
Financing [Insert commentary on key drivers]

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 MDLF Budget Form
MDLF Budget For 2xx9

2xx8 Actual until Reallocation

Organization Expenses Budget Actual 2xx8 2xx9 Budget (Month) 2xx9 Remaining Budget
Code
Operational Budget

1.1 Basic Salary per year $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.2 Allowances $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.3 Severance Pay $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.4 Provident Fund $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.5 Health Insurance $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.6 Living Expenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
1.7 Bounces and Other Salaries expenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Total Personnel $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2 Running Costs
2.1 Telephone , Mobile and ADSL expenses and fees $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.2 Office Rent for West bank and Gaza Branch $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.3 Stationary and Toners $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.4 Water Expenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.5 Electricity $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.6 Fuel for cars $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
15

Financial Policies and Procedures Manual

2.7 Car Licenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.8 Car maintenance $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.9 Car Insurance $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.10 Hospitality $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.11 Internet Services, leased line and monthly fees $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.12 Promotional materials and website maintenance and development $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.13 Announcement and advertisement for procurement $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.14 Translation $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.15 Cleaning Material $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.16 Bank Charges $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.17 Hardware upgrading and accessories $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.18 Software Annual maintenance and upgrading $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.19 Training ,Memberships, Conferences and other staff development $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.20 Mail and newsletter distribution ,and other related expenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.21 Board of Directors per diem $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.22 International travel ( Per Diems ,Accommodations, Transportation, Tickets ) $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.23 Local Travel ( Per Diems ,Accommodations, Transportation, ) $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.24 Auditing ,Monitoring , Evaluation and Other consultancy Services expenses $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.25 Maintenance of equipment and other assets $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
2.26 Miscellaneous $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
 Financial Policies and Procedures Manual
General Insurance $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Total Running Costs $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
$ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Other Costs
3 Legal Advisor $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Total Other Costs $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Sub Total for Personnel ,Running Cost and Other Cost $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx

( Capital Budget )
Furniture:
4.1 Total Furniture West Bank and Gaza $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Equipment $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
4.2 Total Equipment $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Cars $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
4.3 Total Cars $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Software $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
4.4 Total Software $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Total Furniture, Equipment, MIS and Preparing new premises $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
GRAND TOTAL EXPENSES $ xxx $ xxx
5 Contingency $ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
Total budget $ xxx $ xxx
16

Reserved $ xxx $ xxx $ xxx $ xxx $ xxx

$ xxx $ xxx $ xxx $ xxx $ xxx $ xxx
 Financial Policies and Procedures Manual

Interim Financial Reports (IFRs)

Interim financial reports forms can be found as annex to “Reporting Section” of this
manual.

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Financial Policies and Procedures Manual

Process Maps:
Budgeting Process
 The Budgeting and
The Technical
Management Financial Planning
Program Budget Department
prepares the Specialist
prepares the
budgeted prepares budget
Programme
revenues format and
budget
templates

The Budgeting and

Financial Planning Specialist Each department head
obtains the programs' The Budgeting and
prepares the budget for the
budget from the Technical Financial Specialist prepares
department based on
Department and revenues budget according
assumptions and technical
accordingly calculates the to management fees
aspects of that department
management fees

The Budgeting and

Financial Planning
Specialist collects
the sub-budgets
from departments

Sub-Budget 3 Sub-Budget 2 Sub-Budget 1

The Budgeting and

Financial Planning
Specialist prepares
the following
detailed budgets

Prepare Capital/
investment budget MDLF Revenue and grants
Program budget
budget
operating budget

The Budgeting and Financial

Planning Specialist prepares
consolidated budget and
communicate it to the
Financial & Admin Manager

Consolidated
budget

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 Financial Policies and Procedures Manual

A NO
 The Financial & Admin
Manager reviews summary
budgets, agrees accuracy,
reviews budget and Agreed?
assumptions against
economic and business
constraints
YES

The Financial &

Admin Manager
provides his
comments to
Financial Planning
Specialist

The Financial Planning

The department heads Specialist
review and sign on to communicates the
detailed budgets and comments to the
assumptions department heads to
adjusts the budget

Adjusted budget

The Financial Planning

specialist signs off the NO
budget and sends it back
to the Financial & Admin
Manager

The Financial &

Admin Manager
reviews and signs off
the budget for Approved?
completeness and
accuracy

The Financial & Admin

Manager delivers the
NO budget to the General
Director of Operation YES
for NO
review and approval

The General
Director of
Operation delivers
Approved? YES
the budget to the
General Director for
approval

The General
Director delivers
the YES Approved?
B
budget to the
BOD
for final approval

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Financial Policies and Procedures Manual

B
NO
 BOD discusses and
Approved? YES approves the
budget

The Financial Planning

Specialist communicates
the approved budget
to all departments

The Senior Accountant

prepares and reviews
monthly comparison
between the actual
and budgeted
amount
(Variance report) NO

Variance Report

The Financial Planning

Specialist reviews the
variance report and
submits it to the Approved?
Financial & Admin
Manager for approval

YES

The Financial & Admin

Manager identifies
and investigates all
NO key variances and
ensures corrective
measures are in
place

The Financial & Admin

The General director
Manager communicates the
communicates the
variance report with the
variance report with YES Approved?
General Director of
stockholders such as
Operation and the
the BOD and donors
General Director for
approval

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 Financial Policies and Procedures Manual

Cash Forecast Process

Cash forecasts should be

prepared by the
Accountant on a sem-i
annual basis for a six
months period

The Accountant should print

from the accountingsystem all
information necessary to
determine cash inflows as
well as cash outflowsand due
dates
 The Senior Accountant
should compare the
Cash Forecast
information to prepare
cash forecasts and submit
it to the Financial
Controller

The Financial and

Financial Controller verifies
Administrative Manage
the information is and
identifies variances and
submits the forecast to
sends variance report to
the Financial and Admin
General Director and
Manager
General Director of
Operation

The Financial and Admin

Manager in coordination
with the Senior Accountant
should manage cash
accordingly

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Financial Policies and Procedures Manual

Grants Management
This section is applicable for all grants received by the MDLF. The purpose of Grant Man-
agement procedures is to develop, implement and maintain meaningful grant oversight and
coordination for the MDLF thereby increasing grant related revenue, limiting the exposure
to grant related legal liability, and improving the efficiency and impact of programmes and
services funded through grants.

Grants Management
Purpose
The purpose of this section is to set guidelines for the MDLF to receive, record, and follow
up on grants.
Policy
1. The Financial and Administration Department is responsible for the financial manage-
ment, administrative support and supervision, and reporting for the Programme as a
whole.
2. Funds are deposited into and disbursed from designated bank account for each donor
and will be spent on specific activities (sub-components) predefined by each donor.
This policy is not effective and is not applicable if requested otherwise by donors.
3. Commingling of funds between bank accounts is not permitted unless approved in
writ- ing by all related donors.
4. Designated bank account for each donor should be opened by the Ministry of Finance
and managed by the MDLF
5. The MDLF should not attempt to open bank account or sign agreements with donors
without the prior approval of the Ministry of Finance.
6. The MDLF will vest the sole responsibility to disburse on behalf of the programme to
suppliers and contractors – either contracted by MDLF or by Municipalities.
7. No sub funds will be transferred to the Municipalities, as MDLF will be paying
directly to contractors and suppliers on behalf of Municipalities according to the
approved sub grant agreements between MDLF and each Municipality.
8. MDLF adopts centralized disbursement to Municipalities and no advances to Munici-
palities unless they have the capacity to manage efficiently the advances and it’s
subject to the Donors Approval and to the financing agreement.
9. All withdrawals should be approved by the Financial and Administrative Manager and

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 Financial Policies and Procedures Manual

the General Director signs.

10. As long as the closure restrictions on Gaza are maintained, MDLF will adopt a degree
of flexibility by allowing for the payment of non-wage recurrent expenditures as direct
in- puts for sustaining essential municipal services in Gaza on the basis of short-term
plans. This means incremental costs incurred in Gaza might be allowed to be allocated
to the project while same costs incurred in the West Bank might not be allowable.
Payment mechanism remains the same.

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Financial Policies and Procedures Manual

Each
Donor
i.e. World)
(Bank
 MDLF submits WA to (Designated Account Suppliers &
Donor with MOF’s Managed by MDLF Contractors &
co-signature (Direct Payment)
Annex to Central
Treasury Account at on behalf of
the MOF Municipalities

MDLF
Separate DA
Contractors and Suppliers
contracted by MDLF
submit Payment Requests
Legend to MDLF
Full Arrows Movement of funds
Dotted Arrows Request for fund transfer Municipalities submit
Payment Requests to
MDLF
The above chart describes the funds flow for the program for Each Donor participating through parallel financing i.e.
World Bank: (each donor will have a different DA) – Quoted from MDP agreement signed between the World Bank
and the MDLF.

Procedures
Drawdown from the Donor to MDLF
1. The General Director should make sure that a copy of the agreement signed with the
donor was transferred to the Accounting and Financial Department.
2. MDLF should open a bank account for every donation/donor in coordination with the
Ministry of Finance, as detailed in the Open Bank Account in the Cash Handling Sec-
tion.
3. The MDLF should arrange with donors to drawdown the designated grant to the bank
account as follows:
II. The Financial and Administrative Manager is responsible for complying with the
donors’ financial requirements and conditions to transfer the fund. For instance, the

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 Financial Policies and Procedures Manual

Financial and Administrative Manager should prepare all the documentation and
reports requested by donors in order to transfer the money.
III. The Financial and Administrative Manager should prepare requests for
disbursement based on the approved work plans and cash flow projections for
expenditures, and submit it for review by the General Director of Operations.
IV.The General Director of Operations should review and approve the request and
submit it to the General Director for approval.
V. The Financial and Administrative Manager should follow up with donors to make
sure that the donor transfer the amount requested on timely manner.
4. Upon receiving the grant money in MDLF’s bank account, the Financial Department
should record these transfers in accordance to the Cash Receipts under the Cash Han-
dling procedures section of this manual.
5. The Financial Department should report to donors through the General Director in ac-
cordance to the agreement signed and as further detailed in the Reporting section of
this manual.
Drawdown from the MDLF to the Municipality
1. Grants to Municipalities should be made using the mechanism agreed upon with the
donors. For instance, grants to the Municipalities should be made in accordance to the
performance based allocation mechanism and with the eligibility criteria specified. The
implementation of the Grant Allocation Formula is described in a detailed manual
which defines the forms, guidelines, checklists and the corresponding charts that
illustrate the administrative flow. It defines each indicator, how it is to be measured,
and together how they are used for ranking municipal performance.
2. All requests for grants from Municipalities should be evaluated by the Technical
Depart- ment based on the criteria provided by MDLF and should be approved by the
General Director of Operations and the General Director.
3. The Municipalities shall open a separate bank account for the project funded by the
MDLF, if needed.
4. Municipalities are responsible for sub-project implementation and for all contracting
but the MDLF is responsible for making payments to contractors and suppliers in ac-
cordance to the procedures detailed in the Programme Expenditures under the Cash
Handling section of this manual.
5. All approved payments should be made through the special designated bank account
and shall be transferred directly to the contractor/vendor account.
6. Any payment should be made against the original supporting documents/tax invoices

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Financial Policies and Procedures Manual

and should be properly approved.

7. The payment procedures should be in accordance to the Cash Handling section of this
manual.
8. A monthly bank statement for the Municipalities account shall be transferred to the Fi-
nancial Department and should be reviewed by the Senior Accountant and the
Financial and Administrative Manager, if applicable.
9. The Municipality designated bank account should be subject to be audited by auditors
or MDLF staff, when and if needed.
10. The MDLF should report to donors in accordance to the agreement signed and as
further detailed in the Reporting section of this manual.
Management Fees:
MDLF should establish and collect the management fees percentage from donors as ap-
proved by the Board of Directors. The aim of this fee is to have a basis for charging
donors indirect costs of the MDLF.
1. Entries should be recorded by the Senior Accountant as explained in the below exam-
ple.
Example: In order to explain the transactions when recording MDLF grants and manage-
ment fees revenues, we assumed that MDLF has signed a grant agreement with donor X of
US $10,000,000.
A- On 1/1/2010 MDLF signed a grant agreement with Donor X of U.S. $10,000,000
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
01/01/2010 Dr. Contribution receivable 10,000 10,000
Cr. Temp. Res Net Assets (Contribution)
Explanation:
To record the value of the grant after signing the grant agreement with the donor on
01/01/2010
B- On 10/01/2010 MDLF received an amount of $2,000,000 of the Donor X grant.
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
10/01/2010 Dr. Bank 2,000 2,000
Cr. Contributions Receivable

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 Financial Policies and Procedures Manual

Explanation:
To record the receipt of 2 M. of the total grant value.

C- On the same date when the 2 million was received (10/1/2010), MDLF transferred its
share of management fees from the Grant Bank Account to MDLF Bank Current Account.
Accordingly, this transaction should be recorded on both accounts as follows:
Entry No. 1
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
10/01/2010 Dr. Management Fees Receivable 140 140
(Due from MDLF)
Cr. Bank
Explanation:
To record the transfer of Mgt Fees from Grant Bank to MDLF bank.
Entry No. 2
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
10/01/2010 Dr. MDLF Bank 140 140
Cr. Unearned Revenue (Due to Grant)
Explanation:
To record the receipt of Mgt Fees at MDLF Bank.
D- At the end of the month, MDLF should recognize earned revenue (Management fees)
in the MDLF side - Supposing that the $2,000,000 is based on an estimate provided to
Donor X by MDLF of their 6-month need timeline
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
31/01/2010 Dr. Unearned Revenue (Due to Grant) 23.33 23.33
Cr. Management Fees (Revenues)
Explanation:
To record the earned Mgt Fees for Month 1.

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Financial Policies and Procedures Manual

E- At the end of the Month (31/01/2010), when MDLF recognizes earned revenues (Man-
agement Fees), it should also record program expenditure on the Grant Side.
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
31/01/2010 Dr. Program Expenditure 23.33 23.33
Cr. Management Fees Receivable
(Due from MDLF)
Explanation:
To record the MDLF Earned Management Fees for Month 1.

F- After recording the Program Expenditure, the same amount should be released from the
Temporarily Restricted Assets to Unrestricted Assets.
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
31/01/2010 Dr. Temporarily Restricted Net Assets 23.33 23.33
Cr. Unrestricted Assets
Explanation:
To record the release of the Earned Management Fees amount from restriction.

G- On 15/4/2010 when MDLF receive and approve to pay contractors invoices of 1

Million, it should record Program Expenditure.
Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
15/04/2010 Dr. Program Expenditures 1,000 1,000
Cr. Payable to Contractors
Explanation:
To record Program Expenditures.

H- On 15/4/2010 when MDLF recorded Contractors’ invoices, it should release the amount

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 Financial Policies and Procedures Manual

of 1 million from restriction.

Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
15/04/2010 Dr. Temporary Restricted Net Assets 1,000 1,000
Cr. Unrestricted Net Assets
Explanation:
To release the amount from restrictions.

I- On 30/4/2010 MDLF Paid $500,000 to contractors.

Grant Donor X MDLF
Date Account
(000) (000)
Dr. Cr. Dr. Cr.
30/04/2010 Dr. Payables to Contractors 500 500
Cr. Bank
Explanation:
To record payment of payables to contractors.

2. All above journal entries should be reviewed by the Financial Controller and should be
approved by the Financial and Administrative Manager before being posted.
3. After being approved and posted, those journal vouchers should be filed in the
Financial Department files.

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Financial Policies and Procedures Manual

Compliance with the Grant Agreements:

The legal agreement between the borrower and each participating donor normally will
contain various financial covenants. The covenants will include requirements to maintain
appropriate financial records, documentation, internal controls, and to provide interim and
audited annual financial reports to donors. The financial procedures in this manual
facilitate compliance with the covenants. However, other measures and compliance
controls should be implemented, as follows:

A. Financial Compliance:
1. The Financial Department is responsible for compliance with the financial
requirements and reporting requirements of the donors.
2. The Financial and Administrative Manager is responsible for monitoring grant related
financial activity by performing the following:
i. Reviews financial reports and provide general oversight of other grant related
issues, including the proper budgeting and accounting for grants and other
responsibilities indicated throughout this policy.
ii. Approve all direct and indirect payments under the grant.
iii. Monitor Municipalities in related financial issue.
3. The Financial and Administrative Manager should Identify the agreement terms and
determine which of those, if not observed cause noncompliance with the agreement by
performing the following:
 List all financial standard and programme-specific financial provisions contained in
the agreements and prepare a summary document that identifies each of the specific
financial compliance requirements included such as budget limitations, allowed
expenditures, reporting requirements, allowable costs, tax restrictions,
 Review all payments for compliance with agreement terms and budget and reject
any payment not considered appropriate,
 Determine whether the Municipalities’ financial such as cost sharing and claims for
advances and reimbursement contain proper supporting documents.
 The Financial and Administrative Manager should ensure that all required reports
are submitted to donors as agreed and on time, and should report on grant financial
position to the General Director.
 The Financial and Administrative Manager can delegate part of his duties, but not
the responsibility of the compliance, to staff under his supervision and this should
be indicated on the compliance summary sheet.

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 Financial Policies and Procedures Manual

B. Technical Compliance:
1. The Technical Department and the Capacity Building Department are responsible for
implementing grants activities and for achieving the technical objectives of the grants.
2. General Director of Operations is responsible for following up the grant activities, to
achieve this, the General Director of Operations should perform the following:
List all technical standard and programme-specific provisions contained in the
agreements and prepare a summary document that identifies each of the specific
compliance requirements included.
Review all payments for technical compliance against agreement terms and budget.
To ensure all reports are submitted to donors as stipulated in the agreement and on
time.
Report on grant activity to the General Director.
Manage Grants Budgets:
1. The programme budget should be prepared by the Technical Department as part of
the annual budget preparation. The Grant Allocation Formula should be taken into
consideration when preparing the Programme budget.
2. The General Director of Operations and the Financial and Administrative Manager as
well as the General Director should review and sign all payments for compliance with
the donors’ agreement and with the sub-grant agreements.
Community Contributions/Cost Sharing:
Cost sharing will be based on the requirements of the primary donor, and can take the cash
form as follows:
1. If the share is cash, then the Municipality shall cover the expenditures of the first
phase of any project from this share.
2. All cash, from Municipality contribution and related to the project, should be
deposited in a separate bank account (escrow account), and initial payments to
contractors should be made from this bank account until its balances becomes zero.
3. The Municipality may ask the contractor to open a separate bank account; so that it
can transfer the initial payments from its contribution bank account to the bank
account based the contractor’s progress in the project.
4. The Financial Department should not release payments from the MDLF before
obtaining full documentation that the amount was paid from the bank account to the

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Financial Policies and Procedures Manual

contractor by the Municipality.

5. The Financial and Administrative Manager is responsible to ensure that cost share
was fully paid before approving any further payment to the municipality.
6. After submitting adequate supporting documents stating that the Municipality has
paid its share to contractors, the process of drawdown of funds takes place. The
documents submitted shall include original invoices submitted by contractors,
original valid deduction at source certificate, original agreements, original rent
contracts, if any, original agreements with consultants, if any, and any other
supporting documents for any amount requested by the Municipality.
7. Before the closing of the project, the Financial and Administrative Manager should
ensure that the cost sharing cash contributions were provided according to the terms
of the agreements and quantify any shortfalls.
Grant Closeout:
1. Upon completion of the grant term of each grant award, the Technical Department
should send a memorandum to the Financial Department to place the fund and/or
project in a no posting status.
2. This memorandum to the Financial Department should identify the name of the grant
or sub-grant, the project number and describes the final disposition of the funds and
required activities.
3. Upon review of the memorandum and satisfaction of any discrepancies, Financial
Department’s will update the accounting system and confirm grant closeout with the
Donor. Among other requirements, the Financial Department should communicate
with the donors any remaining funds or reports that should be submitted.
4. The grant closeout memo shall be placed in the grant’s file.

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Annex:

(Name of Municipality)
COST-SHARING SCHEDULE
FROM JANUARY 1, 20XX TO DECEMBER 31, 20XX

BUDGET ACTUAL SHORTFALL

CASH
Grant No. 1
Grant No. 2
IN-KIND
Grant No. 1
Grant No. 2
TOTAL

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Financial Policies and Procedures Manual

Process Maps:
Drawdown from the Donor to MDLF
 Agreement signed General Director
with donor ensures agreement
was delivered to
Financial
Department

MDLF opens
special bank Cash Handling –
account for grant Opening Bank
account Process

Financial and Admin

Manager ensures
NO In compliance?
compliance with
donor requirements

Financial and Admin

Manager follows up on
completion of
requirements as Financial and
needed Administrative
YES Manager sends
related documents Reports required
to donor

Financial and
Administrative
Approved work
Manager
plan
prepares request
for disbursement

NO NO

General Director of
Approved? Operation reviews
request

General Director
YES reviews request Approved?

YES

Financial and
Cash handling
Admin Manager
– Cash receipts
sends request
process
to donor

Financial
Drawdown from Financial
Department
MDLF to Department
reports to
Municipality receives grant
donors through
process and records
the General
receipt Director

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 Financial Policies and Procedures Manual

Drawdown from the MDLF to the Municipality

 Municipality
Drawdown from disbursement
the Donor to requests
MDLF Process

Technical
Department
receives
requests

Technical
Approved
NO Department
criteria
evaluates requests

Director of
Operations and
Approved?
General
Director review
requests

NO YES

Financial
Department ensures
Municipality opens
special bank
account

Special bank
account exists?

YES
Financial
Department
obtains supporting
documents and
monthly
reconciliations

YES

Financial Cash Handling –

Department Program
initiates payment expenditures
process

Reporting
process

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Financial Policies and Procedures Manual

Management Fees

Financial
Department
records fees using
accrual basis
 Financial
Financial
Department
Department
System entry provides donors
receives deposit of
with six month
fees in bank
cash forecasts

No

Financial
Senior Accountant
Controller and Senior Accountant
at each month
Approved? Financial and calculates
calculates realized
Admin Manager management fees
fees revenues
review calculation

Yes

MDLF receives Fees

System entry donation cash System entry received higher
amount than budgeted?

Yes

Senior Accountant
System entry
records entry

Senior Accountant
Financial and Admin Senior Accountant
prints and files Financial and
Manager and informs Financial
vouchers in related Admin Manager
Financial Controller and Administrative
files reports to donors
approve entries Manager

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 Financial Policies and Procedures Manual

Manage Grants Budgets

 Technical
Department Grant
prepares allocation
program budget formula

Program budget

NO

Financial and Admin

Manager, General
Director of Operations and
General Director review
budget and payment

Cash Handling
– Program
Approved? YES
Expenditures
Process

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Financial Policies and Procedures Manual

Cash Handling
The purpose of this section is to set policies and procedures for the MDLF’s cash and bank
accounts. These policies and procedures aim at ensuring that cash and bank transactions
are based on proper authorization, as that they are properly controlled and monitored, and
that they are properly classified in the accounting records.

I. Opening and Authorization of New Bank Accounts

Purpose
To document proper procedures for opening new bank accounts.
Policy
1. A separate designated bank account should be opened for each grant/donation, and all
donor related revenues should be deposited and operating expenditures should be paid
from this account, unless otherwise agreed with donors.
1. Accounts are only held with approved banks; all bank accounts should be approved by
the Ministry of Finance and accounted for under the Single Treasury Account.
2. The account should be set up in such manner as prescribed by the grant agreement. For
instance, accounts should be maintained in the Currencies specified by each Donor.
3. Other separate from donors’ bank accounts should be opened for the MDLF operating
expenditures.
4. Opening a new bank account must be justified and recommended by the Financial and
Administrative Manager and approved by the General Director and in certain cases by
the Board of Directors.
5. The Financial and Administrative Manager is responsible for cash management and
proper maintenance of bank accounts.
6. Using or opening new overdraft bank accounts should be approved by the Board of
Directors in advance.
Procedures
1. Upon signing new grant agreement with any donor, the Financial and Administrative
Manager should prepare and sign request for opening new bank account specifying the
following:
i. Agreement, donor and purpose.
ii. The details of the new bank account, which should be based on donors’ requirements

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 Financial Policies and Procedures Manual

such as currency, name, and type of account.

2. The request letter should be approved by the General Director and sent to the Chairman
of MDLF Board of Directors for approval and further arrangement with the Ministry of
Finance.
3. Upon receiving the Ministry of Finance approval to open the bank account, the Senior
Accountant should arrange with the specified bank to open the new account and should
complete bank forms, provide check signing cards and other authorization and
validation information.
4. The Senior Accountant should open a new general ledger account on the accounting
system immediately after the opening the account by the bank.
5. The Senior Accountant should notify the Financial and Administrative Manager, who
becomes responsible to notify other stakeholders such as the General Director, the
Donor, and Departments.
6. Copies of all forms and letters should be maintained in a separate file in the Financial

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Financial Policies and Procedures Manual

Department.

II.Closing Bank Accounts

Purpose
To document proper procedures for closing bank accounts.
Policy
1. The opening or closing of a bank account is properly authorized.
2. A bank account that is inactive or has a zero balance for more than six months should
be closed, unless there is a justification to keep it open.
3. The closing of a bank account is to be recommended by the Financial and
Administrative Manager and approved by the General Director.
4. Unused checks related to the closed bank account should be returned to the bank upon
closure of the account.
Procedures
1. All bank accounts should be reviewed by the Financial and Administrative Manager on
a monthly basis to determine that a business reason still exists for the continuation of
an account. If it is determined that no reason exists for keeping an account open, then
the account should be closed.
2. Before starting the closing process, the following should be performed:
 The Senior Accountant should prepare a bank reconciliation for that account to
determine outstanding checks and arrange payments,
 The Senior Accountant should invalidate all unused checks and handle them to the
Financial Controller,
 The Financial Controller should ensure that all unused checks were accounted for
using the serial numbers of used, voided and remaining checks handled to him by
the Senior Accountant, and submit them to the Financial and Administrative
Manager,
 The Financial and Administrative Manager should return the checks to the bank.
3. The Financial and Administrative Manager should prepare a written request/bank
account closing letter and send it to the General Director for approval. The following
must be included in the request:
 Bank name, address, bank contact and phone number.
 Bank account number.

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 Financial Policies and Procedures Manual

 Disposition of closing bank balance and statement.

 Approval by the proper personnel or donor, if needed.
4. The request letter should be approved by the General Director, and submitted to the
Chairman of MDLF Board of Directors for approval and further arrangement with the
Ministry of Finance.
5. Upon receipt of the properly authorized request, the Financial and Administrative
Manager if requested, should notify and arrange with the bank where any remaining
bank balance is to be transferred.
6. Once the account has been closed, the Financial and Administrative Manager should
notify the Senior Accountant to deactivate the account in the general ledger.

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Financial Policies and Procedures Manual

7. A copy of such letter must be kept in a separate file in the Financial Department.

III.Check Issuance, Wire Transfers, and Cash Disbursements

Purpose
To provide guidelines for the request of a manual check,
Policy
1. All manual checks must be requested and properly authorized on a Payment Request
supported by original documentation and signed by authorized personnel.
2. All disbursements and payments above USD $100 (or equivalent in other currencies)
should be paid by checks or wire transfer.
3. Checks should not be payable to the bearer nor signed blank and all checks should be
stamped by “first beneficiary only”.
4. The MDLF should use duplicated checkbooks that include original check and a copy
containing payment voucher.
5. Original signatures must be evidenced on the check request. Failure to do so will result
in the check request being returned to the requestor for correction.
6. Invoices cannot be subdivided and attached to separate check requests, unless approved
by the Financial and Administrative Manager, in writing.
7. All check requests must be approved in conformance with the then current signature
authorization matrix.
8. The approver on a check request should not be the payee of the check request; next
level authorization needs to be obtained.
9. All employee reimbursements of that nature should be processed through the
Employee Expense Reimbursement Process (see Travel Policies).
10. Failure to include this basic information on the original invoice will result in non-
payment and the return of the invoice to the vendor.
11. MDLF should make direct payment to suppliers and contractors on behalf of
Municipalities.
12. Disbursement should be based on the approved budgets,
Procedures
Operating Expenditures:
1. The Administrative Department provides the Financial Department with all supporting

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 Financial Policies and Procedures Manual

documents to process the payment,

2. Original documentation must be firmly attached to the original check request include,
but not limited for, the following:
 Original Official vendor invoice,
 Receiving Report ,
 Deduction at Source,
 Contract, when applicable,
3. Accountant should do the following:
a. prepare the Payment Order upon the receipt of all supporting documents, and
should record the following entry:
Expenditures, assets XXXX
Accounts Payable XXXX

b. Prepare the checks or wire transfer and verify the accuracy and completion of the
voucher and send it to the authorized signatories for signatures,
Account Payable XXX
Cash-Banks XXXX

4. The Senior Accountant should verify the documents and post the entry before sending
the voucher and the supporting documents to the Financial Controller,
5. The Financial Controller should verify the approved Payment Order and review the
supporting document, and send it to the Financial and Administrative Manager for
further processing,
6. The Financial and Administrative Manager should verify the documents and forward
them for review by the General Director of Operations, and approval by the General
Director,
7. The General Director review the original supporting documents of the payment, sign
the check, and send it for further authorizations (second signatory),
8. Upon receiving the signed checks/wire transfer, the Accountant records the payment in
the cash disbursement journal,
9. The Senior Accountant should review payment and the accuracy of the accounting
record, and post the disbursement journal to the General Ledger.
10. The entry should be reviewed by the Financial Controller and approved by the
Financial and Administrative Manager,
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Financial Policies and Procedures Manual

11. The Secretary hands the checks to the vendors, the vendors are requested to sign
payment vouchers,
12. All supporting document should be invalidated and filed in the Financial Department,
13. A check control log (“check register”) must be established and maintained through
the accounting software to follow-up on outstanding checks. The control log should
contain:
o Sequence of checks issued,
o Name of the beneficiary,
o Check date,
o Clearance date of the return and/ or avoidance date.
14. The check register must be approved by the Financial and Administrative Manager on
quarterly basis.
Programme Expenditures:
1. The MDLF applies the Grant Allocation Formula to determine the financial allocations
of each Municipality.
2. Municipalities are responsible for consulting with their communities to establish a
priority list of sub-projects that fit the eligibility criteria and submitting an application
form for appraisal by the MDLF.
3. The applications are reviewed by area engineers, with inputs from their supervisors
(including field appraisals as required), and their Manager to ensure appropriate
documentation/verification.
4. A technical committee headed by the Director of Operations, does a final review to
check for compliance with the MDLF’s guidelines and provides its recommendation
which is then communicated to Municipalities by the General Director.
5. The Technical Department should send a copy of signed Grant Implementation
Agreement (“GIA”) with the Municipality to the Financial Department.
6. The Municipalities sends the invoices related to the project with all related documents
to the Technical Department in the MDLF.
7. Municipalities shall use the form provided by the MDLF to request replenishment, in
case of advanced payments.
8. The Technical Department reviews the invoices and the related documents; checks
whether each invoice matches with the tender and the agreement between the
contractor and the Municipality, checks the technical specification, checks whether the
invoice meets

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 Financial Policies and Procedures Manual

the budget lines described in the agreement between the MDLF and the Municipality.
9. The Manger of Technical Department signs the invoice and indicates the budget line/
lines to be used by the Financial Department.
10. All documents shall be transferred to the Accounting and Financial Department in
order to offset the down /advance payments or to make a new payment as described in
the agreement between the LGU and the MDLF. (In the case of the final payment of the
project, the manger of Technical Department shall indicate such on at the invoice; the
final payment should be made only after receiving all the documents needed from the
Municipality related to the project).
11. The Accountant in the Financial Department should perform the following tasks:
i. Review the Payment Request.
ii. Compare the Payment Request to the budget.
iii. Prepare Payment Order.
iv. Record the payment in the accounting system.
Expenses, assets XXXX
Accounts Payable XXXX

v. Print the Journal voucher and sign as preparer.

vi. Prepare wire transfer or check and deliver the payment with supporting
documents to the Senior Accountant.
12. The Senior Accountant should verify the documents and forward them to the Financial
Controller for review and approval.
13. The Financial Controller should verify the approved Payment Order and review the
supporting document, and submit it to the Financial and Administrative Manager for
further processing.
14. The Financial and Administrative Manager should verify the documents and forward
them for review by the General Director of Operations, and approval by the General
Director.
15. The General Director reviews the original supporting documents of the payment, signs
the check, and sends it for further authorizations (authorized signatories),
16. Upon receiving the signed checks/wire transfer, the Accountant records the payment in
the cash disbursement journal.

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Financial Policies and Procedures Manual

Account Payable XXX

Cash-Banks XXXX

17. The Senior Accountant should review the payment and the accuracy of the accounting
record, and post the disbursement journal to the General Ledger.
18. The entry should be reviewed by the Financial Controller and approved by the
Financial and Administrative Manager.
19. The Secretary hands the checks to the vendors, the vendors are requested to sign
payment vouchers.
20. All supporting document should be invalidated and filed in the Financial Department,
21. The Financial and Administrative Manager should notify the Municipality of the
payment.
Direct Payments by Donors:
1. The MDLF applies the Grant Allocation Formula to determine the financial allocations
of each Municipality.
2. Municipalities are responsible for consulting with their communities to establish a
priority list of sub-projects that fit the eligibility criteria and submitting an application
form for appraisal by the MDLF.
3. The applications are reviewed by area engineers, with inputs from their supervisors
(including field appraisals as required), and their Manager to ensure appropriate
documentation/verification.
4. A technical committee headed by the Director of Operations, performs a final review
to check for compliance with the MDLF’s guidelines and provides its recommendation
which is then communicated to Municipalities by the General Director.
5. The Technical Department should send a copy of signed GIA with the Municipality to
the Financial Department.
6. When a payment is due to the contractor, the Municipality prepares a replenishment
request and sends the request, attached with the contractor’s invoices related to the
project with all related documents, to the Technical Department in the MDLF.
(Municipalities shall use the form provided by the MDLF to request replenishment).
7. The Technical Department reviews the request and the attached invoices and related
documents; checks whether each invoice matches with the tender and the agreement
between the contractor and the Municipality, checks the technical specification, checks
whether the invoice meets the budget lines described in the agreement between the

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MDLF and the Municipality.

8. The Technical Department may conduct a site visit to make sure the work has been
performed by the contractor, as indicated by the Municipality.
9. The Manger of Technical Department, after reviewing the documents, should sign the
invoices and indicates the budget line/lines to be used by the Financial Department.
10. The Manager of Technical Department should verify the payment request from
technical and budget aspects, and should determine if this payment should be paid
directly by the donor or if it can be processed through the MDLF. The Technical
Department should approve the payment and send it to the Financial Department,
11. All documents shall be transferred to the Financial Department in order to offset the
down
/advance payments or to make a new payment as described in the agreement between
the LGU and the MDLF. (In the case of the final payment of the project, the manger of
Technical Department shall indicate such on at the invoice; the final payment should
be made only after receiving all the documents needed from the Municipality related to
the project).
12. Accountant in the Financial Department should perform the following tasks:
a. Review the Payment Request,
b. Compare the Payment Request to the budget,
c. Prepare Payment Order,
d. Record the necessary entries, as follows:
Dr. Accounts Receivable (Intermediary Account) XXXX
Cr. Net Assets XXXX
This entry represents the recording of the donation, after
signing the grant agreement with the donor. As shown in the
entry, the intermediary account is created for the purpose of
recording the donation.

Dr. Expense XXXX

Cr. Accounts Payable - Contractor XXXX
This entry represents the recording of the invoices received
from the Municipality and reviewed and approved by the
Technical Department

e. Print the Journal voucher and sign as preparer,

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Financial Policies and Procedures Manual

f. Accountant should prepare wire transfer or check and deliver the payment
with supporting documents to the Senior Accountant,
13. The Senior Accountant should verify the documents and forward them to the Financial
Controller for review and approval,
14. The Financial Controller should verify the approved Payment Order and review the
supporting documents, and send it to the Financial and Administrative Manager for
further processing,
15. The Financial and Administrative Manager should verify the documents and forward
them for review by the General Director of Operations, and approval by the General
Director,
16. The General Director review the original supporting documents of the payment, and
send it to the Ministry of Finance to request the donor to pay directly to the contractor,
17. Upon payment to the contractor, the Accountant records the following entries for total
amount paid by the donor,

Dr. Account Payable - Contractor XXXX

Cr. Bank Direct Payment (Intermediary Account) XXXX
This entry represents the recording of the direct payment
made by the donor to the contractor. As shown in the entry,
an intermediary account is created for the purpose of
recording the direct payment.

Dr. Bank Direct Payment (intermediary Account)

XXXX Cr. Accounts Receivable XXXX
This entry represents the offsetting of the intermediary
accounts that were created to record the donation and the
direct payment made by the donor to the contractor.

18. The Senior Accountant should review the payment and the accuracy of the accounting
record, and post the disbursement journal to the General Ledger.
19. The journal vouchers should be reviewed by the Financial Controller and approved by

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 Financial Policies and Procedures Manual

the Financial and Administrative Manager,

20. All supporting documents should be invalidated and filed in the Financial Department,
21. The Municipality should be notified of the payment.

IV . Check Stop Order

Purpose
To document proper procedures for stopping checks.
Policy
1. Check stop order should be issued to the bank upon receiving a written request from
the beneficiary claiming loss or error in the issued check(s).
2. For voided checks that have been distributed, a Stop Payment Order must be requested.
3. The Accountant should remove from the outstanding check list those checks for which
a stop payment confirmation notice has been received.
4. A new check shall be issued after receiving a confirmation from the bank that the
check is stopped.
5. All Stop Orders need to be in compliance with the local laws and regulations.
Procedures
1. The Senior Accountant should be responsible for stop orders based on valid cases.
2. All Stop Orders must be approved by the Financial and Administrative Manager.

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Financial Policies and Procedures Manual

3. Financial and Admin Manager sends it to General Director.

4. General Director Approves stop order.
5. Financial Department sends order to bank.

V. Authorized Bank Signatories

Purpose
To document check signing authority.
Policy
1. All authorized signatories with their authorized limits must be approved by the Board of
Directors.
8. Any change to check signing authority must be authorized by the Board of Directors.
9. The General Director must promptly notify the bank of any changes in authorized
signatories or their authorization limits.
10. A minimum of two signatories are required for each bank transaction. Third signature
will be needed for all payments exceeding $100,000, unless such requirement was
waived by the donors.
Procedures
Programme Payments:
The following individuals are the authorized signatories for all the programme related bank
accounts and the related transactions:
 MDLF’s Financial and Administrative Manager,
 General Director of Operations.
 MDLF’s General Director,
Operating Payments:
The following individuals are the authorized signatories for all other MDLF’s bank
accounts

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 Financial Policies and Procedures Manual

and the related transactions:

 MDLF’s Financial and Administrative Manager, Signatory (B)
 General Director of Operations. Signatory (B)
 MDLF’s General Director, Signatory (A)

VI . Cash Receipts
Purpose
To maintain internal controls over cash receipts received.
Policy
1. Receipt voucher should acknowledge all cash receipts.
2. Receipts vouchers should be serially pre-numbered and should be prepared only from
the accounting software.
3. The original copy of the receipt voucher should be provided to the payer.
4. As soon as cash and checks are received, they must be restrictively endorsed for
deposit to related bank account.
5. The cash and checks must be deposited into the bank within 24 hours of receipt.
6. The payer name and code number (as per accounting records) should be stated on the
receipt voucher.
7. The Financial and Administrative Manager should match the deposit slip with the
receipt voucher to ensure the total checks collected were deposited subsequently in the
bank.
8. The Financial and Administrative Manager should ensure that there is no gap in the
serial number of the receipt vouchers.
Procedures
Receipt of Wire Transfers
1. The Senior Accountant should review the bank statements on a daily basis to determine
any receipts.
2. The Accountant should record the completed Cash Receipt Slip with all backup into
the accounting system as follows:

Cash (Bank –Account) XXXXX

Accounts Receivable (Name-Account) XXXXX

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Financial Policies and Procedures Manual

3. For receipts with differences between the payment and the grant agreement:
a. If the amount is a partial payment apply the amount received.
b. If the difference in payment is not explained in correspondence from the donor,
apply the receipt to accounts receivable and contact donor to determine if the
remaining balance is to be collected.
c. If there is correspondence with the donor indicating an amount in dispute, discuss
the application of the receivable with the Accounting Manager.
4. The Senior Accountant reviews and signs the journal voucher, and forwards it to the
Financial Controller,
5. The Financial Controller reviews and approves the Journal voucher and supporting
documents, and submits it to the Financial and Administrative Manager,
6. Upon the Financial and Administrative Manager approval, the Senior Accountant posts
the journal voucher to the general ledger,
7. The Senior Accountant should send receipt voucher to the donor/payer,
8. The Accountant should file the Cash Receipt Slips and other supporting documents in
the accounting files in order,
Receipt of Checks
1. The Finance Secretary opens all checks and perform the following:
 Logs them into the cash receipt log indicating the date, payee, check number,
company applies to, and amount.
 Separate all checks by their respective payer, and deliver to the designated
Accountant.
2. The designated accountant should perform the following:
 Make copies of all checks received and fill out a deposit slip for each batch.
 Make a copy of the deposit slip, and send the deposit slip with the checks to the
bank to be deposited.
3. The Accountant deposits the receipts to the bank daily, and returns the deposit slip to
the Senior Accountant
4. The Accountant completes the Cash Receipt Slip form, indicating donor agreement
number, check number, amount, deposit date, bank name and accounting code.
5. The Accountant records the cash receipt to the proper accounts and properly relieve
accounts receivable, if necessary.
6. The Accountant should attach the original bank deposit verification, the copy of the

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deposit slip, the copy of the check and any other information received with the checks to
the Cash Receipt Slip, and deliver the documents to the Senior Accountant,
7. The Senior Accountant reviews and signs the journal voucher, and forwards it to the
Financial and Administrative Manager
8. The Financial and Administrative Manager reviews and approves the Journal voucher
and forwards it to the Financial Controller,
9. The Financial Controller should perform the following:
iii. Compare the cash receipt log with the bank deposit,
iv. Review and approve the Journal voucher and supporting documents, and return it to
the Senior Accountant,
10. Upon the Financial Controller approval, the Senior Accountant posts the journal voucher

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Financial Policies and Procedures Manual

to the general ledger,

11. The Senior Accountant should send receipt voucher to the donor/payer,
12. The Accountant files the Cash Receipt Slips and other supporting documents in the
accounting files.

VII. Bank Reconciliations

Purpose
To properly perform the monthly bank reconciliation,
Policy
1. Bank reconciliation must be prepared on a monthly basis for all bank accounts even if
the balance per books agrees with the balance per bank statement.
2. The bank reconciliation should be prepared by the Accountant using the standard bank
reconciliation statement.
3. This standard form provides the following benefits:
 Assurance that all necessary information is included on each reconciliation (the
reconciler name and signature, date of preparing, bank name and account’s number,
the original bank statement attached, numbers and dates of related documents,
balances, and financial manger approval and signature),
 Documentation of relevant supervisor approval.
4. The reconciliation should be prepared in the original currency of the account.
5. The reconciliation should be prepared and approved within four days from the end of
the month.
6. Reconciling items (i.e., outstanding checks and deposits in transit) should be clearly
identified. Items outstanding for a long time should be investigated, and necessary
action should be taken.
7. The Accountant should prepare a voucher for any unrecorded items identified in the
bank reconciliation statement such as cash transfers, bank charges and errors in
recording.
8. Checks outstanding in the reconciliation for more than six months should be cancelled
and investigated. The Accountant should prepare a journal voucher to revert checks
back to cash at bank account.
9. At the end of the year, a review should be made of the checks that were cancelled and
reverted back to the cash at bank. These should be taken to a liability account upon
the recommendation of the Senior Accountant and approval of the Financial and

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 Financial Policies and Procedures Manual

Administrative Manager.
Procedures
1. The Accountant should perform the following procedures:
 Obtain original copy from of the bank statement for the period under reconciliation.
 From the bank statement for the month under reconciliation, obtain the cash
balance as of the end of the month.
 Add to the bank balance the amount of deposits-in-transit as of the end of the
month.
 Subtract from the bank balance the total of outstanding checks as of the end of the
month.
 When all reconciling items have been identified, either add or subtract the
reconciling items from the bank balance as necessary to arrive at the adjusted book
balance.
 From the prior month’s bank reconciliation obtain the balance forward - general
ledger.
 Agree this amount to the beginning of month General Ledger to ensure there have
been no prior period adjustments.
 Roll forward the General Ledger to account for all cash receipts, transfers, loan
payments, bank charges and other activities.
 Agree the ending book balance per spreadsheet to the General Ledger and to the
adjusted bank balance.
 If ending book balance per the spreadsheet does not agree to the General Ledger,
review all items on the General Ledger to ensure they are recorded on the
spreadsheet.
 If ending book balance does not agree with bank balance, review all items on the
bank statement to ensure that all items recorded by the bank are posted to the
General Ledger or are listed as reconciling items.
 Research all non-reconciled differences until found or until passed by the
Accounting Manager.
 Prepare any journal entries as necessary.
 When reconciled, give bank reconciliation and supporting documentation (i.e.
outstanding check list, detail of deposits in transit, copy of bank statement, journal
entries) to the Senior Accountant for approval.
2. The Senior Accountant should review and approve the bank reconciliation, and deliver
it for further approval,
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Financial Policies and Procedures Manual

3. The bank reconciliation should be reviewed and approved by the Financial and
Administrative Manager.
4. The Accountant should file approved reconciliation and supporting documentation
with the monthly closing file.
5. The Accountant should file the original bank statement by bank.

VIII. Voided Checks

Purpose
To properly support, deface, retain and record manual checks that are to be voided.
Policy
1. A voided check is a check spoiled in the process of preparation, before it is recorded
monetarily in the accounting records.
2. A canceled check is a check recorded monetarily in the accounting records and is not
paid by the bank.
3. Voided or canceled checks must be thoroughly defaced by prominently imprinting the
word “VOID” or “CANCELED” with a rubber stamp across the payee’s area name.
4. Both voided and canceled checks must be retained for the same retention period of the
accounting records.
5. The check numbers of all voided or canceled checks and the date of action must be
reported in writing to the financial manager for entry in the control record under the
heading “VOID/CANCELED”.
Procedures
1. Vided check should be defaced by the Accountant by writing/stamping the word
“VOID” on the face of the check.
2. If the void occurs within the same month as the date the check was written, the void
should be entered by the Accountant as a cancellation on the system and reviewed and
posted by Senior Accountant after obtaining the Financial and Administrative Manager
and the Financial Controller approvals, the system will correct the accounts payable
register automatically by posting the reversal of the check to the appropriate vendor.
3. All checks that are voided after the month the check was written, and are valid
payables, must be reissued immediately. The Accountant should prepare new payment
request form with the General Ledger, coding indicating the cash account as the credit
and accounts payable as the debit and should process the payment request using the
disbursement

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 Financial Policies and Procedures Manual

procedures. The old check is voided in the outstanding check module and via journal
entry as a debit to cash and credit to accounts payable. Therefore there is no financial
statement impact.
4. The original payment request number must be indicated on the reissued payment
request form.
5. The original payment request must be marked “VOID”, but filed as usual with other
payment requests in order to maintain the audit trail.
6. The actual voided checks should be kept in a file for the period specified above, all
voided checks need to be kept together in one file.
7. At the end of the month all the voided checks in the file for that month should be given

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Financial Policies and Procedures Manual

to the Accountant for use in reconciling the bank statement.

8. When the bank reconciliation is finished with the voided checks, they should be filed
in the box of canceled checks returned from the bank for that same month. This is done
to keep all checks that have been used together so that they can be easily accounted for.
9. The Senior Accountant should account for the serial numbers of the checks, used
checks, voided checks, and remaining serial numbers.

IX.Request of Check Booklets

Purpose
Provide security over blank checks.
Policy
1. All orders of new checks must be ordered sequentially with no gaps in the check
number sequences.
2. Blank checks should be safeguarded by the check preparer, and should be secured in
locked cabinets or drawers.
3. Paid checks retained with the bank statements must be kept, along with any voided
and canceled checks, in locked storage for the same retention period for keeping the
accounting records.
4. Access to blank checks should be limited to the Accountant and the Financial and
Administrative Manager or his designated alternate.
Procedures
1. In case of check book shortage, the Accountant should notify the Senior Accountant,

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2. The Senior Accountant should prepare request for new check book, and forward it to
the Financial and Administrative Manager,
3. Upon receipt of a new order of checks, for each box, Financial and Administrative
Manager should verify:
a. Company name and address.
b. Bank account number.
c. Accuracy of check sequencing.

X. Initiated Wire Transfers Out

Purpose
To properly record wire transfers.
Note: Wire transfers may be subject to regulatory requirements such as anti-money
laundering requirements from Palestine Monetary Authority. These requirements may be
industry specific and should be investigated by Accounting, Compliance, and Audit
Management.
Policy
All wire transfers must be requested and properly authorized on a payment request
supported by original documentation and signed by authorized personnel.
Procedures
1. The Accountant should complete the wire transfer request form (authorization to the
bank), and the payment request form indicating the necessary information.
2. The Senior Accountant approves the transfer by initialing the payment request and
signing the wire transfer request.
3. The Senior Accountant approves the transfer by initialing the payment request (for
operating expenditures) and/or signing the wire transfer request (for programme) and
sends it for further approvals by authorized signatories.
4. After being approved, the Accountant should not fax the wire transfer request to the

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bank. However, the original wire transfer letter should be submitted to the bank and the
Senior Accountant should call and confirm the information with the bank.
5. The Accountant should input the information into the computer and Senior Accountant
should post the transaction on the day it occurs.
6. All transfers must be reviewed by the Financial Controller and the Financial and
Administrative Manager.
7. The Accountant should file the payment request forms.

XI.Outstanding Checks
Purpose
To properly compile the outstanding check list at the end of each month for use in properly
reconciling the bank statement.
Policy
All outstanding checks should be accounted for.
Procedures
The Accountant should perform the following procedures:
1. Download from accounts payable all checks issued during the month into a
spreadsheet. This spreadsheet should also contain the prior months outstanding check
list.
2. Ensure that all checks are accounted for by making sure there are no breaks in the
numerical sequence of the checks. Start with the last check written in the previous
month and end by verifying that the number of the last check used is the one just
before the next check number in the blank check stock.
3. If a check in the sequence is missing, research what happened to the check to
determine what its status is and whether it will impact the outstanding check list.
4. Obtain the bank statement showing all checks that cleared the bank during the month.
5. Compare the bank statement to the list prepared above (all previous outstanding checks
and checks written during the month) and remove from this list all checks that cleared
the bank.
6. To remove voided checks from the outstanding check list, obtain the voided check file.
Only remove from the outstanding check list those checks in the file that are mutilated
originals of the checks to be removed. The voided check should be entered through the
accounts payable system not by journal entry.
7. For voided checks that have been distributed, a Stop Payment Order must be requested.

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Only remove from the outstanding check list those checks for which a stop payment
confirmation notice has been received.
8. Every month, stale checks (checks greater than six months old; some checks have a 90
day negotiable expiration) must be removed from the outstanding check list, if
applicable, and reversed using the original general ledger account, by posting the
following journal entry:
Cash$ (stale checks) XXXXXX
Expense$ (stale checks) XXXXXX

9. Once all items have been removed (i.e. checks clearing the bank, being voided, having
stop payments issued against them or being reclassified to the stale check liability
account), the remaining list becomes the new outstanding check list for the month.
The dollar
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Financial Policies and Procedures Manual

amount is totaled and that total is the amount to be used in the bank reconciliation.
10. Print the outstanding check list and file with the bank reconciliation.
11. These steps should be performed every month as of the end of each month as soon as
the bank statement is received from the bank.
12. In order for a voided check to be removed from the outstanding check list, the
mutilated negotiable original must be retained or, if the check has already been
distributed, a verification of the stop payment made on the check must be obtained
from the bank prior to the removal of the voided check from the outstanding check list.

XII. Petty Cash

Purpose
Petty cash funds allow cash to be made available to departments and activities to facilitate
cash payment for minor expenditures while maintaining proper control.
Policy
1. One fund in the West Bank and another in Gaza should be set up in the amount of
$1000 and $ 2,000, respectively, for authorized out-of-pocket expenses and minor
business expenditures. Permits and fees less than $100 and miscellaneous office
expenditures less than $100 (e.g. postage stamps) can be paid through Petty Cash.
2. For reimbursement, receipts and proper documentation, including the Petty Cash
Reimbursement Form, should be coded and sent to Accountants when the fund balance
reaches $300.
3. The petty cash fund should be in the custody of an employee who has no role in
approving payments or book keeping; the custodian should not have access to the
accounting records.
4. Payments from petty cash should be made against vendor invoices or a written
approval from the Administrative and Financial Manager; those invoices and/or
approvals should be maintained with the petty cash custodian.
5. At any time, the sum of petty cash on hand plus the total amounts of paid invoices
should always equal to the fund main balance ($ 1,000 in West Bank and $ 2,000 in
Gaza).
6. The petty cash fund should be subject to a monthly review and reconciliation by an
accountant not responsible for petty cash custody.
7. Any loss arising from negligence or theft must be immediately reported to the
Financial and Administrative Manager and the Financial and Administrative Manager
shall report to the General Director.
8. When custody of the petty cash fund is transferred to anther custodian, the existing
fund should be closed and a new check requested for payment to the new custodian.
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 Financial Policies and Procedures Manual

9. The petty cash is to be held in a locked cash box and stored in a secured drawer,
cabinet, cupboard or safe during the day and overnight. Moneys should not be left
unsecured or unattended at any time.
10. Only the custodian or delegated staff should have access to funds and security keys. It
is preferable that one person controls the key.
11. Petty cash receipts, vouchers and other supporting documents are to be obtained,
approved by the Financial and Administrative Manager and attached to the petty cash
form. The petty cash form should be kept up-to-date at all times.
12. Private moneys are to be kept separate from official moneys. Private moneys should
not be held in the petty cash tin
Procedures
Disbursements from Petty Cash
1. The specified custodian of petty cash should obtain supporting documents such as
invoices to support payments from petty cash.
2. Prior to the disbursement of any fund, a petty cash payment voucher should be
prepared by the fund custodian and approved by the Financial and Administrative
Manager.
3. Expenditures paid from the petty cash fund can only be made for the purpose for which
the fund was authorized (see policy above) and must be supported by receipts which
should contain the following information:
 Date of purchase or payment,
 Name of vendor or other payee,
 Positive evidence that a payment was made, i.e., a cash register receipt or a hand
written receipt on which the word “PAID” appears,
 Amount paid,
 Description of the goods purchased (entered by the vendor if a hand written receipt
is obtained, or the by the purchaser if a cash register tape is issued,
 Signature indicated receipt of purchases or services.
4. The petty cash custodian should maintain a petty cash book (separated from the
accounting software) to document all petty cash transactions and a petty cash
expenditures ledger accounts, according to the classification of expenditures in the
chart of accounts.
Replenishment
1. When the cash on hand reached to $ 300, the petty cash fund should be replenished
in order to bring the balance up to $ 1000 in the West Bank and to $ 2,000 in Gaza.
The amount replenished should equal the sum of all disbursements since the previous
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Financial Policies and Procedures Manual

replenishment. Any difference should be promptly reconciled and cleared.

2. The petty cash custodian should prepare a report showing the details and total of all
paid payment vouchers, and the balance requested for reimbursement,
3. The custodian should submit the report with all supporting documents to the
Accountant,
4. Accountant should review and record the request in the accounting system, and submits
the documents with the journal voucher to the Senior Accountant,
Expenses (by type and function) XXXX
Petty Cash XXXXX
5. The Senior Accountant should review and approve the request, and submit it to
Accountant for check preparation,
6. Accountant should prepare the check and send it for further approvals by authorized
signatories,
7. The petty cash replenishment check should be payable to the petty cash custodian after
the approval of the Financial and Administrative Manager and the General Director.
8. the Accountant should record the following entry upon handing the check to the
custodian,
Petty cash fund XXXXX
Cash-Bank XXXXX
9. Petty cash transactions are not posted until the fund is reimbursed, thus the Senior
Accountant should post the reimbursement and the disbursement transaction on the
same time,
10. Any shortage or surplus in the fund should be investigated.
11. Surprise cash counts by the Internal Auditor/Financial Controller should be performed
at least once a month.
12. A proper documentation should be made for the surprise cash counts, this document
should be signed by the custodian and the Internal Auditor and approved by the
Financial and Administrative Manager.
Monthly Reconciliation of Petty Cash

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1. The Accountant, at the end of each month, should review the amounts available in the
petty cash fund.
2. The Accountant should perform a physical count of the available cash in the fund and
the total cash to the total amount of invoices and should prepare a reconciliation form.
3. The Accountant should sign the reconciliation form and submit it to the Senior
Accoun- tant for review and approval.
4. If there are any shortages (losses), arising from negligence or theft, the Senior Accoun-
tant must immediately report the case to the Financial and Administrative in order to
take proper actions.
5. A copy of the reconciliation should be filed.

XIII. Investing Cash

Purpose
To properly record bank interest income.
Policy
1. If there is a surplus in the cash balance the MDLF may invest it.
2. All idle funds that are not expected to be utilized in the next month should be deposited
in an interest bearing account. This policy should be applied even of the interest
income should be returned to the donors.
3. The investment should be risk-free and a short-term investment (commercial banks
saving accounts).
4. The fund should not invest in commercial securities, long-term bonds, or fixed assets.
5. The investment should not take place outside Palestine.
6. The investment must meet the Grant Financing Agreement, including rules concerning
ownership of interest earnings.
Procedures
1. The Financial and Administrative Manager should prepare monthly report showing all
idle funds in their currencies. The report should also include the bank’s interest rates on
deposits, the period in which the funds will be available for deposit, and a preliminary
calculation of interest income that can be generated. The idle funds can be:
Programmes’ available funds.
MDLF operating funds (MDLF management fees).

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Financial Policies and Procedures Manual

Any expected funds, based on newly signed grant agreements.

2. The Financial and Administrative Manager should submit the report to the General
Director for review and approval.
3. After being approved by the General Director, the Financial and Administrative
Manager should immediately prepare a transfer letter of available funds from the
current accounts to deposit accounts, and should have that letter signed by the
authorized signatories.
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 Financial Policies and Procedures Manual

4. The Accountant should record interest income immediately upon receipt of the bank
statement, as follows:

Dr. Cash $(interest income) XXXXX

Cr. Interest Income $(interest income) XXXXX

5. The journal vouchers or entry should be reviewed and posted by the Senior Accountant.
6. The entry should be reviewed by the Financial Controller and approved by the
Financial and Administrative Manager.
7. The Senior Accountant and Financial and Administrative Manager should approve the
Journal voucher.

XIV. Bank Charges

Purpose
To properly record the monthly bank charges.
Policy
Bank charges should be identified and recorded on time and at least monthly, and before
closing the month.

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Procedures
1. The Accountant should locate any bank service charges for the month, including wire
transfer fees. Various charges may need to be accumulated, and with that amount com-
plete the following entry:

Bank charges expense $(bank charges) XXXXX

Cash $(bank charges) XXXXX
2. The Accountant should submit the journal voucher for further approvals by the Senior
Accountant who should post the entry.
3. The Accountant should file the copies of the journal voucher.

Annex:
Bank Reconciliation Form
BANK RECONCILIATION FOR Name of BANK
FOR THE PERIOD ENDING Month XX, 20XX
ENTITY: Bank Name:
ACCT #:
G/L#: Amount:
BALANCE PER BANK XXXXXX
OUTSTANDING WIRE TRANSFERS (XXXXXXX)
OUTSTANDING CHECKS (XXXXXXX)
DEPOSITS IN TRANSIT
ADJUSTED BANK BALANCE (XXXXXX)
BALANCE PER BOOKS XXXXXX
OUTSIDE TRANSFERS IN/(OUT) (XXXXXXX)
BANK CHARGES (XXXXXXX)
INTER-ACCOUNT TRANSFERS (XXXXX)
ENDING BOOK BALANCE (XXXXXXX)

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Process Maps:
Opening and Authorization of New Bank Accounts

Upon signing donor grant agreement ,

Financial and Admin Manager
prepares & signs request letter for
opening new bank account
NO

Request letter for

opening
new bank account
 The General Director reviews
the
NO letter and sends it to Approved?
BOD Chairman

The BOD Chairman reviews

Approved? YES
the request letter

NO

The Chairman forwards it to

YES the Ministry of Finance to be Approved?
approved

The Senior Accountant arranges

with a bank to open new
account & complete bank forms YES

The Senior Accountant opens

new ledger account in the System Ledger
accounting system

The Senior Accountant

notifies Financial and Admin
Manager, General Director,
donor& MDLF departments

The Financial Department

maintains all forms and
letters in a separate file

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Financial Policies and Procedures Manual

Closing Bank Accounts

The Financial and Admin

Manager reviews all bank
accounts on monthly basis
to ensure usage of
accounts
 Is account still
NO being used? YES
End of Process

The Senior Accountant

prepares a bank Bank Reconciliation
reconciliation to identify
outstanding checks

The Senior Accountant

The Financial and Admin T
invalidates all unused checks
Manager returns the checks to thhe Financial Controller reviews
e checks and sends them to and sends them to the
bank
the Financial and Admin Financial Controller
Manager

The Financial and Admin

Manager prepares written Bank account The General Director
request/closing letter and sends closing letter reviews the letter and sends
it to the General director it the BOD
Chairman

NO Approved?

YES

The BOD Chairman and

Ministry of Finance review NO
the letter Approved?

NO NO

The BOD Chairman and

Approved? Ministry of Finance review
the letter

YES

If requested, the Financial

and Admin Manager notifies Upon closing account, Financial
related bank and arranges to and Admin Manager informs
Letter
transfer remaining balance the Senior Accountant to close
the ledger on the system

70
 Financial Policies and Procedures Manual

Check Issuance, Wire Transfers, and Cash Disbursements - Operating Expenses

Administrative Department
provides Financial Department with
supporting documents to process
payment
 Accountant prepares
payment order Payment Order Accountant prepares checks or
wire transfers

The Financial and Admin

Manager reviews order and The Financial Controller
Senior Accountant reviews and
forwards it and supporting reviews payment order and
posts entry
document to General supporting documents
Director

The General Director

reviews System entry
NO the order and check

The Accountant records the

payment in cash
YES disbursement journal
Approved?

The Senior Accountant

reviews and approves entry System entry
and posts it into the system

NO

The Financial Controller and

Financial and Admin
Manager review the voucher

The Accountant invalidates and

The Secretary handles the checks
files all supporting documents in
to the related vendors the related files

The Accountant establishes a

check control register to follow
up on outstanding checks

The Financial and Admin

Manager approves the
register on quarterly basis

71
Financial Policies and Procedures Manual

Check Issuance, Wire Transfers, and Cash Disbursements - Programme Expenses

The MDLF determines financial

allocation
 Appraisal Forms The MDLF obtains applications
forms for appraisal to be
reviewed by area engineers

Committee headed by General

Director of Operations does a
final review to check for
compliance

Technical Department sends

copy of signed GIA to
Finance Department

MDLF Technical Department

obtains invoices related to
projects disbursements

Project invoices

Technical Department checks if

invoices agree with tender Technical Department Technical Department checks
documents reviews invoices and related technical specifications
documents

Technical Department Manager

signs invoices and indicates
budget items to be used

The Financial Department

obtains all documents to offset
balances & make new
payments

The Accountant reviews payment

request, prepares order, records
payment & prints voucher

72
 Financial Policies and Procedures Manual

Payment Order

The Accountant signs the

voucher as preparer

Senior Accountant verifies

documents and sends them
to the Financial Controller for
approval

Financial Controller forwards

documents to Financial and
Admin Manager

Financial and Admin Manager

verifies documents and
forwards them to the General
Director of Operations and
General Director

The General Director reviews

documents& signs check &
sends it for authorized
signatories
 The Accountant records
the payment in the Journal Entry
accounting system

The Senior Accountant reviews

payment and posts journal

The Financial Controller and

Financial and Admin
Manager approve the
voucher

The Secretary handles the

checks to the related The Accountant files all supporting
documents in the related files
vendors

The Financial and Admin

Manager notifies municipality
of payment

73
Financial Policies and Procedures Manual

Check Issuance, Wire Transfers, and

Cash Disbursements - Direct Payments by Donors
 The MDLF obtains The MDLF applies
Committee headed
applications the grant
by Director of
forms for allocation formula
Operations does a
appraisal to be to determine
final review to
reviewed by area financial
check for compliance
engineers allocations

NO

Technical
Department
Complied?
YES sends copy of
signed GIA to
Financial
Department
Replenishment
Request

MDLF Technical
Department obtains
invoices related to
projects
disbursements
Invoices

Technical
Department Technical Technical
checks if invoices Department reviews Department checks
agree invoices and technical
with tender related documents specifications
documents

Technical
Department
performs field visit
to check
completion of work

Technical
Technical Manager
Manager verifies Technical
signs invoices and
indicates budget payment request Manager Approves
to determine Payment
items to be used
payment method

The Financial
Department obtains
all documents to
A
offset balances &
make
new
payments

74
Financial Policies and Procedures Manual

The Accountant reviews

payment request,
prepares payment order,
records payment &
prepares voucher &
signs as preparer
 The Senior
Accountant reviews
Journal Voucher
documents and
forwards them to the
Financial Controller

NO

Approved by
controller?

NO
YES

The Financial and

Admin reviews the Approved by
Financial and Admin
payment order
Manager ?

YES

The General Director

Upon payment, the
reviews all supporting
Accountant records
System entry the payment into the
documents & sends them
to Ministry of Finance to
system
request donor payment

The Senior
Accountant reviews
payment and posts it
into the system

The Financial
The Accountant files
Controller and
Journal Voucher all supporting
Financial and Admin
documents in the File
Manager reviews the
related files
journal voucher

The Financial and

Admin Manager
notifies municipality
of payment

75
Financial Policies and Procedures Manual

Check Stop Orders

The Senior Accountant initiates

stop orders when needed
based on valid cases

The Financial and Admin

Manager approves the
stop order

The Financial and Admin

Manager sends stop order to
General Director for approval
Financial Department sends Stop Order
stop order to bank

76
 Financial Policies and Procedures Manual

Cash Receipts (Wire Transfers)

 Daily Bank
Statements Accountant reviews
on daily basis to
determine receipts

Accountant
prepares cash
receipt slip to
record transaction

Accountant contacts
Difference from donor to obtain
agreement? Yes
explanation

No
Financial controller
approves and
Senior Accountant
forwards documents
reviews and signs
to the Financial
voucher
and Admin
Manager for
approval

Senior Accountant
Senior
sends receipt Receipt Voucher
Accountant posts
voucher to the
journal voucher
to GL donor

Accountant files
receipt vouchers
and documents
in related files

Accounting
Files

77
Financial Policies and Procedures Manual

Cash Receipts (Receipt of Checks)

 Checks The Finance
Secretary opens
all checks
received

The Secretary
logs checks into The Secretary Secretary
cash receipt log separates all delivers checks
and indicate checks by to related
details respective payer accountants

The Accountant
makes copies of all
Deposit slips
checks received and
fills deposit slips

Related Accountant
make copies of
deposit slips &
sends them to
bank to be
deposited

Accountant
deposits receipts to
the bank daily & Deposit slips
returns slips
to Senior
Accountant

Accountant
Cash receipt slips completes cash Senior Accountant
receipt slips obtains deposit
indicating slips
donor
agreement

Senior accountant
The Accountant
reviews and signs
Bank Verification records cash
Journal voucher the voucher and
receipt into the System entry
forwards it to the
system and
Financial and
attaches bank
Admin Manager
verification

Financial and Admin

The Financial
Manager reviews
Controller compares
and approves
A cash receipt
voucher and
with bank
forwards it to
deposits and
Financial Controller
reviews vouchers

78
 Financial Policies and Procedures Manual

The Senior
Accountant
posts voucher
into the system

System
posting

The Senior
Accountant
sends receipt
voucher to donor

Receipt voucher to
donor

Accountant
files cash receipt
slips and all
supporting
documents in
the accounting
files

Accounting
files

79
Financial Policies and Procedures Manual

Bank Reconciliations
 The Accountant
adds the cash The Accountant
Bank statement
balance to obtains a copy of
deposits in transit bank statement

Account agrees
balance with
bank statement to The Accountant No
Prior month
ensure all items subtracts balance
balance
are recorded of outstanding
checks

Accountant adds/
deducts reconciling The Accountant
items from bank agrees beginning
Agreed
balance to arrive at balance with ending
Balance?
adjusted book balance balance from last
month

Accountant agrees
General Ledger to Accountant rolls
spread sheets forward the Yes
General
Ledger

The accountant researches all

non reconciled differences
until found or until passed by
Accounting Manager

The Accountant
NO prepares journal
entries necessary

Journal voucher
System entry

YES

Entry needed?

The Financial and

Admin Manager
Approved?
reviews and
approve the When bank statement
reconciliation reconciles, the Accountant
YES sends all reconciliations
and supporting
documents to Senior
The Accountant files
Accountant
approved
reconciliation and
Accounting
bank statements in
Files
the related files
The Senior
Accountant reviews
bank reconciliation
& deliver it for
further approval

80
 Financial Policies and Procedures Manual

Voided Checks
 The Accountant defaces the
voided checks by writing/
stamping the word “VOID” on System entry
the face of the check

Within the same month

As the date the check was The Accountant enters the void
Date of void? Written as a cancellation on the system

The Financial and Admin

Manager and the Financial
Controller review the void
The Accountant prepares new
payment request form with the
general ledger indicating the
original payment request number NO

Approved?

YES
Payment request

The original payment request

must be marked “VOID” by The Senior Accountant reviews
Accountant and filed with other and posts the reversal of the System entry
payment requests check to the appropriate vendor

Accountant keeps actual voided

checks in a specified file File

At the end of each month all

voided checks should be given
to the Accountant for use in
reconciling the bank statement

Voided checks and bank

reconciliation should be filed File
in the box of canceled
checks

The Senior Accountant accounts

for the serial numbers of the
checks, used checks, voided
checks, and remaining serial
numbers.

81

After the month the check was written

Financial Policies and Procedures Manual

Request of Check Booklets

The Senior Accountant prepares
request for new check In case of check booklets
booklets and forwards it to shortage, the Accountant notifies
the Financial and Admin the Senior Accountant
Manager

Check Booklet

Upon receipt of a new order

of checks, for each box,
Financial and Admin Manager
verifies the company name
and address, bank account
number and
accuracy of check sequencing

82
 Financial Policies and Procedures Manual

Wire Transfers-Out
The Accountant completes
and reviews the wire transfer
request form and the payment
request form indicting the
necessary information

NO

Payment request Wire transfer request

 The Accountant
sends the
requests to the
Senior Accountant Approved?
for approval

The Senior Accountant

approves the transfer by
initialing the payment request
(for operating expenses) and YES
signing the wire transfer
request( for program)

The original wire transfer letter

should be sent to the bank and
the Senior Accountant should
call and confirm the information
with the bank

The Accountant reviews and

inputs the information into the System Entry
computer

The Senior Accountant posts the

System entry
transaction on the day it occur

NO

The Financial Controller and the

Financial and Admin Manager
review all transfers

The Accountant files the

Approved? YES
payment request form

File

83
Financial Policies and Procedures Manual

Manage Outstanding Checks

 The Accountant ensures
The Accountant download
that
there are no breaks in Spreadsheet from accounts payable all
the numerical sequence checked issued during the
of the checks month into a spread sheet

The Accountant obtains the

bank statement showing all Accountant checks the causes for
checks that cleared the bank Sequence N
Ye the missing checks and
during the month exists?
s investigates impact on check list

Bank Statement

The Accountant obtains the

The Accountant compares the The Accountant removes from
voided check file in order to
bank statement to the th e list all checks that cleared
remove voided checks from
outstanding check list the bank
the outstanding check list

The Accountant enters the

voided checks through the
System entry
accounts payable system not
by journal entry

Every month, the Accountant The Accountant removes from

removes stale checks from the outstanding check list those For voided checks that have
the outstanding check list checks for which a stop been distributed, Accountant
and reversed using the original payment confirmation notice requests a stop payment order
ledger account has been received

Once all items have been

removed, the remaining The Accountant totals the
list becomes the new The Accountant prints the
dollar amount and the total is
outstanding check list for outstanding check list and
the amount to be used in the
the month bank reconciliation file with the bank
reconciliation

Outstanding check list

Bank confirmation To confirm stop of checks,

Accountant obtains
confirmation from bank

84
 Financial Policies and Procedures Manual

Disbursements from the Petty Cash

The Custodian of petty cash

obtains supporting documents
such as invoices.
 Invoice 1
Invoice 2 Invoice 3

Prior to disbursement of any

fund, the Custodian prepares
and reviews a petty cash
payment voucher

Petty cash payment

voucher NO

Each expense paid from the Approved

petty cash fund must be YES by
supported by receipts by the Financial
Custodian and Admin
Manager?

The Custodian maintains a

petty cash booklet to
Accounting
document petty cash
file
transactions and a petty cash
expenses ledger accounts

System entry

85
Financial Policies and Procedures Manual

Replenishment of the Petty Cash

The petty cash

Custodian check
the balance of
the petty cash
box
 Custodian initiates
Cash on hand is No need for
replenishment in order to YE NO
less than 300 replenishment
bring the balance up to 1000 S
$ $?

The Custodian prepares a report

showing the details and total of
all paid payment vouchers

Accountant reviews and

Replenishment report Th records the request in the
w accounting system and
submits the documents with
journal voucher to the Senior
Accountant
NO

Journal Voucher
System entry

T
Accountant prepares the check he Senior Accountant
Check reviews
and sends it for further approval YE Approved by Senior
by authorized signatures sand approves the request and
S Accountant?
ubmits it to the Accountant
for check preparation

Check
approved? NO

The petty cash replenishment

check should be payable to
the petty cash Custodian The Accountant records the
after the approval of the necessary entry upon System entry A
Financial and Admin handing the check to the
Manager and General Custodian
Director of Operation

86

e Custodian submits the report

ith all supporting documents to
the Accountant
Financial Policies and Procedures Manual

A
 The Senior Accountant posts
the reimbursement and the
disbursement transaction on System entry
the same time

Any shortage or surplus is

Shortage or investigated by Accountant
surplus? and unexplained shortage is
YES charged to the Custodian’s
personal
account
NO

The Internal Auditor/Financial

A cash count report should be
Controller performs surprise
made
cash count at least once a
month

Cash count report The Custodian and the

The Financial & Administrative
Internal Auditor sign the
Manager approves the report
report

87
Financial Policies and Procedures Manual

Monthly Petty Cash Reconciliation

At month end,
Accountant
reviews
amounts
available in petty
cash

Accountant
performs petty
cash physical
count and total
amount of
invoices
 Accountant
Physical
prepares
count
reconciliation form

Reconciliation
Senior Accountant Accountant signs form
reviews form form

Shortage? Yes

No

Senior Accountant
Accountant files
reports to
reconciliation in
Financial and
related files
Admin Manager

Accounting
files

88
 Financial Policies and Procedures Manual

Investing Cash
 The Financial and Admin Manager
Weekly report prepares and reviews weekly
report showing idle funds and
possibility and period it will be
deposited and with which bank

NO

The Financial and Admin

submits the report to the
General Approved?
Director for approval

Financial and Admin

Manager immediately
Transfer Lettrer prepares transfer letter of
YES
available funds from current
accounts to deposit
accounts, and signs letter by
authorized signatories

The Accountant records

System entry interest income immediately
upon receipt of the bank
statement

Journal Voucher/entry

The Senior Accountant reviews

System enrty
and posts the journal voucher

The Financial and Admin

Manager and Financial
Controller review the entry

The Senior Accountant and the

Financial and Admin Manager
approve the journal voucher

89
Financial Policies and Procedures Manual

Bank Charges
 The Accountant enters the
The Accountant locates any bank
bank charges into the
service charges for the month,
accounting system
including wire transfer fees

System entry

Journal Voucher

The Senior Accountant approves

System entry
and posts the journal voucher

The Accountant files the

copies of the journal voucher
form

File

90
 Financial Policies and Procedures Manual

Procurement and Accounts Payable

I. Requisitioning, Purchasing and Receiving
Purpose
The purpose of this section is to provide policies and procedures for the MDLF’s
procurement of goods and services, processing invoices, and for recording the accounts
payable.
Policy
1. These policies and procedures specify purchase authority limits and determine the
policies and procedures that should be used in purchasing goods, services and fixed
assets for the MDLF and for recording corresponding liabilities for payment.
2. A pre-numbered Internal Purchase Requisition (IPR) should be used for each request of
goods and services that exceeds $10.
3. MDLF should have separate procurement policies and procedures for programmes and
operational expenditure.
4. The Administrative Department, at the beginning of each calendar year, should perform
an annual tendering for MDLF recurring purchases, such as fuel, stationary, office
supplies…etc.
5. Access to the electronic data vendor master file on the accounting software should be
monitored by the Financial and Administrative Manager and should be authorized to
specific employee in the Financial Department. Any change to the master file should
be approved by the Financial and Administrative Manager. Special forms could be
used for this purpose.
Procedures
List of Approved Vendors
1. An approved list of vendor should be prepared and maintained by the Administrative
Department at the beginning of each year.
2. The approved list of vendors should be compiled of MDLF regular purchases and
should be developed based on tenders performed annually to identify least prices and
best qualities.
3. The Administrative Employee should maintain files for the approved vendors. The
files should contain price lists, available services, products and specifications, supplier
experience with the related products, and history of dealings with the MDLF.
Procurement Process (MDLF)

91
Financial Policies and Procedures Manual

1. An Internal Purchase Request (IPR) should be prepared and signed by the employee
who requests the procurement.
2. The employee should submit the IPR to his/her department’s Manager for review and
approval.
3. The requesting department should submit the IPR to the Administrative Department to
proceed with the procurement process.
4. The IPR should be pre-numbered by the Administrative Employee and should be
recorded in a special IPR register, which should be maintained at the Administrative
Department.
5. The Administrative Department should check whether the requested purchases are
available at MDLF, and if not, the Administrative Employee should send the IPR to the
Financial and Administrative Manager for review and approval.
6. The Financial and Administrative Manager should approve the IPR after assessing the
requesting department’s need of the purchases and whether there is available budget
for the requested purchases.
7. After being approved by the Financial and Administrative Manager, the IPR should be
endorsed by the General Director and then submitted to the Procurement Department
in order to select the appropriate procurement method and determine the required
procedures.
8. The Procurement Department should study the IPR and select the appropriate
procurement method, in accordance with the authorization matrix table (See the Annex
below – Procurement Authorization Matrix).
9. The Procurement Officer should prepare the necessary documents, in accordance with
the method selected.
10. If the tender method is selected, the Administrative Department should obtain the
Procurement Department assistance in regard to the best tendering and procurement
procedures to follow.
11. The Administrative Employee should follow and monitor the procurement process
until the goods or services are delivered by the vendor.
12. A receiving report should be prepared for all received purchases as follows:
 When purchases are equal or below $1,000 the receiving report should be prepared
and signed by the requesting department and the Administrative Department.
 When purchases are more than $1,000 a special receiving committee should be
formed by the General Director and should include at least 4 persons from the
Financial Department, Procurement Department, Requesting Department and
someone who

92
 Financial Policies and Procedures Manual

has technical knowledge of purchases. The Internal Auditor may attend the
receiving process to ensure that proper receiving procedures are followed. The
receiving report should be prepared by the Administrative Department and signed
by the receiving committee.
13. The receiving persons/committee should verify the quality and quantities received and
should reconcile the quantities with the purchase request, the purchase order, the tax
invoice, and the contract, if any.
14. The Administrative Department should send the purchasing documents (IPR, purchase
order, quotations/tenders evaluation report, vendor tax invoice, and the receiving
report) to the Financial and Administrative Manager for reviewing, recording,
approving and for preparing the payment.

93
Financial Policies and Procedures Manual

II. Accounts Payable

Purpose
The purpose of this section is to provide policies and procedures for recording of MDLF’s
Accounts Payable and processing of payments.
Policy
1. The Financial Department is responsible for recording MDLF’s purchases and for
payment to vendors.
2. The MDLF should use the accrual basis in recording purchases and in processing
payments to vendors.
3. Accounts payable should be reconciled periodically.
4. Payables should be recorded at face value plus or minus any interest premium or
discount and other appropriate adjustments. The payable amount can be determined
from the billing received and should be verified against purchase orders/requisitions,
contract terms or any other appropriate documents prior to recording liability.
5. When actual values are not available, recorded value should be based on best available
estimates. Estimates should be based on current market price, past history and
comparables.
Procedures
Invoice Processing
1. The Financial and Administrative Manager should submit purchasing documents to the
Accountant in order to record the required journal entry.
2. The Accountant should verify the existence, approval and consistency of the following
supporting documents before recording the procurement transaction in the accounts
payable ledger:
 Internal Purchase Request;
 Purchase Order;
 Quotation Evaluation Reports, if any;
 Contract with the vendor, if any;
 Purchase Receiving Report;
 Supplier Tax Invoice;
 Tax Deduction at Source.
3. Each suppliers’ tax invoice should be checked by the Accountant against the following:

94
 Financial Policies and Procedures Manual

 Clerical accuracy;
 Agreement of description, specification, unit cost and quantity received to the
purchase order noting proper authorization;
 Comparison of the credit period and terms with those specified on the purchase
order and agreement, if any.
4. If the documents are not satisfactory, they should be returned to the Administrative
Department.
5. If the documents are satisfactory, the Accountant should record the invoices into the
accounts payable ledger as follows:
Dr. Expenses/Fixed Assets XXXXX
Cr. Accounts Payable (Vendor) XXXXX
6. If it is agreed to make an advance payment to the vendor, proper payment procedures
should be followed, and the payment should be recorded as receivable and controlled
in a manner that assures they will be recovered by an offset against vendor invoices.
Monitoring and Reconciliations
1. The accounts payable ledger should be reviewed, by the Financial Controller, on a
monthly basis for any debit balances. Accordingly, the debit balances accounts should
be reclassified to their related accounts.
2. A statement of account should be obtained from recurring vendors periodically, on a
sample basis, for example on a semi annual basis.
3. Based on the statement of account received, the Financial Controller should prepare
reconciliation with the accounts payable ledger.
4. Any reconciling items resulting from unrecorded liabilities or payments should be
investigated and promptly adjusted.
5. Any debit balance in the accounts payable ledger should be brought to the attention of
the Financial and Administrative Manager.
6. Monthly accounts payable reported by the Accountant should be prepared to identify
payments due for the period and investigate any long outstanding balances.
7. At year-end, confirmations and statements of major 4 to 6 suppliers’ accounts should
be obtained from them in order to confirm their outstanding liabilities, if any.
8. If confirmation balance does not agree with the vendor’s ledger balance, accounts
payable reconciliation should be prepared to quantify and resolve the differences.
Accounts payable reconciliations should be approved by the Financial and Administra-
tive Manager.

95
Financial Policies and Procedures Manual

Annex:
Procurement Authorization Matrix

Purchase
Payment Payment Method of
Price Level IPR Approval Order
Authorization Method Purchasing
Approval
$0-$100 Requesting Financial and Financial and Petty Cash Direct
Department Administrative Administrative
Manager Manager Manager
$101-$500 Requesting Financial and Bank Account Check Direct
Department Administrative Authorized
Manager Manager Signatories
$501-$1000 Financial and General Bank Account Check 3P/Q
Administrative Director of Authorized through
Manager Operations Signatories telephone
$1001-$5,000 Financial and General Bank Account Check 3 P/Q
Administrative Director Authorized or Wire
Manager Signatories Transfer
General Director
of Operations
$5,001-$10,000 Financial and General Bank Account Wire Tender
Administrative Director Authorized Transfer
Manager Signatories
General Director
of Operations
> $10,000 General Director Board of Bank Account Wire Tender
Directors Authorized Transfer
Signatories

96
Financial Policies and Procedures Manual
Process Maps:
Procurement

The requesting
The employee signs
internal purchase employee prepares
the internal
request (IPR) an internal purchase
purchase request
request (IPR)
(IPR)

The employee
The Department
reviews and
Manager reviews
submits the IPR
and approves
to his/her
the IPR
department
manager

No Approved?

Yes

The requesting
department reviews
and submits the
IPR to the
Adminstrative
department to
proceed with the
process

The Administrative
No employee numbers
the IPR and
records Store data
it in a special IPR
register

Requested
purchases available
at MDLF ?

Yes

Administrative employee
should send the IPR to
End of Process No Approved? the Financial and
Administrative Manager
for review and approval

Yes

General Director
endorses IPR IPR should be submitted to The Procurement Officer
and submits to the Procurement should prepare the
Procurements Department in order to select necessary documents, in
Department the appropriate procurement accordance with the
method method selected

97
Financial Policies and Procedures Manual

Direct Method/
Tender Method
Method Price quotations
Selected? method
 The administrative employee
uses the approved tendering
The administrative
procedures obtained from employee refers to the
the procurement department list of approved vendors

The administrative
employee follows
and monitors the
procurement To Fixed
process until the Assets Process
goods are
delivered

The General
Director forms The requesting
a special Above Goods delivered department
receiving
1,000 Values? Below prepares a
$ 1,000 $ receiving report
committee

NO The Administrative
Department Receiving Report
prepares a
receiving report
and the committee
signs it

The requesting
department and
Receiving Report
the Administrative
employee sign the No
receiving report

The receiving
committee verify The receiving
the quality and persons verify the
quantities received quality and
with the quantities received
purchase request with the purchase
and purchase request and
order purchase order

The Administrative
Department sends
Verfied? YES purchasing documents to YES Verfiied?
the Financial & Admin
Manager to approve

To Accounts
Payable
Process

98
 Financial Policies and Procedures Manual

Accounts Payable
Invoice Processing

Procurement
Process

NO
The Financial &
Admin Manager
submits all
purchasing
documents to the
Accountant to
record the
required journal
entry
 The Accountant
verifies the
existence, approval
and consistency of Verfied?
all supporting
documents

YES

The Accountant
checks each
The documents
suppliers’ tax
should be returned
invoice for accuracy Documents
NO to the Admin
and compliance satisfactory?
Department by
with purchase
Accountant
order and
agreement
YES

The Accountant
Enter data into
enters the
accounting
invoice into the
system
accounts
payable ledger

The Accountant records

the advance payment as
receivable and assures
that they will be
recovered by an offset
against vendor invoices

Enter data into

accounting
system

99
Financial Policies and Procedures Manual

Accounts Payable
Monitoring

The Financial
Controller reviews
the accounts
payable ledger on
monthly basis for
any debit
balances
 Any debit balance
should be
Debit balance? YES brought to the
attention of the
Financial and
Admin Manager
NO

A statement of
account should be The Financial
obtained by Controller
Accountant from all reclassifies the debit
recurring vendors balances accounts
periodically to their related
(quarterly or accounts
semi annual
basis)

Statement of
account

The Financial
Controller
prepares
reconciliation with
the accounts Reconciling
payable ledger Items?
based on the
statement of
account received
NO YES

The Accountant
prepares monthly Any reconciling
accounts payable items should be
report to identify investigated and
payments due for promptly adjusted
the period and
any long
outstanding
balances Any debit balance
in the accounts
payable ledger
should be brought
to the attention of
Monthly the Financial and
accounts Administrative
payable report Manager

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At year end,
confirmations and
statements of
accounts should be
obtained from
suppliers to confirm
all outstanding
liablilities

Confirmations and
statements of
account
 Confirmation balance
No reconciliation
agree with vendor ledger YES
balance? should be prepared

NO

The Accountant
prepares accounts
Accounts
payable
payable
reconciliation to
reconciliation
quantify and
resolve the
differences

The Financial and

Administrative
Manager approves
the accounts
payable
reconciliation

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Financial Policies and Procedures Manual

Fixed Assets
To establish written procedures that will ensure proper recording and accountability for
fixed assets and to establish and implement controls necessary to protect the assets of the
MDLF.

I. Acquisition, Costing & Capitalization of Fixed Assets

Purpose
To establish written procedures that will ensure proper recording and accountability for
fixed assets and to establish and implement controls necessary to safeguard the assets of
the MDLF.
Policy
1. The fixed assets are tangible assets owned by the MDLF and used in MDLF operations
(not for resale). They have initial estimated useful life beyond a single year. A fixed
asset with an initial cost (inclusive of ancillary charges) of at least $100 should be
capitalized and becomes known as a capital asset.
1. A fixed asset is capitalized only if it meets all of the following conditions:
 Owned or considered owned by the MDLF.
 Held for operations (not resale).
 Has a useful life that exceeds one year.
 Meets the capitalization threshold.
2. With the exception of donated assets, fixed assets are accounted for at the original
acquisition cost, which includes the purchase price and all costs necessary to put that
asset into existing use and location. These costs include but are not limited to freight,
insurance, and installations (i.e., ancillary costs.). The cost of an asset will be recorded
at the historical cost of the asset.
3. When two or more assets are obtained at the same time and their individual costs are
not readily known, the individual costs are allocated to the assets based on their
relative fair market values at the time of acquisition. These costs are simply the ratio of
the initial acquisition cost vs. their relative fair market values.
4. When the MDLF receives donations of fixed assets, donations of capital assets should
be recorded in the accounting records as revenue at the fair value at the date of receipt
and capitalized in the accounting records. The methodology used for determining fair
value should be documented.
5. All the documentation supporting the acquisition cost of an asset along with reports or

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information substantiating its existence and location should be maintained and made
available for examination by the Internal and External Auditors.
6. All documentation supporting the relocation, improvement or betterment of an asset,
including cost of such action and dates, should be maintained and made available for
examination by the Internal and External Auditors.
Procedures
Acquisition of Fixed Assets:
1. The Administrative Department is responsible for the procurement of fixed assets.
2. The vendor’s invoice should be received by the Administrative Department.
3. The Administrative Employee should verify the invoice and attach it to the following:
 Internal Purchase Request (IPR);
 Original Official Vendor Invoice;
 Receiving Report;
 Deduction at Source;
 Contract, when applicable.
4. The Administrative Employee should submit the invoice with the supporting
documents to the Financial Department to record the purchase of fixed assets and
process the payment to the vendor.
5. The Financial and Administrative Manager reviews the invoice with the supporting
documents and puts his initial on the invoice to indicate his approval of recording the
fixed assets and initiating the payment process.
6. A copy of the receiving report should be submitted to the Administrative Department
in order to update the fixed assets register and prepare the identification tags.
7. The Accountant records the purchase of fixed assets in the accounting records, using
the following entry:
Dr. Fixed Assets XXXXX
Cr. Accounts Payable – Vendor XXXXX

7. The Accountant should send the documents to Senior Accountant to review it and post
it into the accounting system.
8. The Senior Accountant should review and post the journal voucher, attach the
supporting documents with the journal voucher, sign it and send it to the Financial and
Administrative Manager for review and approval.

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9. The Accountant initiates the payment process.

10. The Senior Accountant should ensure that the purchased fixed assets are identified with
specific tag numbers by the Administrative Department and should report any delay to
the Financial and Administrative Manager (See Fixed Assets Identification
Procedures).
11. The Senior Accountant should ensure that the purchased fixed assets are recorded in
the fixed assets register by the Administrative Department and should report any delay
to the Financial and Administrative Manager (See the Fixed Assets Register and
Records Procedures).
Receiving of Donated Fixed Assets:
1. The Administrative Department is responsible for receiving donated fixed assets and
should prepare a Receiving Report of the donated fixed assets.
12. The Administrative Department should submit the Receiving Report to the Financial
Department to record the donated fixed assets.
13. The Financial and Administrative Manager is responsible for determining the fair value
of assets received before they are recorded.
14. The Financial and Administrative Manager submits the Receiving Report with its fair
value to the Accountant to record it in the accounting system
15. A copy of the Receiving Report should be maintained by the Administrative
Department in order to update the fixed assets register and prepare the identification
tags.
16. The Accountant should record the donated assets in the accounting records. Those
assets are recognized as revenues and should be recorded as follows:

Dr. Fixed Assets XXXXX

Cr. Other Revenues - donations XXXXX
17. The Accountant should send the documents to Senior Accountant to review it and post
it to the accounting system.
18. The Senior Accountant should review and post the journal voucher, attach the
supporting documents with the journal voucher, sign it and send it to the Financial
Controller for review and approval.
19. The Senior Accountant should ensure that the donated fixed assets are identified with
specific tag numbers by the Administrative Department and should report any delay to
the Financial and Administrative Manager (See Fixed Assets Identification
Procedures).
20. The Senior Accountant should ensure that the donated fixed assets are recorded in the
fixed assets register by the Administrative Department and should report any delay to
the Financial and Administrative Manager (See the Fixed Assets Register and Records
Procedures).
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 Financial Policies and Procedures Manual

II. Depreciation of Fixed Assets

Purpose
To provide guidelines for the depreciation of the MDLF fixed assets.
Policy
1. The entire cost of an asset must be depreciated. Depreciation is allocated monthly over
the estimated useful life of the capital asset, as detailed below.
2. Depreciation is to commence in the first month after the asset is placed into service.
3. Fixed assets will be depreciated on a straight-line method over their estimated useful
life.
4. Guidelines for estimated useful lives by capital asset category are as follows:
Capital Asset Category Estimated Useful Life
Furniture 10 Years
Vehicles 5 Years
Equipment 5 Years
Computer 3 Years
Software 5 Years
5. The above useful lives may be affected by changes in the business and technological
environment or the use of the equipment.
6. Depreciation expense for a fixed asset begins in the month following the acquisition
date of the asset and continues until the accumulated depreciation equals the original
installed cost, or until the asset is retired from service.
7. A fully depreciated fixed asset will remain in the fixed asset sub-ledger until the fixed
asset is retired from service.
Procedures
1. The Senior Accountant is responsible for computing, recording, and posting of
depreciation of fixed assets.
2. The Accountant calculates the depreciation of fixed assets, at the last working day of
each month, based on the following:
 Capital assets category/item;
 Depreciation rate designated for the asset;
 Asset cost, as shown in the accounting records.
3. If the accounting software calculates depreciation automatically, the Accountant should
print out the depreciation calculation sheet, sign it and submit it to the Senior
Accountant

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Financial Policies and Procedures Manual

for review and approval.

4. The Senior Accountant should review the calculation sheet, sign it, and send it back to
the Accountant.
5. The Accountant prepares the depreciation journal voucher based on the calculation
sheet and notifies the Senior Accountant to review and post the journal voucher. If the
accounting software prepares the journal automatically, the Accountant should review
the journal and ensure it matches the automatic calculation sheet and notify the Senior
Accountant to post the journal.
6. The Senior Accountant reviews the journal voucher and ensures the following:
 All fixed assets are included;
 The depreciation rates used are in compliance with the authorized rates;
7. The Senior Accountant posts the journal voucher to the General Ledger and submits
the journal, attached with the calculation sheet, to the Financial Controller for review.
8. The Accountant should file the voucher in the journal vouchers file.

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 Financial Policies and Procedures Manual

III.Disposal of Fixed Assets

Purpose
To provide guidelines for the disposal of the MDLF fixed assets.
Policy
1. The Administrative Department is responsible for identifying the following:
 Obsolete assets;
 Damaged beyond repair assets;
 Completely used assets;
 Junk assets;
 Mysterious disappearance;
 Involuntary conversion.
2. Disposing of a fixed asset requires removing the asset’s net book value from the
accounting records. This involves removing the original cost and the accumulated
depreciation of the asset.
3. Any difference between the proceeds received and the net book value represents a gain
or loss on the disposal of fixed assets.
4. This gain or loss should be recognized in profit and loss for the year in which the asset
was removed.
Procedures
1. The Administrative Department is responsible for identifying the fixed assets that need
to be disposed and should obtain the required approvals. The Administrative
Department should perform the following:
 Complete an appropriate form to dispose the asset signed by the asset user;
 Obtain the approval of the department’s manager to dispose the asset;
 Obtain the recommendation of the appointed disposal committee.
 If the historical cost of the disposed asset exceeds 5,000 USD, the General Director
should nominate a committee, which should consist of the Financial
andAdministrative Manager, the General Director of Operation, Procurement
Manager, and professional staff in the related subject. The committee will
recommend the General Director of the actions to be taken.
 If the historical cost of the disposed asset exceeds $10,000, the approval of the
Board of Directors is a must and should be obtained.

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Financial Policies and Procedures Manual

2. The Administrative Department provides the Financial Department with a copy of the
approved forms.
3. The Financial and Administrative Manager will review the request and if approved, a
committee will be formed by the General Director to approve the disposal.
4. The committee will consist of the Financial and Administrative Manager, an employee
of the Administrative Department, and an employee from the department of which the
asset will be disposed.
5. The Committee should prepare and sign a report of the status and identification of the
assets intended to be disposed, reason of disposition, the suggested disposition method,
any prospected losses or gains that can result from the disposal transaction, and the
committee’s recommendation.
6. The report will be submitted to the General Director for final review and approval.
7. The Administrative Department will be responsible for following up on disposing the
assets based on the committee’s recommendation report and the approval of the
General Director and/or the Board of Directors, if needed.
8. The Administrative Department should prepare a fixed disposition report and submit it
to the Financial and Administrative Manager when the disposal transaction is
complete.
9. The Financial and Administrative Manager will review and approve the disposition
report and will submit it to the Accountant to record the disposition transaction.
10. The Accountant should make the following journal entry to record the disposition
transaction:
Disposition through sale – Gain:
Dr. Cash XXXXX
Dr. Accumulated Depreciation XXXXX
Cr. Fixed Assets XXXXX
Cr. Gain on sale of fixed assets XXXXX
Disposition through sale – Loss
Dr. Cash XXXXX
Dr. Accumulated Depreciation XXXXX
Dr. Loss on sale of fixed assets XXXXX
Cr. Fixed Assets XXXXX
Disposition through- Non cash transaction:
Dr. Accumulated Depreciation XXXXX
Dr. Loss on Disposal of FA XXXXX
Cr. Fixed Asset XXXXX

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 Financial Policies and Procedures Manual

11. The Senior Accountant should review and post the journal entry and submit it to the
Financial Controller for review and approval.
12. The Accountant should attach the approved disposition report to the journal voucher
and file it in the journal vouchers accounting file.
13. The Senior Accountant should ensure that the disposition of the fixed assets is reflected
in the fixed assets register by the Administrative Department. (See the Recording of
Fixed Assets into Assets Register Procedures).

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Financial Policies and Procedures Manual

IV.Fixed Assets Identification

Purpose
To provide guidelines for the Identification of MDLF fixed assets.
Policy
1. To ensure that each individual asset has a unique identification. An identification
number should be assigned and tagged for all fixed assets (other than land, buildings).
This tag must have a unique identification number that will be associated with the asset
and becomes a part of the asset’s record.
2. The identification number will be comprised of four components:
 Fiscal year of the original acquisition (4 digits);
 Asset type (1 character letter);
 Location (i.e. room number); and
 A sequential number.
3. The Administrative Department will be responsible for tagging fixed assets.
Procedures
1. The Administrative Department is responsible for identifying all MDLF fixed assets
with tag labels; and should maintain a list of the used identification codes.
2. A copy of Receiving Reports of newly acquired fixed assets should be maintained by
the Administrative Department in order to tag the acquired assets and update the fixed
assets register (See Acquisition, Costing & Capitalization of Fixed Assets procedures).
3. Immediately after receiving the fixed assets receiving report, the Administrative
Department should prepare tags and stick them to the acquired assets.
4. The Administrative Department should update the fixed assets register, immediately
after preparing the identification codes/labels (See Fixed Assets Register and records
Procedures).
5. The Financial Controller, semiannually and on a sample basis, should compare
between the fixed assets register and the existing fixed assets to ensure the existence of
the assets and whether the assets are properly identified/tagged (See Fixed Assets
Register and records Procedures and see also Fixed Assets Physical Count and
Reconciliation).
6. The Financial Controller should report to the Financial and Administrative Manager on
any variances between the register and the count performed.

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 Financial Policies and Procedures Manual

V. Fixed Assets Register and Records

Purpose
To provide guidelines for the maintenance of a fixed assets register and records.
Policy
1. The Administrative Department should maintain an updated fixed assets register that
contains:
 Description of the asset
 Name of the asset
 Identification number (tag number)
 Cost of the asset
 Date of acquisition
 Location of use
 Estimated life and mode of disposal
2. The registering process should be computerized.
Procedures
1. The Administrative Department is responsible for maintaining an updated fixed assets
register of the MDLF fixed assets.
2. The Receiving Reports of newly acquired fixed assets should be prepared and
maintained by the Administrative Department (See Acquisition, Costing &
Capitalization of Fixed Assets procedures).
3. Immediately after preparing the fixed assets receiving report and after preparing the
necessary identification codes, the Administrative Department should update the
fixed assets register and provide the Financial Department with a copy for review and
approval.
4. The Administrative Department should file an updated and approved copy of the
register.

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Financial Policies and Procedures Manual

VI.Fixed Assets Physical Count and Reconciliation

Purpose
To provide guidelines for the periodic physical count and reconciliation of MDLF fixed
assets.
Policy
1. The Administrative Department together with the Financial Department are responsible
for the periodic physical count of fixed assets.
2. Physical count of fixed assets should be performed annually by a special fixed assets
physical count committee.
3. Fixed assets register should be checked and verified by the Financial Department semi-
annually and on a sample basis.
4. Fixed assets recorded in the register should match those recorded in the accounting
system; and if any deviations, differences should be identified, investigated, properly
reported, and resolved.
5. In addition to locating, counting and recording fixed assets, details such as the
identification codes/labels, location and status of the assets should be remarked.
Procedures
Semiannual Verifications:
1. The Financial Controller, semiannually, should obtain an updated copy of the fixed
assets register from the Administrative Department.
2. The Financial Controller will select a sample of 40-50 fixed asset items and ensure that
the selected fixed assets:
 Exist and in use;
 Properly maintained;
 Fixed assets are properly recorded in the register.
3. The Financial Controller should prepare and sign a brief report of the work performed,
and should submit it to the Financial and Administrative Manager for review and
approval.
4. The report should summarize the work performed by the Financial Controller, and
whether there are any deviations.
5. The Financial and Administrative Manager will coordinate with the Administrative
Department to investigate and resolve any deviations.

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 Financial Policies and Procedures Manual

Annual Physical Count:

1. During the Month of December, and before the end of each year, a fixed assets
physical count committee should be officially formed by the General Director.
2. The Committee should consist of the Financial Controller, an employee from the
Administrative Department, an employee from the Technical or IT Department, and
employees from other departments, if required, and the MDLF Internal Auditor and
External Auditor.
3. Official invitations for the attendance of the fixed assets physical count should be
submitted to the MDLF Internal and External Auditors.
4. The tasks of the Committee should be prepared by the Financial and Administrative
Manager and approved by the General Director.
5. The Financial and Administrative Manager should send a copy of the tasks
description to every member of the Committee, in order for each member to know
the details of the assignment and his/her role in the count.
6. The Financial and Administrative Manager should provide the physical count
committee, the Internal Auditor and the External Auditor with a copy of the fixed
assets report.
7. The report should include fixed assets items and the quantity of each item.
8. The Committee should record the actual quantity of each fixed asset item, as
revealed by the physical count.
9. The Committee should prepare a physical count report, sign it and submit it to the
Financial and Administrative Manager for review and approval.
10. The Financial and Administrative Manager should provide the General Director
with the fixed assets physical count report for review and approval.
11. The Financial and Administrative Manager should send the report, after being
review and approved by the General Director, to the Senior Accountant to prepare
necessary adjustments to the fixed assets ledger in the accounting software.
12. The Senior Accountant will prepare necessary adjusting journal vouchers and
submit them to the Financial Controller.
13. The Financial Controller should review the journal vouchers, ensure they were
executed properly, and sign them.
14. The Financial and Administrative Manager should approve the adjusting journal
entries.
15. The approved report and the adjusting journal entries should be filed at the
Financial Department in order to be reviewed by the External Auditor.

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Process Maps:
Acquisition of Fixed Assets

Supplier Invoice
The Administrative
employee sends The Administrative
invoice back to Department
supplier receives invoice

NO

The Administrative Internal purchase

employee reviews request, receiving
Verified? report, deduction at
the invoice and
attaches it with all source, & contract
related documents

YES

Administrative
employee sends
documents to the The Financial
Financial department System entry
Department for records invoice
recording

Financial and Admin

Manager reviews
NO invoice and
approves in order to
initiate payment

Procurements
Department
prepares receiving Approved? YES
report

The Admin
Department updates
the fixed assets
register and updates
Receiving Report identification tags

The Accountant
records the
System entry
purchase in the
accounting
system

Senior Accountant
reviews, posts the entry
A and sends it with
supporting documents
to Financial and Admin
Manager

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 Financial Policies and Procedures Manual

A
 Financial and
Admin Manager
Approved? NO returns voucher
and documents to
Senior Accountant

YES
Senior Accountant
ensures that fixed
The
assets are tagged
Accountant
with specific
initiates
numbers
payment
process

Senior Accountant
Fixed Assets reports delays to
Identification the Financial and YES Any Delays?
Process Admin Manager to
initiate process

NO

Senior
Accountant
ensures that
assets are
recorded in the
fixed assets
register

Fixed Assets
Register and
Records NO Any Delays?
Process

YES

Senior Accountant
reports delays to
the Financial and
Admin Manager to
initiate process

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Financial Policies and Procedures Manual

Receiving of Donated Fixed Assets

The Admin
Department
receive donated
assets
 Financial and Admin
The Administrative
Manager sends
Receiving Report Department
report to financial
prepares a
department to record
assets received receiving report

The Financial and

Admin Manager
determines the
fair value of
received assets

The Admin
Department obtains The Accountant
copy of the records the
receiving report to received assets System entry
update the register values into the
and tags system against
revenues

The Accountant
The Administrative sends documents to
Register
Updated Department Senior Accountant
updates register for review and
posting

NO

Senior Accountant Senior Accountant

ensures that fixed signs and sends
assets are tagged documents to
with specific Financial
numbers Controller

Senior Accountant
reports delays to
the Financial and
Admin Manager to YE Any Delays? Approved?
initiate process S

NO Yes

Fixed Assets Senior Senior Accountant

Identification Accountant sends voucher
Process ensures that assets Financial to
are recorded in Controller
the fixed assets
register

Fixed Assets
Register and
Records NO Any Delays?
Process

YES

Senior Accountant
reports delays to
the Financial and
Admin Manager to
initiate process

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 Financial Policies and Procedures Manual

Depreciation of Fixed Assets

At month end, the

Accountant
calculates
depreciation
 Electronic
calculation Manual
Calculation

The Accountant
The calculates
Accountant depreciation based
prints on Category, cost
calculation sheet and rates
and signs it

NO

Calculation Sheet

Senior Accountant
Approved? reviews and signs
the calculation
sheet

YES

Accountant
records entry into
the system System Entry

NO

Senior Accountant
Journal voucher The Accountant
ensures all assets
prints entry journal
included and
and signs it
correct depreciation
rates

Senior Accountant
posts the entry
and signs it Approved?

YES

Senior Accountant
forwards the The Financial
The Accountant
voucher to the Controller Accounting
files voucher with
Financial Controller reviews and signs Files
all related
the voucher
documents

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Financial Policies and Procedures Manual

Disposals

The Administrative
Department
identifies assets
that need
disposal
 The Administrative
Department fills Disposal forms
disposal forms
regarding the
assets to be
disposed of

NO
Administrative
Department
requests approval The user of the
on disposal from assets to be
the related disposed of signs
Department the disposal form
Manager

Approved?

YES

The Administrative
The Administrative Department obtains
Department Value above
NO approval of the
determines value $5,000? Financial and
of assets
Admin
Manager

YES

Financial and Admin

Manager and the
General Director of NO Value above
Operation review Approved?
$10,000?
form
NO
YES

The Admin
Department obtains
approval of General End of Process
Director and BOD
YES

The Administrative Disposal form to

Financial and Department Financial
Admin Manager forwards approved Department
reviews form to the Financial
the form Department

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Financial Policies and Procedures Manual

The General Director

forms a committee
to approve the
disposal
 The committee The committee must
prepares and signs a include: Financial and
disposal report Admin Manager,
includes Admin and related
descriptions & reasons
department employees
of disposal
NO

The committee
Disposal report sends the report
to the General
Director for
approval

The Administrative
Department prepares a
post disposition report Y
and sends it to Financial ES Approved?
and Admin Manager

Post disposition Financial and

report Admin Manager
Approved?
reviews the report
and sends it to
Accountant

YES

The Accountant
System entry
records the disposal

Senior
Accountant
reviews and posts
the entry
recorded

NO

B Financial Controller
Y s Approved? approves and signs Y ES Approved?
the voucher

NO

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Financial Policies and Procedures Manual

B
 The Accountant
files the voucher
and related Accounting
documents in the Files
respective files

Senior
Accountant
ensures that the
disposal is
reflected in the
assets register

Fixed Assets
Register and
Records
Process

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 Financial Policies and Procedures Manual

Assets Identification
 Acquisition, Receiving of
Costing and Donated fixed
Capitalization assets

The Administrative
Department obtains
copy of receiving Receiving report
report to update
the assets register

The Administrative
Department
prepares tags and
Tagging of sticks them to the
assets acquired assets

The Administrative
Financial Controller
Department updates
on semiannual &
the assets register
random sample basis
according to the
compares between
labels used
register and tags

Fixed Assets
Register Deviations Register and
No
Updated exist? Records
Process

Yes

Financial
Controller reports
differences to the
Financial and
Admin Manager

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Financial Policies and Procedures Manual

Register and Record Assets

 Acquisition,
Costing and Receiving of
Fixed assets Fixed assets
Capitalization Donated
Disposals identificatio
fixed assets
n

The Administrative
Department
receives assets

Receiving Report
Receiving of
assets

The Administrative
Department updates
the fixed assets Register
register updated

NO

Administrative
Department
provides Financial
department with
copy to review
and approve

Updated register
Approved?

YES

Administrative
Department files
a copy of
register when
needed

Admin
Files

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 Financial Policies and Procedures Manual

Physical Counts and Reconciliations – Semiannual Verification

 Financial
Controller selects At mid-year,
a sample of 40-50 Fixed assets Financial Controller
assets & ensures register obtains a fixed
they exist and are assets register from
properly recorded the Admin
department

Sample selection

Financial Controller
prepares a
Summary count
summary report
report
and submits it to
the Financial and
Admin Manager

The Financial and

Admin Manager
reviews and
approves the
report

Approved?

NO

Yes

The Financial
Controller coordinates
with the Admin count
Administrative data
Department to resolve
any deviations if any

Deviations
exist?

YES

The Financial
Controller
resolves
differences with
Administrative
Department

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Financial Policies and Procedures Manual

Physical Counts and Reconciliations – Annual

The Administrative
Department sends Committee consists of: During December
invitations to the Financial Controller , and before year
external and
Admin & IT employees, end, General
external and internal Director forms a
internal auditors auditors &
count committee
others if needed

NO

The Financial and

Admin Department
Tasks approved by
prepares tasks of
general director?
committee
members

YES

Prepare task
descriptions

Financial and Admin

Manager sends a
copy of tasks to the Committee task
members of descriptions
committee to inform
them about duties

Financial and Admin

The committee
Manager sends a
counts the actual
copy of the fixed
fixed assets
assets report to
existing and
the internal and
reports the
external auditor
results

NO The committee
prepares a
count report,
Approved? signs it and
sends it to the
Financial and
Admin Manager for
YES approval
NO

Financial and
Admin Manager
prepares a count
report, signs Approved?
it and sends it to
the General
Director for YES
approval
Senior Accountant
obtains report and
adjusts ledger if Ledger updated
needed

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 Financial Policies and Procedures Manual

A
 Senior
Accountant
System entry
prepares
adjusting entries
if needed

NO

Approved by
Financial Journal Voucher
Controller?

YES

The Financial
Controller reviews
and approves the
journal vouchers
NO

Approved by
the Financial and
Admin Manager?

YES

The Financial
Department files
the approved report
File
to be reviewed by
external auditors

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Financial Policies and Procedures Manual

Payroll
I. Time Keeping and Reporting
Purpose
The purpose of this section is to provide guidelines for timekeeping of MDLF employees’
work.
Policy
1. Monitoring and timekeeping of MDLF employees.
2. Employees should sign in and out using the electronic time-keeping machine.
3. The responsibility for supervision and time-keeping functions must be assigned to an
employee who is not part of the payroll function at the Department of Administration
and Human Resource, and does not take part in the payroll processing, disbursement,
or any general ledger functions.
4. All time sheets must be reviewed and approved by the employees’ supervisors.
5. The time sheets must indicate hours worked, overtime hours, and other special benefits.
6. The employee supervisor must approve all sick leaves, vacations, holidays, and
overtime. A special form must be submitted for approval by the supervisor before
vacation is taken.
7. Overtime must be approved before actual working hours, and the approval of overtime
is part of the approval of the time sheet.
8. Holidays must be reported on time sheets only; no other form is required to be
submitted.
9. Employees must follow management instructions for holidays.
10. Overtime may be required on a periodic basis. Supervisors are responsible for
authorizing any overtime and notifying employees of such extra work hours in
advance, if possible. A special form should be prepared, signed and submitted to the
Department of Administration and Human Resource by the supervisor.

Procedures
1. Employees should sign in and out using the electronic time-keeping machine.
2. The Department of Administration and Human Resource should monitor employees’
attendance and leave and update payroll information on the salaries software.
3. The Department of Administration and Human Resource should also monitor
employees’ vacations, holidays, sick leaves, other types of leaves in addition to their
overtime hours and other benefits and should make sure all these are supported with
approved forms and accordingly update payroll information on the salaries software.
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 Financial Policies and Procedures Manual

II. Payroll Processing and Payment

Purpose
The purpose of this section is to provide guidelines for MDLF employees’ payroll
processing and payment and to ensure that payroll processing is accurate and performed on
a monthly basis.

Policy
1. The Department of Administration and Human Resource is responsible for preparing
the following:
 Payroll monthly calculation sheet;
 Payroll wire transfer;
 Payroll journal entry.
2. Employees’ payroll should be paid from MDLF designated bank account.
3. The personnel and payroll data is strictly confidential information and shall be
restricted to the authorized persons only.
4. Employees’ salaries are considered confidential and should be strictly protected in the
Department of Administration and Human Resource files.
5. Employees’ salaries are calculated and prepared using the HR system.
6. Payroll processing should start by the 25th day of each month so that salaries are ready
for payment by the end of the month. It is prohibited by law to delay the payment of
salaries for more than five working days from the due date.
7. Deductions for employees’ advances and receivables should be made from payroll.
Transactions involving deductions from employees’ salaries should be processed
promptly and reflected in the monthly payroll.
8. The amount of deduction of employees’ advances should be agreed upon with the
employee. However, any advances to employees should be covered from employees’
salaries within the year in which the advances were made to them.
9. Payroll payment must be supervised by employees who are not responsible for hiring
or firing people, employees who do not approve time reports, and employees who do
not take part in payroll preparation.
10. If salaries were not paid prior to month’s closing, a journal voucher must be prepared
to reflect the accrual of salaries. The accrual should be reversed when payroll is paid in
the following month.
11. Payroll income tax is to be 100% deducted in accordance to Palestinian Tax Law, and
any exemption must be supported with documents (rent contracts, students’
certificates, etc.).
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Financial Policies and Procedures Manual

Procedures
Record and Transfer of Salaries:
1. On the 25th day of each month, the Department of Administration and Human Resource
should initiate payroll processing procedures.
2. The Department of Administration and Human Resource should ensure that all
required data are properly and completely entered into the salaries software.
3. The system will prepare employees monthly payroll and payroll taxes and will provide
for end of service benefit, provident fund and other allowances.
4. A print out of salaries sheets must be prepared. The salaries sheets include all
employees’ names, I.D. numbers, gross salary, allowances, deductions, and net salary
5. The Department of Administration and Human Resource should submit salaries sheets
to the Financial and Administrative Manager for review and approval.
6. After reviewing and approving the salaries sheets, the Department of Administration
and Human Resource should prepare the wire transfer.
7. The Department of Administration and Human Resource should prepare the bank wire
transfer and send it to authorized signatories for review and approval.
8. Authorized signatories review and sign the transfer.
9. After being signed by the authorized signatories, the wire transfer should be sent to the
bank in order to be executed.
10. A copy of the wire transfer should be submitted to the Financial and Administrative
Manager.
11. The Financial and Administrative Manager submits the wire transfer to the
Administrative Department and Human resource to proceed with the process.
12. The Administrative Department posts the entry from the salaries software to the
accounting software automatically. The following journal is automatically created into
the accounting software as follows:
Dr. Salaries Expense xxxxx
Dr. End of Service Benefit Expense xxxxx
Dr. Provident Fund Expense xxxxx
Dr. Family Allowances expense xxxxx
Dr. Transportation Expense xxxxx
Cr. Bank xxxxx
Cr. Tax Payable xxxxx
Cr. Provision for End of Service xxxxx
Cr. Provision for Provident Fund xxxxx
Cr. Employees Advances xxxxx

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 Financial Policies and Procedures Manual

13. Salaries documents should be sent to the Senior Accountant in order to review and post
the journal entry to payroll ledger.
14. The Senior Accountant should print out the payroll journal voucher and obtain the
approval of the Financial and Administrative Manager.
15. The Accountant should file the voucher in the payment vouchers file.
Record and Transfer of Payroll Tax:
1. The Senior Accountant should prepare the payroll tax slip, the payment order and the
bank check.
2. The payment order and the check should be submitted to the authorized signatories for
their review and signature.
3. After being signed, a copy of the signed check should be maintained at the Financial
Department.
4. The check should be deposited in the Tax Authorities’ bank account and a Deposit Slip
should be obtained from the bank.
5. The Deposit Slip and the Tax Slip should be submitted to Tax Authorities in order to
stamp the Tax Slip for clearance.
6. The Stamped Tax Slip should be submitted to the Accountant in order to be recorded.
7. The Accountant will prepare the following journal entry:

Dr. Tax Payable xxxxx

Cr. Bank xxxxx

8. The Senior Accountant should post the journal entry into the accounting system.
9. The Financial Controller should review and approve the payment voucher.
10. The Accountant should file the payment voucher, attached to a copy of the check and
the Stamped Tax Slip.

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Financial Policies and Procedures Manual

III. End-of-Service Benefit

Purpose
The purpose of this section is to provide guidelines for calculation, processing, and payment
of MDLF employees’ end of service.
Policy
1. End of service benefits should be computed and recorded monthly.
2. MDLF employees become vested in the end-of-service benefit plan upon
completion of 12 months employment with the institution.
3. MDLF starts computing and recording end-of-service benefit of new employees
after the probation period of those employees.
4. Any employee who works more than 12 months is entitled to end-of-service
benefits.
5. The MDLF is to maintain a separate bank account for end-of-service contributions,
after obtaining the approval of MDLF Board of Directors.
Procedures
Calculating and Recording of the End-of-Service Benefit
1. The Department of Administration and Human Resource is responsible for
calculating and recording employees’ end of service benefits.
2. The end-of-service benefits must be calculated based on the number of actual years
worked with the MDLF, at the end of each month, and the last salary paid to the
employee excluding overtime. The difference between the balance in the provision
of the current month and the previous month is the end-of-service benefit expense
for the current month.
3. The end-of-service benefit should be calculated together with the salaries and they
should be reviewed and approved by the Financial and Administrative Manager.
4. The Financial and Administrative Manager approves the calculation sheet and
reviews it to make sure that salaries on the salaries sheet are consistent with salaries
recorded in the calculation sheet, and that employees on both schedules are the
same, except for the newly assigned employees who have been working for less
than one year.
5. The end-of-service benefit is recognized and recorded together with the monthly
salaries on the salaries software (See Payroll Processing and Payment Procedures)
6. If the MDLF has separate bank account for the end-of-service benefit, the
Accountant should prepare a payment order to transfer the amount from MDLF
bank account to
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 Financial Policies and Procedures Manual

the end-of-service bank account. The payment order should be prepared and
approved; and the following entry should be made after the transfer takes place:
Dr. ESB Bank Account xxxxx
Cr. MDLF Main Bank Account xxxxx

7. The Senior Accountant should approve and post the journal voucher.
End-of -Service Payments
1. An employee shall submit a one-month notice of resignation before ending his/her
services and to be entitled to his/her rights.
2. After the resignation is approved by the employee’s supervisor, a copy is sent to the
Department of Administration and Human Resource to begin the processing of the
transaction.
3. The Department of Administration and Human Resource shall review the employee’s
file for any unrecorded sick leaves, or unpaid vacations, and prepare the calculation of
the end of service benefits taking into consideration fractions of years worked.
4. If the employee has any other unpaid benefits, such as vacation or unpaid salaries, they
should be calculated and summed up with the calculated end of service benefit.
5. The Department of Administration and Human Resources should ask the employee to
hand over anything that belongs to the MDLF.
6. The Department of Administration and Human Resource should prepare an end-of-
service settlement letter which indicates that the employee has handed over anything
that belongs to the institution, and that he has received all his benefits and he does not
have any claims against the MDLF.
7. The documentation (the calculation sheet and the end of service settlement letter) to be
sent with the employee file to the Financial and Administrative Manager for review
and approval.
8. The Financial and Administrative Manager sends the calculation after reviewing and
revising it to the Accountant in order to prepare the journal entry and the payment.
9. The Accountant should prepare a payment order to transfer the amount to the
employee’s bank account and should send the payment order to be approved by the
authorized signatories.
10. The Accountant should make the following entry, after the transfer takes place:
Dr. Provision for ESB xxxxx
Cr. Bank xxxxx

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Financial Policies and Procedures Manual

11. The documents are returned back to the Financial and Administrative Manager for
authorization of the transaction, and posting it to the system.
12. The Accountant should file the journal vouchers properly in the accounting files.

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 Financial Policies and Procedures Manual

Process Maps:
Time Keeping and Reporting
 The Admin and
HR Department
Attendance Employees sign in
monitors
data is and out using
Employees’
stored into time- keeping
attendance& machine
system
leaves

The Admin and HR

Salaries
Department updates
software
th e salaries software
uodated
data

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Financial Policies and Procedures Manual

Payroll Processing and Payment

Time Keeping &

Reporting
 System
prepares On the 25th of each
salaries, taxes, month , the Admin &
HR Department
and end of
ensures system data is
service benefits
complete
allowance

Admin & HR
Department
prepares salary
sheets including
all details
needed

Salary Sheets

NO

Financial and Admin

Manager reviews
and approves salary
sheets

NO

Approved?

YES

The Admin &

HR
Department Transfer Forms
prepares wire
transfer forms

Authorized
signatories review
Approved?
and sign the
transfer forms

YES

The Admin & HR The Admin & HR

Department Department sends
sends a copy of the bank transfer
transfer to forms to the bank
Financial and for execution
Admin Manager
A

134
Financial Policies and Procedures Manual

A
 Admin & HR
Entry posted to Department posts
accounting salaries entry from
system salaries system to
accounting system

Salaries Entry and

Documents

Admin & HR
The Senior
Department sends
Accountant reviews
salaries documents to
and posts the
the Senior
salaries entry
Accountant
for approval NO

Approved?

NO

The Senior
Accountant
Salaries Voucher
prints journal
entry and
approves it

Financial and
Admin Manager
approved?

YES

The Senior
Accountant files the
voucher in the
payment vouchers
file

Accounting
Accounting Files
Files

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Financial Policies and Procedures Manual

Payroll Taxes Processing and Payment

The Senior
Accountant
prepares payroll
tax slip , payment
order and bank
check
 Tax slip Payment order Bank check

Senior Accountant
sends payment
Accounting
order and bank
Files
check to
authorized
signatories

The authorized
Copy of signatories sign and
Bank NO
approve the
check payment request
and check

Senior Accountant
sends the check to
Bank Deposit
slip be deposited at the YE Approved?
bank and obtains a S
deposit slip

The Senior
Accountant
forwards the
deposit and tax slip
to the tax
department

Tax and deposit The Senior The Accountant

Accountant gets the
slips records tax slip
slips stamped by the
amount on the
tax department for
accounting
clearance
system

The Senior
Payment Voucher Accountant
System Enrty
posts the journal
entry into the
system

The Financial
Controller reviews A
and approves the
payment voucher

136
 Financial Policies and Procedures Manual

A
 The Financial
Controller returns
Approved? NO
voucher to
Accountant

YES

The Accountant files

the payment
voucher with copy
of check and the
stamped tax slip

Accounting
Files

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Financial Policies and Procedures Manual

Recording End of Service Benefits

 On monthly
basis, Admin &
HR Department Salaries and
calculates and Employees
prepares end of Data
service benefits

NO Admin & HR
Department sends
sheets to Financial End of Service
and Admin sheets
Manager

Financial and Admin NO

Manager compares
Salaries sheets salaries sheets
with end of service
sheets to check
for differences

The Financial
and
Any
Admin Manager S Approved?
Differences?
YE approves and signs
S t YE he end of service
benefit sheets

YES

The Accountant
Separate records the end
End of Process NO Bank Account for System entry of service benefits
Benefits? on the system
upon recording
salaries
YES

The Accountant
prepares payment
order to transfer NO
benefits to bank
account

Authorized
Payment Order signatories approve
Approved?
and sign the
payment order

YES

Senior Accountant
The Accountant
approves and posts
record payment in
Approved? the journal entry System entry
the system
into the accounting
through an entry
system

NO

Payment voucher
YES Entry posted

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 Financial Policies and Procedures Manual

Payment of End of Service Benefits

 Employee submits a
Supervisor refers one-month notice
to employee and of resignation
explains reason before leaving
his /her services

NO

The employee’s One-month notice

supervisor approves of resignation
Approved?
and signs the
resignation letter

YES

The employee Copy of notice to

forwards a copy Admin & HR
to the Admin & Department
HR Department
for processing

The Admin & HR

The Admin & HR
department Department reviews
Unrecorded
YES employee’s file for Employee’s file
records such leaves?
any unrecorded
differences
or unpaid leaves

NO

The Admin & HR

The Admin &
Department obtains
HR Department
any assets belong
calculates end of
service to MDLF kept by
the employee

The Admin & HR

Department
prepares an end
of service
settlement letter

The Financial and

Admin Manager The employee signs
reviews and the letter to Settlement letter
approves the indicate
calculation sheet clearance with
and settlement MDLF

NO

The Accountant
Approves? YES prepares payment
order

A Payment Order

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Financial Policies and Procedures Manual

The Accountant
prepares
journal voucher

NO

Journal Voucher

NO
 Authorized
signatories sign the
payment order Approved?

YES

Supporting
documents are
sent to Financial
Approved? and Admin
Manager for
approval and
posting into the
YES system

The Accountant
files the voucher
and related
documents in the
accounting files

Accounting
Files

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 Financial Policies and Procedures Manual

Closing
Closing Accounts
Purpose
1. The purpose of this section is to set guidelines for the closing of the accounting books.
2. This policy establishes the standards and procedures for ensuring that the MDLF
accounts for monthly accruals in compliance with management’s objectives and IFRS.
3. The purpose of monthly accrual procedures is to allocate Expenditures to the proper
accounting period and match Expenditures with related revenues and budgets. At the
close of each month, accrual procedures are needed to ensure that all Expenditures and
revenues related to that month are properly included in the fund’s Financial Statements.
Accrual process shall be accomplished in a timely and accurate manner and must be in
compliance with all applicable financial and accounting standards.
Policy
General
1. A timetable exists for completion and confirmation of input and adjustments which
allows for the production of financial and management accounts on a timely basis.
2. The Financial and Administrative Manager is responsible for the maintenance of the
monthly closing and for capturing all non-routine issues and tracks the amounts and the
necessary accounting treatment.
Monthly Closing
1. The Financial Department shall close books on a monthly basis, no later than five
business days following the end of the month.
2. The closing process prevents any person from entering a transaction dated in the
previous period, so any related party to data entry shall make sure that all transactions
were recorded in the system before the end of five business days of the following
month.
3. The Senior Accountant shall make sure that all saved transactions were posted before
the start of the closing process.
4. In case the Financial and Administrative Manager approves the opening of the closed
month, the month shall be opened and immediately closed after posting the entry.

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Financial Policies and Procedures Manual

Year End Closing

1. Year-end closing shall be no later than 30 days after the end of the financial year.
2. The year-end closing shall be performed in two stages: the first stage at the end of year,
as a temporary closing, and; the second stage after reopening the software for the
purpose of entering adjusting journal entries, and then closing the year to roll over.
3. Backup of all the information shall be performed before performing any monthly or
annual closing.
4. The Senior Accountant shall review the valuation of reserves or other account
balances based on estimates, and these reserves shall be approved by the Financial and
Administrative Manager before the closing process take place.
5. All adjusting entries shall be made by Accountants, reviewed by the Senior Accountant
and the Financial Controller, and approved by the Financial and Administrative
Manager before being posted to the system.
6. Each account shall be examined, with the balance verified with reference to supporting
schedules.
Procedures
1. On the 1st business day following the end of the month, the Senior Accountant
should review and post all approved but not posted entries from the previous
month.
2. On the 2nd business day following the end of the month, the Senior Accountant
should determine whether any accruals should be made. In determining what
accruals should be made, the following should be considered:
 Prior month accruals and new agreements that need accruals.
 The Expenditures must have been incurred during the month being closed; that
is, the product or service must have been received on or before the last day of
the month in order to qualify as an expense. Even though an expense may have
originally been budgeted in the month, it does not qualify for accrual unless the
product or service was actually received by the MDLF.
 Payroll taxes withheld shall be recorded at the time of the related payroll. Other
Payroll withholding should be recorded when the related payroll is recorded.
 If payment is due prior to performance, the amount should be accrued to Prepaid
Expenses.
 Depreciation should be monthly recorded.
 Foreign exchange losses and gains.

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 Financial Policies and Procedures Manual

3. If accruals are to be made, the Accountant should record the accruals into the
accounting system by the end of the 3rd day, for the accrual to be recorded prior to
the deadline for closing the books for the month.
4. All recorded journal entries must be approved by the Senior Accountant, and then
delivered with the ledgers and the trial balance to the Financial Controller and
Financial and Administrative Manager for approval,
5. The Financial Controller should perform the following procedures, before
submitting the reports to the Financial and Administrative Manager:
 Confirm significant balances with third parties.
 Reconcile general ledger balances regularly to subsidiary ledger balances.
 Compare journal entry activity reports periodically to supporting documentation.
 Perform a one-to-one check of the listing of recurring period end closing entries/
adjustments to the journal entries actually recorded to validate completeness.
 Ensure that all nonrecurring period end closing entries/ adjustments entered
into the accounting system are compared via a one-to-one check of post-input/
update reports to information contained in the source documents to verify the
completeness and accuracy of all critical field data.
 Ensure that all recurring and nonrecurring closing adjustments are approved by
the appropriate level of management and compared to source documents to
verify the documentation is adequate and sufficient.
 Compare recorded amounts to predicted amounts or subsequent transactions.
 Compare recorded balances and activity periodically to outside sources of
information.
 Review substantiation procedures to ensure that they are proper and functioning
as designed.
6. Upon Financial and Administrative Manager approval, the Senior Accountant
should post the adjusting entries and close the month in the system before the end
of the fifth day of the month,
7. Any entries to be recorded after closing the month should be approved by the
Financial and Administrative Manager. One exception is for recording the
adjusting and reclassification entries proposed by the auditors after the year end,
according to the policy above.
8. After monthly and year-end closing, the Accountant should print out two copies of
the following reports from the system (no need to format), one copy should be filed
as reference for later years and another copy should be sent to the Budgeting and

143
Financial Policies and Procedures Manual

Financial Planning Specialist. These reports shall include but are not limited to the
following:
 Adjusted Trial Balances
 General Ledger
 Balance Sheet
 Income Statement
 Cash Flow Statement
 Adjusting Journal Entries
 Reconciliations,
9. The Budgeting and Financial Planning Specialist should perform the following:
a. Ensure that all balances subject to evaluation are reviewed quarterly to
determine any necessary adjustments.
b. Analyze key ratios, trends, and variances periodically to determine required
provisions for losses, accounts to be written-off, and additional valuation
allowances.
c. Review provisions, write-offs, and additional valuation allowances.
d. Use reliable external sources to help with valuations where appropriate.
e. Review methods and formulas used for realization, accruals, and write-offs
periodically for accuracy and current applicability.
f. Review all significant asset accounts at least annually to ensure recorded
balances do not exceed net realizable values.
g. Report results to the Financial and Administrative Manager, who will report to
the MDLF General Director.

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 Financial Policies and Procedures Manual

Annex:
The timetable should be distributed to all appropriate staff and referred to, as fol-
lows:
Deadline – Day
Procedure Prepared by Approved by
of month
Determine needed Accountant None Day 1
entries
Record closing entries Accountant Senior Accountant Day 2
Review entries Financial Controller Financial and Administrative Day 3
Manager
Post approved entries Senior Accountant Financial and Administrative Day 4
Manager
Print and file reports Accountant None Day 5
Analyze reports Budgeting & Financial General Director Day 15
Planning

Reconciliation that shall be performed:

Semi-
Reconciliation Monthly Quarterly Annually
Annually

Bank reconciliation
Revenue account reconciliation
Expense account reconciliation
Projects-in-progress account reconciliation
Accounts payable balances reconciliation
Balances of employees’ allowances
reconciliation
All other balance sheet account reconciliation
Petty cash reconciliation

145
Financial Policies and Procedures Manual

Process Maps:
Closing the Accounts
 On the 1 st day following
the end of the month the On the 2nd day following the
Senior Accountant posts end of the month, the Senior
Any accruals?
approved but not posted Accountant determines
entries whether any accruals should
be made

YES

The Accountant reviews and

records the accruals into the
System entry NO
accounting system prior to the
deadline for closing the books

NO

The Senior Accountant reviews

all recorded journal entries Approved?

The Senior Accountant delivers

The Financial Controller confirms
the journal entries with the
significant balances with third
ledgers and the trial balance
parties and reconcile general YES
to the Financial Controller
ledger balances to subsidiary
and the
ledger balances
Financial and Admin Manager
for approval

The Financial Controller

compares journal entry reports
to supporting documentation
NO
and perform a one to one
check

The Financial Controller ensures

that all recurring and
nonrecurring closing
adjustments are approved by Approved?
the appropriate level of
management

YES

146
 Financial Policies and Procedures Manual

A NO
 The Financial and Admin
Manager reviews the
adjusting entries and all Approved?
necessary reports

YES

The Senior Accountant posts the

adjusting entries and close the
month in the system before the System entry
end of the fifth day if the month

After monthly and year end The Financial and Admin

closing, the Accountant prints Manager approves any entries to
out 2 copies of the be recorded after closing
following reports from the month
the system

Adjusted Trial
Balance Cash Flow
Statement

Adjusting Journal
General Income Statement
Entries
Ledger

Balance Sheet Reconciliations

The Budgeting and

Planning Specialist
ensures that all
balances are reviewed

The Budgeting and

Planning Specialist
analyzes key ratios
, trends and
variances
Accountant files one copy as The Budgeting and Planning
reference for later years and The Budgeting and Specialist reports results to
File another copy sent to the Planning Specialist General Director, Financial
Budgeting and Planning and Admin Manager and
analyzes key ratios
Specialist General Director of
, trends and
variances Operations

The Budgeting and

Planning Specialist
reviews provisions, write
off

The Budgeting and

Planning Specialist
reviews provisions, write
off

147
Financial Policies and Procedures Manual

Reporting
It is the policy of the MDLF to report on its financial operations and condition fully and
forthrightly, on a regular basis, promptly, and following the letter and spirit of accounting
principles it has adopted. Further, it is the policy of the MDLF to present financial
informa- tion in a form that is useful to its stakeholders.
Reporting
Purpose
To provide a consistent reporting of financial information to stakeholders
Policy
1. Financial information is to be provided on a timely basis using a consistent format.
2. Financial statements are a structured representation of the financial position of and
the transactions undertaken by the MDLF. The objectives of financial reporting are to
provide information useful for decision making by the MDLF and its stakeholders and
to demonstrate the accountability of the MDLF for the resources entrusted to it.
3. The Financial Statements accomplish these objectives in the following manner:
•Providing information about the sources, allocation and uses of financial resources.
•Providing information about how the entity financed its activities and met its cash
requirements.
•Providing information that is useful in evaluating the MDLF’s ability to finance its
activities and to meet its liabilities and commitments.
•Providing information about the financial condition of the MDLF and changes in it.
•Providing aggregate information useful in evaluating the MDLF’s performance in
terms of service costs, efficiency and accomplishments.
4. The preparation and presentation of the Financial Statements is the responsibility of
the Financial Department. The Senior Accountant prepares the Financial Statements,
the Financial Controller performs the first review, and the Financial and Administrative
Manager will have the responsibility for final review and approval of them. Financial
Statements must be approved by the General Director before disclosing them.
5. The Financial Statements are to be prepared in accordance with the International
Financial Reporting Standards (IFRS).
6. The Financial Statements should be clearly identified and distinguished from other
information in the same published document.

148
 Financial Policies and Procedures Manual

7. The usefulness of the Financial Statements is impaired if they are not made available to
users within a reasonable period after the reporting date.
Procedures
Following is a list of the items required in a financial package:
(a) Quarterly Interim Financial Reports:
The quarterly interim financial reports:
• Should be prepared four times as of and for the period ended March 30, June 30,
September 30, and December 31.
• Should be prepared by the Senior Accountant, reviewed by the Financial
Controller, and approved by the Financial and Administrative Manager and the
General Director.
• Should be reviewed by independent private and qualified auditors acceptable to
the Donors. The auditor should issue negative assurance review report in accor-
dance to ISA.
Reports should be ready for audit within one week from the end of period: April 10,
July 10, and October 10, and January 10.
Should be submitted by the auditors to donors after 45 days from end of each quarter.
(b) Annual Audits of Programme Consolidated Financial Statements
The consolidated Financial Statements:
• Should be prepared at the end of each fiscal year.
• Should be prepared by the Senior Accountant, reviewed by the Financial
Controller, and approved by the Financial and Administrative Manager and the
General Director.
• Should be audited by independent private and qualified auditors acceptable to
the Donors. The external audit report should encompass all activities under the
programme grant agreements, be in accordance with the Bank’s auditing require-
ments and be conducted according to International Standards on Auditing.
• The audit should be performed in accordance to the Terms of Reference (TOR)
in Annex.
Reports should be ready for audit within one month from the end of the fiscal year,
and the auditors report should be completed and submitted to donors within six
months from the end of the fiscal year.
The audited Programme Consolidated Financial Statements accompanied with
auditors’ management letter will be submitted to the Donors within six months after
the end of each fiscal year.
Should include the following:
I. A complete set of Financial Statements includes the following components:
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Financial Policies and Procedures Manual

i. Statement of Financial Position

Statement of financial position is a financial statement that reports an
organization>s assets and the claims against them - liabilities and net assets -
at a set date noted on the statement (Also called the balance sheet)
ii. Statement of Financial Performance
Statement of Financial Performance is a financial statement that reports the
results of an organization>s business operations (revenue and expenses)
for a set period, usually one year (Also called an Earnings Report, Income
Statement, Statement of Income, and Statement of Operations)
iii. Cash Flow Statement
Cash flow statement is a financial statement that reports the flow of cash in
and out of the organization for a set period, usually one year. It reports the
operating activities, investing activities and financing activities of the
organization.
iv. Statement of Changes In Net Assets/Equity
Statement of Changes in net assets/equity is a financial statement that reports
the changes and movements that took place on net assets last year ending
balance.
v. Accounting Policies and Notes to The Financial Statements.
II. The annual Programme Financial Statements should include the following:
i. A Statement of Sources and Uses of funds (by Grant Category / by
Activity showing Bank and Counterpart Funds separately);
ii. Statement of Cash Position for Programme Funds from all sources;
iii. Statements reconciling the balances on the various bank accounts
(including Bank Dedicated Account) to the bank balances shown on the
Statement of Sources and Uses of funds;
iv. Withdrawal Schedule - Bank Grant listing individual withdrawal
applications relating to disbursements by the IFR Method, by reference
number, date and amount and;
v. The Notes to the Financial Statements for the significant accounting
policies and all other relevant information
(c) Budget Variance Analysis:
Should be prepared at the end of each month.
Should be prepared by the Senior Accountant, reviewed by the Financial Controller,
and approved by the Financial and Administrative Manager and the General
Director.
Reports should be ready within one week from the end of month,
150
 Annexes:
ANNEX A- Interim Financial Reports (IFRs)
1. Sources and Uses of Funds
Municipal Development Program
Sources & Uses of Funds ( World Bank )
For the Period from ………………………….………………….…. to ……………….……………….……………….
Current period
cumulative Prior period Forecast for
Description (1/1/20xx-31/03/20xx)
coming Six
Planed Actual Variance Planed Actual Variance Months
Opening Balance from Last Quarter
Sources of Funds (World Bank MDP)
Total Sources of Fund
Less Uses of Funds
Category 1 : Municipal Grants for Capital Investments
Recurrent Expenditures for Gaza Municipalities (*1)
Category 2 :Support to Municipal Innovations and Efficiency
151

Financial Policies and Procedures Manual

Category 3 :Capacity Building
Category 4 :(a) Consultants’ services, goods, audit
(b) MDLF Management Fee

Total uses of Funds

Excess of Sources over Uses of Funds
Add Current Liabilities
Due to Municipalities
Due to Contractor
Total Current Liabilities
Add (less) Gain ( loss ) from Currency Exchange
Cash Available Per Book
Variance For Current Q
Total Forecast

Total Fund Requested For next period

Forecast for the coming Six Months. *************** Less Cash Available at Bank **************
Total Amount to be paid by World Bank *************** (*1) Details are summarized in Schedule «Recurrent Expenditures».
 Financial
2. Sources and Uses of Funds by Donor
Municipal Development Program
Sources & Uses of Funds By
 For the ………………… P…e…r…io.… fro…m…………….t…o…………….……………….
d……………….….
Actual
W.B. Dutch AFD C umulative
Description Variance
for Plananll
Quarter Cu mulativ Quarter Cumulative ProgramQuarter ed

Policies
e Cum ulative
Opening Balance from Last Qu arter
Sources of Funds ( World Ban k, Dutch & AF )
D
Total Sources of Fund

Less Uses of Funds

Category 1 : Municipal Grants for Capital
Investments
Category 2 :Support to Municipal Innovations and
Efficiency
Category 3 :Capacity Building

and
152

Category 4 :(a) Consultants’ services, goods, audit

(b) MDLF Management Fee
Total Uses of Funds

Excess of Sources over Uses of Funds

Add Current Liabilities

Procedures
Due to Municipalities
Due to Contractor

Total Current Liabilities

Add ( less ) Gain ( loss ) from currency exchange
Cash Available Per Book

Manual
 3. Municipality Disbursement by Sub-Projects - World Bank
Municipal Development Program
Municipality Disbursement by Sub-Projects - World Bank
Category 1 : Municipal Grants for Capital Investments

Nablus

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 WB 100%
2 WB 100%
3 WB 100%
4 WB 100%
5 WB 100%
6 WB 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00
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Qalqilya

Financial Policies and Procedures Manual

Source of WB % of Actual (Last Actual (Current
NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00

Jericho

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00
 Financial Policies and Procedures Manual
Bethlehem

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4 100%
5 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00

Tubas

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
154

Total 0.00 0.00 0.00 0.00 0.00 0.00

Jenin

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4

Total 0.00 0.00 0.00 0.00 0.00 0.00

 Hebron

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4 100%
5 100%
6 100%
7
Total 0.00 0.00 0.00 0.00 0.00 0.00

Ramallah

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
155

2 100%

Financial Policies and Procedures Manual

3 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00

Tulkarm

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4 100%
5 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00
 Financial Policies and Procedures Manual
Al-beirh

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4 100%
Total 0.00 0.00 0.00 0.00 0.00 0.00

Salfet

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
Total 300% 0.00 0.00 0.00 0.00 0.00 0.00
156
 JSCI

Source of WB % of Actual (Last Actual (Current

NO Project M. Allocated contracted Total Remaining Forecasting
Fund Financing Period) period)
1 100%
2 100%
3 100%
4 100%
5 100%
6 100%
7 100%
8 100%
9 100%
Total Category 1 0.00 0.00 0.00 0.00 0.00 0.00
Category 2 :Support to
Municipal Innovations
and Efficiency
157

Total Category 2

Financial Policies and Procedures Manual

Category 3 :Capacity
Building 0.00
Total Category 3
Category 4 :
(a) Consultants’
services, goods, audit
(b) MDLF
Management Fee
Total Category 4
Total all categories
Financial Policies and Procedures Manual

4. Schedule of Recurrent Expenditures for Gaza Municipalities

Municipal Development Program
Schedule of Recurrent Expenditures for Gaza Municipalities
For the Period from ………………………….………………….…. to ……………….……………….……………….
Forecast
Current period for
cumulative
Recurrent Expenditures Items (1/1/20xx- coming
Prior period Six
31/03/20xx)
Months
Cleaning and maintaining public land, facilities, and assets
Road maintenance
Maintaining public health services including water purification
and pest control
Water and electricity utilities related to the provision of municipal
services
Fuel to run electric generators and water and wastewater pumps
Collecting and dumping solid waste in legally permissible areas
Laboratory tests
Maintaining and operating municipal service vehicles
Equipment spare parts
Vehicle insurance
Maintaining electromechanical and IT equipment
Carrying out advertisements under the Procurement Plan
Office supplies
Public awareness related to increasing municipal revenues
Communications
Renting service vehicles
Salaries of contractual staff or workers
Total

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 Financial Policies and Procedures Manual

5. Designed Account (DA) Activity Statement

Municipal Development Program
Designated Account (DA ) Activity
Statement
For the Reporting Period ………………………….………………….….
Project Name: …………………………………..
IBRD/IDA Loan No. : ……………………………
Deposit Bank : …………………. A/C No. : …………………..
Currency of DA: …………….
PART I

1 . Cumulative advances to end of current reporting period 0

2 . Cumulative expenditures to end of last reporting period 0
3 . Outstanding Advance to be accounted (Line 1 minus line 2 ) 0

PART II

4. Opening DA balance at beginning of reporting period ( as of…......) 0

5. Add/Subtract : Cumulative adjustment ( if any ) 0
6. Advances from World Bank during reporting period 0
7. Add lines 5 and 6 0
8. Outstanding advances to be accounted for ( add line 4 & line 7 )
9. Closing DA balance at end of current reporting period ( as of..............) 0
10.Add/Subtract: Cumulative adjustments (if any) 0 0
11. Expenditures for current reporting period 0
12. Add line 10 and line 11
13. Add line 9 and line 12
14. Differences (if any) (line 8 minus line 13)

PART III

15. Total forecasted amount to be paid by World Bank 0

16. Less: Closing DA balance after adjustments 0
17. Direct payments/SC payments 0
18. Add line 16 and 17

19. Cash requirement from World Bank for next two reporting periods (line 15 minus line 18)

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Financial Policies and Procedures Manual

6. List of Contracts that are prior reviewed by the World Bank

Municipal Development Program
List of contracts that are prior reviewed by the World Bank
For the Period from ………………………….………………….…. to ……………….……………….……………….

Actual Remaining
Contract # Contractor Amount US$
Payments Balance

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 Financial Policies and Procedures Manual

ANNEX B. External Auditor Terms of Reference (ToR)

TERMS OF REFERENCE (TOR)
FOR THE AUDIT OF THE [NAME OF PROGRAM] FOR THE YEAR (PERIOD)
ENDED [MONTH DATE, YEAR]
[This TOR is applicable to new operation/Program using new the disbursement guidelines]

Background including Program Budget (Components and Categories per each Donor)
The TOR should provide appropriate background information of the Program, including:
a) A brief description of the Program including information on Program sources of
funding;
b) A general description of implementation arrangements, including the
organizational structure of all implementing entities (if more than one);
c) List the source and total amount of funds for the period subject to audit under this
TOR (Bank’s loan/credit, trust funds, counterpart funds, etc); and
d) Total disbursements / expenditures for the period subject to audit

Objective
The primary objective of the audit engagement is to enable the auditor to express a profes-
sional opinion as to whether (i) the Program Financial Statements (PFS) of the [NAME OF
PROGRAM] (the Program) as of [MONTH DATE, YEAR] and for the fiscal year then
end- ing, show true and fair view of the Program’s financial position at the end of each
fiscal year and of the funds received and expenditures for the period. (ii) Expenditures
reimbursed on basis of Statements of Expenditures (SOE) or Reviewed Interim Financial
Reports (IFRs) are eligible to Bank financing and are reflected on the PFS, and (iii) the
Designated Ac- counts have been used exclusively for payment of eligible expenditures as
reflected in the PFS, and (iv) The Program’s accounting system (books and records)
provides the basis for the preparation of the PFS, was established to record the financial
transactions of the Pro- gram, and is maintained by the Program’s implementing agency
[NAME OF PROGRAM IMPLEMENTING AGENCY]. For this purpose, the auditor
shall carry out whatever neces- sary examinations of the statements and underlying records
and control systems. The Audit opinion should also state whether the Procurement
Guidelines of IDA have been properly applied and in accordance with the TFGA.

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Financial Policies and Procedures Manual

Scope
The audit will be conducted in accordance with International Standards on Auditing (ISA)
as published by the International Auditing and Assurance Standards Board of the
International Federation of Accountants (IFAC), with special reference to ISA 800
(Auditor’s Report on Special Purpose Audit Engagements) and to relevant World Bank
guidelines. In conducting the Program audit, special attention should be paid to the
following:
a) External funds have been used in accordance with the conditions of the relevant
general conditions, relevant financing agreements and disbursement letter, with due
attention to economy and efficiency, and only for the purposes for which the
financing was provided. Relevant general conditions and financing agreements are
[CITE RELEVANT GENERAL CONDITIONS AND FINANCING
AGREEMENTS];
b) Counterpart funds have been provided and used in accordance with the relevant
general conditions, relevant financing agreements and disbursement letter, and only
for the purposes for which they were provided;
c) Goods and services financed have been procured in accordance with the relevant
general conditions, relevant financing agreements and disbursement letter;
d) Necessary supporting documents, records, and accounts have been kept in respect
of all Program ventures including expenditures reported via Summary Report (or
Interim Reviewed Financial Reports (Interim Reports)) if used as the basis of
disbursement), or Designated Accounts (DAs). Clear linkages should exist between
the accounting records and the financial reports presented to the Bank.
e) Where Designated Accounts have been used, they have been maintained in
accordance with the provisions of the relevant general conditions, relevant
financing agreements and disbursement letter.
f) The PFS have been prepared in accordance with generally accepted accounting
principles and practices and relevant World Bank guidelines, and give a true and
fair view of the financial position of the Program as of [MONTH DATE, YEAR]
and of the resources and expenditures for the fiscal year then ending.
g) Review the compliance on each of the financial covenants in the (STATE
SPECIFIC SECTION OF LOAN/FINANCING AGREEMENT and list, as
necessary).
h) Ensure conducting field visits with clear mandates to verify physical progress. In
this context, auditors should use relevant technical specialists as needed
i) Verification of daily workers fees under recurrent expenditures to Gaza
Municipalities; the auditor will insure the eligibility daily workers payments
according to the funding proposal and to the respective sub- project agreement.
Sample to be checked have to be representative of both West Bank and Gaza in
respect to the program allocation to these areas.
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 Financial Policies and Procedures Manual

Quarterly Review of Interim Financial Reports

The auditor will be expected to carry out a review for the Interim Financial Report (IFRs)
submitted as a basis for Disbursement every Quarter. The Quarterly Review of IFRs will
be part and parcel of the end of year financial audit.
The objective of the interim audit is to ascertain the compliance with the terms of funding
agreements. More specifically, it aims to ensure that disbursements were executed in
accordance with procedures agreed to with the Donors, that resources received were used
for eligible expenditures as spelled out in the Project Papers and the Grant Agreements and
are in compliance with the agreed upon requirements.

Program Financial Statements

The Program Financial Statements should include
a) Summary of Funds received, showing the World Bank, Program funds from other
donors, and counterpart funds separately. (Funds Received by each Donor).
b) Summary of Expenditures shown under the main Program headings and by main
categories of expenditures and by Donor, both for the current fiscal year, previous
fiscal year, and accumulated to-date; (Funds Disbursed related to each Donor).
c) Summary of Summary Reports (Reviewed IFRs) used as the basis for the
submission of withdrawal applications;
d) Statement of Designated Accounts; and
e) Balance Sheet showing Accumulated Funds of the Program, bank balances, other
assets of the Program, and liabilities, if any.

Summary Reports
(or Interim Reviewed Financial Reports (interim reports) if used as the basis of
disbursement)
As part of the audit of the PFS, the auditor is required to audit all Summary Reports and
Interim Reviewed Financial Reports (Interim Reports) used as the basis for the submission
of withdrawal applications.
These Summary Reports (or Interim Reports) should be compared for Program eligibility
with the relevant general conditions, relevant financing agreements, and disbursement
letter, and with reference to the Program Appraisal Document for guidance when
considered necessary. Where ineligible expenditures are identified as having been
included in withdrawal applications and reimbursed against, these should be separately
noted in separate note disclosures and also in the management letter, by the auditor. The
Program Financial Statements (or included within the notes to the Program financial
statements) should be a

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Financial Policies and Procedures Manual

schedule listing individual Summary Reports (or Interim Reports if used as the basis of
disbursement) withdrawal applications by specific reference number and amount.
The auditor should pay particular attention as to whether:
a) The Summary Reports (or Interim Reports) have been prepared in accordance with
the provisions of the relevant financing agreement.
b) Expenditures have been made wholly and necessarily for the realization of Program
objectives.
c) information and explanation necessary for the purpose of the audit have been
obtained;
d) supporting records and documents necessary for the purpose of the audit have been
retained, and
e) The Summary Reports (or Interim Reports) can be relied upon to support the
related withdrawal applications.

Designated Accounts
In conjunction with the audit of the Program Financial Statements, the auditor is also
required to audit the activities of the Designated Accounts associated with the Program.
The Designated Accounts usually comprise
a) deposits and replenishments received from the Bank;
b) payments substantiated by withdrawal applications;
c) interest that may be earned from the balances and which belong to the borrower;
and
d) the remaining balances at the end of each fiscal year.
The auditor should pay particular attention as to the compliance with the Bank’s
procedures and the balances of the Designated Accounts at the end of the fiscal year (or
period). The auditor should examine the eligibility of financial transactions during the
period under examination and fund balances at the end of such a period, the operation and
use of the DAs in accordance with the relevant general conditions, relevant financing
agreements and disbursement letter, and the adequacy of internal controls for this type of
disbursement mechanism.
For this Program, the Designated Accounts are referred to in [CITE RELEVANT
CLAUSES] of the relevant general conditions, relevant financing agreements and
disbursement letter.

Audit Deliverables
The auditors will issue an audit opinion on the [NAME OF PROGRAM] Program Financial

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 Financial Policies and Procedures Manual

Statements (refer to the “Program Financial Statements” paragraph above for a definition
of the statements included therein).
In addition to the audit opinion, the auditor will prepare a “management letter.

A) Audit Report
The auditing report shall include an explicit professional opinion whether (a) the
Program financial statements give a true and fair view of the state of the Program’s
affairs, (b) expenditures reimbursed on basis of Statements of Expenditures are eligible
to Bank financing and are reflected on the PFS, and (c) the Designated Accounts have
been used exclusively for payment of eligible expenditures as reflected in the PFS, and
(d) The Program’s accounting system (books and records) provides the basis for the
preparation of the PFS, was established to record the financial transactions of the
Program, and is maintained by the Program’s implementing agency. The Auditors
should take into account relevant statutory and other mandatory disclosures and
accounting requirements stipulated in the GA and express in the report any relevant
exception and the impact of the exception on the PFS. The audit report shall be
produced on yearly basis. Also, a report shall be produced at the completion of the
Program.

B) Management Letter
In which the auditor will:
•give comments and observations on the accounting records, systems, and controls that
were examined during the course of the audit;
•identify specific deficiencies and areas of weakness in systems and controls and make
recommendation for their improvement;
•report on the degree of compliance of each of the financial covenants on the financ-
ing agreement and give comments, if any, on internal and external matters affecting
such compliance;
•Communicate matters that have come to attention during the audit which might have a
significant impact on the implementation of the Program; and
•Bring to the borrower’s attention any other matters that the auditors considers
pertinent.
•Include management>s comments in the final management letter.

C) Quarterly Reviewed Interim Financial Reports (IFRs)

The financial statements, including the audit opinion, and management letter should be
receivedbythe Program’simplementingagency,[NAMEOFPROGRAMIMPLEMENTING
AGENCY], no later than six months after the end of the audited fiscal year. The
Program’s implementing agency should then promptly forward two copies of the
audited Program financial statements (including audit opinion) and management letter
to the Bank.
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Financial Policies and Procedures Manual

General
The responsibility for the preparation of financial statements including adequate disclosure
is that of the management of the [NAME OF PROGRAM IMPLEMENTING AGENCY].
This includes the maintenance of adequate accounting records and internal controls, the
selection and application of accounting policies, and the safeguarding of the assets of the
entity. As part of the audit process, the auditor will request from management written con-
firmation concerning representations made to the auditor in connection with the audit.
The [NAME OF PROGRAM IMPLEMENTING AGENCY] will co-operate fully with the
auditor and will make available to the auditor whatever records, documentation and other
information is requested by the auditor in connection with the audit. The auditor should
be given access to all legal documents, correspondence, and any other information associ-
ated with the Program and deemed necessary by the auditor. Confirmation should also be
obtained of amounts disbursed and outstanding at the Bank and of amounts disbursed
under [SPECIFY OTHER DONORS, LOANS OR GRANTS, IF ANY].
It is highly desirable that the auditor become familiar with the relevant World Bank
guidelines, which explain the Bank’s financial reporting and auditing requirements. These
guidelines include:
Financial Management Practices in World Bank Financed Investment Operations,
dated November 2005
World Bank Disbursement Handbook for Borrowers
World Bank Disbursement Guidelines, dated September 2005
Financial Monitoring Report (FMR) - Guidelines to Borrowers dated November 30,
2001.
This term of engagement will remain effective for future fiscal years unless it is
terminated, amended or superseded.
The auditor should understand that working papers under World Bank Program can be
subject to the review by Client’s and/or World Bank designated staff.

Irregularities Including Fraud

A. The MOEHE is responsible for ensuring the establishment and maintenance of an
adequate system of internal control. It is also responsible for ensuring compliance with
statutory and other regulations, and for the prevention and detection of irregularities,
including fraud. Although, the Auditors are not required to search specifically for such
matters, the audit shall be planned and conducted so that the Auditors have a
reasonable expectation of detecting material misstatements in the accounts resulting
from irregularities, including fraud, or breach of regulations.

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 Financial Policies and Procedures Manual

B. The Auditors will report in writing any serious weaknesses, fraud, irregularities or
accounting break-downs that they come across in the normal course of their duties to
the designated office holder, MOEHE, and the Bank without delay.

Access
A. The Auditors shall have rights of access to the books, accounts, vouchers, TFGA and
related Supplemental Letters, Program Appraisal Document, correspondence, and all
other documents in relation of the Program and to such information and explanations as
auditors consider necessary to perform their duties and fulfill their responsibilities.
B. In addition, the auditors will be provided with copies of the Bank relevant publications
that the Ministry has to recognize including: (i) World Bank guidelines “Financial
Accounting, Reporting, and Auditing Handbook” (FARAH) (ii) The World Bank
“Program Financial Management Manual“ and (iii) the World Bank “Procurement
Guidelines”.
C. In turn, on occasions the Bank representatives may wish to meet with Programs’
auditors, in connection with a visit to the auditors’ office, review of the audit working
papers, files and discussion of the work performed and conclusion reached by the
auditors. The Auditor should not limit access in any way and must reply to all
inquiries raised by the Bank representative. Failure to comply with this provision may
disqualify the Auditors from dealing with the all Programs funded or administered by
IDA. Formal discussion should normally be arranged through the Program’s
designated office holder or representative. The Bank will have this exclusive right
during performance of the audit and within two years after completion of the audit
engagement.
D. Annual Meetings. The Auditor will be requested to attend a meeting with the Ministry
in which the Program’s annual reports and financial statements of account are
presented. The Auditor will discuss the audit report and management report and any
part of the business that concerns the Auditor.
E. Termination of Appointment. If there are serious shortcomings on the part of the
Auditor, the Governing Body, after consultation with the World Bank, may pass a
resolution to remove the Auditors before the expiry of their assignment.
Restriction of Auditor’s Liability. There is no limitation of the auditors’ liability in
respect of audit opinions given under this assignment. The Ministry will not agree to any
such restriction in liability.
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Financial Policies and Procedures Manual

Quarterly Reports
 The senior accountant
Quarterly interim
prepares and reviews
Financial Report
the Quarterly interim
(IFRs)
Financial Report
(IFRs) quarterly

The Financial
Controller
reviews the
quarterly interim
financial reports

Approved? No

YES

The Financial and

Admin Manager and
the General Director
Approved?
review the quarterly
interim financial reports

YES

Independent
auditors review
the reports

The Auditor issues

negative assurance
review report

Reports should be
submitted by Negative assurance
auditor to donors review report
after 45 days
from end of each
quarter

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 Financial Policies and Procedures Manual

Annual Consolidated Statements

 Consolidated The Senior
Financial Accountant prepares
Statements the Consolidated
financial statements
at year end

The Financial
Controller reviews
the consolidated Approved? NO
financial statements

YES

NO
The Financial and
Admin Manager and
the General Director Approved?
review the
consolidated
financial statements
YES

Independent
auditors review
the consolidated
financial statements

Auditor issues a
report complying
with the bank’s
requirements and
to international
standards on
auditing

External audit
report

Auditors report
and management
letter should Financial
completed and Statements
submitted to
donors within6
months from the
end of year

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Financial Policies and Procedures Manual

Budget Variance Analysis

 Budget
The Senior Accountant
Variance prepares and reviews
Analysis the budget variance
analysis at month end

The Financial
Controller reviews
Approved? NO
the Budget
variance
analysis

YES

The Financial and

Admin Manager and
the General
Director approve
Budget variance
analysis

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 Financial Policies and Procedures Manual

Structure and Jobs Descriptions

A. Organizational Structure

Board of Directors

General Director

General Director of
Operations

Administrative &
Financial Manager

Admin Assistant
Senior Accountant - Budgeting and
Gaza Financial Controller Senior Accountant Financial Planning
Specialist

Accountants

Financial Department B

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Financial Policies and Procedures Manual
B. Job Descriptions

Position Title: Financial and

Administrative Manager Reports To: General Director

Department: Financial Department

Summary
1. Responsible for all financial and fiscal management aspects of operations,
2. Responsible for providing leadership and coordination in the administrative, business
planning, accounting and budgeting efforts of the MDLF.

Roles & Responsibilities

1. Establishes and implements short- and long-range departmental goals, objectives,
policies, and operating procedures.
2. Creates, coordinates, and evaluates the financial programmes and supporting
information systems of the MDLF.
3. Approves and coordinate changes and improvements in automated financial and
management information systems for the MDLF.
4. Ensures compliance with local laws and donors reporting requirements.
5. Oversees the approval and processing of revenue, expenditure, and position control
documents, department budgets, ledger, and account maintenance and data entry.
6. Coordinates the preparation of financial statements, financial reports, special analyses,
and information reports.
7. Establishes and maintain appropriate internal control safeguards.
8. Interactswithothermanagerstoprovideconsultativesupporttoplanninginitiativesthrough
financial and management information analyses, reports, and recommendations.
9. Interacts with donors on all financial matters related to grants agreements.
10. Ensures records systems are maintained in accordance with IFRS.
11. Develops and directs the implementation of strategic business and/or operational plans,
projects, programmes, and systems.
12. Analyzes cash flow, cost controls, and expenses and analyze financial statements to
pinpoint potential weak areas.
13. Oversees financial management of Municipalities to include developing financial and
budget policies and procedures.
14. Other duties as assigned.

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 Financial Policies and Procedures Manual

Experience & Qualifications

Essential Desired
1. Experience in strategic planning and execu- 1. MBA in Finance/Accounting or CPA/CMA
tion. Knowledge of contracting, negotiating, 2. 10 - 15 years of experience
and change management.
2. Knowledge of finance, accounting, budget-
ing, and cost control principles including
Generally Accepted Accounting Principles.
3. Knowledge of automated financial and ac-
counting reporting systems.
4. Ability to analyze financial data and prepare
financial reports, statements, and projec-
tions.
5. Professional written and verbal communica-
tion and interpersonal skills.
6. Ability to motivate teams to produce quality
materials within tight timeframes and simul-
taneously manage several projects.
7. Ability to participate in and facilitate group
meetings.
8. Bachelors’ degree in Finance or Account-
ing, ten years of experience in senior-level
finance or accounting position.

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Position Title: Budgeting and Financial Reports To: Financial and

Planning Specialist Administrative Manager
Department: Financial Department

Summary
1. Responsible for preparing and consolidating all financial planning and analysis,
through the Financial and Administrative Manager
2. Responsible for providing support for strategic planning and corporate business
development activities.
3. Responsible for developing the long-term strategic financial plan across the global
enterprise.
4. Responsible for managing the annual budgeting process and coordinating

Roles & Responsibilities

1. Cooperates with senior management to develop the strategic plan,
2. Manages the preparation of the annual budget and monitors changes to forecasts,
3. Cooperates with Investor Relations to produce and monitor competitive market data,
4. Coordinates the financial aspects of grant development decisions,
5. Prepares and delivers major financial presentations and reports to donors and the Board
of Directors including monthly and quarterly reporting packages (IFR)
6. Prepares ad-hoc analysis for the Financial and Administrative Manager and other
senior management team members
7. Analyzes and develops recommendations for significant budget and plan to actual
variances
8. Prepares financial analysis for contract negotiations

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Experience & Qualifications

Essential Desired
1. Bachelor’s degree in Accounting or Finance 1. MBA in Finance/Accounting or CPA/CMA
and 5+ years of financial analysis 2. Experience in one of the big four
experience in a manufacturing environment accounting firms
2. Track record of increased responsibility in
finance management in a multi-national or-
ganization
3. Excellent leadership skills and ability to de-
velop finance and accounting staff
4. Experience in web analytics, CRM or Busi-
ness Performance Management (BPM) tools
5. Strong analytical and financial modeling
skills

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Financial Policies and Procedures Manual

Position Title: Financial Controller Reports To: Financial and

Administrative Manager
Department: Financial Department

Summary
1. Responsible for managing the transaction processing and financial close and reporting
functions within accounting,
2. Responsible for ensuring the accuracy and timely completion of the closing process
3. Responsible for providing detailed knowledge of IFRS,
4. Responsible for providing direction and clarification to accounting staff when
interpreting technical pronouncements,
5. Responsible for overseeing the implementation of accounting policies, procedures and
financial reporting requirements and ensures that changes are understood and complied
with at corporate and at the business unit entities.

Roles & Responsibilities

1. Perform post checks and audits of payments and other entries and financial transactions
in compliance with the IFRS and donors requirements.
2. Ensures accounting policies are enforced and assists with internal and external audits
3. Manages the implementation of corporate finance and accounting initiatives
4. Develops accounting policies based upon interpretation of accounting principles and
pronouncements
5. Completes final review of all financial reports prepared by the Senior Accountant,
6. Responsible for preparing reports to donors, and sign-off on quarterly and annual reports
7. Oversees the daily finance operations and monitors the effectiveness of the monthly
close process
8. Reviews all MDLF disbursements.
9. Reviews and ensures that monthly financial statements are prepared accurately and
within MDLF and reporting standards
10. Investigates and prepares memoranda supporting technical accounting conclusions
for significant transactions and accounting matters
11. Monitors and analyzes monthly operating results against budget
12. Establishes and implements short and long-term departmental goals, objectives, and
enforces policies and operating procedures at corporate and at the business unit

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13. Maintains primary relationship with External Auditors

14. Cooperates with Internal and External Auditors during periodic reviews

Experience & Qualifications

Essential Desired
• Bachelor’s degree in Accounting or Finance • Any CPA,CIA, CMA and extensive knowl-
• 5+ years of corporate controller experience. edge of IFRS
• Advanced degree in Accounting or Finance

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Financial Policies and Procedures Manual

Position Title: Senior Accountant Reports To: Financial and

Administrative Manager
Department: Financial Department

Summary
1. Responsible for directing the activities of transactional accounting functions within the
MDLF.
2. Responsible for the accuracy, integrity of transactions and underlying data in key areas
including: General Accounting, Accounts Payable, Accounts Receivable, Accruals,
Revenue Recognition, Inventory Valuation, Standard Costing and Reporting.
3. Responsible for the closing of the accounts and for the timely and accurate reporting of
the business unit>s monthly financial results.

Roles & Responsibilities

1. Manages staff within the Financial Department.
2. Oversees the daily financial operations and transaction processing,
3. Directs the monthly general ledger accounting close process ensuring that all journal
entries and analysis are completed timely and accurately to support the financial close,
which includes overseeing the monthly closing calendar
4. Ensures that monthly financial statements are prepared in accordance with polices and
guidelines
5. Prepares budget to actual comparisons and variance analysis for manufacturing
operations
6. Monitors and analyzes monthly operating results against budget for the business unit
7. Cooperates with the Budget and Financial Planning Specialist to prepare the annual
operating budget.
8. Approves monthly reconciliations,
9. Provides guidance on the accurate recording of complex accounting events
10. Compiles financial information to prepare financial statements including monthly,
quarterly and annual accounts,
11. Ensures financial records are maintained in compliance with accepted policies and
procedures,
12. Ensures all financial reporting deadlines are met,
13. Prepares financial management reports,

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14. Resolves accounting discrepancies and irregularities

15. Supports budget and forecast activities,
16. Monitors and support taxation issues,
17. Develops and maintain financial data bases,
18. Undertakes posting of all central journals, as directed by the Financial and
Administrative Manager,
19. Ensures teams are performing the above to an equally high standard and deal with
any issues that may arise.
20. Prepares statutory information as and when requested,
21. Undertake other work when required
Experience & Qualifications
Essential Desired
1. Bachelor>s degree in Accounting or Finance 1. Advanced accounting or finance degree, or
2. 5+ years of accounting experience in the CPA/CMA
management of financial systems and bud- 2. Knowledge of IFRS,
gets, financial reporting, financial data 3. knowledge and experience of related com-
analy- sis, auditing, taxation and providing puter applications
financial advice
3. Ability to establish priorities, work indepen-
dently, and proceed with objectives without
corporate oversight
4. Solid understanding of IFRS
5. Working knowledge of spreadsheets and re-
porting tools
6. Supervisory experience of staff accountants

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Financial Policies and Procedures Manual

Position Title: Accountant Reports To: Senior Accountant

Department: Financial Department

Summary
Apply principles of accounting to record financial information and prepare financial reports
by, and utilizing appropriate accounting control procedures.

Roles & Responsibilities

1. Records entries to accounts, such as general ledger accounts, and document business
transactions.
2. Prepares payments and related system reports for accuracy and completeness.
3. Reviews supporting documents to ensure accuracy, relevance and validity of
documents before recording entries.
4. Prepares Bank Reconciliations,
5. Assists in the preparation of profit and loss statements and monthly closing and cost
accounting reports.
6. Assists in the preparation of profit and loss statements and monthly closing and cost
accounting reports.
7. Maintains, and coordinate the implementation of accounting and control procedures.
8. Records and review revenue, expense, invoices, and other accounting documents.
9. Resolves accounting discrepancies.
10. Interacts with Internal and External Auditors in completing audits.
11. Other duties as assigned.
Experience & Qualifications
Essential Desired
1. Bachelors Degree in Accounting, 1. Knowledge of finance, accounting,
1. Three to five years of accounting experience budgeting, and cost control principles
in similar position including IFRS.
2. Knowledge of financial and accounting
software applications.
3. Ability to analyze financial data and
prepare financial reports, statements and
projections.

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 Financial Policies and Procedures Manual

Position Title: Administrative Assistant Reports To: Financial and

Administrative Manager
Department: Financial Department

Summary
Provide administrative support to the Financial Department. Duties include general
clerical, receptionist and project based work and project a professional image through in-
person and phone interaction.

Roles & Responsibilities

1. Answers telephones and transfer to appropriate staff member.
2. Creates and modify documents using Microsoft Office.
3. Performs general clerical duties to include but not limited to: photocopying, faxing,
mailing, and filing.
4. Maintains hard copy and electronic filing system.
5. Signs for and distribute mail.
6. Distributes and coordinate with suppliers to collect their payment checks.
7. Supports staff in assigned project based work.
8. Other duties as assigned.
Experience & Qualifications
Essential Desired
1. Diploma in Secretary or Bachelor of Business 1. Basic reading, writing, and arithmetic skills
Administration. required. This is normally acquired through
1. One to three years of clerical experience. a high school diploma or equivalent.
2. Knowledgeof Microsoft
Officeandtelephone protocol. Duties
require professional verbal and written
communication skills and the ability to
type.

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