USER'S MANUAL

for
BASIC ACCOUNTING SYSTEM

Prepared For

U.S. Department of Agriculture

Office of International Cooperation and Development
DEVELOPMENT PROJECT MANAGEMENT CENTER

U.S. Agency for International Development

Bureau for Africa; and Office of Financia Management
January, 1982 DRAFT

USER'S MANUAL
for
BASIC ACCOUNTING SYSTEM
 CONTENTS

PURPOSE P

ACCOUJING SYSTEM REQUIREMENTS 1

BASIS FOR ALL FINANCIAL MANAGEMENT: 4

PROJECT AGREEMENT, SUBSEQUENT AMENDMENTS AND
PROJECT IMPLEMENTATION LETTERS

ACCOUT['LNG BOOKS TO BE MAINTAINED 5

* Donor Receivable Account 6
* Encumbrance Journal 8

* Cash Receipts and Disbursements 8

Control >pdger

ACCOUNTING OPERAFIONS 8

Step #1 - Approval of Project Agreement 8

2 - Establish Separate Project 12

Accounting Books and Records

3 - Record Approval of Project 12

Agreement

4 - Request USAIT Advance of Funds 13

5 - Receipt of USAID Advance of Funds 17

6 - Encumbrance of Funds - Issue 19

Purchase Ordcr, Travel
Authorization, and Contract

7 - Adjustments to Encumbrances 22

8 - E:tablish Open Payable File 24

9 - Receipt of Gocods and Services 25

10 - Processing Payments 26

11 - Record Paymer ts 29

12 - Adjust Budgel for Approved Changes 32

13 - Establish a Fetty Cash Fund 33

14 - Replenish Petty Cash Fund 36
 CONTENTS

Page
15 - Prepare Monthly Financial Reports 37

16 - Prepare Ban'< R!conciliation 48

Statement
17 - Interest Earned on AID Generated 52
Resources
APPENDIX I - Data Elements in Basic Accounting 54
II - Internal Control 55
III - Application of Ac!crual 57
Accounting
IV - Property Records 58
V - Accounting for Loan Funds or Revolving 59
Credit Funds
VI - Branch Accounting for Multiple Stations 65
SAMPLE FORMS 67
* Petty Cash Voucher 35
* Purchase Order 68
* Travel Authorization 69
* Receiving Report 70
* Payment Voucher 71
* Petty Cash Voucher - Field Expenses 72
* Cash Receipt Voucher 73
* Journal Voucher 74

FLOW CHART
* Basic Accounting System - Data Flow 75
 USER'S MANUAL
for
BASIC ACCOUNTING SYSTEM

The Basic Accounting System described in this

manual was conceptualized 5y Mark Matthews,
Financial Management Offic,, AID, and Merlyn
Kettering, Development. Pro.iect Management
Center (DPMC), United Stats Department of
Agricultare, Washington, D.C., for improving
Financial Management of Ai) projects. The
first draft was outlined bi William O'Reilly,
CPA, under contract with DPMC. Many people
were con:ulted, among them several AID
Missions controllers and their suggestions
were taken into consideration. This latest
version 4as written by John P. Raleigh,
Christopher Ritzert and Ju:ine Church. The
translation into French wa.; entrusted to
Laurent Nerve, OECD, Paris who brought his
expertise to this effort.
PURPOSE

The purpose of this Accounting User's Manual is to assist

host countries to establish and maintain adequate project account­

ing systems in accordance with USAID standards of accountability.

Specifically, the Manual is intended to provide (1) a

guide for the establishment of minimum accounting procedures

for host countries controlling AID finds for local currency

costs under project grants; (21 a ba.3is of reference for those

charged with the responsibility of m~tintaining accounting

records for a local cost component )f a USAID project and who

wish to evaluate their current accounting system to see if it

meets minimum USAID standards.

Although the Manual is intended primarily for Implementing

Agencies, it may also be used by contractors of Implementing

Agencies whose accounting system's requirements are similar.

ACCOUNTING SYSTEM REQUIREMENTS

A Basic Accounting System consists of a series of operations

relating to the recording, classifying, summarizing, and

reporting of financial transactions, together with the procedures

to prescribe the manner in which the operations will be

performed. The accounting system is a tool used by project

management to plan, control, and appraise operating

Performance. For both the donor and the Implementing Agency,

it is also the means through which compliance with fiscal

requirements of the grant can be determined.

 - 2 -

For every project, the accounting system must meet the

following requirements:

(1) Accouinting records should provide the information

needed to adequately identify the commitments (encumbrances)

and
funds that are due (donor receivables), as well as receipts and

expenditures of" AID funds authorized for local costs of the project

according to approved budget categories;

(2) Entries in the accounting records should refer to

supporting documentation filed in such a way that it can

be
readily located;

(3) Accurate and current financial reporting information,

including periodic bank reconciliation statements, should

be pro­

vided;

(4) It should be possible for an auditor to readily trace

each transaction from accounting reports through available

records and back to source documents so that all funds expended

can be accounted for to determine whether project expenditures

have been valid;

(5) Internal controls must be established to assure

integrity, accuracy, and usefulness of financial data.

The procedures discussed and illustrated in the Manual are

not intended to be specifically applicable to any one project.

 -3 -

They are intended to be sufficiently flexible to serve as a

general guide so that parts of this Manual, as applicable, might

be adopted for projects as needed. Not all detailed accounting

methods and procedures are prescribed in this Manual. For exam­

ple, it does not prescribe the type of employment records to be

maintained, nor supporting documentation for payroll expenditures.

Such accounting records should be established pursuant to local

project requirements. It is essential, however, that the system

adopted by the Implementing Agency meet the same control and

accountability principles for effective financia2 management as

specified in this User's Manual.

Illustrations of typical forms that may be used for specific

accounting purposes have been included. These are intended only

as suggested examples. The exact rulings and sizes are not signi­

ficant. They should be considered only as a basis for the

development of a set of forms which provide for the specific needs

in a particular project situation.

Objectives and Scope of the Proposed Systems

The purpose of the accounting control system to be installed

or modified in Implementing Agencies is to correct deficiencies in

the financial management practices relating to the accounting,

controlling, and reporting on the use of AID funds. It may also

accomodate other donor funds as well. The system will have the

capacity to:
 (a) Provide accurate, complete and timely host country

accounting information;
(b) Strengthen internal controls preventing misuse and

waste of donor-generated resources and ensure compliance

with conditions of project agreements;

(c) Provide a system of financial reporting that will

assist USAID t.n monitoring project implementation,

oversee host country Implementing Agency cash require­

ments, and periodically assess financial management.

Although any standard accounting system must be adapted to

meet the specific needs of the organization using it, the core
system described in the following sections is intended for those

bilateral and regional organizations which coordinate, formulate and

implement donor funded projects.

BASIS FOR ALL FINANCIAL MANAGEMENT: PROJECT AGREEMENT, SUBSEQUENT

AMENDMENTS AND PROJECT IMPLEMENTATION LETTERS

The basis of the fiiancial management of a project is defined

in the Project Agreement. The letter contains the basic specifi­

cations and conditions r,quired for reporting and managing AID

resources. It also fixe23 the overall amount of the grant and

allocates it accordingly to defined life of the project. However,

the project agreement coild be sig;nificantly altered through

amendments. These mostly concern shifts in the project objec­

tives.
 - 5 -

It should be noted that the project agreement establishes the

allocation of funds to broad budget categories which will be

accounted for by the host country (local currency funds) and those

ac,.ounted for directly by USAID.

A more detailed budget of the local currency funds is agreed

upon annually and communicated in a Project Implementation Letter.

Changes car be brought to the initial letter within the

constraints of the original project grant.

ACCOUNTING BOOKS TO BE MAINTAINED

Accounting transactions for each project will be reflected in

three accounting books: (1) a Donor Receivable Account, (2) an

Encumbrance Journal, and (3) a Cash Receipts and Disbursements

Control Lelger. Although a design of specific project accounting

books may vary, the essential feature of any basic project

accounting system should be to have a pe-manent, clcar, and

accurate record of available funds received, cash disbursed, and

balances on hand and in the bank.

While the official amount of the project grant is expressd in

dollars, project accounting records should be kept in local

currency with the possible exception of the donor receivable

account.

If the donor receivable account is expressed in US dollars,

the dollar equivalent should be used in all the other accounting

records. The method of adjusting ifor fluctuations in

exchange rates should be agreed upon.

 -6-

DONOR RECEIVABLE ACCOUNT

When the Project Agreement is approv6d that contains
local
currency, a Donor Receivable account should be
created. The
opening balance of this account should be the
local currency
equivalent of The amount authorized by the donor
for "local cost."
The balance of the receivable account should be
decreased as funds
are drawn from USAID. The tranfaction recorded upon receipt of

the Project Agreement is as follows:

• In the "Reference" column post the following statement:

"Signed Project Agreement."

" In the "Amount" columns, post the total amount
the Donor
Project Agreemen; has budgeted for local costs.

Upon receipt of an advance check from USAID,

a reduction is made
in the Donor Receivable AccounL.

• The amount of the advance posted to the Donor

Receiv­
able Account must agree with the amount posted

simultaneodsly to the Cash Receipts and Disbursements

Control Ledger as a cash receipt.

* The closing balance in the Donor Receivable Account

is entered on the monthly Fe-conciliation of Accounts

reports.
* The closing balance is used to plan the cash
requirements
for the remainder of the project and the fund
request for
the next quarter.
 -7-

Pruject No. 4A7 '/.Project Title:

DONOR RECEIVABLE ACCOUNT

Amount Amount
Date Reference Authorized Received Balance

&1?e. 7o. S757 i__-5!4j00

Seni
b,n st iR c t o c

* 1krnth end balance is entered in Reconciliation of Accounts, p. 47

 -8-

ENCUMBRANCE JOURNAL

The purpose of the Encumbrance Journal is to establish

an
on-going record of all order:, contracts, or other
commitments of
Cunds against project budgetW and ensure that a project Ls not over
commi tted.

CASH RECEIPTS AND DISBURSEMEPTS CONTROL LEDGER

The Cash Receipts and Disbursements Concrol Ledger

contains
a chronological listing of a!! deposits and checks
issued,
together with information on checks as to the date of issuance,
name of the payee, and the bkdget category to he charged. The
illustration on Page 10 contn;ins the column headings used in
establishing the Cash Receip, s and Disbursements
Control Ledger
for the project illustrated n the Manual. The column h4adings
are always based on the budgnt categories contained in t:ie
approved Project Agreement.

The Cash Receipts and Disbursements Control Ledger

is
designed to be used for writing and posting all checks including

those for the payroll.

ACCOUNTING OPERATIONS

1. APPROVAL OF PROJECT AGREEMENT

The Project Agreement, which has a significant impact

on
the accounting system, contains the budget of local
cost items
to be paid by the Implementln4 A:, v including :pecific
categories such as personnel, travel, tools, fertilizer,
etc., to be used for controlling project funds.
 M .JET NO.
677-001

E tNCIMrk1M CEJOURNAL t

2 13 1 Ki2 JI I P EN I DT I 1;0Q1 A I i T RA 1 .W T

- CI
E 1
PE BM*3ATO
IO ~~
RT1FENCE AMOUJNT MLANsE
6~~ AWIMM PALA" IIAA-~

Ji
- ---B -i P1Ar
b -
,1l;C I. Ql [.N., ,-T ,'j
o . ,I t lii
"000 . ,. RAY , 20 0 r/i
/ /::J'" i

l'I ' i :!!i f' -I-/ ,iiK i

I !i
7

Iii l
YLW jf j j I_ i1
*In
thousand
CFA.
This is
only an
i
example;
**
usually
Budget category the exact
"Travel" amount
w-as established is recorded.
for the amount
(P 001.
L) of 4 millions
The a CFA by Project
t oun
wa Lvi 'sfei 'z'
:I'oLi Uie Implementation
buuget
catego Letter
"Training".
oy
Purpose:

(a) To establish a contractual agreement between USAID and

the hos- country.

(b) Provide a detailed budget of authorized expenditures.

(The budget may be included in the Project Annex or a

subsequent Implementation Letter.)

Procedure:

(a) Obtain authorization and approval for Implementing Agency

to establish separate project bank account. A separate

bank account is required before the check can be issued.

(b) Assure compliance with grant terms and c~nditions for

approved accounting system.

Example of Approved Project Agreement Budget.

Budget Category Amount

Personnel $ 42,)00
Materials 22,)00
Irrigation Equipment 86,)00
Loan Fund 30,)OO
Training 15,000
$195, )00
 - 12 ­

.2. ESTABLISH SEPARATE PROJECT ACCOUNTING BOOKS AND RECORDS

Purpose:
(a) To provide accountability over resources.

(b) To evaluate performance.

Procedures:
(a) Establish a separate bank account for each project.

(b) Establish and maintain the following separate accounting

books for each project:

" Donor Receivable Account

" Encumbrance Journal

• Cash Receipts and Disbursements Control Ledger

(c) Create column headings in the following books based

on
the budget categories established annually in a

Project Implementation Letter (PIL):

• Encumbrance Journal (includes amounts)

• Cash Receipts and Disbursements Control Ledger

3. RECORD APPROVAL OF PROJECT AGREEMENT

Purpose:
To document authorization and approval of Implement­

ing Agency to incur expenditures.

Procedures:
(a) Post the signed project agreement to the Donor Receiv­

able Account including:

" Date

" References
 - 13 -

Total amount authorized for local cost in local

currency equivalent.

(b) In the Encumbrance Journal post the date, the number of

the project implementation letter, approved budget

categories and amounts in local currency equivalent.

(c) Post the allocated amounts to the expense categories in

the Cash Receipts and Disbursement Control Ledger using

the same column headings as the categories contained in

the budget section of the letter accompanying the

advance from USAID.

Example:

(a) The Project Agreement Budget on Page 10 shows an

approved budget for $195,000. Therefore, at this

point USAID is obligated to the Implementing Agency

for the full amount of the grant, i.e., $195,000.

This amount is recorded in the Donor Receivable

Account as indicated on page 6.

(b) The $195,000 is also posted to the Encumbrance Journal

by budget categories and in the total column. The

budget categories must equal the total column.

• REQUEST USAID CASH ADVANCE

Purpose:

To commence orderly implementation of the project.

Procedures:

Upon receipt of the executed Project Agreement and

 - 14 ­

assurance that conditions precedent to first disburse

ment have been satisfied, a request. for funds by budget

category should be initiated to obtain a cash advance

from USAID based on immediate disbursement needs. The

time period covered by the cash advance may vary, but

it would normally be three mont's or less as based on

the following type of analysis which should be attached to

the Request for Advance:

 - 15 -

Example for First Period

PIL Estimated
Estimated Annual Disbursements Ending
Disbursements Budget Next Period Balance

PP-rsonneI142,000 10,000 32,000

Naterials 22,000 8,000 14,000

Irrigation Equip. 86,000 20,000 66,000

Loan Fund 30,000 11,000 19,000

Training 15,000 3,000 12,000

Subtotal 195,000 52,000 143,000

Plus3 Reserve 8,000

Requested Balance 60,000

Example for Second Period

and Subsequent Periods

PIL
Estimated Annual Accumulated Estimated Ending
Disbursements Budget Disbursements Disbursements Ealance

Personnel 42,000 10,000 13,000 19,000

Materials 22,000 8,000 9,000 8,000

Irrigation Equip. 86,000 19,500 25,000 41,500

Loan Fund 30,000 11,000 14,500 4,500

Training 15,000 2,500 3,500 9,000

Subtotal 195,000 51,000 65,000 79,000

Cash on Hand 9,000

TOTAL 56,000

Plus Reserve 5,000

Advance Requested 61,000

 - 16 -

Example:

Memorandum to Request Cash Advance

In accordance with the requirements of Project Agreement

No. XXX-XXX, we wish to request an advance

of working capital
for the period of (1 to 3 months). The required periodic
reports are attached. The following is an analysis of our

requirements for the said period.

 - 17 ­

5. RECEIPT OF USAID ADVANCE OF FUNDS

Purpose:

To provide and record the initial cash for the

project.

Procedure:

(a) Post the dollar amount of the U.S. Government

check issued by USAID to the Donor Receivable

Account. Subtract this amount from the previous

balance of the Donor Receivable Account and indi­

cate the remaining balance of USAID funds

available under the local currency portion of the

Project Agreement.

(b) Local funds must be deposited in a separate bank

account and the deposit slip returned to the

accountant responsible for posting the Cash

Receipts and Disbursements Control. Ledger.

(c) Post the deposit in local currency to the Cash

Receipts and Disbursements Control Ledger.

Indicate the date of posting, and the deposit slip

references. Add the local currency deposit to the

receipts column and carry the amount to advance and

balance columns.

(d) Establish and maintain a separate file for all

bank deposit slips and maintain them in chronolo­

gical sequence. This file will be maintained by

the person responsible for preparing the bank

reconciliation statement.
 - 18 -

Disallowances:
The implementing organization will make periodic

requests for reple.ishment of its cash advance from USAID

by submission of expenditure reports (drawn up from

detailed supporting documentation). If, upon review,

certain expenditures ean not be justified by supporting

documentation, or are det(rmined to be outside the speci­

fication of the project agreewent, they will be

disallowed and not reimbui'sed by USAID.

The reimbursement or advance replenishment will be

the amount requested less the amount of any disallowed

expenditures. The disalicwances should be noted in a log

to be kept by the host cointry DAF or budget section.

The organization should work to a resolution of the

discrepancy by either further clarification of the item

with USAID or by making pyment from another source of

funds. If the implementirg organization repays the

account from other resources, the cash receipts and dis­

bursement control ledger will show a receipt and will

enter the credit to same budget category as the disputed

item. If the project usef host country funds as working

 - 19 ­

capital, the disallowed expenditure simply is not reim­

bursed. A log should be kept as mentioned above and the

encumbrances and disbursements will be permitted to exceed

the project agreement amount by the amount of the

disallowed items. In this case, the cumulative

disallowances cannot exceed the working capital from

other sources. The original working capital left at the

end of the project will be reduced by the cumulative

disallowances incurred throughout the life of the project.

6 ENCUMBRANCE OF FUNDS - ISSUING PURCHASE ORDERS, TRAVEL

AUTHORIZATIONS, AND CONTRACTS

Purpose:

(a) To provide written authorization and approval for

purchases of goods and services, travel and other

transactions requiring encumbrance of funds.

(b) To assure availabili.r.y of project funds.

Procedures:

The host country implementing agency will:

(a) Prepare transaction documents:

Purchase orders
 - 20 ­

. Travel Authorizations

Travel Advances

Contracts

Journal vouchers for encumbrance adjustments

(b) Certify availability of funds

(c) Obtain authorized approvals

(d) Issue the purchase order or other relevant document

(e) Post Encumbrance Journal

(f) File one copy of (d) in permanent journal file and

one in open encumbrance support file

 - 21 -

Illustrated Example (See Encumbrance Journal Page 9)

(1) On December 15, 1981, a purchase order is issued

in the amount of $2,000 for the irrigation equipment.

Posting: Purchase Order Number 1001 is posted

to the Encumbrance Joirnal. The "Amount" column

under "Equipment" indicates the encumbrance, and

the "Balance" column .ndicates the remaining

amount available to b#- encumbered.

(2) On December 16, 1981, a purchase order is issued in

the amount of $1,500 for m~iterials.

Posting: Purchase Or,'er Number 1002 is posted

to the Encumbrance Joulrnal. The "Amount" column

under "Materials" ind-.cates the encumbrance, and

the "Balance" column indicates the remaining

amount available to be encumbered.

(3) On December 17, 1981, a tra vel authorization i3 issued

for $700 to Mr. Z. Andersori.

Posting: Travel Authcrization 401 is posted to the

Encumbrance Journal. The "Amount" column under

"Travel" indicates thu encumbrance, and the "Balance"

column indicates the remaining amount available

to be encumbered.

(4) On December 18, 1981, a contract for training is executed

for $3,800.

Posting: Contract Number 2001 in the amount of $3,800

is entered in the Encumbrarce Journal similar '.o the

items above.
 - 22 ­

7 ADJUSTMENT TO ENCUMBRANCES

Purpose: To make dJustment-s to the Encumbrance

Journal for:

(a) travel;

(b) contracts; and

(c) purchase orders.

Procedure:
(a) For travel, dLsencumber the difference between

the amount that had been encumbered by a travel

authorization and the amount actually spent on

the travel. 'The process requires two steps. The

original travel advance was charged as an expense

to the approp-'iate travel category. When the

actual vouche- is submitted the cests will be

higher, lower or the s;ame asi the advance. If

lower, the traveler will be required to reimburse

the account aid the receipt will affect a rortion

of the originil travel advance. If higher, an

additional ch* ck will be ,;ritten '.o the traveler

comensating im for the cost of his travel,

(adcitional checks plus advance equal traveler's

expenses). IO the travel voucher equals the

advance, no aijustment is required.

 - 23 -

The total traveler costs including cost of

transportation should be compared to the amount

encumbered by the travel authorization to decide

if an upward or downward encumbrnce adjust­

ment is required. A journal voucher or tra­

vel authorization amendment would serve as

the supporting document.

(b) For service contracts where the iimount initially

encumbered is greater than the amount actually

expended, disencumber the unspent amount by making

a negative entry in the Encumbrance Journal and

indicating adjustment of service contract. A

journal voucher would be one means of documenting

the entry or perhaps a contract ;imendment.

(c) For purchase orders where the co:;t of the goods

received is less thin tnat originally encumbered,

disencumber the di fferenice betwet:n the amoint

encumbered and the amount billed by enteri:ig a

negative in the amount Jocumentec by an Eniumbrance

Journal Voucher or Purchase Order Amendment Journal

and indicating adjustment of purchase order.

 - 24 ­

8. ESTABLISH OPEN PAYABLE FILE

Purpose:
To provide a centralized record of all goods and

services that have been encumbered but not yet completely

paid for.

Supporting Documentation:

The Open Payable File contains the following

documents:

(a) Purchase Orders

(b) Contracts

(c) Travel Authorizations

(d) Journal Vouchers for adjustments to original pur­

chase order amount

(e) Amended Purchase Orders for changes and correc­

tions in original terms. An amended Purchase

Order for- change in price would obviate the need

for a Journal Voucher to authorize the price adjust­

ment.

(f) ReceivinF Reports

(g) Summary sheet, for partial payments

Procedures:
(a) All documents supporting entries in the Encumbrance
Journal are filed chronologically in order to be easily

referenced when sunporting documentation is required.

 (b) All documentation supporting unpaid invoices
should be attached to the corresponding purchase order
until the file is complete. The supporting documentation

may include Purchase Orders, Delivery Slips, Invoices,

and evidence of partial payment. The documents remain in

the Open Payable File until payment has been approved.

They are then removed and transferred to the accounting

section where payment will be made anJ recorded.

9. RECEIVING REPORT OF GOODS AND SERVICES

Purpose:
To document acceptance of delivery of goods or per­

formance of services, and assure validity of correct

quantities and conditions of items.

Procedure:
(a) Prepare a Receiving Report upon receipt of goods,
indicating date, vendor, quantity, description,

and condition of items.

(b) For services, prepare a Memorandum of Performance

of Services to indicate satisfactory acceptance

of purchased services.

(c) The transaction documents are forwarded to the

accountant maintaining the Open Payable file

(located in either the DAF or Accountin

office). They are then attached to the

 - 26 ­

corresponding copy of the purchase order in

the "open payable file" until the invoice is

received and processed for payment.

10. PROCESSI:YG PAYMENTS

Purpose:
To provide internal control over the authorization,

approval and disbursements in payment of all claims and

invoices, assuring that only properly authorized and

correct payments are processed.

Procedure:

(a) Verification of Documents.

Verify that goods and services invoiced

match those actually received according to Receiving

Reports and that those received correspond to those

ordered. If the payment is for an amount different than

the amount encumbered, an adjustment for the difference

should be posted to the amount column of the EncumDrance

Journal. If the actual payment is less than the amount

originally encumbered, the adjustment should be reflected

on a journal voucher and summarized at the end of The

month and recorded in the Encumbrance Journal.

Since no prior approval i3 required for downward

adjustments in encumbrances, a summary journal voucher for

all such adjustments for the month is appropriate. However,

 - 27 ­

if the adjustment i3 upward in the encumbrance, then the

same approvals required for the initial encumbrance docu­

ment are needed for the adjusting journal voucher.

(b) Preparation of Payment Vouchers

Prior to any disbursement of funds, a voucher

is prepared indicating the payee of the check, describing

the services performed or goods received, the amount

involved by budget category charged, and the approval

of the Project Manager.

(1) Vouchers are numbered consecutively, beginning

each month with the number "one". The number of

the month precedes the voucher number i.e., the

fifth voucher in February is shown as 2-5.

(2) Affix to the voucher the purchase order, receiving

copy, and invoice or any other substantiating

document.

(3) No voucher is to be prepared without an indication

by someone in authority that *he item purchased was

previously encumbered and was in fact received or

that the service:; were in fact. performed.

This is done by having the persor responsible for

accepting the goods complete a Receiving Report, or by haiing

individual responsible for receiving -,ervices pr'epare a

Memorandum of Performance of Service, upon receipt of the

 - 28 ­

specified goods or services. The approval may also be

indicated by having the authorized person sign the

invoice as approval for payment.

(c) Preparation of Checks

A check should be prepared and issued only

when there is proper supporting documentation.

The supporting documentation includes the pay­

ment voucher, corresponding encumbrance document,

original copy of the approved invoice stamped

"paid" and the receiving report. These documents

are attached to the payment voucher and filed in

check number sequence. All payments should be

made by check; bank transfers are not allowed

unless permitted in a Project Implementation

Letter.

The Implementing Agency should devise a

method (either photocopies, carbons or snap­

out vouchers) of maintaining copies of checks

used for making payments. The three copies

are used as folilows:

(1) The original copy of the check is signed

by the authorized officials of the Imple­

menting Agency and serves as payment to

the creditor.
 - 29 ­

(2) The second copy of the check, which is

used to maintain numerical sequence of
ch-cks issued, should be stapled to the
supporting Iocumentation consisting of

the purchase order, original copy of the

invoice, voucher, (if used) and receiv­
ing report. This file should be

maintained in check number sequence by

month. Such a system provides the essen­

tial supporting information for the

auditing of cash disbursements.

(3) The third c~pj should be filed alphabeti­

cally by vendor.

The format of the check voucher is il.lustrated

on Page 30.
. RECORD PAYMENTS
Purpose:
(a) To systematically summarize financial data for
monthly reports.
(b) To provide an audit trail of all expenditures.
(c) To have an accurate control over cash on hand.
Procedure
(a) Post the transaction to the Cash Receipts and refer­
ence to the number of the encumbrance document.
 - 30 ­

(b) Record liquidation of encumbrance in the Encumbrance

Journal by checking ( the original amount posted

and posting the check number of the liquidating

di3bursement. See page 9 (the Encumbrance Journal)

for an illustration of this procedure. Any upward

adjustments for increases in original encumbrances

posted to the Encumbrance Journal from a Journal

Voucher should also be checked ( when payment is

made and should also cross-reference the check number.

(c) Maintain payment file. For every payment there

is a "payment package" consisting of a copy of

the check with all the supporting documental-ion

attached to it. It is essential that this "payment

file" be maintained in check number sequence so

that the records of the project nay easily Ibe

audited at any time. The "payment package" and

supporting documents provide the audit trail

for all amounts recorded on the monthly financial

report for the project.

 - 31 ­

! <ample:

Record the following payments:

I. December 28, 1981, paid $1,?00 to Quality

Equipment Company for three units of equip­

ment.

2. December 29, 1981, paid $800 to Bell Training

Company for technical services.

Fee Page 10 for illustration of the recorded

payments in the Cash Receipts and Disburse­

ments Control Ledger.

 - 32 ­

12. ADJUST BUDGET FOR APPROVED CHANGES

Purpose:
To maintain official up-to-date record of the
authorized amount of project expenditures by budget

category.
Procedure:
(a) The Project Agreement, subsequent Project

Implementation letters, or some stated policy

indicate the amount of budget flexibility which
may be exercised by the Implementing Agency with­

out obtaining prilr written authorization

from USAID.
(b) Adjust the budgeted amount recorded in the
Encumbrance Journal with a separate entry.

(c) Indicate budgeL changes on the monthly

financial reports.
 - 33 ­

13. ESTABLISH A PETTY CASH FUND

Purpose:

To have a cash fund available for making payments

in local currency whenever payment by check is not

practical or possible.

Procedure:

(a) The chief financial officer of the Implementing

Agency must approve the establishment of a

petty cash fund. The approval must be in writing

and must name the custodian of the fund and the

persons delegated the authority to approve petty

cash vouchers.

(b) Each Implementing Agency establishes an

internal policy for the maximum amount which

can be paid from petty cash. The policy will

depend on the types and amounts of payments

to be made in currency where it is not practical

to prepare the documentation usually required

for purchases.

(c) Issue check to the custodian of the fund for

the total amount of the fund. The payment

to establish the petty cash fund is entered

in the Cash Receipts and Disbursements

Control Ledger.
 - 34 -

Uses of Petty Cash Fund:

(a) Any item covered by a purchase order is not

purchased with petty cash funds unless the item

is needed on an emergency basis or is not avail­

able through established purchasing channel:.

(b) When a cash payment is made from the petty -,ash

fund, an interim receipt, or other 3upporting

documentation, is placed in the petty cash box.

Therefore, the total of cash remaining in the box,

plus the total amount of interim receipts or invoices

therein, should equal the amount authorized in the

fund at all times.

(c) Normally, there should not be any purchases in

excess of the authorized maximum amount. Approval

for any expenditure over this amount must be

obtained from the project director.

(d) Each receipt must be supported by an invoice

which shows tie date of purchase, item purchased,

and the cost. The reverse side of the receipt

may be used to describe several items if

such is the case. Attach each receipt to its

proper invoice.

(e) Where the receipt indicates "charge to", enter the

expense account. "Approved by" should be signed

 - 35 ­

by the staff person responsible for the petty

cash. "Received by" is signed by the person who

actually spent the money or made the purchase.

(f) Each interim receipt fust be reconciled in

amount, date, and item purchased with variances

between cash advanced and item cost.

TNTERIM RECEIPT

AMOUNT $, NO.
RECEIVED OF PETTY CASH

Date 1981
FOR

CHARGE TO

APPROVED BY RECEIVED BY
 - 36 ­

14. REPLENISH PETTY CASH FUND

Purpose:
To maintain an adequate balance in the petty cash

fund to meet current needs.

Procedure:

(a) Replenish fund on an imprest basis as needed.

As close to the end of the month as possible,

prepare a payment voucher to summarize by budget

category the petty cash vouchers which have

been paid during the month. U

(b) A Petty Cash replenishment voucher equal to the

month's expenditures is then prepared to bring

the account up to its fixed amount. It is then
processed through the budget section to encumber

funds. The amount posted to the Encumbrance

Journal by each budget category is based on

actual expenditures made from petty cash.

(c) A check, payable to the custodian of the fund,

is drawn for the amount of the payment voucher.

Cash from this check is put in the petty cash

box to replenish the "undi to its authorized

amount. The reimbursement check is entered

in the Cash Receipts and Disbursements Control
Ledger and is charged to the cost categ-orie.
 - 37 ­

indicated in trhe petty cash vouchers.

(d) The petty cash fund should be replenished as

close to the end of accounting period as

possible in order to include the valid

expenditures in the period in which they occur.

15. PREPARE MONTHLY FINANCIAL REPORTS

Purpose:

Good financial procedures require that management

be furnished with periodic detailed reports containing

current information to accurately reflect the project's

financial conditior. and prog;ram performance. The reports

should be accurate and compLete and, wherl necessary,

should be accompanied by a narrative statement.

Project management reviews the reports to ensure

that operations have been properly reflected. They also

determine whether there is a proper balance between

the costs incurred to date and the amount of work

accomplished; as well as, whether the balance of funds

and other resources; remaining are commensurate with

the amount of work yet to be accomplished.

Reports are the means by which the results of

financial operations are summarized for the

project management of the Implementing Agency and

USAID. The following standards apply in the pre­

paration of these reports:

 - 38 ­

(a) Internal reports are developed to meet the

needs of project. management. This might

include, though not be limited to, a report

showing project budget vs. encumbrances or

exp. Jitures, and a reconciliation of

accounts.

(b) Reports should be ac.curate and timely.

(c) Financial data in each report should be taken

directly from accounting records and should be

easily traceable from the report, through the

system, to the source documents.

Sample Types of Reports Prepared:

3tatus of Encumbrances. (Page 40 )

Status of Disbursements. (Page 42 )

i :oject Status Report.

JR econciliation of Accounts.
(Page 44 )

(Page 47 )

Procedure:
(a) Add totals of the footed columns in jour- ls
and ledgers.

(b) Post summary totals from project journals

and ledgers to monthly financial reports.

(c) The person who prepares the report certifies

that amounts reported are true and correct.

 - 39 ­

(d) The Chief Financial Officer of the Imple­

menting Agency also certifies that the monthly
financial report is true and correct to the
best of his knowledge.
The data for the Status of Encumbrances report

is obtained from the following sources:

Data Element Source

Category Description of budget category
and amounts established in PIL.

Budget Project Agreement or as amended

in Project Implementation
Letter or subsequent amendment

Previous Period Encumbrance Journal

Encumbrances

Cumulative Total of previous period and

Encumbrances current period columns of
Encumbrance Journal

Unencumbered "Budget" less "Cumulative

Balance Encumbrances"
 ProJect No. /7 ?/Z Project Title:
STATUS OF ENCUMBRANCES

~~3
'~~~' , ~ ~ A 3 /PC /

r-v iic x -, /(T-(

CGOO
PCI 10 oC) PC P, 101) Ci )ftLIL UAAMT;A(
rfieAV U,[br
T Yv &1 G E -
T"b ENC IJ ,A C G C II !C
t E1 AM~ T-:_3iRI

0.__

______________/,70o
/"S o /j.o, !'
- ' ,c' .

300,0
do

____________________________
IS 01

Pro pa
B e--- A

-I J~~L
____ __

Prepared ByZ
Approved By:
 -41 ­

The data for the Status of Disbursements report

.is obtained from the following sources:

Data Element Source

Category Description of budget category

and amounts establishd in PIL.

Budget Project Agreement or as amended

in Project Implementation
Letter or subsequent amendment

Cumulative Total of "Previous Period"

Encumbrances and "Current Period" columns
of Encumbrance Journa!

Previous Period's Prior period's cumulative

Disbursements disbursements derived from
the Cash Receipts and
Disbursements Control Ledger

This period Foot total from Cash Receipts

Disbursements and Disbursements Control
Ledger

Cumulative Add "Previous Period Dis­

Disbursements bursements" and "This
Period Disbursements"

Unliquidated "Cumulative Encumbrances"

Encumbrances less "Cumulative Disburse­
ments"
 Project No. 917 917 lroJect Titlez "i___-___ -­ r_,_

STATUS OF !)]S IIISI IENTS

S
I24tjTluOus -IKS I
C 'ItJLnfr V- PERJob PCklol CUi"lIiV( Jif//iljlt)JIK
C TG 6 0 P.. G1'T IC NCU/f1iIP,,/_C5 Di59Jf166NWAJ -IfJ' , cl)5 P,,C G

"I0(0)4
{ ,oo SOoo, so,.
-- -­ , P---t )6 0I 1,--0 - - - -- __ __ -­

0-
22

380 1
00611,5050

goo6
1,20
_________ L<rK
ii9
/J.-, 01 _

__ Wo- ,__..__ ,___,_.5-___,__

___ a <s):

IPrepanred By, Approved lyt

1Oisburserients are off from the Cash Receipts and

l)isbursements Control Ledger by the sum of the
Petty Cash.
 - 43 ­

The data for the Project Status Report is obtained

from the following sources:

Date Elements Source

Category Description of budget category

in project agreement or as
amended

Cumulative Encumbrance Journal

Encumbrances

Cumulative Cash Receipts ana Disburse-

Disbursements ments Control Ledger

Accruals Analysis of "Open Payable

File"

Cumulative Accrued Add "Cumulative Disburse-

Expenditures ments" and "Accruals"

Percent Buagpt "Cumulative Enctimbrances"

Encumbered divided by "Budget"

Percent Budget "Cumulative Accrued

Expended Expenditures" divided by
"Budget"
Project No. 1/7 Yi~Project Title: ~~V(/~ 7

PlOJEC" STA'I'TIS 11EPOJT

COMOUITIVEC
Ci~ntiL~rC
Cc
JLACVj
1CdtLnr,d/ fi--L Rllr6?I
V/-:cL
r,:(1r-
]jbg
-
,
I­

".,7 000 _________ - -0 0 /

000 t700 1oo

/5/
o/ bOO

are 7 i a_s
ip' u em n Co o L by tt

y: -Fptz -­ proed -

__are off from the Cash Receipts and Disbursements Control Ledger by the sum of the Petty Cash
 - 45 -

The data for the Reconciliation of Accounts

report is obtained from the following sources:

Data Elements Source

Donor Receivable Balance in Donor Receivable

Cash on Hand Balance in checkbook plus

petty cash fund

Disbursements Foot column of current month

disbursements in the Cash
Receipts and Disbursements
Control Ledger

Grant Amount Total amount of "Local

Project Cost" in the
Project Agreement

Reconciliation of Accounts:

A Reconciliation of Account Statement for each

project is prepared on a monthly basis and submitted

to the USAID Mission Controller. This report presents

information as to the status of the project funds

originally made available, as well as data as to the

amounts which have actually been received, the amounts

expended, the unliquidated encumbrances which are

treated as accruals, and the cash balance in the project

bank account.
 - 46 -

In the illustrated monthly report on Page 47

the Project Agreement is for a grant of $195,000 which

is converted to local currency. The total of cash

advances received from USAID is $52,000, which is

the difference between the orignial amount of the

grant, $195,000, and the current stated balance in

Donor Receivable of $143,000. The disbursements

to date as recorded in the Cash Receipts and

Disbursements Control Ledger amount to $3,150 ($2,950

actual expenditures + $200 advance to Petty Cash fund

= #3,150). The balance of cash on deposit in the

project bank account is $48,850.

You will note that the cash on hand plus

petty cash ($200.), plus the Donor Receivable, plus

the disbursements (excluding the petty cash fund)

always equals the amount of the original approved

grant.
 - 47 -

Project No.

RECONCILIATION OF ACCOUNTS

/rep300 AppoveBy /,,:

Prepared B-,,:___________ Approved By:__________

 - '40 ­

16. PREPARE BANK RECONCILIATION STATEMENT

Purpose:

(a) To maintain internal control and assure accuracy

of 'inancial reports and accounting journals and

ledgers.

(b) To provide a record for tracking lost checks.

Procedure:

The bank reconciliation statement should be

prepared monthly by someone who has not been involved in

maintaining the Cash Receipts and Disbursements

Control Ledger nor in processing vouchers for pay­

ment.

When you are sure that the balance in the Cash

Receipts and Disbursements Control Ledger is mathemat­

ically correct, you are ready to reconcile your, records

with the bank's. You will need the preceding month's

reconciliation, copies of check vouchers (same

information as Cash Receipts and Disbursements Control

Ledger) or checkbook stubs, anc the bank statement

received from the bank. Then take the:;e steps:

(a) There will probably be some checks from

the previous month that will have since

cleared the bank. Check thes, oFf on the

list of outstanding checks shown on the

 - 49 ­

preceding month's reconciliation, and in the

first section of the current reconciliation

indicate those that are still outstanding.

(c) Check off against the Cash Receipts and

Disbursements Conz-ol Ledger all cancelled

checks drawn during the month being recon­

ciled. Add the checks recorded but that

have not y.3t cleared the bank to the list

of outstanding checks on the reconciliation.

(Disregard any checks that you may have

written after the end of the month.)

(c) Compare deposits li.'ted on the bank statement

with deposits entered on your Cash Receipts

and Disbursements Control Ledger. List in

the first ection of the reconciliation any

deposits recorded in your checkbooks or Cash

Receipts arid Disbursements Control Ledger

during the month but not appearing on the

bank statement. (This should only be for

deposits mide on the last day(s) of the

month.)

(d) If any errors in amounts are discovered in

the precedLng steps, list theim in the :;ecorid

section of the reconciliation statemen. as

adjustment:, to be added or deducted.

 - 50 ­

(e) Examine the bank statement for service

charges or other adjustments to your account

and enter them in the section labeled "Bank

Charges".

(f) Carry out the additions and subtractions

shown on the bank reconciliation. The

adjusted balance per bank statement should

equal the adjusted balance per your Cash

Receipts and Disbursements Control Ledger.

Errors Made by the Bank

Occasionally, you may find that the bank has

made a mistake in your account. The following types

of errors can occur:

* Deposit or check of another person posted to

your account.
* Your deposit or check posted to another

account.
* Deposit or check posted in the wrong amount.

* Preceding month's balance incorrectly brought

forward on your bank statement.

* Addition or' subtraction incorrectly carried

out on the bank statement.

All errors should be reported to the bank at onee.

They must also be shown as adj'istment iterns in tht

first section of your bank reconciliation. When the

 - 51 ­

next month's bank statement is received, make sure

that any bank errors from the previous month have

been corrected iil the statement.

TANK RECONCILIATION
as of
December 31, 1981

134JANCE PER BAN4K $2,850.00

Tess: Outstanding Checks

1. No. 107 12/27 $104.16

2. 108 12/28 795.00
3. 109 12/29 82.90
4.
5.
(982.06)

Add Deposits in Transit

1. 12/30 + 840.00
2.

Reconciled Balance Per Bank 2,707.94

96%!,ANCE PER BOOKS 2,711.94

T ess: Bank Charges 4.00)

Reconciled Balance Per BOOKS 2,707.94

 - 52 ­

17. INTEREST EARNED ON AID GENERATED RESOURCES

Purpose:
To comply with AID's policy requiring the return
of interest earned on grant funds advanced to an

implementing organization.

Procedure:
(a) After the monthly bank reconciliation is completed,

interest earned during the period is a reconciling

item to be added to the book balance contained

in the Cash Receipts and Disbursement Control

Ledger.
(b) Add the interest earned to the Cash Receipts

and Disbursement Control Ledger as a receipt

and distribute to a non reportable, Miscell­

aneous or Interest Earned (budget type) category.

The cash balance should also be increased

accordi ngly.
(c) A check should be drawn to the order of

USAID and be entered in the Cash Receipts and

Disbursement Control Ledger and distributed to

the same rniscellaneou. or interest earned

category reducing the category's activity to a

net 0 for the period.

(d) The check should be properly signed by the

authorized personnel and forwarded to USAID.

 - 53 -

It should be noted that the interest close-out

procedure noted above could be done less
frequently than monthly to correspond to periodic
reporting requirements. The entries as described

above would look as follows in the Cash Receipts

and Disbursement Control Ledger.

Date Payee .iCeck Receipts

No.
Disburse-
~ments
Misc
Ms.
Advance
050
Balance

0 400) 10,950
82 Earie_

1/8/ USAED *563 400 400 10,550

82 __ _ _ _ _ __ _ _ _ _ _ __ _ _ __ _ _ __ _ _ _ _ _ _ _ _
 - 54 - 2 .--

DATA ELZ.IENTS IN BASIC ACCOUNTING "0

C ;
C.) NO-

CO~
_
C)___q)
Data Element
C' o0 0
4 . 0. 0

Project Number
Project Name , ____ __. . •

Dae _

Referencef TI 1 I
Amount - Grant "____ H __-
Aut hor':;ec. BdgetI I ___

Rece.-vea
ed "
Disbursed I __L." "

Cash on hand _ I _

Encumberei.
Unencurn
iL e red +6717Z
1_
Balance i • , j , j"
Ca
h a_ v, nce j;
D onor r ee va e ! ,. , ".
__ __
_

Check Number"

ElementBudc-et C eory
Address _ Li2
Name - 7Zequeszor J - - -

ApDrcver -

A u Z;-1r :edc s .g.

I i
I:tem Descr' nr':Or!.___1
Furuose of Trav 1T
I[tinc rary - I ~ __ ______

Mode of Transportaton t
Purchase Order 'umber
­

_ _ ____,n ____

:,an!,: :ash Balance

 - 55 -

APPENDIX II

INTERNAL CONTROL
The project management of each Implementing Agency is

responsible for developing and implementing a system of internal

control which will: (a) safeguard The assets of the project;

(b) check the accuracy and reliability of accounting data; (c)

promote operational efficiency; and (d) encourage adherence to
prescribed managerial policies.
It is important for each Agency to observe the following
fundamental requirements in establishing an effective system of
internal control:
* A clear-cut organizational plan which provides for

definite placement of responsibility and for specific

lines of responsibility.
* Division of duties between authorization and record­
keeping so that the activities of one employee act as
a check on those of another.
* Use of forms, documents, and procedures which facilitate

control and provide for proper approvals.

* Provision for testing for compliance with policies and

procedures, particularly tho3e relating to transactions

reflected in the books and tie reports.
The extent to which the above requirement; may be expected
to exist is related to the size of the project. The complete

separation of functions is not feasible in an organization with

 - 56 ­

a small number of employees. Even in small organizations,

however, a high degree of effective internal control may

be obtained by the proper plan of organization and

division of duties. For example, no ird~vidual should be

completely responsible for initiating an order, receiving

the goods and services, approving the payment, and also

signing the check for the same transaction. If one person

does have authority to approve an order and to approve

the invoice, then another authorized official should sign

the check.
 - 57 -

APPENDIX III

APPLICATION OF ACCRUAL ACCOUNTING

The objective of accrual accounting is to recognize all

substantial expenses or financial activity in the period in which

it occurs. Specifically, goo-s or services received or performed

but not paid for, would be considered an accrual as of a given

reporting period. Actual dis'ursements plus accruals would pre­

sent a status of project implementation that is more accurate

than only disbursements.

Disbursements tend to lag behind the actual receipt of goods

and performance of service. Since the accrual :neasures this lag,

it provides useful project maiagement information in assessing

current conditions.

An easy way of calculating accruals is by analyzing the

accounts payable file. Any encumbrance document with a

corresponding receiving report would be considered an accrual.

The Project Status Repor on Page 48 indicates an accrued

cost for materials of $900.00. This amount was determined by

reviewing the Open Payable File. in the file supporting the

December' 16, 1981 purchase of $1,500 in materials from the

National Supply Company there is a Rer.eiving Re~ort showing that

$900 worth of materials had been received on December 20, 1981.

This is the only accrual reported for the month of December 1981.
 - 58 -

APPENDIX IV
PROPERTY RECORDS
Implementing Agencies are responsible for maintaining
adequate control over property purchased. A property card
record should be established for each item of equipment. The
property record should contain the following information:
* Description

* Date acquired

* Purchased or contributed
* Cost

* Property number

* Location

Person responsible
* Date of last inventory.

A physical inventory should be taken once a year to verify

equipment b;tlances.
 - 59 -
APPENDIX V

ACCOUNTING FOR LOAN FUNDS OR REVOLVING CREDIT FUNDS

Loan funds or revolving credit funds are popular project

design techniques to provide small amounts of credit to farmers

or other Sahelian target groups. The establishement of such a

fund will be considered a disbursement c'n the major or primary

accounting system and the credit or loan fund will have its own

system to be employed by the entity tracking the fund's utilizatinn.

Similar to any other request, the DAF would review a request for

the establishment of the revolving credit fund for validity and

availability of funds under the appropriate budge. category.

After encumbering the funds, the requesting documtnt, with the

required availability of funds approval, would be forwarded to

the accounting section for review, check issuance and recording

in the Cash Receipts and Disbursement Control Ledger.

The fund is now ready for opening and establishing its

accounting records. The check is transmitted to the appropriate

custodians of the fund or deposited diroctly into the fund's

bank account. Upon deposit, the deposi; slip would be the document

from which the fund's accountant can open a cash account and

a loan equity account. Assuming a $500 fund, the entry would

look as follows:

CASH LOAN EQUITY (Amount of Funds)

I ncreasesi Decreasesi Balance I Decreases I Tncreases IT alance

- --------------------------
500 5.050. 0,
 - 60 -

The cash account should have a simple check register or

other book that functions similar to the Cash Receipts and Dis­

bursements Control Ledger.

As monies are released to parties requesting credit, cash

is decreased and a loan receivable account is established. The

loan receivable account should have subsidiary records for each

individual who has received funds. Assuming two loans of 100

dollars and 50 dollars to Mr. X and Mr. Y respectively the

accounts and subsidiary records would look as follows:

CASH

---- -- ­
LOAN EQUITY

------
----------
---------------------------------
Increases

500
4----------
Decreases Balance

500
-------------------------------
Decreases Increases

500
Balance

500
100 400
50 350

LOAN RECEIVABLE
-----------------------------
Tncreases

100
50
771
f
Decreases
---------- -------------------
Balance

100
150
MR. X MR. Y
---------------------------------
-------------------------------
Loan rt Repayments Balance Loan or Repayments Balance
100 100 50 50
 - 61 -

As time lapses interest will accrue. Some countries include

the interest at the time of loan. In the case shown below, interest

is recognizea as being owed by the debtor to the loan fund at

specific intervals and an interest receivable entry on the records

is made ani the loan equity is increased accordingly. The subsidiary

loan records are adjusted to reflect the interest that has accrued.

CASH LOAN EQUITY

-------------------- -------------------------

Increases j Decreases Balance Decreases Increases Balance

500 ] 500 500 500

T100 4r0 15) 515
D0 350

LOAN RECEIVABLE

Increases Decreases Balance

100 100

50 150

INTEREST RECEIVABLE

Increases Decreases Balance

10 10

5 15

Mi. X MR. Y

Loan or Repayments Balance Loan or Repayments Balance

Interest Interest

100 100 50 1 0
15
10 110 5
 When the recipient of the loan mkes payment, the action

results in an increase in cash and a decrease in the loan and/or

interest receivable and subsidiary debtor receivable. The sub­

sidiary loan record for the individual who made payment is

adjusted accordingly. Assume that Mr. X pays his loan plus interest

in full.

CASH LOAN EQUITY

----------------------------------------------------------------
Increases
50:
Decreases Balance
500
Decreases jncreases
500
Balance
500
100 400 15 515
50 350
110 460

LOAN RECEIVABLE
-------------------------------

J SIncreases
100
Decreases Balance i
100

50 150
100 50

INTEREST RECEIVABLE
-----------------------------
Increases Decreases Balance
-~-------- ---------- --------
10 10
5 15
10 5

MR. X
----------------------------
Loan or Repayments Balance
Interest
-------- ----------- --------
100 100
10 110
110
 - 63 -

If an outstanding loan is deemed uncollectable and it is

determined to write it off as a bad loan or debt the loan and interest

receivable is decreased and the loan equity is correspondingly

decreased. The subsidiary loan record should be placed in a

delinquent or uncollectable folder and a running list of bad accounts

should be maintained permanently. Assuming Mr. Y's loan is deemed

uncollectable, the following transaction results.

CASH LOAN EQUITY

----------------------------------------------------------------
Increases Decreases Balance Decreases Increases Balance
500 100 500 500 500
510 41)0 15 515
460
355 55

110 460

LOAN RECEIVABLE
increases Decreases Balance

---------- ---------- --------1

100 100
50 150
100 50
50 - 0 -

INTEREST RECEIVABLE

fncreases Decreases Ralance

10 10
-i 1I0
15
5
5 -0

MR. Y

Loan or Repayments Balance

0nterest

5 55 Imove to uncollectable file

 It should be observed that the total of the balances
of
the cash, loan receivable and interest receivable always
equals
the loan equity balance. Additionally, the sum of the
non­
deliquent subsidiary loan records should equal or tie
into the
master loan and interest receivable accounts.
 - 65 -

APPENDIX VI

BRANCH ACCOUNTING FOR MULTIPLE STATIONS

Many projects can not operate with one central disbursement

authority handling all the receipts and expenditures of funds.

It is necessary, in those cases, to provide some working capital

to a variety of substations or branches such as medical clinics

or pilot farms.

These operating funds, sufficient to cover expenses that

would be most efficiently made on site, may be advanced to the

substation by the central project office and may be replenished

periodically upon presentation of allowable receipts or other

supporting documentation to the central project office. Unlike

a petty cash account, however, the central office may advance

funcs tc be encumbered and disbursed within specified budget

categories, the substation being responsible for the accounting.

The subsidiary accounting station would keep the same kinds of

books as the central office: an Encumbrance Journal and a Cash

Receipts arid Disbursements Control Ledger.

When an advance of funds is made to the substation the

transaction appears in the central office's books as an encumbrance

under a subsidiary category and a disbursement in the Cash Receipts

and Disbursements Control Ledger under the same category. When the

branch office presents its encumbrance and expenditure summary docu­

ments detailing its activities, the sum of encumbrances and disburse­

ments, by budget category can be conso idated into one report,

 - 66 ­

if required. The subsidiary category on the central station's

books may be eliminated for its own consolidated reporting purposes.

The substation records the advance as a cash receipt.

It records its encumbrances in its own Encumbrance Journal and

disbursements in its Cash Receipts and Disbursement Control

Ledger just as the central office does, liquidating encumbrances

when they are paid. Documentation should be kept on file to

justify every encumbrance and expenditure. Reporting should

follow guidelines provided by the parent or central organization

to enhance the consolidated reporting if required. A release of

50,000 CFA to the subsidiary project site would look as follows:
 - 67 -

Sample Forms
and
.Basic Accounting System-Data Flow
 - 68 -

PURCHASE REQUISFIION / ORDER

NA~v E OF ORGANIZATION
ADD1!3SS
PURCHASE REQUISITION / ORDER

TO
ADDRESS DATE MONTH/ DAY YEAR
ORDER
No.
SHIP TO
ADDRESS
CITY
QUANTITY
ORDERED RECEIVED DESCRIPTION
FUNIT PRICE
AMOUNT

LRVDI RE"EV ,­

, . . • "[

SIGNATURE SIGNATURE
REQUESTED BY APPROVED

o RECEIVING REPORT
COPY
FINANCIAL O'rICER
 AUTORISATION DE VOYAGE OFFICIEL -TRAVEL AUTHORISATION
Nom wt prinori NSTricui. Grid.
Verne 3nd first nam~e Register No. Rank
Dtvtiuon ou Dlr~c~jon ou Dipntnument __________________________
_ NO du pogtv T61. -

:'von or Directorare or 0epartmrnt Office tel ext.

Mantfis du rovage

i o rvell
die _ _ _ _ _ _ _ _ l (daft)_
W__ _ _ (hu )
'Pift plae wni1erw .orr il to e ciramed out (date) of (timed dijrW p'robdQ do Wa missioni
a W (df ____ stimated durvtiont
)qn do tr _______________

Jit f.Vace wh~ere worNr is to be CArfe1 our t (Uie

idte

I D rXAJIWO1
MS O -M OtP . 04PAAMAJE

___________________________ _____________________C.0__ ________________________ I____________.D_____"__

_ _ __ _ _W do__
_ _ to "a_
W__ __
__e_ __ _ _ __ _ _ __ _ _
___ _

ar .o dea nd4 U s Ip9 de% bS)~ ~ .---- dvit" at cas or T.

este d Li die.o . L c.Cro e a
vecsrequ~ .

0.-nsapovrienwig a ~n erde

veand dmiianaei ut carfe nern_______ ________ ________ ZhO TC ___

vnie: raquesla aspv Msso par lee 0rcmurvnes E~c­

-i resfve 2 Tvvv_________ythExeutiv Diror ______eral.C

nartzue particuflires
Cutd0i omments)r

I ~ ~ ~
cUGE ~ dOpacsarT
UO(TtXEpAR AU BUOGE7~
-4~neCOflRe
 - 70 ­

o1E NATIONAL BORDEREAU DE RECEPTION N! 008172

DES CM.ALES
CENTRE DE. . ............ ......
NATURE DU PRODUIT....................
POIDS NET PAR SAC

No~mbre ccv
o d ?cidj Nat
vcl Kg K P. U. Vcieur

.......
........... . .................
...~...........
......... . ......... .......... .............
~~~~~~~~.... . . ..........
........... ......
........ .... . .........
.....-.............
................
...........
.. ..... . . . . . . .

.............
.......... . . o.. ................ ...

. . ... .... ..................................

o . ..... ............ . . .. .

i . . .o.ooo
.­ . .,,..
....... . o. °
..... . ...............
............................
.........
.... .. ..­ ­ -
... ...........................................-.
............ .

.................... .ooooi
o . .........
......
.......
.... ...... ...... .. ........ ...
...............

Vi du C.....*.r
La Riceptlonncire
--- ScLuro
L 1
,.gnour.
 BUDGET EXERCICE 19 ...... No 28
NAME OF
ORGANIZATION MANDAT DE PAYEMENT Ordonnateur ..
Mols et Mrr.
PROJE -. ..... ............. rice d'mision I
En vertu des cr6dits ouverts au utkredu chapitre ddaigni ci-contre Exercice d'origina .e
I'ordonnateur soussigni, mandats our I& caissed
' N; du border-.uu
d' mision.

Is crasince d6taillA ci.aora: N* du mandat

OBJET DE LA DEPENSE CHAP. ET ART. SOMMES

DESIGNATION DU CREANCIER : (1) Montant brut do l'ordcnnancernont

A PRECOMPTER:

Somme note a pryor ou A virer (A) j

Pi6ces justificatfvec de la dipense Arrkti par noun Is p.-iant
MANDAT do payement i Is somme de

COMPTE A CREDITER m.. ......... -. ..

("Viramo,t dane un wtabssmemnt d credit ou choi um comptabid uu

Trvsor). (Pour lordonnatour dAig4u4 omp4che at par ortjre)

Pour acquit do iasonima IndtquiA ci.djeeu3 (A) (2). VU bon h payer ou A Yiref pour I somme do (A)
A ____________ I9...

PAYEMENT PAR VIREMENT

A servir saulament an cac de viroinent postal

Objet du virement . .
. ....... COMPTE A CREDITER
. ................ • 8,nflclalre ­

COMPTE A CEDIT1 Bnaficsi'e ._ .. .... ...... .... . ... ....... --

poatal
Contre 6ocourant
Compte cheaues postaux _

C/c postal ou EtLblissaement bancture . -

Cantre do ch6acues postaux .n....

~ .I n".....
Cornpte ..... ......
.... ........ ....
.. ... .....
.... . . .. ...

( ) Nom. prennms, adresse cjmplete. Pour Ie ,idtes ; nuson Modl r 2

sociale exacte.
(2) Cadre & ,nnuler ior3que 'epayernent n'a pas lieu en numdraJre.
 - 72 -

Petty Cash for Field Expenses

NAME OF ORGANIZATION

PIECE DE CAISSE DEPENSE N2 012951

IMPUTATION
ICPAION) NATURE DES OPERATIONS ONAN
MONTANT

SOMME EN LETRrR-
-

POUR PAIEMNNT
CouplohiL,4 II _____ _______ 0u ,,z a ____________

Le 14n fcialrt
Jo 1rml
ell,* LE PAYEUR

Le Somicc c sapilg
 - 73 -

Field Cash Receipts

NAME OF ORGANIZATION

PIECE DE CAISSE RECETTE IN? 015102

IMPUTATION NATURE DES OPERATIONS MONTANT

(Credits ) (Dblits)

SOMME EN LETTRES ..............-.

POUR PAIEMENT
Cam g bilL Ii .u.....a.......... D a a, le
La P' 'tie Ver~ntu
Journal foflo :. . _........_Le
Receveur

Le Servici conptbNo
 - 74 -

JOURNAL VOUCHER J. v. NO.

DATE

ACCOUNT
DEBIT CREDIT
NO. TITLE

TOTAL
OgSCIIP TION

PAC D BY
_
IoAIC
_ _ •
IAP0040VXD
. .
Mly CDA POSTED MY DATE
. ,,
 a. 1. 1 I'A

o;1' 3 . at j - l i.JOs

0.1 0. (

I11 O)I
Iluo II Zoo

AZG!. IJ~llfl A] aUAl Iopn(IV

ualgA*(1 (1V I.33

1i)IAV~(I-W11SaSaai .LNI033VOISV G1N