During the fourth day, Chompoo also presented an overview of the key concepts and practices related to basic financial management and project budgeting. She explained how to prepare budget projections for activities, understand financial reporting, and gather the necessary supporting documents, especially when implementing activities or traveling.
Budgeting
Budgeting is an important part of financial planning. It helps us understand how much money we need for different parts of the project. There are several common budget categories:
- Personal Costs include staff salaries, staff benefits and allowances, and coordinator fees.
- Consultants or Professional Services are costs for hiring experts to support specific activities within the project.
- Travel and Transportation covers per diem, flights, local transportation, insurance, and visas for travel related to the project.
- Workshops, Trainings, and Meetings include expenses like venue rental, materials, and facilitator fees.
- Communication costs refer to things like, phone bills, internet, media expenses and printing reports.
- Monitoring and Evaluation may require data collection, field visits, and other tools to assess project progress and impact.
- Sub-grants or Partner Support includes money given to local partners or community organizations to carry out project activities.
- Operations and Administrative Costs are for general office needs such as rent, cleaning, and maintenance.
- Equipment and Supplies include items like stationery, pens, and paper needed for daily operations.
- Contingency is a budget for unexpected costs. Some donors allow for this, while others do not.
- Indirect Costs or Overhead are shared costs when working with multiple donors. These might include shared operational and office expenses or equipment used by several projects.
Projection
After we have a budget, we need to create a projection of how we plan to spend the budget over time. This means planning which week or month we expect to use specific parts of the budget.
Using projections, it is possible to plan, manage and control the use of funds effectively. Projections:
- Helps identify funding gaps or surpluses early
- Guides reallocation (reprogramming) of unused budget
- Supports donor reporting and decision-making
- Prevents overspending or underutilization of funds.
There are two ways to do projections – either Activity-based budgeting, which breaks down the budget by activity, or Lump-sum budgeting, which doesn’t break it down into details, but instead uses one line for the whole activity.
Actual Expense
When the actual expense happens, it is important to conduct a proper financial record, and mostly it will be implemented by the finance department or team in the organisation. For the smaller groups and organisations, this task is done by the project coordinator. This includes documenting the expenditure and preparing a report. Important details to record are the payment voucher, payee, description, budget class, local currency, exchange rate, and the actual amount spent. However, APTN has tried to minimise the document requirements and make it less complicated.
To relocate underspent funds, we need to get approval from the donor. We cannot just move the funds by ourselves.
It’s not only the finance team that will verify your expenses; auditors and donors will also review them. So, you should always provide complete and accurate supporting documents to the finance team. We must follow your organization’s financial policy.
Documentation
For travel-related expenses or equipment, for some organizations, you need to get approval from your supervisor before traveling. The finance team can help support you in preparing travel itineraries, transportation tickets, and boarding passes. Some organizations require the original boarding pass as evidence, so we must always refer to and follow the policy.
If you did not receive a per diem, you need to keep the receipts for meals or food. However, if you did receive a per diem, which is a lump sum amount, you don’t need to keep meal receipts.
If you travel abroad and need to exchange currency, keep the proof of exchange rate as part of your documentation. You may also need to provide panel invitations or confirmation letters, especially when you’re working with external organizations.
You must provide a signed document to confirm that participants have received their per diem. For large expenses, such as meeting packages or hotel bookings, we will need to request and compare quotations (at least 4 quotations). For hiring trainers or facilitators, you must prepare a Terms of Reference (TOR), a signed contract, and their CV.