1.

Introduction

The wave of the growth of the NGOs globally also has crossed over Bangladesh. The fragile and fragmented development of the formal political institutions coupled with availability in donor aid, have driven the spectacular emergence and growth of a third sector in Bangladesh consisting of numerous NGOs during 1990s. During this period Bangladeshi NGOs expanded their activities at all levels of society to meet the needs of the poor. There are more and bigger NGOs here than in any other country of equivalent size. As the NGOs in Bangladesh have grown in scale and scope, there have been growing debates concerning various issues of NGO operation and performance and accountability. A number of laws exist under which NGOs can secure a legal identity with a recognized Government structure e.g. Societies Registration Act. 1861, Trust Act 1882, Cooperative Societies Act 1925, and Companies Act of 1913 (amended in 1994). THE FOREIGN CONTRIBUTIONS (REGULATION) ORDINANCE, 1982 and THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978. Some accounts related sections of THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978 are given in appendices 1.

The NGO Affairs Bureau (NGOAB) was created by the Government in 1990 to meet the need for a one-stop service to the NGOs. Located under the Prime Ministers Secretariat, NGOAB has been assigned all responsibilities to coordinate NGOs under the 1978 Foreign Donations (Voluntary Activities) Regulation Ordinance and the 1982 Foreign Contribution (Regulation) Ordinance. The Bureau enables the NGOs to obtain their registration clearance, approval and permission through a single agency of the Government within a specified time frame. The aim of NGOAB is to ensure quality performance of the NGO sector and its accountability to the state.

Functions:
register NGOs, process and approve NGO project proposals, and disburse project funds approve appointment and tenure of services of expatriate officials and consultants Review and comment on reports and statements submitted by NGOs coordinate, monitor, inspect and evaluate NGO programmes identify and approve Chartered Accountants for auditing NGO accounts realize fees/service charges from NGOs carry out field level inspections of NGO income and expenditure maintain liaison with NGOs and donor agencies

Ordinances/regulations/circulars vest the NAB with all its responsibilities regarding coordination, regulation and monitoring of foreign and foreign assisted non-governmental voluntary organizations and individuals working in Bangladesh. While considering the application for registration, the NAB is required to seek approval from the Home Ministry. Projects may be for one or multiple years. NGOs can submit a five-year project proposal, commensurate with an identified priority area of the five-year plan of the state. The NAB arranges approval and release of the funds on a priority basis for such projects. The targets specified in the project proposal, however, must be achieved within the stipulated period. Usually, funds for the following year can be released for the project if its implementation strategy and achievement of target for the year is considered to be satisfactory by the Bureau (Circular: Section 7(h): 1993). The NAB communicates its decisions with 21 days from the day of the receipt of the project proposal and forwards it to the relevant Ministry for its opinion. The Ministry must send its decision to the NAB within 14 days (Circular:Section 7.1(b):1993). The state and its machinery have from time to time introduced several rules and procedures, but due to their complexity and the weakness of the state, NGOs can easily evade them. 2

The Association of Development Agencies in Bangladesh (ADAB), an apex body of NGOs in Bangladesh has a self-regulatory code of ethics for its member NGOs. Surprisingly, these codes are mostly directed towards downward accountability of the NGOs. The code, entitled Declaration Regarding Definition, Statement of Purpose and Code of Ethics, defines NGOs as nonprofit organizations committed to the development of the underprivileged and undeserved. The code intends to establish self-regulatory practices and norms for the member NGOs of ADAB in relation to the people for whom they work, the government of Bangladesh, other NGOs, development partners, and their own staff. Members must also be accountable and transparent to the government with regard to their activities and use of funds. The members must also promote competence, professionalism, and the highest standard of transparency and honesty. The code makes explicit reference to the need to encourage democratic leadership, participatory management, and transparency, including to the people (Karim, 1996). The code has merits as it includes provision for both the upward and downward accountability frameworks for the NGOs. However, the ADAB is yet to finalize monitoring compliance and sanctions for non-compliant members. NGOs have formed the FNB (Federations of NGOs in Bangladesh) as a counter organization of ADAB. But the FNB is yet to reorganize its capability to play any role as like as ADAB. From the above discussion we have a clear picture of the manner/procedure regarding the way the state of Bangladesh regulates those NGOs which finance charitable work through foreign donations.

The discussion and findings start from the accounting framework then the accounting and internal control procedure of the one NGO named Swanirvar Bangladesh. The final part of the article discuses issues relating to financial report and financial transparency of one of the projects implemented by it. Some relevant recommendations are also placed at the end.

1.2

Objectives

The objectives of our report are confined to the extent of showing a clear picture of accounting procedures followed by the NGOs of Bangladesh.

The objectives are:

To identify the relevant NGOs recording process. To show the flow of fund for the project. To visualize the internal control system. To discuss different accounting related aspects. To discuss the reporting process. To identify the auditing aspects. To try to make an overall picture of NGO accounting practices in light of the practices of Swanirvar Bangladesh.

To set some relevant and effective recommendations to improve NGO accountability and operation to get the maximum benefit.

1.3

Problem statement

In preparing the report, we have encountered a number of difficulties. The operation and the total regulatory system of NGO working were found unstructured.

The problems we faced include: Lack of available formal means to collect data. One personal contact helped but the official was unable and unwilling to furnish information for secrecy or any other unexplained reason. The available information was mainly on internal audit on a specific project called SNSDP required by the donor, but no set form, instruction, copy of books of accounts were available. We had to rely only on some very restrictive verbal information. We also faced the problem with the data collected as they were from the audit report. No information were available regarding the compliance with the regulatory requirement of the Government. The officer concerned made delay to furnish data, as a result, we were in short of time to compile, analyze, edit and prepare. To conclude about the overall NGO practices by doing one case study was hard.

1.4
Name of the organization Address Phone : Fax : Email : Year of Establishment Place of Establishment : : : :

Profile*
SWANIRVAR BANGLADESH (SBD) 5/5, Block-c, Lalmatia, Dhaka-1207 9116808, 9116558, 9116806 880-2-8112377, 880-2-8125140 alhusainy@swanirvarbd. orghusainy@bol-online.com 25th September, 1975 Bangladesh Rice chtitute, Joydevpur, Gazipur.

Registration_________________________________________________ Name of Registration Authority Department of Social Service : NGO Affairs Bureau : Family Planning Directorate : Chief of the Organization : :Registration No. Dha01713 225 52/95 Mr. S.M Al-Husainy. Hon Chairman, Executive Committee, Swanirvar Bangladesh.770, Satmosjid Road, Dhanmondi/RA, Dhaka. Phone : Email : 8112424 alhusainy@swanirvarbd.org Date 2/7/1985 15/07/1987 09/07/1995

* Annual report,2006-07, Swanirvar Bangladesh,5/5,block-c,Lalmatia,Dhaka-1207

SWANIRVAR BANGLADESH Background of Swanirvar Bangladesh: Swanirvar Bangladesh came into existence on the 25th September, 1975 as a formal organization through the joint efforts of the Non-Governmental and Governmental body. Swanirvar workers are determined to sustain their activities for the cause of Total Village Development through the active participation of the people of all levels, governmental agencies and public representatives. Swanirver Bangladesh is recognized nationally and internationally as anon profitable organization for rural development activities. The main objective of Swanirver Bangladesh is to attain the all round socioeconomic development of Bangladesh on the basis of self-reliance. VisionTo act as the change agent and catalyst to enable the rural populace for makings efforts for family based as well as community based socio-economic development with the principle of self reliance. MissionTo motivate, organize and train target groups with main focus on women and the most disadvantaged sections at the grass roots. ObjectivesTo promote literacy and skill development, health care, nutrition and general family welfare, micro enterprises development, income generation and poverty alleviation, environmental improvements and the like leading towards economic advancement, social upliftment and empowerment .Swanirvar Bangladesh is a useful bridge between local government and the people. Ideals and basic concept of Swanirvar Bangladesh To transform the hands of beggar into the hands of worker. To work with what one possesses, not to wait for what is not in this hand.

To utilize the manpower, local resources fruitfully and use every inch of land for productive purposes. To organize the grass root people of the society through formation of their own organizations on a voluntary basis and to train them to become self-reliant.

Principles of Swanirvar Bangladesh Preparation and implementation of development plans through local initiative. Proper distribution and utilization of local resources through government assistance (financial and other). Preparation and implementation of various projects through the committees formed at village, union, upazila levels and organize the people of all levels, to involve them in development activities. To facilitate communication between government officials and rural community and ensure coordination of development activities. TO organize village co-operatives for taking the leadership of the village to discharge the responsibilities in rural development activities. To inspire all levels of people to discharge their responsibilities with patriotism for the greater good of the rural community. Program of Swanirvar Bangladesh: Swanirvar Total Village Development Program Swanirvar Credit Program Swanirvar Participatory livestock Development Project Swanirvar Mass Literacy Program Swanirvar PKSF Project Swanirvar Environment Development Program: Swanirvar Relief Program Swanirvar Karmi Kallayan Samity Swanirvar Workers Trust Fund Swanirvar Pathshala (Primary School)

 Swanirvar Training Center: Swanirvar Rural Housing Construction Project Swanirvar Publication, Information and Media Special Program of Swanirvar Bangladesh Total Village Development ProgramThe present condition of the village may not be changed until the mass people of the rural areas could be able to make self-reliant through hard working. Besides this the landless poor, marginal and co-share farmers and small farmers, unemployment youths and woman folks are not in good condition. Therefore the Total Village Development Program of Swanirvar Bangladesh originates to reasonable and judicious solving of their problems instantly for total development of the society. Every village of our country comprises by small group of houses. There is a leader in every villages and they are very much influential and conducted various work. Besides these present village society of Bangladesh consists of landless, marginal farmer, unemployment youth and women folk and they are not in good position in society. So in the interest of total well being of society and organization, and total rural development problems should be solved instantly. Total village development program is implementing through five principles: 1. Organization and creation of workers 2. Work for all 3. Employment 4. Population control 5. Mass education Swanirvar Credit Program: In Bangladesh Swanirvar Micro-Credit Programmer was started in the year 1978 through Dheki loan in ten upazilas. Now it has been working in collaboration with NCB(Sonali, Janata, Agrani bank) and specialized bank(BKB &RAKUB). During 2006-2007 TK81.62 Crore has been disbursed through 3 Nationalized Commercial banks, BKB, RAKUB to 9

rehabilitate the poor, landless and destitute of the country for self employment. A total of TK 561.83 Crore has been disbursed as loan till June, 2007. The loan has been invested in small and income generating rural projects; like agricultural production, poultry and cattle farming, cottage industry, fisheries, tailoring, handicrafts etc. Swanirvar NGO Services Delivery Project: Swanirvar NGO Services Delivery Project has been implementing Health and Family Planning Services since 2002 with the Technical Assistance of NSDP financial support of USAID. The project with 818 salaried staff and 1649 volunteers has been providing essential service package on health and family planning in 50 clinics. Between July 2006- June 2007, family planning services has been provided to 2,813,354 persons within the program areas. Providing essentials health services an amount of TK 2,344,699 has been earned this year. This amount is now as deposited to banks account. For implementation of the said project program TK 86,072,790 has been spent. Swanirvar Participatory livestock Development Program: Swanirvar Bangladesh has been implementing this program enhancing nutrition to destitute and poor women rearing poultry and livestock. Self employment has been possible through the poultry farming causing economic development, which has been reducing the nutrition defecit.This project is now under implementation in 4 upazilas of Gaibandha district. Swanirvar Mass Literacy Program: Through the Hard to Reach project, the mass literacy program of Swanirvar Bangladesh 2700 students of 90 centers of Dhaka, Chittagong, Rajshahi, Khulna divisional cities have been provided education to 182,860 peoples. Swanirvar PKSF Project: Since 1990 the Swanirvar Palli Karma Sahayak Foundation Credit Project started with a capital of TK one lakh. This credit program was aimed at for self employment generation

10

through distributing credit to small projects of the poor people of the villages. This program will assist in enhancing their income generation. Apart from this, the program has been providing leading role of women empowerment and their acceptance of family planning, free from illiteracy. Swanirvar Environment Development Program: Environmental problem is a universal one. Thats why Swanirvar Bangladesh has been working on environment protection in different ways. Tree plantation, supply of pure drinking water, sanitation program, personal hygienic, improved stove, etc are amongst those. Swanirvar Relief Program: Swanirvar Bangladesh undertakes relief and rehabilitation program for the people who are affected by natural calamities at different times. With the assistance of the Royal Danish Embassy such a relief and rehabilitation program was undertaken in the SouthWestern part of the country, which was severely affected.Besides, program on rehabilitation is undertaken caused due to natural calamities such as cyclone, flood, drought, high tide etc. Swanirvar Karmi Kallayan Samity: The Excutive Committee of Swanirvar Bangladesh has approved a proposal for creating a contributory welfare fund named as Swanirvar Karmi Kallayan Samity (SKKS) for the Swanirvar workers, staff in 1994. The regular employees of the Swanirvar Bangladesh has this fund with deposit of their one days salary in every month. Swanirvar Workers Trust Fund: In order to ensure welfare of the Swanirvar workers, a Swanirvar Workers Trust Fund was created on 25 October, 1984. The main source of fund to this trust is the contribution of the Swanirvar workers. An amount of TK 1,226,116 has been deposited in the central account as trust fee in the financial year of 2006-2007. An amount of TK 8111,424 was earned from the rent of the Workers Trust Bhaban.

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Swanirvar Pathshala (Primary School): Swanirvar Pathshala started its work since 1982 to provide opportunity for education to the poor children who are deprived of education. 154 boys and girls were received education from baby class to class 5 through this pathshala. Different foundations are contributing financial assistance to the Pathshala. Swanirvar Training Center: With various facilities a training center was established in the Swanirvar workers trust building, based on the demand of need based training of Swanirvar workers for different project. This training center has got scope for training of the employees of Swanirvar Bangladesh as well as personnel of outside organizations. Swanirvar Rural Housing Construction Project: 274 families affected by flood of Faridgonj and Sharasti UIpazila of Chandpur district had been rehabilitated providing them with constructed houses. This program was being implemented jointly with the government. Swanirvar Publication, Information and Media: The only quarterly news of Swanirvar Sangbad is published regularly. Swanirvar Bangladesh participates regularly in the agriculture-oriented program of Bangladesh Betar. Special Program of Swanirvar Bangladesh: Every year Swanirvar Bangladesh observe and celebrate with due respect the Independence Day, the Victory Day, International Language Day, International Voluntary day and other important Days.Cultural groups have been formed with the basic concept and objectives of Swanirvar Bangladesh. This group has earned name and fame participating in various Days at national level events.

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Source- Annual report,2006-07, Swanirvar Bangladesh,5/5,block-c,Lalmatia,Dhaka-1207

1.5 Literature Review

Raising the Age of Marriage for Young Girls in Bangladesh July 2006 By -Mary K. Burket, MA -Mohammad Alauddin, PhD -Abdul Malek, MA, MBA -Mizanur Rahman, PhD Compelled by financial struggles and cultural norms, girls in Bangladesh often enter into marriage well before their eighteenth birthday, sometimes when they are barely teenagers To address the problem of early marriage and the issues surrounding it, c Bangladesh designed the model program, Raising the Age of Marriage for Young Girls in Bangladesh. The three-year project was launched in July 2003 with support from an anonymous donor, and closed at the end of June 2006. Through education, the project empowers girls to take control of their futures. The three aspects of the program primary and secondary school support, advocacy, and vocational trainingcombine to help girls overcome the hurdles that prevent them from finishing school, finding employment, and delaying marriage until they are ready. The project targeted the neediest girls within five upazilas (subdistricts) of Kishoreganj, one of the poorest areas of Bangladesh. Stipends for School Girls To help transition girls from primary to secondary school Swanirvar supported 4,092 girls in the last three years of primary and the first year of secondary school, transitioning a total of 2,859 girls into secondary school. Advocacy Swanirvar, held advocacy meetings throughout the project area. These meetings informed the girls about the benefits of education and delaying marriage and inspired hope for their futures Paramedic Training Swanirvar supported three classes of 20 girls at the AITAM Welfare Organization in Dhaka, a paramedic training institute. The year-long paramedic training course prepares the girls to work in both clinic and community settings. They are trained in maternal and child health care, family planning, and other basic health services.

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2.1

Methodology

The methodology we followed in preparation of the report was to just finding the details of the accounting and related aspects and not to evaluate. Both secondary and primary data were collected. The numerical figures were found from the internal audit report. Case study Method Another mention worthy dimension is that we followed the case study method to draw conclusions and have tried to generalize the overall NGO accounting practices in light of one NGO. The reasons for doing that is such: There are no specific standards for preparation of accounts of NGOs. NGOs differ roughly in terms of procedure followed Projects undertaken differ in terms of accounting practice. Time and Cost would be huge to analyze more than one NGO.

As the rationale for following case study method in analyzing above, we have tried to generalize as much as possible.

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2.2

Data Collection

We have used case-based qualitative research framework and case data were collected during the 04 to 14 of July,2008. The primary sources of data were observation,internet, interviews and official documents. Data were collected in the following manner: Information was collected through inspection of official documents, that is, accounting reports; internal audit report etc. of the selected ngos project. Unstructured interviews with key NGO official were conducted. Various laws, regulations, circulars were collected from internet, books. Collection of information through observation, interviews and official documents were centered on the following major issues: What accountability requirements do NGO funding providers impose? What accounting formalities are performed by these NGOs to meet the accountability requirement? NGO-specific accountability requirement of the Government of Bangladesh. The accountability framework of the NAB for NGOs and its influence over the NGO. What process is followed for recording, internal control, reporting and auditing?

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2.3

Data Analysis

In analyzing the collected data, the annual report, the internal audit report and the verbal information were compiled.

We analyzed the data with the objective of preparing the overview, not comparing with any set of standards.

In analysis, we have used some estimation. When analyzed, we also have considered the project nature, requirement etc. Collected data were categorized according to the relevant field of accounting for better understanding and conceptualization & organization.

Different diagrams were drawn for finding the interrelation and better analysis.

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Chapter 3 3.1

Findings

3.1 NGO ACCOUNTABILITY FRAMEWORK IN BANGLADESH The NGO accountability in Bangladesh is expected to be centered round three groups of stakeholders the beneficiaries, the donors and the state. However, the requirements of the existing NGO accountability frameworks in Bangladesh are skewed towards the demands of the two influential groups the donors and the state. The NGOs receiving foreign funding are subject to the tight accountability requirements of the respective donors. All NGOs (both foreign and locally funded) are subject to government control. Those in receipt of foreign funds are subject to the Foreign Donations (Voluntary Activities) Regulation Ordinance, 1978 and Rules under the Ordinance, administered by the NGO Affairs Bureau (NAB). . The voluntary organizations are subject to the Societies Act of 1961 and Rules made under the Act. The Governments regulatory framework is mainly concerned with ensuring that NGO activities are lawful, and do not conflict with government policies (The World Bank Country Study 2002). Funds from donors are sent directly to NGOs bank accounts , but they cannot be lawfully drawn on until the NAB has approved the relevant project. NGOs are required to submit their project proposals to the NAB, which consults with the relevant government ministries and gives clearance to NGOs banks holding donor funds to allow withdrawals. If a bank pays out without NABs approval, it is disciplined through the Bangladesh Bank (the central bank of Bangladesh). There is no doubt that this control function of the NAB is necessary to ensure legitimate sources of funding. However, often it is observed that NAB extends its regulatory power to determine which activities NGOs are allowed to pursue.

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Maintaining accounts of foreign donation:

The Rules require only double entry accounting, Cashbook and ledgers but NGO practices are varied. Some use cash accounting, some use accrual accounting. Every voluntary organization would collect foreign donations through only one bank account. The vouchers of expenditure should be maintained safely for 5 years in the head office and the field offices would do the same. The books of accounts for foreign donations would be kept according to form FD5. The books would be maintained half yearly; one form 1st july -31st December, another from 1st January -30th june.

Submission of Annual Reports

NGOs are required to prepare annual reports on their activities within three months of the end of the financial year and send copies to the NAB, ERD, the relevant Ministry, Divisional Commissioner(s), Deputy Commissioners and the Bangladesh Bank. The reports must hold the following information. 1. In the annual report, every project should be described individually. The real outcome of the projects compared with the budgeted expenditure should be disclosed according to District and Thana. 2. Full list of fixed and current assets including vehicles. 3. The details of sources of income and expenditure of the organization itself. 4. The description of traveling abroad of the employees of the organization. 5. The details of investment mentioning sectors of revolving credit fund .

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6. Descriptions of the projects implemented through the agreements with different ministries and departments of the Government or fund collected from any other sources. 7. In the annual report, a description of the employees(whose monthly salary & allowances are 5000 or more or one time grant is 10000 or more) mentioning name, position, age, nationality, total salary, allowances and duration of employment.

Power of Inspection
The state may, at any time inspect the accounts and other documents of NGOs. The state may require the NGO to submit a declaration as notified in the official gazette (Ordinance No. XLVI- Section 4(l): 1978). Failure to produce any accounts or other documents or failure to furnish any statement or information by the NGO is a contravention of state regulations (Ordinance XLVI: Section 4(3): 1978). The NAB has the responsibility and power to audit and inspect the accounts of NGOs (Circular: Section 10(a): 1993). The Rules under the Ordinance have enumerated the books of accounts to be kept. Annual accounts are required and audit is done by chartered accountants selected by the NGO from a list approved under the Rules. According to the Rules, the audit reports are due within two months of the end of each financial year. The Ordinance empowers the Government to inspect NGO books and to carry out its own audits if necessary. Annual reports must also be submitted to the NAB. Although NGOs are required to submit annual reports to the NAB, the NAB is rarely concerned about the real outcome of the project. On the other hand, donors do demand project-based accounting but they are only interested to work out the use of their funds rather than the outcome of the use of their funds. NGOs in Bangladesh can be categorized in following 3 types (Bala and Mir,2005) Category 1: One NGO whose majority of funding comes from foreign donors. Category 2: Two NGOs whose majority of the funding come from their own sources.

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Category 3: One NGO whose majority of funding come from local donors.

Accounting Practices
3.2 Case Study Swanirvar Bangladesh
Our specific study area of Swanirvar Bangladesh falls under the category 1 of above. The discussion on the accounting practices of Swanirvar Bangladesh is mainly based on the audit report of one of its major projects named Swanirvar NGO Service Delivery Project.(SNSDP).

3.2.1 Accounting Procedure and aspects:

Accounting policies:
Budget is monitored in accordance with the donor guidelines. Swanirvar Bangladesh introduced and implemented half yearly inventory system for proper inventory management . Introduced Accounting Software package for smooth accounting system. Swanirvar closely track cost and revenue for feasibility plan(HCM, Lab service and contact physician scheme). Swanirvar complies with the audit findings at central as well as clinical level. For smooth running of financial management Swanirvar arranges refreshers training on F& A issues for all clinic managers and office assistants.

Basis:
Accounting is based on cash basis and reflects revenues when received and costs when paid rather than when incurred as an obligation.

Preparation of Statements: Accounts are maintained in 2 dimension in mind

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Donor requirement -Agreement -Nature of the project. -Specific Project based accounts preparation. Government Requirement. -May be project base -Mostly period base but project segmented.

Branch 1 Branch Recording Process Branch Reporting Process Preparing annual financial statement Fund Accountability statement. Income and Expenditure A/c Balance Sheet. Other required statements.

Branch 2 Branch Recording Process Branch Reporting Process THE HEAD OFFICE (Central Accounting Department)

Branch 3 350 Branch Recording Process Branch Reporting Process

Figure:

Overall accounting system of Swanirvar Bangladesh

Chart of accounts:
The first step taken by Swanirvar Bangladesh is to choose an accounting software package(Tally) which is clear and concise and easy to operate and maintain the NGO accounting. The second step of Swanirvar Bangladesh was to clarify purpose of

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organization and reflect that in a clear and concise chart of accounts. It is important that a chart of accounts reflect all the major functions and project operation of the organization. Swanirvar Bangladesh has more than hundreds projects, it prepares charts of accounts and codes them for computer aided soft ware. The coding of the account head represents

-NGO name -Project name -item name -no /quantity/value For example, for assets Name of asset Computer Telephone digital Television Air conditioner Generator Code used Sw/NSDP/Com-1-17 Sw/NSDP/PHo-1 Sw/NSDP/TV-1 Sw/NSDP/AC-1 Sw/NSDP/G-1

Revenue Recognition
According to ISA-18, revenue should be measured at fair value of consideration received or receivable. NGOs dont have revenues like the normal business organizations, they recognize grants as revenues. Swanirvar Bangladesh maintains a bank account for foreign donors (According to: Foreign Donations Regulation Ordinance, 1978 (30) under subrule (4) of rule 4) and revenue is recognized as the interest accrued and as per IAS-18, interest revenue is recognized on a time-proportion basis using the effective interest rate. The sources are -Revenue Generation fund.(RGF) -Revolving Drug Fund (RDF) -Cash received from the donor. -program income. -Registration fees. -Service charge (service type wise)

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-Bank interest (on project wise fund, received from donor)

Receipts
Receipts are two types: Sundry receipts not to be utilized by the project but to be deposited to the Krishi Bank Account: 1. In respect of each receipts of cash/cheque a money receipt must be issued. Money receipt should be completed in all respect describing the precise nature of the receipts, amount and figures and duly signed and dated. If for any reason a money receipt is cancelled the original must be kept attached to the duplicate copy. Braches keep money receipts with details of : -Branch name -Date -Receipt no -amount The policy of Swanirvar Bangladesh is not to approve overwriting, using of correcting fluids etc without appropriate counter signatures. 2. Receipts of funds for project expenses from donors: Projects bank account is credited for the amount received from donors with the total amount With specific date.

Entry for cash transferred to branch Journal entry in Brach Detail Cash dr. Head office current A/c cr. debit **** **** credit

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Journal entry in Head office Detail Branch office current A/c dr. Fund control A/c cr. debit **** **** credit

Cash: Branches are to keep records and send report in the following format: Name of the branch Bank name A/c no. cash at bank cash at hand total

The Head office maintains the total cash of all branches with the same details.

Bank Reconciliation: Every Brach is to furnish Bank Reconciliation statement with the following headings: Brach name. Bank name A/c no Balance as per book Outstanding Cheques cheques issued but not presented to bank for payment deposited but not collected by bank within the Balance as per bank statement at the reporting date.

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within the reporting period.

reporting period

Accounting for disbursement:

No expenditure should be incurred or any commitment made to incur expenditure unless it has been approved in the budget. Payment other then the petty cash must be made through cheques. Authorized signatories must sign all the cheques. Before making any payment t is essential o ensure that the expenditure is necessary for the project.

Heads of Expenditure
- Salaries - Benefits - Fees and honoraria - General administration - Expenses for local level activities. - Travel & associated expenses. - Supplies and equipment. - Purchased services - Education and training.

Bank account and cheque books:

Bank account n the name of the project shall be opened and operated by joint signature s only. The PD and FAM shall be the joint signatories pf the accounts. Accounts may be current account, STD account and fixed deposit account. At the head office such number of accounts shall be maintained.

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Payment voucher:
For every payment a payment voucher shall be prepared. A cheque payment voucher should be prepared in respect of each payment by a cheque. A petty cash voucher should be prepared in respect of each petty cash payment. Each type of voucher must be given a serial number. Payment by cheques: Bills/invoices for supply of goods and services are to be checked before payment for expenditure authorization by the procurement committee and budget provision. For purchases up to 25000/= approval of PD is required and for above 25000/= approval of Finance director or Chairman is required. For each payment a bank payment voucher shall be prepared by the accounts officer who shall attach to the voucher all supporting documents. FAM shall examine the voucher and PD will scrutinize voucher and then sign it.

Transaction flow chart:

Suppliers invoice

Accounts officer/FAM Prepare and verify bills and Submit to PD Payroll register

PD verifies and Gives sign

Issue cheque

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Flow chart- Donor contribution:

Petty cash replenishment and maintenance with in the head office:

Donor

Krishi Bank a/c

Withdrawal by PD from Krishi bank a/c Petty cash

Receipts by Withdrawal by PD Petty cash a/c

Payment from Given to projects Petty cash a/c

1.cash received should be recorded as receipt on the petty cash statement . 2.when disbursement are made should be recorded as payment of the petty cash statement. 3.petty cash statement is updated for each transaction.

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Posting to general ledger:

All the receipt statements and disbursement statement shall be used as input source document for processing the transaction through the computerized accounting system. All transactions should be entered into general ledger.

Petty cash voucher:

Small payments are made by petty cash. Petty cash voucher is prepared by accounts assistant. Petty cash voucher is reviewed by the FAM. Petty cash voucher is approved by PD.

Procurement :
Swanirvar Bangladeh has a high level procurement committee headed by executive director of Swanirvar Bangladesh. Procurement is done by marinating procurement Process such as need assessment, Competitive tender/ quotation, work order good receive, stock entry, mode of payment etc. The head office provides approved list of suppliers to ensure quality and competitive price.

Assets:
Branches need to keep record and send report of assets available there to the Head office with following details: Brach Name of Identification Date of Quantity Unit cost 6000 0 Value 6000 0 Condition Good

name asset no. (code) Austogram Generator Sw/NSDP/G -1 Condition can be -Good -Working -Poor

acquisition 19-111 2005

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A separate book is maintained for assets directly procured and provided by donors to the specific project with the details: - Name - Quantity - Cost per unit - Total cost - Reference no - Assigned branch.

Ending commodity stock value:

Branches give the details in following format: Serial no 1 Brand name Cotrim quantity 500 Unit cost 2 Value 1000

-Head office segments branches in the following 2 types for this purpose only -Urban branch - Rural branch -Head office treats the balance of all branches in Revolving Drug Fund calculation.

Payroll:
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A personnel file should be maintained for each employee to record the under noted information: Employee ID Full name of the employee Fathers name Address Designation Educational qualification Gender Date of birth Date of employment Date of confirmation Posting Project activity allocation code

Payroll is structured as follows- Basic - Benefit 60% of basic - Bonus 1.5 times basic Only one type of payroll register is maintained. As per our informational limits, we would demonstrate one of the major projects of Swanirvor Bangladesh named, Swanirvar NGO Service Delivery Project.(SNSDP) and related accounting & control issuies:

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3.2.2 Swanirvar NGO Service Delivery Project.(SNSDP).

3.2.2.1 Project in brief:
Swanirvar NSDP is one of 30 NGOs supported by Ngo service Delivery Program (NSDP) funded by USAID. Swanirvar Bangladesh operates various types of development programs. SWV, Dhaka is providing family and health care services in Dhaka city Corporation & 14 municipal areas through 50 Static clinics,129upgrade satellite clinics out of 1557 Satellite spots, 309 Satellite teams & 1603 Depot-holders.

This organization started delivering Essential Services Package (ESP) under National Integrated Population & Health Program (NIPHP) from September 1997 through 38 static and 1532 satellite clinics and 1619 Depot-holders in 36 rural Upazilas. It expanded area coverage in the urban areas to provide the same services in 10 static clinics since November 2004 and additional two static clinics in 2007.

Project implementation plan:

The project activities are implemented through two-tier management system. At the central office located in Dhaka one Project Director (PD),Eight Monitoring officers (Program-3 & Medical-5), two MIS officers manage the project. This group is responsible for planning, supervision, monitoring and overall management of the project The project finance is managed by the PD with the assistance of one Finance & Administrative manager (FAM) and three Accounts Officers. An Administrative Assistant, two Program Assistant, One Accounts assistant, one MIS Assistant, one Driver, two Messengers and one Security Guard also support the central office. At the

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clinic site overall activities are managed by Clinic Managers (CM), Medical Officers. FWV/Paramedics are the key service provider assisted by Clinic Aides (CAs). At the 50 clinics, there are 50 clinic managers (CMs), 7 Medical Officers (MOs), 10 Service Promotion Officers (SPO), 39 Office assistant (OAs), 180 Paramedics, 159 Service Promoter (SPs), 24 Counselors, 23 Lab Technicians, 134 clinic aids (CAs) and 1649 Depot-holders (DH) (Volunteers with a very partly honorarium) are responsible for running Swanirvar NSDP. Types of clinical services provided by NSDP: Family planning Child Health Care Services including EPI Mother Health Care Services Anti Natal Care m(ANC) Post Natal Care (PNC) Tetanus Vaccination General Health Care Tuberculosis Cost per unit of service (2006- 2007) TK16 Income per unit of service (2006-2007) Tk4 Funded by --Pathfinder International. 9,Galen Street, Suite 217,Watertown,MA 02472,USA.

3.2.2.2 Internal Audit

Auditor Rahman Rahman Haq, Chartered Accountants 9,Mohakhali C/A, Dhaka-1212. 32

Member firm of KPMG International, a Swiss cooperative.

List of statement and aspects Reported:

1. Report on Fund Accountability statement. 2. List of fixed assets and non-expendable equipment. 3. Report on internal control. 4. Report on compliance. 5. Schedule of prior audit findings and status. 6. Schedule of findings and questioned costs.

3.2.2.2.1 Financial Statements:

Fund Accountability Statement: (Audit report 1,2008) 3 accountability statements have been prepared. -consolidated -Pathfinder Grants Contribution -Program income

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Swanirvar Bangladesh Fund Accountability Statement For the period. Details Funds available Beginning fund balance RGF* Fund balance Cash received from Pathfinder international/NSDP, Dhaka. Program income earned Bank interest Others Total Note Budget **** Actual **** Variance ****

Expenditure Salaries Benefits Fees and honoraria General administration Expenses for local level activities. Travel & associated expenses. Supplies and equipment. Purchased services Education and training. Total

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Ending fund balance * Revenue Generation Fund

****

****

****

The ending fund balance must agree to the guaranteed balance in Grantee Financial Report(GFR) with the donor as per agreement.

Statement of Program income from sale of medicine (RDF) (Audit report2,2008)

Swanirvar Bangladesh Statement of Program income from sale of medicine (RDF) For the period. Opening Balance Cash in hand and bank Commodities Total Fund received from additional clinics Fund received from community for POP Transfer to NSDP Add : Income earned during the period Bank interest Expenses for feasibility plan POP expenses Closing balance **** Cash in hand and bank Ending commodity stock value --RDF: Rural clinic Urban clinic **** 35

3.2.2.2.2 Internal Control:

Swanirvar Bangladesh classifies its internal control structure in the following categories: 1. Cash receipts and disbursements 2. Payroll 3. Allocation of expenditure 4. Procurement 5. Asset management 6. Financial reporting 7. Program income During internal audit, Two issues regarding the internal control system were identified 1. Overwriting/handwriting in the money receipts -May provide chance to misappropriate -Management has taken necessary steps to control that. 2. Medicine purchased from unauthorized supplier. -May lead to purchase of low quality product with high price - Management has taken necessary steps to control that.

Annual report to the Government.

Swanirvar Bangladesh send annual report according to the Government requirement and related particulars as prescribed and to the designated authorities in the prescribed format.

4.1

Limitations
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 Lack of accounting standards for NGO Accounting, reporting and auditing. After audit and inspection, if a complaint is lodged against an NGO, virtually no appropriate action is taken. Usually a note is passed to the NGO to correct the error, which is a trivial remedial measure. Due to the strong support of donors for NGOs, in the recent past the state has had to scrap its own desire to withdraw the registration of a number of NGOs and even had to change the head of the NAB when that individual appeared tough with NGOs that had indulged in irregularities (Hashemi, 1995). As NGOs are heavily dependent on foreign resources, the flow of money from the outside, in the absence of accountability, can make the NGOs corrupt, controversial and autocratic .(Zarren, 1996). Despite the negative effects , ironically real in most cases, NGOs are accountable to the donor countries rather than the state of Bangladesh. In reality, the state is unable to control NGOs. The NGOs often work against the directions and decisions of the state. Weak administration on the one hand and strong national and international backing on the other encourage some NGOs to defy the state and to work according to their own whims. In the recent past, the registration of ADAB was cancelled by the NAB but reinstated within a few hours. A powerful international lobby naturally achieved this. There is a tug of war between the NAB and the Social Welfare Directorate which gives the NGOs opportunities to break the rules . Middle management capacity, retaining incentives, cost-effectiveness and leadership succession are key challenges as NGOs deliver more complex services. Legal framework (registration, oversight, tax) outdated and the multiple Implementing agencies lack capacity. Lack of co ordination between NGOs and the Government. 37

 Laws relating to internal governance, accounting, disclosure and transparency are rudimentary. NGO Boards face similar corporate governance problems as corporate sector (family members, lack of term limits, lack of role clarity) Donor financial reporting requirements are questionable Quality of external audits and public access to reports are significantly low and vary from NGO to NGO in a large scale.

4.2

Recommendations
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The following recommendations would improve the existing legal status of NGOs in Bangladesh, by reducing bureaucracy, removing legal contradictions and making NGOs more accountable. State Rules, Acts and Ordinances should be replaced or modified to reflect the current critical atmosphere.The state should remove all administrative and procedural bottlenecks created through promulgation of various Ordinances and streamline the existing working procedures, enabling NGOs to complete all formalities within the shortest time possible. The state should evaluate the strength and weakness of current measures for regulating NGOs and ensure promulgation of flexible and effective rules and regulations. Improving NGO Efficiency It takes more than two months to prepare renewal papers for an NGO registration, which, in any event are not thoroughly scrutinized. Because the state has the authority to cancel the registration of any NGO or stop its activities and inform the donor, in any case of serious allegations, once a NGO is registered, renewal procedures should be simplified. Some of the Foreign Donation (FD) forms and procedures followed by the NAB are complex and cumbersome. The application forms and procedures should be simplified through discussion between the GOB and NGOs. With regard to registration, the Home Ministry should grant approval or disapproval within sixty days of receiving the application from the NAB. An application for the appointment of expatriates or extension of tenure should be decided within twenty-five days. The NAB should send reminders to the National Security Intelligence (NSI). Appropriate action should be taken by the administrative Ministries, Divisions and Departments to give their advice to the NAB within twenty-one days with regard to approval of NGO projects.

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 To enable NGOs to prepare budgets and implement projects within the time limit of financial year, if the report about a particular NGO is satisfactory, then the NGO could be given clearance for other projects in the same year without further investigation by the NAB. The existing procedure that requires projects and clearance of funds be annually approved by the state should be changed. NGOs that have approval for a project should be able to use foreign funds until the project is completed, without annual renewal. Since the funds must be received through specific NGO bank accounts, the state will be able to monitor the flow of foreign funds to the NGO sector and to each NGO. It will be the business of NAB officials to check whether an NGO has several bank accounts. The National Security Intelligence (NSI) should be aware of each NGO's activities so that it is ready to comment on an application without further inquiry. If the NGO has done anything highly objectionable during the last 30 years, it should be closed and the relevant donor informed. For NAB approval of projects, NGOs should be required to submit the names of its Board Members and/or Executive Committee and the number of staff positions in each category. Staff names, however, should not be required.

Holding NGOs Accountable The state audit system is ineffective. A mechanism must be developed under which the state officials involved in the development process make regular field visits to NGO programmes. Such officials should also conduct impact evaluations upon the completion of a project to enhance the state's understanding of the programme dynamics and the operation of NGOs.

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 Commercial activities of NGOs should be duly taxed and profits from them should be used for development work. The law should be changed accordingly and NAB should make sure that it is implemented properly. In conformity with law, immediate legal action ought to be taken against the officials of several NGOs who are involved in misappropriation, embezzlement or accused of misconduct, irregularity or lawbreaking. Theoretically, the state is accountable to Parliament and ultimately to the public for its activities and programs, but NGOs remain unaccountable. This is unacceptable. NGOs must be regulated by Parliament. If the government can remain above narrow party interests and if the opposition party can remain strong and responsible, then an effective parliamentary committee could be created to scrutinize and evaluate the activities and programs of the NGOs.

Strategic recommendation: Strong case for a focused scaling up of NGO activity through a mix of enhanced direct provision and facilitating (local) Government and community provision so that accountability relationships are strengthened

A strategic compact between GOB, donors, NGOs and clients where each improves certain aspects of its current practices could further enhance development impact of NGOs

GOB part of compact could be (i) to oversee NGOs while not impairing their ability to innovate (ii) withdraw from direct service provision where NGOs have comparative advantage (e.g. micro-

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credit) (iii) strengthen procurement and budgetary practices to improve contracting and evaluation of NGOs Donor role in compact could be to support NGOs while ensuring that accountability of NGOs to Bangladeshi stakeholders is preserved. As contracting processes improve more donor funds to NGOs, for social services, could go via Budget. Advocacy needs to be funded directly.

NGO part of the compact could include (i) strengthening financial management and corporate governance (ii) improving transparency and active publicity about activities and finances (iii) carrying out strategic reviews to determine scaling up or down of programs/enterprises (iv) strengthening middle management and succession planning Clients can contribute to the compact by actively exercising their power as consumers (eg vouchers), by monitoring service quality and demanding information

4.3

Conclusion

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In Bangladesh, NGOs play a pivotal and pragmatic role when the state does not reach the poor and meet their needs. Despite their numbers, NGOs have brought little change in levels of poverty. Even the largest NGOs in Bangladesh when taken together cover only a fraction of the population- perhaps only 10-20 percent of landless households (Hasherm, 1995). This highlights the NGO need for reaching more poor and provision of services given the limitations of the state and the laws. So, alleviation of poverty of the masses should be at the top of the agenda of the NGOs, state and donors in Bangladesh. However, the NGOs' umbrella body (which is required to elect its executive committee) is not broad-based. Elections to the executive committee are often not properly held and its membership is often confined to friends and relatives. This surely frustrates the potential of NGOs as democratic voluntary organizations. Nevertheless, NGOs cannot function in isolation from the mainstream of political, economic and social life in this Country. They must conform to certain standards, adhere to state regulations and have their work coordinated at the state level. NGOs can only complement the state's activity. Under the current system, the state cannot ask NGOs to become more transparent and accountable or to cooperate more with the state due to donor pressure. The state is very weak in Bangladesh (Wood, 1997). Instead, the state creates undue hindrances which only increase transaction costs of NGOs without encouraging or forcing the NGOs to respond more to the needs of the poor. But still NGOs need to be transparent to their clients, donors and the state both functionally and financially if they really want to represent the interests of the poor or at least provide services to them.

4.4

Appendices

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1.
[Published in the Bangladesh Gazette Extraordinary, dated the 12th December, 1978] GOVERNMENT OF THE PEOPLE'S REPUBLIC OF BANGLADESH 1{ PRESIDENT'S SECRETARIAT PUBLIC DIVISION NOTIFICATION Dhaka, the 12th December, 1978. No. S. R. O. 329-L/78.-- In exercise of the powers conferred by Section 7 of the Foreign Donations (Voluntary Activities) Regulation Ordinance, 1978 (XLVI of 1978), the Government is pleased to make the following rules, namely:THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978.

6. Maintenance of books of accounts. (1) Every person or organisation undertaking or carrying on voluntary activities shall maintain books of accounts (a) Where the foreign donation relates to articles only, in Form FD-5; (b) Where the foreign donation relates to currency, in the cash book and ledger book on double entry basis. (2) Accounts under sub-rule (1) shall be maintained on a half-yearly basis, one for the period commencing on the 1st day of July and ending on the 31st day of December, and the other for the period commencing on the 1st day of January and ending on the 30th day of June. (3) All books of accounts maintained under this rule shall be audited by a chartered accountant as defined in the Bangladesh Chartered Accountants Order, 1973 (P. O. 2 of 1973), and two copies of accounts so audited shall be furnished 29{along with a certificate from the auditors in Form FD-4, to the NGO Affairs Bureau with a copy to External Resources Division and the administrative Ministry concerning to the activity of the project}.

7. Bank accounts.

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Only one bank account shall be maintained by every person or organization authorized under these rules for receiving foreign donations : Provided that separate bank accounts for separate projects may be maintained for internal transactions after the donations have been received through the only bank account opened under sub-rule (4) of rule 4.} 8. Seizure of books of accounts. -- (1) Every seizure of books of accounts and other documents under section 4 shall be made in accordance with the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898), as they apply to any search or seizure made under the authority of a warrant issued under section 98 of the Code. (2) The officer or officers responsible for seizure of books of accounts and other documents under sub-rule (1) shall return them if no action is taken as required by the Ordinance.

4.5

Bibliography

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Audit Report 1,2008, Rahman Rahman Huq, SWV NGO Delivery Project, Swanirvar Bangladesh, pp. 2-4. Audit Report 2,2008, Rahman Rahman Huq, SWV NGO Delivery Project, Swanirvar Bangladesh, pp. 32. Bala,Swapan Kumar and mir, Monir Jaman , Overaccount to Underaccount? A Study of the Third Sector Accountability and Accounting in Action in a Developing Country, . Hashemi, S. M. 1995. "NGO Accountability in Bangladesh: Beneficianies, Donors and State" in Edwards, M. and Hulme, D. (eds.) Non-governmental Organisations : Performance and Accountability Beyond the Magic Bullet. London: Earthscan Publications. Karim, M. (1996), NGOs in Bangladesh: Issues of Legitimacy and Accountability, in Edwards, M. and Hulme, D., eds., Beyond the Magic BulletNGO Performance and Accountability in the Post-Cold War World, Kumarian Press, Connecticut, USA, pp.132-141. World Bank (2002), Bangladesh-Financial Accountability for Good Governance, A World Bank Country Study, Washington DC. Zarren, F. (1996). "The Legal Status of NGOs in Bangladesh: A Critical Assessment". Social Science Review. Vol. XIII. No. 2. pp. 67-90.

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