Below is an outline of control objectives and general procedures for making purchases which can be integrated into the financial management policy of NGOs:
The control objectives here will be to ensure that:
- All purchases are duly authorized and approved before the goods and services are ordered.
- All goods received or services rendered are according to specification and in quantities requested for.
- Liability for all purchases is accurately reflected in the books of account and that suppliers are paid only in accordance with the agreed term
- Goods ordered are actually received into stores as may be appropriate and relevant accounting records updated accordingly.
- The existing purchase policy of the organization must be followed.
- For all purchases of capital good, and goods purchased in bulk like stationary and other supplies, three quotations should be obtained. Then the final supplier is decided upon. However justification should be given in case the lowest of quote is not selected. Quotations should be attached with the relevant vouchers while submitting the same checking.
Purchasing Capital Assets
- Any non consumable item of equipment, needed to start program operations and major capital expenditures as outline in the plans and budgets are called fixed assets.
- In the case of capital asset purchases and consumables in bulk, it is always healthy to issue purchase orders clearly spelling out the terms and conditions of purchase.
- As mentioned above, all non consumable items of expenditure should be purchased with three quotations. It is important here to understand that attractive asserts like camera, tape recorder etc also from part of fixed assets, even through their value might not be very high. Office equipment and IT equipment will also from part of the fixed assets.
- All incidental charges which are incurred to get the asset to the place where it is situated and to get the asset into operating condition must be added to the cost of the asset.
- An inventory of the capital assets should be maintained and updated from time to time.
- It is suggested that the fixed assets register is approved and signed by the competent authority after it is updated every six months or annually.
- All assets must be given an identification number and such number must be painted on the asset. This number should also be mentioned in the fixed assets register.
- Physical verification of assets should be undertaken (preferably by an office bearer or someone of adequate authority) at least once a year. All additions, deletions, modification etc should be recorded
- Contracts Register (for all contracts issued with payment details and other particulars)