ACCOUNTING AND CASH MANAGEMENT POLICY
1. INTRODUCTION
This Accounting and Cash Management Policy outlines the procedures and best practices for Jouzour Loubnan Association to handle its accounting and cash inflows and outflows efficiently and securely. It aims to:
- Ensure timely and accurate record-keeping of all transactions.
- Comply with applicable laws and regulations in Lebanon.
- Maintain adequate liquidity to meet operational needs.
- Minimize the risk of loss or theft.
- Takes into account the fragile financial situation of the banking sector in Lebanon and the high financial cost of banking transactions.
2. Scope
This Accounting and Cash Management Policy applies to all transactions of Jouzour Loubnan Association, including but not limited to:
- Donations and grants received.
- Membership fees and events revenues.
- Salaries and wages paid.
- Vendor payments.
- Petty cash disbursements.
3. Accounting STRATEGY
Jouzour Loubnan Association utilizes:
- A third-party firm – currently A&C Moussa for Auditing and Consulting (the “Accounting Firm”), for its accounting needs that shall apply all Lebanese and IAS rules except for IAS 29 that is not applied across Lebanon due to its complexity and the absence of reliable indicators from governmental bodies necessary for the application of this standard; and
- The accounting shall be done both in LBP for reporting to the Lebanese Government and in USD to provide management and donors with a better visibility on its Financial Statements as regards to fluctuating exchange rates.
- Another third-party firm for auditing its financials – currently Semaan, Gholam & Co (the “Auditing Firm”).
To enhance transparency, accountability, and project-specific financial tracking:
- For each project funded by a donor, a specific subaccount will be opened in one of Jouzour Loubnan’s banks. Banks’ statements of all Jouzour Loubnan accounts and subaccounts shall be sent to the subcontracted accounting firm every six months.
- The accounting will be done by the Accounting Firm on a project-by-project basis.
To that effect, funds received for CSR and from the website www.adoptacedar.org will be considered as a specific project and other donations will be recorded separately.
4. INTERNAL Accounting procedure
4.1 Safe box
Only the Vice President and the Project Manager have access to the safe box. The Jouzour Loubnan safe box can be replenished with funds withdrawn directly from the JL’s bank accounts: When cash is debited from a project’s bank subaccount, it shall be deposited into the designated project’s safe subaccount. Overhead funds received from each project should be deposited in the general expenses’ subaccount. Donations and adoptions should be recorded as a credit to the general expenses’ subaccount. All incoming cash, whether from bank withdrawals or donations, shall be accompanied by verifiable documentation. This includes bank receipts for withdrawals, and copies of the official donation receipts for contributions.
The verified receipts (from banks or donation) shall be immediately recorded in the designated "Safe Box Cash Flow Tracking EXCEL Spreadsheet”. This spreadsheet tracks all cash inflows and outflows from the safe box, project-by-project, and should be approved and signed by the Vice President and the Project Manager each month after verifying the cash balance. The signed spreadsheet shall be submitted to the Accounting Firm monthly, to be incorporated into the Jouzour Loubnan Association's primary accounting records.
4.2 Petty cash
Petty cash is handled by the Administrative Assistant and all related transactions are approved by the Project Manager.
It can be replenished directly from the safe box’s general expenses subaccount, upon a payment request applied by the Administrative Assistant, and approved by the Project Manager or the Vice President. The total amount to exist in the Petit Cash should not exceed 1,000USD or equivalent in other currency. The incoming cash must be accompanied by verifiable documentation.
Petty cash is replenished with Lebanese pounds obtained through exchanging USD notes and other approved sources.
Any payment to be made directly from petit cash must be proven by a receipt, and, when it’s needed, by an invoice.
The verified documents for incoming and outgoing amounts shall be immediately recorded by the Administrative Assistant in the designated Petty Cash Tracking EXCEL Spreadsheet. This spreadsheet tracks all cash inflows and outflows from the safe box and should be approved and signed by the Administrative Assistant and the Project Manger each month, after verifying the cash balance. The completed spreadsheet shall be submitted to the Accounting Firm monthly, to be incorporated into the Jouzour Loubnan Association's primary accounting records.
4.3 Donations:
To ensure accurate recordkeeping and transparency, the following procedure for documenting donations and offline tree adoptions (made in cash at the office) shall apply:
- The pink copy of the original receipt shall serve as verification for all offline adoptions and in-office donations.
- These receipts, along with any other donations received, shall be submitted to the Accounting Firm by the end of each month and included in the Safe Box Tracking Spreadsheet or the Petty Cash Tracking EXCEL Spreadsheet depending on the amount.
- For better tracking, sequentially numbered receipts shall be used for in-office cash adoptions and donations.
- As Jouzour Loubnan cannot issue invoices, a "Thank You" letter shall serve as a formal acknowledgement for such donors. A copy of this letter shall be scanned and filed on OneDrive.
4.4 Invoices and receipts tracking:
The Administrative Assistant shall write the relevant project name clearly on top of each invoice and receipt using a blue ink pen.
This annotation will act as a reference point for the Accounting Firm when incorporating the information into Jouzour Loubnan Association's primary accounting records.
The completed sheet is submitted to the Accounting Firm monthly, to be incorporated into the Jouzour Loubnan Association's accounting records.
5. Cash Receipts
- Deposits: All cash receipts shall be deposited promptly into the petty cash box, or in the safe or in a designated bank account, within 24 hours of collection. Receipts should be issued for all donations and fees received.
- Donation verification: Donations, especially large ones, shall be verified for legitimacy before acceptance.
- Endorsement: When applicable, all cheques shall be endorsed immediately upon receipt with the payment order to “Jouzour Loubnan Association" and deposited according to established procedures.
- Cash in Safe: A limited amount of cash not exceeding fifty thousand US Dollars ($50.000) or its counter value may be kept in the safe on an as needed basis.
- Petty Cash: A limited amount of petty cash not exceeding one thousand US Dollars ($1,000) or its counter value may be kept for small disbursements, but it should be replenished through a documented and controlled process as detailed in paragraph 4.2.
6. Cash Disbursements
- Payment methods: Disbursements shall be made through authorized payment methods, such electronic transfers, cheques or cash.
- Payment request: For projects cash expenses, a payment request shall be prepared and by the Administrative Assistant, listing the amount to be paid, the name of the project, a breakdown of the payment, and payment proof documents. Project cash expenses shall be settled directly from the designated project’s safe subaccount. Expenses for the adopt a cedar program should be covered from the general expenses’ subaccount.
- Approval process: All disbursements above 500$ shall require approval through double signatures of the Project Manager and / or the Vice President and / or the President while all disbursements equal or under 500$ shall require the single approval of the Project Manager or the Vice President.
- Invoices and supporting documents: All disbursements shall be supported by valid invoices or other supporting documents such as workers sheets, timesheets, fuel sheets, pay slips, etc.
- Procurement procedures: Procurement of goods and services shall follow established procedures to ensure value for money and avoid conflicts of interest.
7. Disbursement Procedures for Fresh USD Checks
Payment Request: When a payment is authorized for disbursement by check, the administrative assistant initiates a payment request.
Check Preparation and Approval: The project manager prepares the check, specifying the payee and amount. The check requires two signatures, the Treasurer and the President, for approval.
Documentation and Internal Controls: Prior to delivering the check to the designated recipient, the administrative assistant creates a copy of the check, attaches the copy and the relevant invoice to an email for the project coordinator, and stores a copy of the check electronically on OneDrive.
Check Distribution: The administrative assistant sends the original check to the designated recipient.
8. ADVANCES
To ensure responsible use of company funds, cash advances will be provided to authorized personnel following a documented approval process.
Authorized personnel are the members of the senior management team and full-time employees with a minimum of 6 months of continuous service. Consultants and subcontracted personnel engaged in specific project activities may be eligible for advances related to their contracted duties.
Authorized personnel seeking advances must submit a request outlining the anticipated expenses and the reimbursement period and obtain approval as mentioned in paragraph 6.
Advance amounts will be limited based on the purpose:
- For advances on salaries, the requested amount shall not exceed 20% of the employee’s basic salary, in USD or equivalent in other currency.
- For advances related to a specific activity within a specific project (e.g. travel expenses, supplies purchase downpayments, etc.), the requested amount shall not exceed the forecasted expenditure, and should be justified by offers, quotations and/or invoices.
- In the event of a documented emergency, authorized personnel are encouraged to discuss alternative solutions with the Vice President and the President, such as short-term loans or payroll advances, which may be available depending on specific circumstances.
Employees are required to reconcile their advances for specific activities within a specific project within 15 days of completion, by submitting receipts and returning any unspent funds.
Detailed recordkeeping of advance transactions shall be maintained.
9. Record-keeping
- Detailed records: Accurate and detailed records of all transactions from the Safe and the Petty Cash shall each be maintained in a designated ledger. These ledgers shall include date, amount, description, related project reference, payee/payer, and payment method.
- Regular reconciliation: Bank statements shall be reconciled with internal records twice a year to ensure accuracy and identify any discrepancies.
- Document retention: All supporting documentation for all transactions shall be scanned and filed and retained for the period of ten years.
10. Internal Controls
- Segregation of duties: Cash handling duties shall be segregated between different individuals to minimize the risk of fraud. The Administrative Assistant and the Project Manager will work together on cash handling, adhering to the four-eyes principle for enhanced security.
- Access control: Access to cash and financial records should be restricted to authorized personnel only.
- Independent review: Financial statements and internal controls shall be reviewed periodically by the Vice President or the President.
11. Currency Fluctuations and Inflation
Lebanon is operating in a dollarized environment with high inflation for wages even when denominated in US Dollars. Given the current economic environment in Lebanon, Jouzour Loubnan faces significant risks from inflation and currency fluctuations when grants are in Euro. Here are some measures to mitigate these risks:
- Fundraising strategy: Focus on fundraising in stable currencies and adjust fundraising targets to account for inflation. Donations in LBP, if any, will be immediately exchanged for USD.
- Contractual arrangements: Negotiate contracts with partners or donors to specify payment in the currency of the related donation whenever possible.
- Local sourcing: Maximize procurement of goods and services from within Lebanon to minimize exposure to foreign currency.
- Cost-cutting measures: Implement measures to reduce operational costs (e.g., renegotiate rent, energy bills, insurance) to offset rising inflationary pressures.
- Financial forecasting: Regularly review and update financial forecasts to account for inflationary trends and adjust budgets accordingly.
- Salary adjustments: Implement a transparent and fair system for adjusting staff salaries in line with inflation to maintain morale and prevent employee turnover.
12. Contingency plan in case of natural disasters or political instability
12.1. Pre-event Measures
- Financial Diversification
o Except for funds that were in banks before October 2019 that are frozen, maintain reserves exclusively in stable currencies, like USD or EUR.
o Seek diverse funding sources (grants, individual donations, partnerships) to reduce reliance on any single source.
o Explore alternative revenue streams, like online fundraising or local services.
- Operational Resilience
o Secure important documents and financial records digitally with monthly back-ups made and stored on a different premise.
o Train staff on emergency procedures in crisis situations.
o Identify and secure alternative supply chains and transportation routes for essential resources.
- Insurance Coverage
o Review on a regular basis, existing insurance policies to ensure adequate coverage for property damage, business interruption, and employee safety.
12.2.During/Immediate Post-event
- Activate Emergency Protocol
o Convene a crisis response team and assess the situation's impact on cash flow and operations.
o Prioritize essential expenses and adjust budgets accordingly.
o Communicate transparently with staff, donors, and stakeholders about the situation and potential impacts.
- Access Emergency Funds
o Utilize pre-determined emergency reserves or activate insurance claims as needed.
o Reach out to supportive donors or foundations for immediate assistance.
o Consider temporary fundraising campaigns or appeals for emergency donations.
- Maintain Operations
o Implement alternative work arrangements like remote work or flexible schedules as needed.
o Adapt project timelines and activities to accommodate disruptions and resource limitations.
o Utilize technology and existing partnerships to maintain communication and project progress.
12.3. Post-event Recovery
- Financial Recovery
o Focus on restoring cash flow through increased fundraising, cost-cutting measures, and efficient resource allocation.
o Seek financial support from international aid organizations or government recovery programs.
o Analyse financial losses and adjust future budgets and funding strategies accordingly.
- Operational Recovery
o Rebuild damaged infrastructure and assets necessary for project activities.
o Review and update emergency preparedness plans based on lessons learned.
o Foster community resilience and support local partners in rebuilding efforts.
13. Compliance
Jouzour Loubnan Association is committed to complying with all applicable IAS (except for IAS29) and Lebanese laws and regulations related to Accounting and Cash Management.
The association shall stay informed about any changes in relevant regulations and update its policies accordingly.
14. Policy Review and Updates
This Accounting and Cash Management Policy should be reviewed and updated periodically to reflect changes in organizational needs, risks, and regulations.