Proper management: true separation of functions (Administrative Organisation) for small organisation

According to work group Governance code culture the management is responsible for the financial policy and risk management, which is achieved through solid internal procedures and external reporting. Although everyone agrees that the separation of functions is important, there are several organisational and practical objections that make the separation of functions difficult. Especially foundations with a small set-up often have no separation of functions or a roundabout separation of functions.

The most important reasons to separate these functions as a part of the Administrative Organisation (AO):

preventing the embezzlement of money;

Increasing the reliability of the reporting;

Increasing the internal transparency.

What is separation of functions?

Dividing the responsibilities (roles) over various persons (officials). The table shows the functions and who fulfils those within an organisation:

Separation of functions with the payment of bills per bank

The management approves the budget and the project leader will make the orders. The managing board supervises whether or not the order is done correctly and when the bill will be paid. The treasurer ensures that the payment can be done through the bank (is there enough money?) and the accountant registers the bill as well as the payment thereof. It is important that there are always two sets of eyes involved for each step.

Steps in the process:

1.Place the order

2.Receive the order

3.Receive the bill

4.Approve the bill

5.Register the bill

6.Prepare the payment

7.Send payment

8.Register payment

All steps are important, but especially step 6 and 7 are important, because at these steps the moneyleaves the organisation. You would expect that banks facilitate those steps, but this is not the case.The banks do not facilitate the separation of functions. Thus, the registration role (inserting the bank service package) the safeguarding role (is there enough money) and the executive role (approving the payment) cannot be realised through the bank service package.  Then one of two solutions can be chosen that are both flawed from the control point of view. The board or management does the payments, by entering all bills individually. This takes in much of management’s time and mistakes can be made regarding the bank account number and the exact amount of the payment. The other option is that the chief accounted or office manager does the payments, this is also a flawed solution from a control point of view because the one who prepares the payment is the same person as the one sends the payment to the bank.

Fruxlupa's solution

The accountancy service package which we work with offers the possibility to

1. Limit the mistakes in both the bank account number and the exact amount

2. Prepare all payments through a batch payment.

The preparation can be done by exporting  payment batches  from the accountancy service package and through a SEPA (.XML) file these batches will be imported into the bank service package. The importing of the payments and the sending of the payment batch can be done  very quickly after each other. In this way both the treasurer and the director or project leader (two sets of eyes) can jointly send the payment to the bank. This manner of operation also has the advantage that you have a current creditor status which can be important for a liquidity forecast or an estimation. If you have any questions regarding this solution do not hesitate to contact us. This is possible through info [at] lupacompany.com