1 Purpose and Scope of the Manual 6

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3.4. Annual Plans and Budgets.

3.4.1. The Process

i) Every year the KRCS prepares annual plans and budgets for the departments and for each of the KRCS continuing programmes. The annual plans and budgets shall be the short-term plan of the KRCS and shall be in accordance with the SP.

Half year budget revisions for the previous year are done in July.
The following table illustrates the procedure for Core and Program budgets and are explained below in the text:

Budget Cycle for Core and Program

Deadline Date


1. Half yearly budget revisions (for previous year’s budgets)

July 30th

All directorsAll HOD

2. Activity plans and budget guidelines to programs

July 30th

SG/ all directorsHOD

3. First draft of the plans and budget

August 30th

SG/All directorsHOD’s/ all standing committees

4. Final draft of the budget

September 15th

SG/Finance Committee/ NEC

5. Presentation to Partnership meeting

September 30th

SG/All directorsHOD’S

6. Approval by NEC

November 30th

SG/Standing committees/Finance Committee/NEC

ii) The planning sessions shall take place during the months of July/August every year. The annual planning and budgeting exercise shall be preceded by a series of planning and co-coordinating sessions, meetings, workshops and seminars which will help the key staff involved in the process to brainstorm, generate ideas and agree on budgetary assumptions, short term goals, objectives, targets, activities, indicators etc.
iii) Following the planning sessions, annual plan and budget guidelines shall be issued to directors and program officers.

The activity plan guidelines shall be issued by the SG after consultation with senior management, and the budget guidelines shall be issued by the DOFHOF.

These activity and budget guidelines shall be issued not later than 30th July to enable the planning and budgeting process to commence in time.
iv) After the guidelines have been issued to all directors and program officers, management shall arrange to convene sessions to discuss and finally agree to these guidelines. Such sessions shall take place in the month of August.
v) The budget figures will be arrived at from the plan and will take into account the following factors: assumptions as laid out in the budget guidelines, the previous years’ budget and actual income and expenditure, other relevant economic data and the variance of actual income and expenditure from the budget in the previous year.
vi) The annual plan and budget will be prepared in line with a format as previously developed and agreed.
vii) Directors and program officers are responsible for preparation of the plan and budget for their department or program, in accordance with the guidelines for preparation and within agreed deadlines. The SG will co-ordinate the planning process reviewing all program plans and budgets. Such review to include satisfying himself/herself that proposed plans are in accordance with objectives of the SP and that budgets are consistent with plans. The DOFHOF shall be responsible for co-coordinating preparation of the core plan and budget.
viii) The first draft of the plan & budget shall be submitted to the DOFHOF by 30th August.
ix) The DOFHOF shall review the plan and budget. Such review to include satisfying himself/herself that budgets have been prepared consistently and in accordance with the guidelines and that all budgetary assumptions appear reasonable.
x) Once the plan and budget have been reviewed they will be sent back to the directors and/or program officers for revision in accordance with review comments.
xi) Once amendments and adjustments have been made, the revised documents will be presented to the respective standing committee for review and then to the DOFHOF for final review. Each review completed by DOFHOF and/or accountant will be evidenced in writing, with review comments placed on file with the supporting papers for the plan and budget.
xii) Any resultant amendments will be effected by the appropriate director and/or program officers before returning to SG for signing off.
xiii) During budgeting process, all programmes are advised to include an agreed percentage charge on total budget towards the support of administration and coordination budget.
3.4.2. Approval

i) During the annual partnership meeting the KRCS will seek response from the donors and after negotiations and mutually agreed upon plans and budgets have been developed, the redrafted plans and revised budgets shall be resubmitted to the NEC for their final approval by 30th November.
ii) After this approval, the plan & budget shall be considered as the KRCS’ approved plan and budget for the following year and
iii) No variation of the same will take place without the authorisation of the Finance Committee.
iv) Once finalised, funding sources for the annual plan and budget shall be identified.
v) Target groups for the partnership would normally include, other members of the Red Cross Red Crescent Movement, other potential partner agencies such as UN Agencies, Embassies, the Government of Kenya and corporate partners.
3.4.3. Funding

i) The partners may make an indication to the KRCS of support to a particular program or a specific activity. This then becomes a pledge which becomes effetive when a transfer of funds or other resources to the KRCS.
ii) Pledges received through the Federation, would be confirmed by completion of a Pledge Management Note (PMN), which forms the basis of a contract between the KRCS and its partner.
iii) Pledges from partners will be confirmed by signing the Memorandum of Understanding, by both parties involved and forms the basis of a contract between the KRCS and its partners.
3.5. Quarterly Plans and Budgets.

i) After the approval of the annual budget, the respective program budgets shall be broken down by quarter to facilitate planning, implementation, management and reporting.

ii) Preparation of quarterly plans and budgets shall be the responsibility of directors supported by program officers.
iii) The senior management shall co-ordinate the planning process and review all program plans and budgets ensuring that the proposed quarterly plans are in accordance with objectives of the annual plans and budgets.
iv) As head of finance,T the DOFHOF shall be responsible for co-coordinating and preparation of the quarterly plan and budget.
3.6 Branches

Every KRCS branch must have an annual approved budget that is prepared before the start of the year in question. The preparation of the plans and budgets is the responsibility of the BMCBC while the approval is done by HQ.
The aim of a budget is to provide the branch with a financial management tool enabling the planning and assessment of the cost of operations.
The first step in preparing a budget is planning. The branch needs to do a strategic plan of activities which mainly looks at what the branch wishes to do over a period of time, say a year. The plan must be in line with the mission and vision of the KRCS.

The planned activities must be SMART (specific, measurable, achievable, realistic and time bound).

The plans are then costed in order to come up with the budget.

The annual budget is then broken down into quarterly or monthly budgets for ease of implementation and control.

Head Quarter

4.1. Fundamental Accounting Principles

KRCS operates at HQ an accounting software package.

The software is used by KRCS for all transactions and is a full double entry accounting system, designed to provide the Society with a financial management instrument and reporting tool for consolidating their financial data.

The accounting software is based on the four coding principles: donor, project, activity and nominal account codes. Branches account with original documentation monthly to the HQ following a manual system.

The KRCS operates a number of projects, which are separate accounting entities from the administration and coordination account (core).

The KRCS general ledger accounting structure reflects this separate entity nature of the programs.

The Society maintains separate bank accounts for each donor.
4.1.1. Income

i) Income for administration and coordination account is recognised when earned e.g. rent income is recognized in the period it is receivable.

ii) Income for programs is recognised when received.

iii) All accounting entries must be supported by original documentation e.g. invoices and vouchers.
4.1.2. Expenditure

i) Expenditure both for administration and coordination and for projects is recognised when incurred e.g. an expense is recognized when goods or services are received.

ii) LPOs, service contracts, working advances to branches and staff are used to recognize funds commitments for purpose of budget monitoring.

iii) In the regions and branches, expenditure is recognised when paid for.
4.2 Chart of Accounts

The complete chart of accounts is oriented towards use of the computerized accounting system, which provides four levels of registration system. The accounts structure of KRCS consists of four dimensions:

* Donor Code

* Project Code

* Activity Code

* Nominal Account Code
4.2.1. Donor Code

Donor code is an identification of each donor.
4.2.2. Project Code

Project code is an identification of the specific projects and administration and coordination.
4.2.3. Activity Code

An activity code is in principle a code identifying activities for the various programs.
4.2.4. Nominal Account Code

This refers to the GL accounts which identify income and expenditure accounts.
4.2.5. Account Number

i) Account number is a code identifying the account as income, expenditure, asset or liability.

ii) For suppliers offering KRCS a certain credit time, an account number will be used to identify the individual supplier, as accounts payable account.

iii) The program officers are responsible for indicating donor, project, activity and nominal codes on all financial transactions related to the programs.

iv) The accountant is responsible for indicating the donor, project, activity and nominal codes on all core costs.

v) Over-all, the accounts staff is responsible for checking all coding for all financial transactions. Errors should be reported back to the responsible officer.

The account number may contain up to 20 digits and the activity and project each up to 10 digits.

4.3. Updating Chart of Accounts

Any changes to the chart of accounts will be done as and when need arises. The changes will be initiated by program officers, reviewed by DOFHOF and approved by the SG on a chart of accounts update form. They will be updated in the accounting system by the DOFHOF.

The complete chart of account is enclosed in Appendix 1-4.

Head Quarter

5.1 Opening a Bank Account

The authority to open a bank account rest with the NEC through the Finance Committee A resolution to this effect must be presented to the bank when opening the account. All bank accounts must be opened in the name of Kenya Red Cross Society, followed by an indication of the project/donor.
5.2 Operating a Bank Account

A bank account shall be operated in accordance with a resolution passed by the NEC, where signatories are also appointed. A system of dual signatories shall be used to operate the accounts. Cheques are signed by the Governor/Treasurer or the appointed alternatives and DOFHOF/SG.
5.3 Signing of Cheques

All bank accounts require minimum two signatures. Cheques are first signed by management and countersigned by a member of NEC. In order to secure smooth release of funds each of the two signatories have an appointed second signatory in case of non-availability of the signatory.

Signatures of departing KRCS officers or NEC members must be cancelled in writing immediately.

See appendix 9
5.4 Banking of Proceeds

All cash and cheques will be immediately banked in their respective bank accounts and in any case not later than 3 days following receipt.

The use of cash proceeds before banking is prohibited

Proper bank paying-in books should be maintained for both cash and cheques, from the current KRCS Bankers.

The designated accountantTreasury Accountant is responsible for receipting income and will write the banking slips, record them in a bank deposit register and hand them over together with the money to the accounts assistant for banking, who will then sign on the register to confirm receipt of the same.

5.5 Cashing of Cheques.

The accounts staff andstaff and programme assistants are the only officers at HQ authorised to draw cash from the Society's bank accounts. They are therefore the known agents for KRCS bank accounts together with the existing signatories. The SG in consultation with the DOFHOF will appoint accounts staff who can cash such cheques.

All cheques meant for cashing should bear the name of the officer who is going to cash it.
5.6 Cancellation of Cheques

All cheques that have to be cancelled shall be approved by the DOFHOF.

A journal voucher shall be prepared to reverse the entry in the cash book and creditors account. Cancellation of the payment will be made both in the cashbook and on the payment voucher.

If it is appropriate to replace the cheque, a new payment voucher shall be raised. The accounts clerkPayables Accountant shallAccountant shall never cancel a cheque without seeking approval from the DOFHOF.

Any cheque that remains un-presented for 6 months shall become stale and shall be cancelled through the above procedure.
5.7 Closing a Bank Account

The authority to close a bank account rests with NEC through the Finance Committee.

5.7. Opening a Bank Account

Branch accounts will be opened on introduction by HQ following a resolution by BMCBC. All bank accounts must be opened in the name of KRCS branch.

Where a branch is running a HQ coordinated program, the program should open a separate bank account for ease of control.
5.8. Operating a Bank Account

The BMCBC resolution should indicate the appointed signatories to the bank accounts, the signatories should include the chairman, vice chairman, treasurer and secretary. Where a branch has a branch coordinator, he may also be a signatory. A system of dual signatories shall be used to operate the accounts. Signatures of departing branch officials must be notified to the bank and cancelled in writing immediately.
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