Financial Management

As previously mentioned, a number of projects will use the financial accounting systems of existing organisations. Nevertheless, it is important that all SFF projects have a financial management system that clearly identifies all income, spending and in-kind contributions that relate to the particular project.

Record keeping is critical in administering an SFF project. SFF do not request copies of invoices for request for payments, but it does require all projects to have in place a system for filing and recording of financial arrangements should these be required (for example, for audit purposes).

Filing

The following should be filed in an appropriate place:

income – from SFF and others;
invoices received – file your invoices once they have been paid (in cheque number order with the most recent paid on the top), with the date paid and cheque number written on each account;
invoices generated – copies of any invoices generated by the project;
bank statements;
manual cashbook (if used);
budgets, cashflows;
copies of any correspondence to the IRD (for example, applying for tax exempt status);
copies of all GST returns plus supporting documents for each return;
copies of progress reports and request for payment forms; and
financial correspondence relating to the project.

Budget

The financial manager and the project manager should draw up a budget based on the actual amount of funding available to the project – including the funds approved in the SFF funding application.

There are a number of options for keeping track of the budget. You can use:

a manual cash book (see the example in Appendix 18);
an electronic spreadsheet /cashflow forecast sheet (you can download an electronic spreadsheet from www.maf.govt.nz/sff); or
an accounting package, for example, Cash Manager, MYOB.

Break down the costs by milestones for every year of the project, then over each four-month period. The budget should be monitored each four months to identify any significant variation. A copy of the budget and actual figures should be available to all office bearers so that everyone is kept informed.

Variances from Budget

Variances due to timing differences are normal. However, they need to be explained in the SFF progress reports. Variances due to changes in actual costings need to be justified to SFF in the four-monthly progress reports.

Over the course of the project, the ratio between SFF funding and other cash contributions and in-kind contributions should be close to what was set out in the application. However, it is accepted that there will be some variation over the course of a year, depending on when the other income streams are received and variations to in-kind input according to the work programme.

Payment of Accounts (Creditors)

The project account’s postal address should be the address of the person who authorises payments (normally the financial officer). The financial officer must authorise all accounts before they are paid to ensure they are in line with the budget and contractual obligations have been met. If the financial manager charges for their time, another member (for example, the chairperson) needs to authorise their invoice.

Electronic Financial Monitoring

You can use an electronic accounting programme such as Cash Manager or MYOB. Alternatively, you may use the package your accountant uses for preparing the project accounts (for example, Banklink).

Each month, once the information has been included from the bank statement, a cash flow can be printed out that will show the budget, income and expenditure for the month and the overall expenditure for the year compared to the budget. This is the simplest way of tracking the income and expenditure for the project.

Software Options

The following packages are simple to use and require only limited computer knowledge or experience. They also have good support available in the initial stages. Both are able to be used on a stand-alone basis or in conjunction with an accountant. There is a cost in purchasing both of these packages. There are likely to be other packages available which will do the same job.

Cash Manager (www.cashmanager.co.nz) – You can evaluate this programme by downloading an example from the website. This programme covers GST, cashflow, budgeting and invoicing.
MYOB Cashbook (www.myob.co.nz) – MYOB can supply you with a demo disc of this programme (phone 0800 60 69 62). This programme covers GST, cashflow and budgeting, but does not include invoicing. An invoicing package is available for an additional cost.
Accounting software is more suited for a project with a number of transactions and that has a financial manager who has the time to set this up.
Banklink – Banklink is used through your accountant and requires no computer knowledge. You do not have to purchase a software package. This is a good option for projects with a large number of transactions and/or where projects have limited access to financial experience or time for financial management.

This programme electronically downloads your bank statements directly to your accountant at the end of each month. Your accountant then codes the debits and credits on your bank statements. You would need to put together a budget and provide the accountant with details of any debits and credits on the bank statements for coding purposes.

Using this package you can have your GST returns completed, receive a monthly cash flow comparing actual expenditure to your budget, and the accountant can prepare your annual accounts.

Codes and Coding

Code the accounts at the same time as they are authorised for payment so they can be entered into a computer system to calculate GST and/or collect information required for the annual accounts. Each software package supplies codes for all expenditure items.

Manual Financial Monitoring

If you are not using an electronic package such as MYOB or Cash Manager, a manual cash book can be used. This option is good for a project with only a few transactions per month. The budget figures can then be checked against the amount spent and income received each month.

Manual Cash Book

A manual cash book is where each payment made and income received each month is written down on paper, which is then reconciled against the bank statement and compared to the budget. No computer is needed to complete this exercise. A simple manual cash book is attached in Appendix 18.

Managing In-kind Expenses

In-kind expenses are expenses that are incurred during the running of a project and are contributed on a no-payment basis. They can include virtually anything that can be deemed a legitimate cost to the project (for example, labour, meeting attendance, provision of services, materials, plant, equipment and land, and vehicle running).

In-kind contributions provide an indication of the level of community and industry support for the project, and also provide the leverage to access funding.

Most groups under report in-kind contributions. In almost every case the main reason for this is that these groups don’t have adequate systems set up for the recording of such contributions. You will need a reliable system for recording in-kind contributions. Costs included must be realistic and be able to be verified.

Recording in-kind contributions is an essential part of project management.

There is not an approved system for the recording of in-kind contributions. However, there are a few simple steps that you can follow to help you set up a system.

Step 1 – Identify Contributors

List all the different parties who are likely to contribute to the project, and the contribution they are likely to make.

Some examples:

Members of a management committee may provide their time free of charge and use their own transport to and from meetings.
A farmer may make his or her land available for trials, and provide seed and fertiliser.

Step 2 – Record Contributions

Devise a system for recording the individual contributions to your project. Keep an ongoing record of the contributions that have been made so they can be tracked on a regular basis – it is easier to do this rather than pulling figures together at claim time.

Recording in-kind contributions relating to people’s time is often the most difficult component of in-kind recording, especially when a lot of people are involved.

If you are dealing with groups or organisations, delegate the task to them to account for their own people. If you are dealing with a lot of individuals then you will need to account for their time yourself. There are several ways you can do this, including:

providing contributors with timesheets;
passing around a sheet at a meeting to record attendance and costs attendees have incurred; and
estimating contributions based on number of people and participation hours.

Some examples:

Hand around a sheet at management meetings to record meeting attendance and any other costs incurred by group members (see Appendix 19).
The farmer providing the land, seed and fertiliser could record his or her contribution by assessing the lease value of the land and by providing actual seed and fertiliser costs.

Step 3 – Categorise Contributions

Assign the contributions to the categories as set out in the SFF claim form and draw up an in-kind budget. This will help you track progress overtime.

Step 4 – Check Progress

Keep regular checks on how things are going. Ask your contributors to return an update of their in-kind expenses for each reporting period (see Appendix 20).

Completing an IR9 Tax Return

Your organisation may qualify as a non-profit body under section DJ17 of the Income Tax Act 1994. If your organisation does qualify, it is not required to pay income tax on any income received from SFF.

If all of your project’s income is from SFF, and you are in receipt of the IRD’s exemption under section DJ17, then there should be no requirement for the filing of the return of income IR9 form. Other income received, including sponsorship or advertising revenue may require the filing of the IR9 form.

If you do have to complete an IR9 form, we recommend you use a chartered accountant to help complete the form and file it with IRD. The group’s annual financial statements will also be required.

Contact for Enquiries

Fund Administrator
Sustainable Farming Fund
Ministry of Agriculture and Forestry
PO Box 2526
Wellington

Tel: 0800 008 333
Fax: 04 894 0746
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