The Institute of Chartered Accountants
of Sri Lanka

 Preparation of budgets may be a requirement by the donors of specific projects and they may finance the project according to the approved  budget. However in order to have a better control over the expenditure it is necessary to work within an agreed budget for all types of projects.

 The needs of the Tsunami affected people have to be established firmly in relation to an official list of registered victims of the disaster at the  particular site, location or village.

 There should also be as far as possible a committee of government officials working at village level co-opted in an advisory capacity for the  rehabilitation process and a committee of the beneficiaries themselves capable of assessing
 the needs of the victims of the disaster.

 These two groups should act in close co-ordination with the representatives of the Organisation based at village level and / or at head office level in  assessing and certifying the needs of Tsunami victims.

 Expenditure budgets should be prepared based on the results of the needs assessment. Realistic estimates need to be made for all anticipated  expenditure and income.

 The following broad expenditure classification is suggested for budget preparation and financial reporting.

 A - Programme Expenditure

 Majority of expenditure is expected to be programme expenditure and can be subdivided as follows.

 1.Programme expenditure of Capital nature -
  Eg: House construction,School construction

 2.Programme expenditure of Revenue nature -
   Eg: Management of pre schools, conduct of health camps.

 Programme expenditure should be classified according to the programmes / activity to be undertaken (Eg: management of pre schools) and a budget  code needs to be assigned for each programme / activity. The expenditure that will be incurred in conducting the programme / activity should be  further classified according to their nature in the detailed budget.

   Eg: Teachers salary, uniforms, travelling allowance etc. for management of pre-school.

 For each programme or activity, a detailed activity plan needs to be prepared giving sufficient details which may include:

• Suitable description of the programme
• Objectives of the programme
• Expected date of commencement
• Number of beneficiaries
• Selection criteria of beneficiaries
• Expected expenditure giving a detailed break up and the total
• Cost per beneficiary
• Expected date of completion 

 For projects of long duration (Eg: house construction) activity plans should be made in such a manner that comparisons can be made of the actual  cost incurred and work completed with the budgets while the project is in progress.

 B - Administration Expenditure

 For successful implementation of the budgeted programmes, a fair amount of administration effort is required. However organisations are advised to  minimise such expenditure in order to pass maximum benefits to the Tsunami victims.

 Administration expenses may include.

 1.Salaries of personnel fully involved with the project work.

 2.Vehicle maintenance and related expenses.

 3.Rent, electricity and water, if separate office is maintained.

 4.Communication expenses.

 5.Any other administrative expenses directly related to the project.

  A separate budget code should be assigned for each type of administration
  expenditure.

 C - Capital Expenditure

 A reasonable amount of capital expenditure directly related to Tsunami relief operations may be required for the success of projects. This may  include.

• Transport Equipment            - Eg: motor vehicles, tractors etc.
• Construction Equipment       - Eg: cement mixers, JCB loaders etc.
• Data Processing Equipment   - Eg: computers, printers etc.
• Communication Equipment    - Eg: cellular phones 

 Any other capital expenditure directly related to the project.

 A separate budget code should be assigned for each type of capital expenditure.

 Budgets and subsequent amendments should be approved by the donors in the case of specific projects. Similarly the management committee of the  organisation should approve budgets for general purpose funds, before any activities are undertaken.

 The entire budget period should be sub-divided into control periods of three months, so that meaningful comparisons can be done quarterly with  actual, while the projects are in progress.

 Once the budgets are prepared and approved, recording of actual expenditure should be done in accordance with the budgeted expenditure  classification. Programme expenditure should be recorded activity wise in the ledger.

 As the project progresses, regular comparisons should be made with actual at the end of each quarter to ensure budgeted expenditure and  performance targets are achieved.

 If there are significant variations (say more than 15%) in costs and performance targets, explanations should be obtained / requested from the  responsible officers. Such explanations need to be documented for subsequent audit verification.