Management of agricultural research: A training manual. Module 7: Financial Management (1997): Session 1. Financial management 1: Components and information needs: Reading note: Financial management 1: Components and information: Financial management

Management of agricultural research: A training manual. Module 7: Financial Management (1997)

Session 1. Financial management 1: Components and information needs

Reading note: Financial management 1: Components and information

		(introduction...)
		Basic financial information
		Financial management
		Financial and cost analysis

Financial management

The preparation of financial statements is important as they provide insight into operating and financial performance of the organization. However, preparation of these statements is not by itself sufficient for efficient management of financial resources. The finance function is concerned with meeting the organization's obligations. This is analysed by preparing cash flow statements. In addition, the chief executive has to ensure that the organization has made provision for funds needed to meet its recurring expenses and capital or development expenditure. The finance manager has to look beyond the data and information provided in the annual financial statements and must obtain insights into existing or developing problems and the financial consequences of such problems. To effect this requires a systematic approach, and the approach used in financial management in fact defines its components. It is very simple: analyse the financial statements, develop additional data, make decisions based on subsequent analysis, and finally examine whether the results confirm expectations. The four components of this approach are:

· financial and cost analysis,
· planning and budgeting,
· variance analysis and control, and
· project and activity planning.

Table 1 NIFR income and expenditure account for the year ending 31 March 1993

		(in thousands of dollars)
		1992	1993
EXPENDITURE
Expenses in respect of properties
	Maintenance expenses	12.28	14.76
	Municipal tax	3.98	5.48
Establishment expenses
	Salaries and allowances	532.22	599.64
	Consultancy and research/projects	28.68	37.32
	Travelling expenses	7.24	7.64
	Supplies, services and contingencies	170.29	166.39
Expenditure on various courses and workshops arranged
	Post-graduate programme	59.45	65.40
	Workshops and seminars/training programmes	188.00	246.07
Legal expenses		2.18	3.36
Auditing fee		0.53	0.79
Miscellaneous expense
	Publication expenses	6.95	8.83
	Telephone and dispatch	3.24	4.27
	Expenses on development activities	8.52	13.69
Other expenses on research and consultancy
	Ad hoc research staff salary	113.05	124.78
Other expenses
Scholarships and fellowships		16.26	19.02
TOTAL		1 152.82	1317.44
Surplus carried over to balance sheet		2.34	2.25

INCOME
Rent realized		9.24	9.71
Interest realization on loans and advances to staff		0.26	0.73
Grant from the Min. of Education sanctioned in year: Amount received		614.40	694.45
Less: Amount transferred to
	Representing expenditure on non-recurring items	73.69	93,46
	House building advance fund	12.00	12.00
	For purchase of EPABX		15.00
	For purchase of computers	10.00	10.00
		518.71	563.99
Add: Amount transferred on balance unspent during the previous period		13.63	2.34
		532,34	566.33
Income from other sources
	Post-graduate programme	66.78	71.19
	Workshops, seminars and other training programmes	219.83	293.03
	Consultancy and research projects	179.77	200.37
	Scholarship and fellowship money from various agencies	12.93	12.99
	Miscellaneous receipts	68.40	90.82
	Grants for specific research project	32.13	35.68
Transfer from reserves
	Contribution to research project from Ford Foundation grant	2.52	6.40
	Contribution from the Research Fund to meet excess from Min. of Agric.	20.96	32.44
TOTAL		1155.16	1319.69

Table 2 NIFR balance sheet as of 31 March 1993

			(in thousands of dollars)
			1992	1993
ASSETS
Fixed assets
	Land and buildings		1730.21	1797.64
	Furniture, fixture, equipment and vehicles		439.77	558.14
	Books purchased from library fund		57.60	68.23
	Computers, equipment and books		114.62	162.67
	Other fixed assets		21.42	26.12
	Stores at cost		6.45	5.12
Investments
	Long-term fixed deposits		96.61	119.45
	National deposit receipts		17.85	17.85
	Short- & long-term deposits with banks		1246.53	1318.24
Loans and advances
	Loan scholarships		0.86	0.89
	Advances to employees
		- House building	30.75	43.77
		- Other advances	69.76	43.20
Deposits
	Security deposits		3.07	3.33
	Telephone deposits		1.79	1.29
Income outstanding
	Interest		35,99	33.56
	Other income		8.61	25.68
	Grants due from the Ministry of Education		46.41	50.88
Due from students			5.26	0.61
Cash and bank balance			64.21	120.43
			3997.77	4397.10

		(in thousands of dollars)
		1992	1993
FUNDS AND LIABILITIES
Earmarked funds		3385.02	3736.77
	Lands and buildings	2010.73	2144.15
	Academic activities	405.65	461.63
	Student aid	85.06	88.23
	Furniture and equipment	707.03	837.26
	Fund for purchase of EPABX		15.00
	Funds for purchase of computers	72.66	71.64
	Faculty and staff development	103.89	118.86
Grants from international agencies		203.73	204.97
	For building expenditure	113.10	113.10
	Books and computers	81.11	81.16
	Fund for AGRI Journal	9.52	10.71
Liabilities for expenses and other items		72.50	36.25
Deposits and sundry credit balances		310.37	393.05
Income and expenditure account Balance as per last balance sheet		37.44	26.15
Less: Amount transferred to grant from the Ministry of Education in income and expenditure account		13.63	2.34
Add: Surplus as per income and expenditure		2.34	2.25
		3997.77	4397.10