In earlier posts, we have seen what should be good NGO Travel Policy. As questions asked by many of my readers regarding each traveling policy in detail, I inspire to write a blog on each Traveling Policies prevailing in the NGO sectors in detail and also its advantages and disadvantages. Today, Let us take a traveling policy used by many NGOs, from small one to huge one, which is per kilometer charge to project.
Charging per kilometer to Funding Agency
We all know that NGOs have to agree on a specific budget with Funding Agencies. Many of the NGOs have decided per kilometer rate and charged to Funding Agency and chttp://kcjmngo.com/wp-login.phpreated a Fund with whatever name, be it Vehicle Maintenance Fund, Vehicle Fund, Traveling Fund Reserve…. etc.. Now from this fund, actual expenses for travel (Fuel, Servicing, Oil etc…) is paid but if you want to invest in other extras or accessories, like a dash camera from Blackboxmycar.com just for security, it will need to come from your budget. Is this an ideal policy? In my opinion a BIG NO. One should avoid this policy. Lets us discuss positive and negative points of this travel policy of ngo. Start with Negative.
Why one should avoid this policy?
- The amount charged to Funding Agencies may or may not be same as actual total expenses of travel. This lead to generate surplus amount in your Vehicle Fund in your Balance Sheet at the end of the year.
- This give wrong impression, that you are saving some money from year to year from Projects supported by funding agency.
- Some NGOs even raise a Bill of Traveling to Funding Agency as support. This will lead into double entry of Income and expenses. First time entered as income in Grant Received and Project Expenses and second time Traveling Income by raising invoice and actual travel expenses. If you are doing this , stop it immediately.
- By using this you are violating terms of Project Agreement with Funding Agency. Because you agreed to spent budgeted money on specific Project. However when you adopt this policy, you are saving some money and not actually spending all as per agreed budget.
- As per FCRA rules, you have to spent Foreign Grants for the purpose it is received. You can not create reserve or Vehicle Fund from FC money.
- When Vehicle Fund gets accumulated from year to year and showing balance of considerable amount on Liability side on Balance Sheet, it is assumed that you have that much amount in your Bank or FDs on the assets side correspondingly. This sometime become obstacles in getting fund from Funding Agencies.
What is the solution then ?
In my opinion, Actual expenses of travel to be booked to project. In supporting, original fuel bills, maintenance bills should be attached. In second level supporting, a Log book should be maintained. In case of more than one project, bills and expenditure should be divided proportionately.
Try to adopt that Traveling policy which suits your organization and your funding agencies more. My advice is, if you are following this travel policy, add one clause in the agreement with funding agency.