Purpose and Principles

1. This policy sets out the procedures for all of Sparrows' financial transactions, and the additional accountability that comes with receiving public funds through the Department of Social Development, because responsible use of its finances is what keeps Sparrows in existence.
2. Consistency. Sparrows' financial policies and systems must be consistent over time. This promotes efficient operations and transparency, especially in financial reporting.
3. Accountability. Sparrows must explain how it has used its resources and what it has achieved as a result, to all stakeholders, including the children in its care. Stakeholders have the right to know how funds entrusted to Sparrows have been used.
4. Transparency. Sparrows is open about its work: it prepares accurate, complete and timely financial reports and makes them accessible to relevant stakeholders.
5. Viability. Sparrows' expenditure must be kept in balance with incoming funds, at both the operational and strategic levels.
6. Integrity. Individuals acting for Sparrows must act with honesty and propriety. The integrity of financial records and reports depends on the accuracy and completeness of the underlying records.
7. Stewardship. Sparrows takes good care of the financial resources with which it is entrusted, and ensures they are used for the purpose intended. Overall responsibility for this lies with the Board, which must ensure that the centre's assets are maintained and protected (Children's Act, 2005, General Regulations, regulation 86(2)(e)).
8. Accounting standards. Sparrows' financial records and documentation adhere to best practice in the non-profit sector, applying accounting policies that serve transparency, consistency and accountability.

Accounting Periods

1. Sparrows records and reports its finances for each financial year, which matches the Department of Social Development's own funding year (§18 below).

Budgeting

1. The Constitution provides for fundraising from various sources; budgeting is essential to putting that provision into practice. The Board must review and approve the annual budget (Children's Act, 2005, General Regulations, regulation 86(2)(c)).
2. A provisional annual budget must be presented to the Board 13 months before the financial year to which it applies, for provisional approval 12 months before that financial year begins, with a review of the cost assumptions used two months before the financial year starts and final approval once the allocation letter is received from the Department of Social Development for that financial year.
3. Funds must be secured during the ten months following provisional budget approval, for the items budgeted.
4. If funds are not secured by the tenth month after provisional budget approval, the Board must consider and approve provisional budget amendments before the start of the financial year, so Sparrows operates within available resources.
5. During the financial year, monthly expenditure reports must show expenses against budget items. It is the Board's duty to ensure budgets are applied, and that any over-expenditure against a budget item is accounted for and approved. The Board must also receive regular written reports from the manager (Children's Act, 2005, General Regulations, regulation 86(3)).
6. Budget variance (reallocation between line items) is approved within the thresholds set out in the Delegation of Authority Policy, and reported to the Board quarterly where it falls within the Executive Director's own authority.

Designated or Restricted Funds

1. Sparrows manages designated or restricted funds responsibly, according to the requirements agreed in the signed terms, memorandum of understanding, or contract between Sparrows and the relevant donor or partner.
2. Sparrows compiles individual financial feedback reports for specific donors as required and agreed.
3. Designated or restricted funds are shown as separately detailed parts of the overall Audited Financial Statements, encompassed within the single audit opinion.
4. Audited Financial Statements are made available on request, and the Executive Director publishes them on Sparrows' website after the Annual General Meeting every year.
5. Accepting a grant or donation whose conditions carry strategic implications — where the conditions would distort a programme or compromise Sparrows' mission — requires Board approval, regardless of the amount involved. The money is not the risk; the strings attached to it are. This is a Board decision even where the amount itself would otherwise fall within the Executive Director's ordinary authority under §8 below.
6. A designated or restricted fund may be used to bridge a temporary shortfall in a different purpose while Sparrows waits for another donor's payment to arrive — for example, using another donor's funds to cover an immediate cost that the Department of Social Development's own transfer would normally have funded, while that transfer is delayed. This is permitted only where the lending fund's own donor terms do not prohibit it, and only as a genuine timing bridge: the amount drawn is owed back to the fund it came from from the moment it is used, not reallocated to the new purpose permanently, and the lending fund's own designated purpose must not itself be left short in the meantime.
7. As soon as the delayed donor's payment is received, the bridged amount is transferred back to the fund it was drawn from, in full, before any of that payment is applied to anything else. This is not discretionary, and not something to net off informally against future need — the lending fund stood in for another only temporarily, and is made whole the moment the reason for the bridge falls away.
8. Every bridging use is recorded when it happens — the amount, the lending fund, the purpose it covered, and the date — and again when it is reversed, so the movement is visible in Sparrows' own books and to the Treasurer and Board through the existing monthly expenditure reporting (§3.5), not something only discovered at audit.

Operating Reserve

1. Sparrows currently holds no operating reserve. The reserve target itself is tracked via the Executive Director KPI Matrix, not fixed as a rand figure in this policy.
2. Reserve funding sources. The reserve is built only from the following, and never from a fund restricted under §4 to a purpose other than the reserve:
   1. an unrestricted year-end operating surplus, or part of one, that the Board resolves to allocate to it;
   2. VAT refunds (§5.3);
   3. an endowment, bequest or other gift a donor directs to the reserve (§5.4);
   4. proceeds of fundraising that the Board specifically directs at the reserve, under the Donor and Fundraising Policy; and
   5. any other income the Board specifically designates for this purpose.
3. VAT refunds. Sparrows is a confirmed VAT vendor, filing as a Category C vendor, and usually receives a net monthly refund. VAT refunds are Sparrows' own recovered funds, allocated to the reserve under §5.2.2.
4. Endowments and donor-directed gifts. A gift a donor directs to the reserve, including one described as an endowment, is held on the donor's own terms under §4. Where those terms preserve the gift's capital, only the income those terms allow to be spent counts toward the reserve for drawdown purposes under §5.6; the capital itself is not drawn down.
5. Holding the reserve. The reserve is held in its own interest-bearing account, opened under §6.3, separate from Sparrows' operating and other investment accounts. A gift held under §5.4 on terms requiring its own separate account is held in that account instead.
6. Drawdown. The Executive Director may draw down from the reserve up to the lesser of 20% of the reserve balance at the start of the financial year (counted as §5.4 provides) or R50,000, in total, per financial year. Any drawdown that would take the financial year's total above that limit needs the Board's approval first. The limit lets the Executive Director bridge a short gap without waiting for a meeting, and stops one person emptying a buffer that exists to protect Sparrows from income shocks. While Sparrows holds no reserve, the limit is nil. This is the reserve-drawdown threshold in the Delegation of Authority Policy (§3), and the Board's adoption of this policy is the Board-approved reserve policy that the Strategic Plan provides for.
7. Reporting. The reserve's balance and movement are included in the regular financial reporting to the Board (§3.5).

Bank Accounts

1. The Constitution provides for the use of bank accounts in Sparrows' regular operations. As decided by the Board, these accounts are held at First National Bank.
2. Transactions over R100 on accounts held at First National Bank trigger a cell phone notification to the signatories, as an additional control.
3. Decisions to open or close bank or investment accounts must be authorised and minuted at a Board meeting.
4. The Constitution provides for investments and loans at the Board's discretion.
5. Sparrows limits cash transactions as far as possible, and prefers electronic funds transfers (EFTs).
6. Funds in Sparrows' current account must not exceed the value of operating expenses for the previous two months, unless the Executive Director expects an irregular expense. Funds exceeding this amount must be paid into an interest-bearing investment account.
7. The bank mandate has three authorised signatories, chosen from the Chairperson, the Treasurer, the Secretary, the Executive Director, or another office-bearer the Board has specifically authorised in writing, and any two of them release a payment on online banking. At present they are the Chairperson, the Treasurer and the Executive Director. The bank requires three signatories on the mandate. If the office-bearers occupying these positions change, the Board must resolve to authorise the new office-bearer, record the resolution in the minutes of a regular meeting, and submit it to the relevant banking and investment institutions.
8. A payment is released from a banking or investment account by any two of the authorised signatories under §6.7, and by no one outside that group, whatever their role. That release confirms a payment matches what the Board has already approved; it is not a fresh decision on whether to make the payment.
   1. Preparing a payment for release — data entry, checking it against supporting documentation, queuing it for signature — is a separate, operational step, and the Executive Director sets this process up within the thresholds at §8 below. The Executive Director may designate a member of staff, who is not a Board member, to carry out that preparation step; doing so does not make that person a signatory and does not change who actually releases the payment.
9. A register of banking and investment accounts must be kept, detailing the account, institution, and authorised signatories for each account.
10. Sparrows' bank and accounting records are reconciled monthly by the Treasurer, independently of whoever captures the underlying transactions day to day and of any bank feed or rule in the accounting system that posts them automatically. The person or rule that records a transaction is never the only check that it is correct. The Treasurer signs the reconciliation as evidence it was performed. This is separate from, and in addition to, the cash-specific reconciliation at §7.6 and the annual independent audit at §16.

Receipts

1. Sparrows does not accept cash payments. Card machines are available on-site for any in-person payment, and Sparrows' bank details are available on request for an electronic transfer. This is a deliberate policy, adopted to improve audit outcomes: cash is far harder to trace and verify than an electronic payment record, and removing it removes a real, recognised audit-control weakness rather than merely a preference.
2. Despite §7.1, cash occasionally still reaches Sparrows without being solicited — for example, an unsolicited cash donation that cannot practically be declined in the moment, or coins and notes from a collection tin. Where that happens, it is handled with the same safeguards as any other cash: handed to the relevant responsible person, who writes a receipt for the cash in ink, signed by both payer and payee where a payer is identifiable, and gives the payer a copy where one exists.
3. Receipts are sequentially numbered, with a copy kept in the receipt book.
4. Cash is kept locked until banked.
5. Cash received is banked within a week of receipt, or added to petty cash as the Petty Cash Policy §5 provides, because a small amount is not worth banking.
6. Cash received and cash deposited are reconciled monthly and verified by the Treasurer, who signs the reconciliation as evidence of that verification. Where cash is retained as petty cash instead of being deposited, its reconciliation is governed by the Petty Cash Policy §9, not restated here.
7. §7.1's no-cash position applies equally to an on-site donation made by a visitor during a visit (the Perimeter Security Policy) — a card machine is available, and Sparrows does not accept a cash donation offered in person.

Payments

1. All payments follow the authorisation process below.
   1. Payments are made from valid supporting documents. Before a payment is prepared, the person doing it checks the paid-invoices record for that supplier and invoice number.
   2. Operating expenditure is authorised within the thresholds set out in the Delegation of Authority Policy. Dividing one purchase or contract into several invoices to stay under those thresholds is not permitted; separate, independent purchases from the same supplier — including routine, recurring ones — are each measured on their own terms. The pattern and volume of spend with any one supplier remains visible through the regular financial reporting to the Board, which is where an unusual increase is expected to be raised, rather than through a pre-approval requirement triggered by ordinary repeat business.
   3. Capital expenditure (asset acquisition) is authorised within the thresholds set out in the Delegation of Authority Policy — see also the Asset Management Policy.
   4. Reserve drawdown is authorised within the limit set out in §5.6.
   5. Where the Executive Director is not available, payments — an operational matter — are authorised by the Senior Child and Youth Care Worker, or, where the Senior Child and Youth Care Worker is also unavailable, by the Social Worker, consistent with the Delegation of Authority Policy's own arrangement for the Executive Director's absence (§10) — in either case, in consultation with the Executive Director where possible, and signed on the payment requisition slip as evidence of that authorisation.
2. All payments are made with sufficient supporting documents in place.
3. Supporting documents are filed and kept for the period in the Records and Retention Policy §4.1.
4. Payment schedules are at the Executive Director's discretion, made as close to due dates as possible, considering available funds and the priorities below.
5. Payment priorities are:
   1. Statutory obligations (PAYE, UIF, Provident Fund, VAT, and similar);
   2. Child care expenses (electricity, water, food, fuel, and similar);
   3. Staff salaries;
   4. Administrative costs (telephone, stationery, and similar);
   5. Building and vehicle maintenance;
   6. Other expenses.
6. Payments by debit, credit or garage card must be substantiated with a valid invoice.
7. Only staff the Board has authorised may use debit, credit or garage cards linked to Sparrows' bank accounts.
8. A register of authorised card-holding staff is kept and reviewed by the Board at the start of every financial year.

Salaries

1. Sparrows complies with all relevant law on the payment of salaries, including the Labour Relations Act and the Basic Conditions of Employment Act.
2. Sparrows does not include medical aid as part of a staff salary package.
3. Sparrows enrols every permanent employee in the Child Welfare South Africa Provident Fund automatically. The employee contributes 6% of salary, and Sparrows contributes an equal amount, 6% of salary, in addition to salary. An employee who is not permanent, including a temporary or part-time employee, is not enrolled.
4. Sparrows endeavours to pay an annual cost-of-living and performance increase, based on the prevailing year-on-year Consumer Price Index (CPI), subject to available funding.
5. Staff salaries are paid monthly, by the last working day of the month, with PAYE, UIF and other required deductions accounted for.
6. The payroll is submitted to the Chairperson or Treasurer for approval before payment, evidenced by that person's signature on the payroll summary sheet. This is not the Board approving an ordinary operational expense: payroll is ordinarily Sparrows' single largest recurring expenditure line, well above the operating-expenditure threshold in the Delegation of Authority Policy (§3) above which the Board approves any other expense — this clause applies that same principle as a standing monthly check, rather than requiring a fresh Board resolution for a predictable payment every month.
7. The Executive Director captures all payroll payments.
8. Each staff member receives a monthly payslip carrying the information the Basic Conditions of Employment Act requires.
9. Sparrows treats payroll information as confidential, and discloses it to a third party only as permitted under the POPIA Data Protection Policy, or with the staff member's express permission.

Petty Cash

1. Petty cash is governed by its own standalone Petty Cash Policy — see that policy for the float ceiling, per-transaction ceiling, custodian, and reconciliation requirements. It is a companion to this policy, not an unconnected one: where it is silent on a point this policy addresses generally, this policy governs.

Prepaid Retail Accounts

1. Sparrows holds a prepaid card account with the Shoprite Group, under its "Act for Change" discount programme, usable at any Shoprite Group store. It funds Sparrows' regular bulk purchases — chiefly at Usave — separately from the smaller, everyday purchases the Petty Cash Policy covers.
2. The account is loaded in two ways. A standing R500 is loaded weekly, set up once at the start of each financial year rather than authorised transfer by transfer, to keep Sparrows' ordinary weekly purchases running. A further amount, ordinarily R15,000, is loaded as needed to fund a larger bulk purchase — queued in online banking by the Executive Director and released by two authorised signatories under §6.7-§6.8, the same as any other payment from a Sparrows bank account.
3. Keeping the standing weekly amount low, and loading a larger amount only when a specific bulk purchase needs it, is a deliberate Board decision to limit the risk sitting on the card at any one time, rather than holding a large balance on it as a matter of course.
4. The physical card linked to the account carries no PIN, a further control against loss or theft.
5. The account is reconciled monthly, in the same way as Sparrows' bank accounts (§6.10) and cash (§7.6).

Online Payment Gateways

1. Where Sparrows accepts a payment through an online payment gateway, that gateway's own payouts are reconciled against Sparrows' bank statement in the same way as any other income, and the gateway itself is engaged and managed consistent with the POPIA Data Protection Policy and the Operator Register it requires.

Insurance

1. The Board maintains adequate insurance cover for Sparrows' property, liability, and other insurable risks, reviewed at least annually and adjusted as Sparrows' risk profile changes.
2. A gap between the cover Sparrows holds and the cover a specific risk warrants is brought to the Board for a decision, rather than left unresolved once identified.

The Kabouterland Loan

1. Sparrows has made an interest-free loan to Kabouterland Educare Centre, a separate organisation the Executive Director also runs. Because the Executive Director's dual role in both organisations is itself a conflict of interest, this loan — and every advance or repayment made under it — is disclosed and managed under the Conflict of Interest Policy, and reported to the Board at every meeting until it is repaid in full, rather than folded into the ordinary monthly expenditure report as a routine item.
2. Kabouterland repays Sparrows R2,500 per month. At the end of each quarter, Kabouterland also pays Sparrows any surplus remaining from that quarter's income once its own operating costs for the quarter have been met.
3. Where Kabouterland is still waiting for its quarterly Department of Basic Education subsidy to clear into its own bank account at the start of a new quarter, Sparrows may advance it a further amount to bridge that gap, up to two months of Kabouterland's own ordinary operating expenses — since the subsidy is not always received in the first month of the quarter. This is a separate, short-term facility from the loan at §14.1 — it does not affect, replace, or get netted against the §14.2 monthly repayment, which continues regardless.
4. Sparrows' Board also governs Kabouterland, so no office-bearer of either organisation is free of the interest the Executive Director's own dual role creates — routing this decision to a different office-bearer would not add real independence. An advance under §14.3 is exercised under this policy's own standing Board authorisation, within the fixed cap at §14.3, and is reported to the Board at its next meeting in every case — the safeguard is transparency to the one Board that governs both organisations, not a different individual's sign-off.
5. An advance under §14.3 is repaid to Sparrows in full, immediately, once Kabouterland's quarterly subsidy is received — not held over, and not netted informally against the following month's §14.2 repayment.

Retirement Fund Contributions and Debts

1. Sparrows pays each contribution to a retirement fund by the date the fund's rules set. Late payment of a retirement fund's own contributions is a statutory contravention (Pension Funds Act, 1956, section 13A), and it is a legal compliance risk under the Risk Management Policy §5.1.2.
2. A debt Sparrows owes, and any contribution it has not paid by its due date, is entered in the Risk Register. An entry in a zero-tolerance category carries the requirements in §9.4 of the Risk Management Policy: a named individual accountable for closing it, a target date, and review by the Board monthly until it is closed.

Audits

1. Sparrows' financial records are audited annually by a reputable, independent auditing firm registered with the Independent Regulatory Board for Auditors (IRBA).
2. The Board proposes the appointment of auditors for the next financial year to Sparrows' members, for approval at the Annual General Meeting.
3. The audit follows a fixed sequence: the Executive Director prepares the financial records and supporting files for the auditors; the auditors carry out the audit independently; and the auditors report their findings and opinion, together with the Annual Financial Statements, directly to the Board. The Annual Financial Statements are received as the auditors' final, signed document and are presented to the Board exactly as issued, whatever form that opinion takes.
4. Audited Financial Statements are completed in time for Sparrows' Annual General Meeting in August each year — which, in turn, comfortably meets the Department of Social Development's own deadline at §18.4 below.
5. Audited Financial Statements are reviewed and approved by the Board annually.
6. Annual Financial Statements are reflected in the Annual Report.

Accounting Officer

1. In addition to its own independent audit under §16, the Nonprofit Organisations Act requires Sparrows to arrange for a written accounting officer's report within two months of drawing up its financial statements, confirming that they are consistent with Sparrows' own accounting records, that the accounting policies applied are appropriate, and that Sparrows has complied with the provisions of the Act and of its Constitution that relate to financial matters (section 17(2)) — a report distinct from the auditors' own opinion under §16, and one the NPO Directorate requires alongside the annual narrative report (s18(1)(a)).
2. A person qualifies as accounting officer only if they belong to a professional accounting body recognised for this purpose (Nonprofit Organisations Act, 1997, section 1, which takes its meaning from section 60 of the Close Corporations Act, 1984). Sparrows engages Charteris & Barnes CC for this role, separately from A2A Kopano's own engagement as independent auditor under §16 — two distinct firms, each performing a distinct duty, rather than one firm reporting on its own work.
3. The Executive Director keeps this engagement current, and brings it to the Board if it ever needs to change.

Public Finance Management Act and the Transfer Payment Agreement

1. Sparrows is bound by the Public Finance Management Act (PFMA) through its Transfer Payment Agreement with the Department of Social Development, which requires Sparrows to ensure compliance with the PFMA (Section A, clause 4). Sparrows is not itself an organ of state. Section 38(1)(j) of the PFMA also requires the accounting officer of a transferring department — here, the Department of Social Development — to obtain a written assurance from any entity it funds that the entity implements effective, efficient and transparent financial management and internal control systems, before transferring the money. Sparrows discharges this each funding cycle, through the Assurance in Terms of Section 38(1)(j) of the Public Finance Management Act, which forms part of the Transfer Payment Agreement and which the Chairperson signs on Sparrows' behalf. This policy exists, in part, to make that assurance true in substance, not just on paper.
2. Reporting to the Department. Under the current Transfer Payment Agreement, Sparrows must submit monthly narrative reports on programme progress, prepared by the Social Worker, and monthly technical financial reports accounting for funds utilised with invoices as portfolio of evidence, prepared by the Executive Director, both by the 25th of the following month; and a further report within five days of each quarter's end. Financial reports must include a certified statement of any interest earned, with the calculation method and bank verification.
3. Restricted use. Department of Social Development funding may only be used for the purposes specified in the funding agreement — the same principle already stated generally at §4 above, applied specifically to this funder. Sparrows must also declare funds received from other donors for the duration of the agreement, and confirm receipt of Departmental funding with the date and amount received.
4. Annual Financial Statements to the Department. Because Sparrows' allocation exceeds R300,000, full Audited Financial Statements — balance sheet, income statement, cash flow statement, and notes — are due to the Department within six months of the financial year-end (by 30 September), together with a report from the person who compiled them addressing whether the statements fairly present Sparrows' financial position, consistent with prior years. §16.4 above already sequences Sparrows' own August AGM ahead of this deadline.
5. Unspent funds. Sparrows must declare any unspent Departmental funds within 30 days of the relevant period ending, with reasons, and a plan to utilise the funds by 31 July of that year.
6. Banking. The Transfer Payment Agreement separately requires at least two members of Sparrows' Board to be bank signatories, one of them the Treasurer or equivalent — a condition this policy's signatory rule at §6.7 meets.
7. Asset stewardship. Property, furniture, equipment and vehicles essential to programme delivery, or that the Department contributed toward purchasing, must be appropriately monitored, controlled and secured — see the Asset Management Policy.
8. Audit and recovery exposure. The Department may conduct unannounced audits of financial records, service delivery points, and beneficiary interviews, and Sparrows must cooperate within 24 hours of any audit request. The Department is entitled to recover funds following its review of Sparrows' annual financial records, where those funds were lost to mismanagement, spent on non-approved items, or paid for a programme Sparrows did not deliver. This is the concrete, external reason the internal controls in §§6 to 9 above matter — not internal discipline for its own sake.

General

1. Any matter not covered by this policy is brought to the Executive Director's attention for a decision. That decision is recorded, for consideration at the next review of this policy.

Review

1. This policy is reviewed annually by the Board, for currency and relevance, before the start of each financial year. The Board is responsible for approving policy (Children's Act, 2005, General Regulations, regulation 87(3)).
2. At each review the Board checks that the facts stated in §6.7, §14, §15 and §17 (the bank mandate, the Kabouterland loan, the debts Sparrows owes, and the accounting officer and auditor) are still current, because they change.