Why would you need a grant of authority?
Have you ever had an employee or family member come back from town having purchased some parts or office supplies that you did not authorize? Perhaps a field hand has signed for a delivery of inputs when you were not there to verify the goods and amount were correct, or a supervisor became angry and fired one of your workers. Maybe after a spill, one of your managers has jumped in front of the microphones and spoken on behalf of your business. When you questioned the action, it became obvious everyone had good intentions, but the extent of each person’s authority was not clear.
Put simply, a grant of authority clearly defines the extent of the authority delegated to each role within the organization. This can include making decisions, spending money, signing legal documents or entering into verbal agreements, speaking on behalf of the business, and more. There should be no confusion in your mind, as owner or GM, or in the mind of any worker on your farm about their responsibilities and authority regarding money, people, and communication.
What should a grant of authority include?
Your grant of authority document can be as simple or as detailed as you need it to be. This grant of authority is typically approved at the highest level of the organization, which would be your organization’s board or owners. You must clearly communicate the document and review it with your team of workers regularly.
Sometimes called a delegated authority document, your grant of authority usually explains who has the authority to carry out specific duties, such as
- Placing and authorizing orders for goods and services
- Signing checks
- Authorizing staff expenses
- Accessing the safe and petty cash
- Handling incoming cash and checks
- Signing legal documents and contracts
- Checking and authorizing accounting records
The document can be formatted according to your preferences, but it normally follows these rules:
- It defines the lowest level of authority. That is, if a role is given authority to do something, all roles above it in the organizational chart will also have that authority. Normally, managers will automatically have at least the same financial authority as their team members and may have more (if this is stated in the document).
- It outlines deputizing arrangements to cover when key staff are absent. In other words, if your operations manager will be out on vacation for a week, they can follow the steps given in this doc to name a key supervisor to handle some of their typical tasks. (Note that the grant of authority document may provide only for someone at a higher rank to handle some of those duties, and the manager going on vacation must adhere to the document’s guidelines.)
- It prevents anyone from authorizing a transaction from which they will personally benefit.
- It prevents staff from authorizing payments to their managers.
- It sets out limits and conditions for each authority. It will specify a maximum limit for an authorization or define the category of expenditure that can be authorized for each staff or role. (For example, if your office manager has a limit of $500, the document may stipulate that this may be spent only on office supplies and equipment repairs or that the manager may spend only $500 per month.)
See the sample grant of authority below, and then modify roles and authority to fit your business.
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