- PERFORMANCE OF EACH OF THE MILL PROJECTS
- THE ACCOUNTING WORKSHOP
- ACHIEVEMENT OF PROJECT GOALS
- RECOMMENDATIONS FOR ENHANCING FINANCIAL MANAGEMENT
In May 1999 a 4-day course in accountancy and
bookkeeping was conducted for the NGO treasurers and fee collectors of the 11 mill
projects under the NAME (Ngorongoro Mills Association). The Development Consultant Fedde
Renkema was asked by Utamaduni Cultural Association (UCA) to carry out a follow-up mission
in order to assess the effects of the training and to offer advice and guidance.
The output of the consultancy would be a report which
should contain practical recommendations for enhancing efficient finance
management and economic procedures in the operations of the NAME mills" and
should describe the financial operations of the 11 NAME mills, indicate an
assessment of the performance of the individual mill projects and outline an analysis of
the financial institutions of the NAME for reaching the goals set in the project
Institutional Development for Food Security in the Ngorongoro district of
The mission was carried out from 23 August till 3 September 1999.
All 11 mills except Piyaya (due to lack of time) were visited by the Consultant together
with the NAME Co-ordinator, the NAME Treasurer, the NAME Mills Mechanic and the
The cooperation of all these team members was excellent (my sincere thanks to the
NAME people involved!!). In spite of some delays due to late arrival of the Consultant and
breakdowns of the aged NAME vehicle the mission was successfully completed (except of the
visit to Piyaya).
This report starts with my main findings and observations made
during the visits to each of the projects. In the following chapter a link is made with
the accounting workshop as conducted in Loliondo. After that, I give my assessment as
regards the achievement of the formulated project goals. This is followed by
recommendations for improving the financial administration and the financial management.
2. PERFORMANCE OF EACH OF THE MILL PROJECTS
- The mill has produced very little this year. Since February till
May it was out of order and then there were no customers till 9th July. From 1-25 August
it only operated 7 days due to various reasons (no customers, lack of fuel, absence of
- The total revenues (mapato) during the past 7 months are very low,
about TSh 60,000 only.
Accounting standards and Management:
- The operator, who also collects the fees, keeps an informal cash
sale record and also a daily income book. Since the breakdown of the mill in February, he
did not keep the official cash sale book as this book stayed in the NGO office until the
day of our visit.
- Some payment vouchers for expenses are available but filling in
needs improvement (e.g. he just writes himself as the receiver of the money for diesel
while there are no receipts for the diesel purchases).
- The daily income book, kept since 7th July, has not
been seen by anybody else than the operator himself. There is not a functioning mill
committee, while the LADO Treasurer has neither received the income nor checked the books.
The operator, who does not receive a salary, himself decided to spend the little Faida (in
July TSh 22,000) for maize etcetera.
- The operator attended the Loliondo course and feels capable to
keep the books, but he mentions problems with completing monthly economic reports.
- My overall assessment is that both the financial administration
and the financial management are of very poor standards.
- The mill is operational, but needs an overhaul soon, which if
properly done could cost even TSh 700,000.
- The management of this project is very poor, both at the local
level as well as at LADO level.
- While the production during the first months of this year was at a
reasonable level (see mid-term assessment), it dropped rapidly after March due to
decreasing demand. In May and June there were no customers. The mapato in July were TSh
22,000, with very small amounts per customer being milled, and on 6th August the machine
broke down until the day of our visit. Total mapato from January till August comes close
to TSh 300,000 (there is some unclear conflicting information).
- In the July monthly report, the operator / fee collector has
correctly calculated the productivity at Tsh 315 faida per liter diesel (as taught during
the Loliondo course). The number of debe milled per liter had never been measured, but
according to my crude estimate could have been as low as below 3 debe per liter diesel.
Accounting standards and Management:
- The fee collector / operator understood well what was taught in
Loliondo. However, there were some differences between the cash sale book and the daily
income book. The daily income book, kept since July, was not fully completed, as it had
been away during some time.
- No salaries have been paid, no NAME fee calculated in the July
monthly report, and it is unclear where the small cash surplus of July went.
- The engine is running but with problems (smoke, overheating, loss
of power, starting problems). It needs an overhaul.
- The critical problem is that spares of this type of engine (SL 3)
are not available in Tanzania (out of the 11 engines there are 4 of the SL type, all
facing the same problem of unavailability of spare parts; I assume that this problem will
get due attention during the coming evaluation).
- A project with various serious problems and with some improvement
in bookkeeping, but still missing proper supervision and management.
LADOs Financial Management
LADOs development capacity/potential is now much higher
than that of the other member NGOs and the NAME itself, facilitated by the recent
arrival of substantial Dutch donor support from which salaries for several staff is
paid. Accordingly, the management can become more professional than when run just on a voluntary
basis. The following observations are presented in order to support this move towards more
professionalism in the running of LADO:
- The Treasurer has made a financial report June-July 1999 on the
basis of monthly reports of the 2 projects and following the NAME format.
does not yet keep a cash analysis book with detailed daily income and expenses of the mill
projects. In fact during recent months, the Treasurer has exercised very little
supervision and control over the projects ("we call them to the office and get their
reports"). In the short Treasurers report, the cash in hand was recorded as
zero, as he did not receive monies from the projects.
- This year only the monthly totals of income and expenditure of the
2 mill projects appear in the cash book of the Treasurer, although last year detailed
expenses were recorded. As far as I could observe, the Balance B/F per 1/1/99 was not
correctly filled in. By the end of April 1999, according to the Treasurer, the mills
project had a Balance of TSh 123,000 which "was in the Bank". However, the total
Balance on the general bank account of LADO was less than that amount.
- A good move was the opening of a separate bank account for the
mills on 12/07/99. However, a transfer of the Balance of the mills projects (how much was
the Balance?) was not effected and since the opening deposit of TSh 3,000 no monies have
been entered on this account. In the period January to July 1999 the total recorded income
of the 2 projects amounted to TSh 328,000 and the expenses to TSh 214,000. Therefore, one
would expect that the surplus of TSh 114,000 would appear on the bank account, in addition
to the Balance B/F of accumulated faida per 1/1/99.
- In my opinion there is a clear need for LADO to improve on the one
hand its own financial administration (bookkeeping) of the mills projects, and on the
other hand its management of these projects (planning, monitoring, supervision of
personnel, and in particular the control of finances, etcetera).
- It is noted that in our meeting the Chairman of LADO fully agreed
with the identified weaknesses. I also feel that LADO has sufficient capacity to run such
projects properly. Therefore it is to be expected that already during the coming
evaluation a substantially improved picture will emerge.
- The high turnover during the first 3 months of the year (see
mid-term assessment) could not be maintained. This was mainly a result of extra customers
from a nearby village where the mill was out of order in that period. During the past 3
months the mill had an average monthly mapato of about TSh 75,000.
- The operator could not calculate the productivity, as the
consumption of diesel was not recorded. Asked, it was estimated that the productivity was
between 4 and 6 debe per liter diesel, depending on dryness of the maize, while it would
take perhaps 4 minutes to mill a debe of maize.
Accounting standards and Management:
- The fee collector who had attended the Loliondo workshop left in
July. The new fee collector keeps a cash sale book and a daily revenue book. The money is
said to be handed over to the Treasurer by the end of the week, but receipts are not
written and the signatures of the Treasurer in the daily income book are missing (this
book needs checking and the Treasurer should certify correctness with his signature).
- Some customers pay in kind with maize or get credit, but these
transactions are not systematically recorded.
- There is an analysis book, but it is not filled in daily (only
monthly totals). For June and July monthly reports were made; these were not yet of an
- Salaries of TSh 15,000 per month are paid to the operator and fee
- In March TSh 47,400 was paid as 3 months contribution to the
- The machine is working fine.
- A good project. The financial administration is getting more
attention but still needs further improvements and more control by the Treasurer.
- The project started afresh in July, when BUDEA took over the
running of the mill from the local committee. BUDEA is now clearly the owner, and it paid
in June over TSh 300,000 for the needed overhaul of the engine.
- The mapato in July with no operations during half of the
month- were only TSh 30,000 and in August about TSh 60,000.
- The operator estimates that it takes about 5 minutes to grind a
debe of maize, but he has no idea of diesel consumption ("perhaps 2 bags per 10 liter
Accounting standards and Management:
- There is no cash sale book, only informal records with cash sales
and daily totals.
- Salaries were not paid. In July the books showed a negative faida
which was mainly due to high diesel purchases which were probably still in stock by the
end of the month (this illustrates a weakness of the simple accounting system which
calculates a "faida" without taking into consideration variations in stocks and
- After the overhaul in June, there were still minor problems
(mixing of fuel with oil), but this was rectified during our visit and the mill is now
- After the management problems in the past, prospects are better
now, but BUDEA needs to increase its efforts to establish a proper financial
administration and management of the project.
- From 12 June till 19 July the mill did not work due to lack of
diesel (although the place is remote, it is unclear why it takes 5 weeks to solve this
problem, or even why diesel was not obtained before running out). In the meantime
customers could go to the other 2 mills in the village. The mapato were TSh 68,000 in June
and TSh 64,000 in July. In August the mill did not function due to a breakdown.
Accounting standards and Management:
- The problem of ownership has been solved: in June the Womens
Group handed over the ownership to BUDEA. However, the matter of loans is still
- There are informal cash sale records and there is a daily income
book. However, the entries in the daily income book are sometimes lower and sometimes
higher than what can be counted from the cash sale records.
- Salaries are set at TSh 15,000 but not yet received by the
operator and fee collector, as the faida was insufficient.
- The machine is operational, but needs spares soon (about TSh
- The project management needs considerable improvement.
- Although the production this year has not reached the very high
levels of 1998 (mapato 3,2 million), the first 7 months still reached total mapato of TSh
1 million (very low figures in April and May).
- We carried out several productivity checks, with the results
varying between 4.6 and 5.7 debe milled per liter of diesel. It took between 1.5 and 2
minutes to mill one debe.
- The mill is clearly productive and profitable.
Accounting standards and Management:
- The female operator + fee collector fills in receipts without
names, sometimes after having milled for several customers. The tasks for one person
(including crowd control) are a bit much when there are many customers. This could affect
accuracy of the books. She explained that it is not easy to get the names of customers, as
there is a cultural taboo on people calling their own name.
- Since June it was agreed that she would not receive a fixed salary
but a 10% commission of the turnover (ref. recommendation in chapter 5).
- The financial administration looks good, including the keeping of
the analysis book.
- The financial management can be further improved: there is not yet
an NGO bank account; cash balances are not recorded daily and cash checks / reconciliation's
are not done. A major mistake last year was that the significant cash
surpluses were given out as "loans to poor village people". There is no debtors
registration and no sign in the books this year that any of these "loans" were
repaid. Apparently the NGO leaders considered the cash surpluses as usable profit (ref.
recommendation in chapter 5). The consequence of this "policy" is that the
proper building up of the reserve fund for depreciation of equipment has not been
- NAME fees have been paid.
- The machine is working well, although due to vibration it
sometimes needs welding of some breaking parts.
The planned visit to this remote project could not take place due
to delays. The project is well known to the NAME Treasurer, who provided the following
- As in the period Nov98 March99 the mapato were high in June
(TSh 165,000) and July (TSh 310,000), and during these 2 months a total faida of TSh
207,000 was made (inclusive of NAME fee of TSh 25,000).
- In June and July the productivity was about 6.0 debe per liter
Accounting standards and Management:
- An analysis book is kept since June99. NAME fees were calculated,
to be paid at the end of August. Monthly economic reports have been received by the
- The cash in hand should be about TSH 400,000 and "the money
is there" but a physical check has not been carried out.
- The machine is in good condition
- The production has been low in the last 3 months (total mapato
about TSH 140,000), while the machine was half of the time not operating (first as it
lacked a business license and later due to a breakdown).
- People have fortunately alternatives, as there are 3 other mills
in the area.
Accounting standards and Management:
- Several people are more or less involved with the financial
administration: The "fee collector" who attended the Loliondo workshop; he is
usually not around but went to the workshop instead of the actual fee collector / cash
keeper who cannot read and write. She is entrusted by the womens group to keep the
monies and since June she is helped by the mill operator who keeps an informal book with
the daily mapato. The quality of keeping this book is very poor and there is no cash sale
book and no monthly reports. The local co-ordinator of NGOPADEO projects keeps a daily
mapato book, but it is not signed for by anybody and not totaled per month.
- There is little information about expenses, the cash keeper
estimates the cash in hand at about TSh 30,000.
- The salaries are TSh 15,000 for the operator and the fee
collector, but most of it was unpaid due to lack of money.
- Lack of supervision of NGOPADEO Treasurer.
- The machine has continuous problems. Part of this (the belts
breaking or running off) is due to wrong installation (clearly visible misalignment of the
engine and the grinder). More serious: the machine is of the SL type, for which spares are
not easily available in Tanzania.
- For various reasons this is a very poorly managed project.
- The mapato in June were low due to lack of maize. The total mapato
recorded in June till August was TSh 271,000 (exclusive of grain milled on credit).
- Since 1996 the very well constructed mill has been working very
efficiently with the highest faida of all the NAME mills. It was alleged that it even could
grind 9 debe per liter. A crude estimate from figures made available to us showed a
productivity of over 7 debe per liter. However, the mapato recorded in the books in July
would correspond with about only 5 debe per liter.
Accounting standards and Management:
- The ownership problems described in the mid-term assessment
unfortunately still remain. It appears that Village Chairman and Treasurer remain
reluctant to be accountable for the monies of the project, neither to NGOPADEO nor to the
- Since 16th July the fee collector keeps a cash sale
book and a daily income book. The money goes to the Treasurer who does not sign for it. In
July the mapato did not tally with the cash receipts, but in August it did. The fee
collector himself feels that he needs more practice in making financial reports.
- During our visit the project leaders were not available. It
appears to be time for the NGOPADEO and NAME leaders to determine an appropriate course of
- Some days before our visit the machine stopped working. After 3
years of operations this strong and well installed engine, located in a nicely designed
mill house, now needs spare parts costing about TSh 200,000. The project has undoubtedly
produced enough faida for such normal repairs, hence this situation forms a good test for
the leadership to show that the project is sustainable and soon is in full operation
- Technically an excellent project, but sustainability threatened by
poor accountability of local leaders.
- Very low mapato in June and July, better in August, total TSh
145,000 in the last 3 months.
- There is a stiff competition, as Endulen has even 9 mills.
- Instead of the usual cleaning table for maize, there is just a
piece of netting wire hanging loose on some stones and pieces of wood. It is unclear why a
simple but proper cleaning table has not been made, as it is not unlikely that customers
opt to go to a mill that provides a more caring service.
Accounting standards and Management:
- Cash sale book, daily income book and payment vouchers are filled
in, but the fee collector is not yet confident ("time of the course was too
short"). No monthly reports.
- During the past 5 weeks there were several differences between the
recorded daily income and the cash sale book. It was explained that the fee collector had
been absent and that the operator filled in the books.
- The NGO Treasurer, who had not attended the Loliondo workshop,
signed for receiving the monies but not for checking and certifying the books.
- Salaries had not yet been paid, only some payments for food, which
seems to be NGOPADEO policy during the first months of employment.
- The engine is working, but it has problems (smoke and leaking
oil). It needs an overhaul, but it is unfortunately of the SL type (lack of pares in
- There is a low level of activity in this project, reflecting both
the management capacity as well as the low need for a mill at this location at the
outskirts of Endulen.
- During the 3 months June August 99 the total mapato were
about TSh 220,000. This was low, due to the machine being out of order for 5
- The operator estimated that the productivity now is between 5 and
6 debe per liter. It was much lower before June, when according to him it could even take
up to 20 minutes to grind a debe of maize. But after successful repairs by the
NAME mechanic the grinding time improved to around 6 minutes per debe. During our visit a debe
was grinded in just below 6 minutes.
Accounting standards and Management:
- The fee collector who also is operator since the start of the
project in 1998, did not go to the Loliondo workshop ("only the project treasurer was
supposed to go"). However, as operator he went to the technical workshop in Malambo
and learned from the fee collector in Malambo how to keep the books. And he keeps his
books very well!!
- The end of July the books were checked and certified for
correctness by the Secretary of NGOPADEO.
- Salary to the operator has not yet been paid, he is still waiting
for a decision.
- The machine is working, but it is often breaking a screen which
forms a serious problem (mechanic does not know how to repair it). The foundation is not
good. The machine is of the SL type (no spares).
- Taking into consideration the technical problems the project is
doing well, receiving good attention of operator / fee collector and NGO leaders.
3. THE ACCOUNTING WORKSHOP
In this chapter I will give my observations on participation,
methodology and contents, and on the impact of the workshop:
The workshop was attended by most of the NGO treasurers and fee
collectors, not many were missing. There was some confusion as to who should attend: some
of the actual fee collectors did not attend as their place was taken by the local
To combine fee collectors and NGO treasurers in one workshop has
advantages of working together and improved communication. However both the average entry
level as well as the training needs of these 2 groups are rather different. The
consequence is that there was an emphasis on basic skills and not enough attention for the
more difficult issues like writing a good monthly financial report.
Methodology and contents
In line with the oral culture there was little prepared handout
course materials for the participants with guidelines, examples and exercises. There were
more discussions and explanations rather than written individual exercises and tests to
verify whether the individuals could complete the books and make relevant calculations.
The contents of the workshop programme were clearly relevant. The
completion of the basic documents and records as described in the workshop report is a
crucial straight forward task, and this fitted well in the needs of the participants. The
preparation of the monthly financial report and activity report is much more difficult. In
this respect I think that participants should have received more guidance and important
issues -amongst others cash reconciliation and debtors monitoring- should have been given
due attention (see recommendations in chapter 5).
The grain storage management mentioned in earlier documents was
not covered in the workshop as it was not yet seen as needed.
There is a clear improvement in the basic financial administration
in most of the projects since June or July 1999. In nearly all the projects the fee
collectors have sufficient knowledge to complete the basic documents and records, while
the majority of them actually complete the records in a reasonable or good way.
At the level of the Treasurers and NGO financial management there
remains much more to be desired. On the one hand this is due to low effectiveness of the
workshop as regards the monthly financial reporting (see above). On the other hand this is
due to factors beyond the workshop: even if the treasurers and leaders of the member
NGOs and the projects do have sufficient administrative skills, such skills are not
always applied due to a variety of factors like lack of commitment or time, lack of
accountability, the wish or pressure to hide irregularities, fear of exposure of
etcetera. In my opinion the coming evaluation should address this issue of low performance
of treasurers and management of the NGOs.
4. ACHIEVEMENT OF PROJECT GOALS
In this chapter my impressions are given as regards the
achievement of the 3 formulated project goals:
- "generate maximum benefits
for community development
Although in most projects now 20% of the faida is earmarked for
development projects, there is in none of the projects clear information how much if
any- money has been used for development projects. The financial accounts or reports do
not show the accumulated balance of this earmarked faida.
- "reach sustainability of operation of the maize mills under
the NAME service system"
The long-term indicator of success was described in the project
design workshop as "how many of the provided engines and mills have earned their
replacement after 16 years." And elsewhere in the document the annual necessary
saving for reinvestment of an average mill was estimated at TSh 350,000.
Until now none of the projects have succeeded in making plus
keeping such necessary savings. Most of the projects have a faida far below the required
level, mainly due to
too low turnover. Only 4 of the 11 projects seem to have made a
turnover high enough to be able to make the necessary savings (see next chapter). However,
these 4 have not reserved enough for the depreciation fund but appear to have used most or
all of the surplus money for other purposes (generally without proper documentation).
- "operate efficient technical and financial business
administration in the management of NAME"
Although there is some progress made, there is still a long way
to go before this goal will be achieved.
5. RECOMMENDATIONS FOR ENHANCING FINANCIAL MANAGEMENT
In this chapter I will firstly deal with a number of economic
issues which need more attention. This is followed by a focus on the need for more control
of the assets, in particular cash control. Finally we look into possible improvements in
the financial administration, especially the financial reporting.
5.1 Economic issues
In the Loliondo workshop it was taught to calculate the
productivity of a mill monthly, using the formula "faida kila mwezi / matumizi ya
The disadvantage of this measure is that it depends on many
variables, including the price charged for milling. This price varies in the projects from
TSh 250 to 400 per debe, and with inflation it will increase in the course of time.
Therefore this measure is not useful to compare the productivity between the different
mills or follow the productivity development of each mill in the course of time.
The number of debe grinded per liter of diesel should be used as
main measure of productivity.
For each project the "standard productivity" should be
determined on the basis of some supervised trials under normal circumstances (as done in
Malambo during my visit). The actual productivity can be calculated over any period both
by operator as well as by the treasurer and then compared with the standard. In case of
shortfall, this should then be explained (see paragraph on control measures).
Profit and Faida
Although the kiSwahili word "faida" is usually
translated as profit, the faida as calculated in the project accounts is not the real
profit of the project. This faida is actually a cash surplus after the operational
expenses have been deducted from the income from grinding. This cash surplus still
includes the NAME fee and the costs of depreciation. What would remain after deducting
these two cost items is the profit. This confusion by using wrong terminology is serious,
because many people believe that their project is making profit while in fact it is
operating at a loss.
The column "faida" in the economic reports should be
preceded by the column "NAME fee" and the column "depreciation costs",
both of them to be treated as "matumizi".
The project aims at reserving 60% of the "faida" for
replacement of the equipment (depreciation). It would be better to take a fixed amount per
month for depreciation, calculated on the basis of the life span and price of the
equipment, rather than letting it depend on the amount of "faida" which could be
too high but in most of the mills is too low to generate enough money for replacement of
machinery. In case the new price of a mill would be say TSh 6 million, and the life span
is say 15 years, then using a simple method- an amount of just over TSh 33,000 is
needed per month for depreciation. If there would still be a real profit (see previous
recommendation) then this could be divided between development projects and contribution
to the NGO.
The project should reconsider how to deal with depreciation, and
ensure that sufficient funds for depreciation are set aside.
A usual salary set for operators and for fee collectors is TSh
15,000 per month. However, in many cases salaries have not been paid mainly due to low
income or mills being out of order. When salaries are not paid, it is likely that workers
feel entitled to "help themselves", especially when this is facilitated by them
being in charge of receiving income while not being checked properly.
A system of salaries being based on the income of the project,
e.g. 10% of the mapato, like it is now done in Malambo, appears to have clear advantages
(it is in a fair way related to actual work done, the staff are interested in increasing
the turnover, and the project would not be responsible for payments in case of too little
The NGOs should review the salary system and consider
paying staff a certain percentage of the turnover (mapato).
Debtors and loans
There are 2 types of debtors: Some of the projects allow
customers to pay later, and secondly it also happens (like in Malambo) that loans are
given to people from the cash surplus. In practice there is little control on these debts
and the repayment rates appear to be rather poor. In the case of Malambo most of the faida
which was meant to be reserved for the depreciation fund has been lost in "loans to
The projects should be more careful with giving loans (if given
at all) and with allowing grinding on credit. Loans should only be given after proper loan
procedures have been put in place and if this would not endanger the sustainability of the
5.2 Control of productivity and of assets
A simple control measure for efficient running of the mill is to
measure the average number of minutes it takes to grind a debe of maize. After a standard
for the mill has been determined (N.B. this could be done for each mill during the next
visit of the mechanic) the operator could check this at least once a week. This could give
an early warning sign that the machine is in need of servicing.
A second more important control measure is to calculate the
average number of debes of maize grinded per liter of diesel (see recommendation 1). For
this purpose it is necessary to record accurately the number of liters used. In
most projects only the purchase of diesel is recorded, but not the use itself. Any time
the operator fills diesel he should exactly measure the number of liters and record it
with the date. Over any period of time the average productivity can then be calculated by
the operator himself, but more importantly by his supervisor (Treasurer). In case the
actual productivity is lower than expected, this could be explained by many reasons
(technical problems; diesel has disappeared; the operator left the machine idling; many
too small portions grinded; it was forgotten to write a cash sale receipt and/or the money
was not entered in the income book; some customers got free service; the maize was too wet
and took longer to grind)
In none of the projects I have seen evidence of sufficient
efforts to check on income and productivity, and I have no doubt that in most of the
projects the productivity is too low and that much more money could have been made or
could have been entered into the books. This poor performance is due to several factors
like lack of management capacity and lack of accountability.
The project should establish adequate productivity control of the
mill operations. To this effect, the NAME management should provide a written guideline to
the NGOs describing what to be done, by whom and how often.
The projects do use normal cash sale receipt books. However,
normally receipts are not given to each customer, while one receipt is used to write the
amounts for several customers (to save paper) without mentioning any names. In this way it
is no better but more expensive than writing the same information in a simple school
In this way the book cannot function as a checking mechanism
whether all payments received from customers indeed were entered in the daily income book.
In fact, moneys can disappear far too easily at this stage where it is handled by the fee
collector. Projects could consider to put a sign in the mill: "Customers must be
given a cash receipt before the operator is allowed to grind the maize".
When receiving the mapato from the fee collector, the Treasurer
should not only sign for receipt, but also certify with his signature that he has checked
the cash sale book and the income book and found the books correct.
At the level of the Treasurers of the projects and the member
NGOs the cash control is generally inadequate. I did not see any evidence that ever
a proper cash reconciliation has been done between the cash balance as shown in the books
and the money physically in the cashbox or somewhere else with the Treasurer (proper
financial procedures would prescribe that such cash reconciliation's are done regularly and
signed by both the Treasurer and Chairman or Coordinator, who with their signature would
certify correctness). In none of the projects it is clear how much money there should be
in the cash box. It is clear that the road is wide open for money
disappearing. It is not
clear how committed some leaders are towards improving the financial administration
could prefer to let it remain being chaotic, because than it is not easy to prove their
own involvement in fraud; others could take the easy route of not keeping the books
properly because they cannot explain why money is missing and cannot find
The projects should establish an adequate level of cash control,
on the one hand ensuring that all income received is entered into the books and on the
other hand by conducting regular cash reconciliation's (to be certified for correctness by
for example the NGO Chairman).
The project Treasurers should regularly follow-up on debtors, and
provide in the monthly reports information about payment of debts and defaulting.
- Financial administration and reporting
After the Loliondo workshop the financial administration of most
of the projects has improved. At some places the recommended system is not yet followed,
e.g. LADO did not yet obtain analysis books. In my opinion there is some room for further
improvements of the system itself:
Cash sale book
The names of all customers should be written on the receipts,
even if receipts are not handed out and amounts of several customers are recorded on one
receipt (see also recommendation 7 and the paragraph on cash control).
Daily income book (daftari la mapato)
Some columns should be added in order to facilitate debtors
control (column on credit sales and column on payments received from the debtors) and
productivity control (column on the number of liters diesel filled in the tank minus the
remaining balance B/F to be measured at month end). The recommended layout is then as
||L diesel Filled in
||Signat. Fee Coll.
The projects should adopt the use of an improved Daftari la
The layout as earlier designed and recommended in the Loliondo
workshop should still be improved. Actually, it presents in my opinion a bit peculiar
mixture of a cash analysis book and additionally some accounts which are not income and
expenditure accounts but are balance sheet accounts. This forms an overview which
could fit in a monthly report, but it cannot take the place of a cash book as has been
tried without good results by most of the NGOs. For example in a cash analysis book
you would not find credit purchases (manunuzi kwa mkopo), but you would find subsequent
payments to creditors if and when done . And in a cash analysis book you would not find
the allocation of 20% of faida to development projects, but you would find actual payments
to such projects if and when done.
In my opinion it is better to undo this mixture, and let the
treasurers keep a traditional cash analysis book in which they book all income and
expenditure (with the expenditure detailed in columns for dieseli, oil, mishahara, gharama
za ufundi, ununuzi spea, usafirishaji vifaa, matumizi mengine, and NAME fee). In case
profits are made the subsequent payments to development projects and for NGO expenses
could then be booked under matumizi mengine (or in 2 separate columns for this
expenditure). The last column of this cash analysis book should be fedha mkononi (the cash
balance). The monthly calculation of profit and its allocation is a totally different
issue which should be separately dealt with in the monthly report together with other
matters like madeni (debtors).
The NAME should reconsider the layout of the Analysis Book which
was recently introduced at the Loliondo workshop and replace it with the layout described
above (which is a normal cash analysis book).
When the system of financial administration for this project was
set up, it was apparently kept as simple as was thought possible (not going into the more
difficult double entry bookkeeping system). In my opinion it was kept too simple. As it
is, the system does not facilitate monitoring of debtors or provide insight in what
actually happened with profits made. The management cannot answer questions like:
"how much money is there at present in the fund which was meant for development
projects?" or "how much money has been lost last year due to credit sales and
loans?" The reason is that there is only an administration of income and expenditure,
but not of the assets and liabilities. In other words, what is missing is the keeping of
balance sheet accounts (there is no balance sheet).
The proper solution for the member NGOs would be to set up
a ledger with not only the income and expenditure accounts but also the balance sheet
accounts, and apply double-entry bookkeeping. However, if this is not yet feasible, a
simpler way is to record each month the balance brought forward and the changes in the
main accounts: cash, bank, debtors, creditors, fund for depreciation, fund for development
projects and fund for NGO expenses. The monthly financial report should then include a
summary paragraph with the following format:
In addition to the cash administration, the NGOs should
establish a system for recording the changes in assets and liabilities (see suggested
format) of the projects.
Monthly financial report
During the Loliondo workshop the contents of a monthly report
were discussed and since June some good efforts were made by fee collectors, following
what was taught. In my opinion the contents of the report as recommended during the
workshop were too limited. It should be stressed that writing a monthly financial report
is the responsibility of the Treasurer (making use of information received from the fee
collector / operator). The Treasurer should be provided with a proper guideline in order
to ensure that crucial management issues are included in the report.
I would suggest the following guideline for the contents of the
monthly financial report:
- Income and expenses [give the totals from all columns of the cash
- Profit and allocation [calculate the profit made this month and,
if positive, the allocation to the funds for development projects and NGO expenses]
- Diesel use [= opening balance B/F plus purchases minus closing
- Productivity [calculate the average number of debe grinded per
liter diesel; the easiest way to do this is first to divide the total mapato by the number
of liters used (see 3.), and then divide the outcome by the price per debe]
- Balances of accounts [fill in the format as recommended above]
- Debtors [give details on defaulting of debtors and actions taken]
- Cash reconciliation [give outcome of the cash reconciliation, see
recommendation 7, suggested format:
-- 30/6/99 Cash in hand according to Analysisbook TSh 60,000
-- 30/6/99 Cash in the cash box counted TSh 55,000
Surplus / (Deficit) (TSh 5,000)
Action to be taken:
- Any other matter [e.g. explanation of special expenses, problems,
actions to be taken, etcetera]
For each project the NGO Treasurer should produce a monthly
financial report, following the suggested guidelines. After approval of the report by the
NGO leadership, a copy should be sent to the NAME.
There have been improvements in the financial administration of
most of the projects since the Loliondo workshop. The impact is mainly noticed at the
level of the fee collectors (basic administration). The improvements at the level of the
NGO Treasurers are still limited.
One reason that the NGO financial administration and management
is not yet up to standards, is in my opinion that the system developed and taught at the
workshop is in some aspects not appropriate. Therefore I made a number of recommendations
to improve the system itself. After acceptance of these recommendations, follow-up is
necessary and supervision of implementation by the NAME Co-ordinator and NAME
A contributing factor to poor administration and management could
be in some cases a lack of commitment, lack of accountability and of the will to improve
the administration. Where there are such attitudes, a solution cannot be found in more
donations or more workshops.
Another reason for inadequate administration and management is in
some cases lack of skills and experience. Although the workshop was helpful, it is not
possible in a couple of days to substantially increase skills levels in accountancy. A
follow-up workshop for Treasurers and Chairpersons not for fee collectors- would be
desirable, particularly in order to discuss various issues of financial management and to
do practical exercises (hands-on approach with plenty of individual exercises and testing,
rather than group discussions).
As regards achievement of the 3 formulated project goals, there
is still a long way to go.
REPORT BY: FEDDE RENKEMA,