1.
Introduction
A 7-day
workshop was held from 4 – 10 September 2000, for practical training of NGO
Treasurers and Coordinators in bookkeeping and financial management
The aim of the workshop was to increase the capacity of leaders of local
NGOs (involved in operating grain mills) in financial administration and
financial management.
The
workshop was conducted by Business Economist Fedde Renkema.
The
expected outcome of the workshop was that participants would have sufficient
skills to keep NGO books properly and act adequately in financial management and
control of the assets of the NGO. After
the workshop this is to be shown in practice.
2.
Participation
The
workshop was attended by the following persons:
-
·
Maria
Brashi, UMG
-
·
Joseph Bura,
SADA
-
·
Marta
Gabriel, BUDEA
-
·
Lawrence
Ledio, BUDEA
-
·
Mokora
Makutian, NGOPADEO
-
·
Kaigil
Ngukuo, LADO
-
·
Benedicto
Njemu, UMG
-
·
Ngakenya
Ole Njorio, NGOPADEO
-
·
Michael Ole
Tipap, LADO
The
second SADA participant could not attend. In
addition 3 of LADO’s staff members utilised the opportunity of the workshop
being held at LADO’s office and participated also in the workshop.
The
interest and commitment of all participants was impressive.
There was a clear desire to learn as much as possible.
A
substantial difficulty was formed by the differences in level of the
participants. About half of them
classified themselves as “beginners” while some of the others had already
reached more or less advanced levels in financial administration.
Most of the “beginners” were double handicapped, as their command of
English was not high and as a result they had no easy access to the written
materials and were dependent on translation of everything said (others could
understand everything twice, once in English and then in Kiswahili).
Naturally
it is highly desirable to have a more uniform level, but in the existing
circumstances some degree of differences is unavoidable.
The more advanced participants were very cooperative in helping beginners,
and also two of them did a splendid job in translating from English in Kiswahili.
3.
Method and
materials
During
the workshop there was a mix of lecturing, discussion and practical exercises on
topics of relevance for the participants. The
aim was that both beginners as well as more experienced participants would
optimally increase their knowledge and skills, which would be tested at the end
of the training.
The
instructor had brought for each participant (NGO) copies of the following
materials:
-
·
Practical
Financial Management for NGOs Course Handbook (recently developed by
Springfield Centre for Business in Development, UK, in cooperation with
Tanzanian partners). While this
handbook is not on the market, the editor allowed me to make photocopies for
our workshop.
-
·
Financial
Management for Self-Reliance (a manual for managing the finances of a
non-profit organisation, by Janet Shapiro, available in South Africa).
-
·
Selected
photo stated chapters of other books, particularly on keeping of cash
analysis books.
As the
Course Handbook is in my opinion excellent, the programme of the week followed
most of the chapters and appendices of this Handbook, with the aim that by the
end of the week participants would have learned as much as possible of the
contents of this book. In addition
we spent time on other materials about the keeping and reconciliation of cash
analysis books, because this topic is not well covered in the Handbook while it
is of crucial importance for the participants (until now most of the NGOs fail
to keep a cash book properly, while none of the NGOs is carrying out regular
cash book reconciliation's). Further,
in addition, we covered some management issues and the financial administration
of a grain store project.
4.
Training programme contents
The main
topics which received attention during the workshop were the following:
-
·
Governance
and management of NGOs
-
·
Principles
and tools of financial management
-
·
Design of
the accounting system, single and double entry system
-
·
Chart of
accounts, Trial balance, Income and expenditure account, Balance sheet
-
·
Source
documents, Cash books and Journal books, General ledger
-
·
Cash
analysis books (layout, keeping and closing), reconciliation of petty cash
book with cash box, reconciliation of cash book with bank statement
-
·
Budgeting
and budget monitoring (budget compared to actual report)
-
·
Control of
assets (cash, vehicles, stocks)
-
·
Depreciation
(calculations and depreciation fund)
-
·
Financial
reporting (monthly financial report of a grain mill, quarterly financial
report of an NGO, quarterly report NMA Treasurer)
-
·
Grain store
management (dangers of credit sales, stores control, stock reconciliation)
-
·
Grain store
administration (cash book, purchase book, sales book, stores book)
5.
Results
of the workshop
At the
end of the workshop the “advanced” participants completed a test (see
annex).
Four out of five of these participants (representing all the 5 NGOs
except Ngopadeo) scored more than 55 out of 100 points.
The
“beginners” got the test with some of the questions left out, and this was
done in Kiswahili under guidance of the 2 participants who had achieved the
highest score. Their results were
-not surprisingly- considerably lower than in the “advanced” group.
While
increased knowledge and skills is an outcome of the workshop which was achieved,
the impact of the workshop is at this moment still uncertain.
The impact will be shown in terms of actual improvements in the
bookkeeping, financial reporting and financial management and control of the
grain mills and the NGOs. Whereas
increased knowledge and skills is a necessary condition for such improvements,
they are in themselves not yet sufficient for improvements.
They need to be backed by crucial features like the will, the commitment
and the organisational capacity to do a good job.
In my opinion it is now up to the leaders of the NGOs which have formed
the NMA to show results, as at least LADO, BUDEA and SADA do have at least one
person with sufficient knowledge of financial administration.
In this respect it would also be helpful if the NGOs would read again my
consultancy report on financial management and accountancy system from September
1999, because it seems that the implementation of most of the recommendations is
generally lacking.
6.
Grain
storage projects
During
the workshop we discussed some issues of management and the design of a simple
administration system for a grain storage project (see above).
A major
policy issue is whether to allow sale on credit or not.
About half of the participants argued against selling on credit due to
the risk of not getting payment (defaulting on loans).
In addition to losing money due to defaulting, there is another
disadvantage of sale on credit: your
debtors are sitting on your working capital, and even if they eventually pay
back their debt you don’t have that money to operate your business which is to
buy new maize. Therefore, there is
a risk that an ever growing percentage of your capital is being absorbed by
debtors and bad debtors, and that your business operations gradually come to a
standstill due to lack of cash to buy new maize.
In my
opinion, in the NMA context, there is reason to be cautious to start grain
storage projects. Such projects can
easily fail due to weak management (particularly control of cash and stock) and
poor financial administration. In
my opinion it would be wise for donor agencies only to start such a project with
NGOs which have a good proven track record as regards financial administration
and management. An NGO would in my
opinion not qualify if for example they do not have the habit to regularly carry
out cash reconciliation's.
The
combination of a grain mill with a grain store is in principle a very good
combination. Very positive is the
possibility that the depreciation fund of the mill can be used to provide
working capital for the grain store. When
after some time depreciation funds are needed for major repairs, you can sell
maize and have less working capital for the maize purchases (but build it up
again through the monthly allocation of depreciation costs).
In my
opinion a good start of a grain storage project could be made by a successful
grain mill project which has every month a cash flow surplus as the result of
depreciation of machinery. Some of
the NMA grain mill projects do have such a comfortable cash flow surplus, but
they have no good purpose for investing this temporary cash surplus (and in
practice this money is then easily misused for other unclear purposes).
Given
this situation, in my opinion, donors should take the back seat with starting a
grain storage project. If a grain
mill project takes the initiative to invest depreciation funds in maize, and if
it successfully is controlling the cash and stocks, then the time could be ripe
for a donor to enlarge the working capital or provide funds for other needs of
the storage project.
7.
Conclusion
While
the workshop in itself was successful, I am looking forward to see the impact
which can be shown by the NGOs through improving various areas of financial
management, including financial control and financial reporting.
Cape
Town, 27 September 2000
Fedde
Renkema, Development Consultant
NMA Accounting Workshop, Loliondo September 2000
End of Workshop Test
Name Participant :
points
1.
Which 4 main types of accounts are found on the Chart of Accounts?
4
2.
What is the double entry system in bookkeeping?
6
3. What is a
Trial Balance?
6
4. Which
ones of the following accounts are not found on the Balance Sheet: Cash,
Debtors, Sales Income, Depreciation costs, Equipment, Accruals, Vehicle
maintenance costs.
6
5. Which
columns would you include in a “Budget Compared to Actual Report” (give a
layout of a table with the headings of the columns).
6
6.
What are indirect costs and what is apportionment of indirect costs?
6
7. Fill in:
Total Assets = Accumulated Funds (Equity) plus …………………….
Net Current Assets (Working Capital) = Current Assets minus
………………………
Net book value = Cost of a fixed asset minus
……………………..
9
8. What is a
Journal Book used for?
4
9.
Which one of the following is the most important tool in financial
management of NGOs: Cash Analysis Book or Constitution or Budget or Balance Sheet?
5
10. What is
the imprest system?
5
11. What is
the principle of “separation of duties” in finance procedures and why is it
important?
5
12. In a
normal situation, when may signatories sign blank cheques? (explain)
4
13. An NGO
receives from donors a diesel engine plus grain mill worth TSH 10 mln and it
pays from own accumulated funds for a new building TSH 8 mln.
How would you calculate the depreciation?
Give your calculations for the first year.
What should happen with the funds calculated for
depreciation?
14. Which
measures of productivity would you recommend for checking efficiency of a grain
mill?
6
15. Explain
shortly how in your view a cash/bank reconciliation should be done (including
what should be calculated and /or compared, when, by whom and who should sign
for correctness).
8
16. Describe
what in your view should be written in a monthly financial report of a grain
mill project (pls give an outline of the contents of the report by mentioning
the main headings which you would recommend).
10
I
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