Donations and Controls

Towards the end of 2019 my dear Uncle rested after a long battle with Diabetes. As is custom here in Kenya we got together as a family and later with friends to see how we could give him a deserving send off and defray the hospital bill that had not been settled.

In Kenya we have a long history of donations when a crisis or other need arises. Whenever there is a hospital bill, a death, a wedding , an education bill, a visit to a new born, a Church building fund, a political party support or just a family get together Kenyans rely on the tried and tested method of Harambee (a pulling together of finances towards a cause). It can be seen as form of social insurance where friends and relatives come together every so often to bear each others burdens of mainly a financial type. Culturally it is expected that one shows up for their friends and family with the expectation that should you have a need that requires more than you can bear, then your friends and family will come through for you.

Before the advent of the globally renowned mobile money transfer platform Mpesa, Almost all donations were collected in cash or cheques. This was done in meetings organised to collect the donations where contributions were acknowledged publicly mainly to spur others to give generously though this could also have created a control over the funds collected since those present can do a tally as collections are announced.

From my experience as treasurer for my Uncles funeral , there is now a mix of both cash and Mpesa with older folk and politicians still giving cash. The collection of donations in the way it is done here posses several challenges :

• Keeping track of the amounts being donated- The Cashier or Treasurer needs to be a person of utmost integrity and skill. The reason is; cash is given to her in various ways such as cash, cheque, Personal Mpesa, event Mpesa among other routes. There is no 'double entry' to the cash coming in. In a business transaction you would be able to check Inventory reduction, sales etc and compare that with cash received. That is not the case with donations for Harambees or even say Church offerings.Thus the completeness and accuracy of all donations made is the sole responsibility and trust of the cashier or treasurer.
• Keeping track of cash Spent- Once the cash has been received , It then needs to pay for expenses relating to the event e.g. for a funeral you would need to pay for a hearse , for mortuary fees, for a caterer if food will be served, for tents and seats, for a PA system etc Typically there is no predefined controls about how the money will be spent such as requisitions, competitive bids, LPO, Invoice, GRN etc. What tends to happen especially in the case of urgent matters like hospital bills or funerals is money is disbursed as requested.There is just no time to set up controls. You just have to trust that those who refer suppliers or vendors to the committee have done some checks that they are people of integrity.In some cases some prefer to spend on a particular item say the media announcements and report that to the committee instead of sending donations.
• Reporting and reconciliations- Because of the above 2 situations reporting of receipts including those in kind and expenditure can be some work for the cashier or treasurer. If there is a genuine error or a deliberate misapplication then it would be hard to catch.Secondly very few follow up to get a detailed report of what transpired. There are no legal or professional demands that require a particular form of reporting. It is therefore up-to the committee to follow up on the matter before it is disbanded.

To be fair this modus operandi ensures utmost efficiency with funds being received from far and wide and then quickly being disbursed to ensure quick turn around for the issue at hand - say ensuring a patient travels to a foreign country for much needed treatment or as in our case a funeral of a loved one.

As a CPA, I am obviously intrigued as to how the money flow in these arrangements can be secured while still ensuring the efficiency. I would recommend

1. The committee should comprise people of Integrity, knowledge and skill on money matters
2. The Cashier / Treasurer needs to be a person of integrity and skill. Hard work will be required to ensure you give the committee a timely and credible report.
3. Ensure a detailed Budget is done and actual spending is tracked against it. This allows the committee to address items that have huge variances
4. Keep track of items funded directly as well as those funded from the central kitty against the budget
5. Report all monies received in their various buckets e.g. Mpesa, Cash, money held by a committee member, online, direct bank deposits etc
6. Record and follow up on pledges
7. Report all giving received. This maybe challenging but Mpesa linked to a bank account can give detailed reports. This allows all to see how well the social insurance has worked so that they can reciprocate. For cash donations, ensure what the person says is their giving is recorded and confirmed. This is because some individuals knowingly or unknowingly may state a higher figure than is actually given.

I think we can debate about the benefits or lack thereof of the Harambee as a way to fund some of these activities but I think It is here to stay partly because we have huge wealth gaps and partly because it is the way we express care culturally.

You can share your thoughts with me on [email protected]