A Project of the American Enterprise Institute and the Federalist Society

Coping With Generous Donations

Financial Times

February 27, 2006

By Robert Bruce

Last year's spate of natural disasters, from the tsunami to the Pakistan earthquake and Darfur, was unprecedented. And so was the charitable response. And in turn that has led to a very urgent need for upgrading the financial controls involved.

Mango, Management Accounting for Non-Governmental Organisations, is the charity that aims to strengthen the financial management of aid agencies and NGOs through training, placements of staff to help out, and support services. Mango's director is Alex Jacobs, himself a chartered management accountant.

"The volume of funds raised post-tsunami was Pounds 400m," he says, "which was well over 10 times the amount raised from appeals in the past".

The overwhelming generosity of donors created its own difficulties. "It was an unbelievably large amount of money to be handled by NGOs," says Mr Jacobs. "They were just not used to working on that scale."

Add to that the fact that two of the countries in which much of the relief is being deployed were caught up with internal conflicts and the difficulty of providing effective relief in an efficient and cost-effective way escalates.

The post-tsunami report published late last year by the Disasters Emergency Committee (DEC), which oversees the UK efforts, made this plain. "An important complication is that the most affected regions of the two most affected countries, Indonesia and Sri Lanka, have suffered civil war for more than two decades," it said.

And, for example, what might have seemed a simple issue of sourcing timber to build shelter and homes in Indonesia became fraught.

"Environmental groups put aid agencies under intense pressure not to buy locally and at the same time the Indonesian government threatened to ban imports," said the DEC report.

The aid effort, in Mr Jacob's words, "has to be played out through the prism of local politics". The world of humanitarian aid has changed. "It is much harder than just turning up and handing out blankets," says Mr Jacobs. Responses have to become much more subtle.

Short-term medical relief is relatively simple. But long-term rehabilitation work is much harder. This can range from assisting people's livelihoods, by providing fishing boats, for example, to rebuilding houses. This is a good example of the complexity. Planning permission may become complex. Questions of ownership arise.

Local governments may press for tourism complexes to be built rather than rehousing the local people where they lived close to the sea pre-tsunami.

There is also the question of the handling of the sheer scale of the donations. "There is a lot of concern in the NGO community about the effects of flooding local bodies with money," says Mr Jacobs. "The donors say 'We need to spend this in the year' and it creates incredible difficulties."

The culture is changing. Mike Kelly is UK Head of Corporate Social Responsibility at accounting firm KPMG, one of the many supporters of Mango. "It becomes a question of spending the money efficiently," he says. "In the same way that business generally is held to be more accountable at large to society so are the NGOs. So management accountancy is even more fundamental as a core skill."

This is also fundamental to Mango's efforts. As the aims of the NGOs working in hard-hit areas move from short-term disaster relief to long-term projects their needs change. "It has taken quite a long time for agencies to move from the short-term to the long-term projects," says Mr Jacobs. As an example, he points to placements made by Mango in the Maldives to help with a five-year Pounds 20m project rebuilding water infrastructure and sanitation.

The embedding of financial skills in local communities is also a long-term goal. Mango is involved in such a project in Sri Lanka, for example. "We are going to second staff to Sri Lanka initially to work with Sri Lanka NGOs and then support Sri Lankan accountants to support local NGOs," says Mr Jacobs. "It is more appropriate to have Sri Lankan people helping Sri Lankan people."

At the same time accountants from the UK who have put themselves on to the Mango register head out on short-term projects to provide training around the world.

Stephen Blakeley of KPMG Sustainability Advisory Services spent five weeks in rural schools in the Eastern Cape of South Africa, for example.

"Seven accountants went out to teach basic budgeting and accounting," he says. It is a question of training the head teachers and governing bodies and training the local authorities in how to interpret budgets.

"I was placed with one school down a dirt track in a rural area," says Mr Blakeley. "They were very enthusiastic and keen," he says, "and very responsive".

It was a question of dealing with highly intelligent people who lacked a formal education. "The important thing is that Mango has access to financial trainers as a resource," he says. "It is linking up the resources to where they are needed. It is the simplicity of it that makes it easy."

The large UK accounting firms of PwC, KPMG and Ernst & Young provide financial support for Mango and through an agreement with PwC to increase their support Mango are about to embark on another project that will enable a distance learning programme to be created. "It will make the training cheaper and more accessible to people around the world," says Mr Jacobs.

The world of aid has changed completely as a result of the tsunami. "Accounting is just as important as blankets," says Mr Jacobs.

"Agencies have been aware of this for years. But when you move on to a bigger scale there is more pressure to show the donations are being used appropriately."

Management accounting is the silent partner in all of this. "It is of central importance to the sector," he says. "If we get it right then we can develop a more effective accountability regime."

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