Complex world of grants management

Victor Muchemwa

Zimbabwe receives more than US$400m in grant aid on an annual basis with most of it coming from bilateral and multilateral agreements between the government and foreign governments.

Donor aid is channelled through UKAid, USAid, EU, UN Agencies and others. For implementation, these agencies implement programmes through various models such as;
Implementation by international NGOs (INGOs): These are development partners with a lot of expertise and experience in delivering programmes across the globe and most of them with headquarters in the West. Some are even private companies in their homeland but registered as NGOs when implementing charity programmes overseas. Some leverage programmes from own fundraising activities such as Oxfam GB. The risk level of operating through INGOs is considered lower than local NGOs.

Implementation by local NGOs: Local NGOs have better knowledge of local environments but suffer from lack of capacity and experience in managing large grants. Unlike INGOs which can be asked to return funds if there are disputes or misuse of funds, most local NGOs literally get away with murder whenever funds are abused. The most common method of redress is donor fund pull out. A school of thought or movement in support of local NGOs is that using local organisations and systems is a sustainable model as donor funds are not around forever! There will come a time when donor funds will dry up with locals expected to take over.

Partnership between INGOs and NGOs: A preferred model of using leveraging organisational expertise from INGOs in capacity building local NGOs. The model however suffers setbacks of being more expensive and there have been instances where capacity building goes on forever. A capacity building INGO may prefer to keep operating and providing capacity building services as a source of income, if no capacity gaps exist, then they are out of income and jobs.

Most common risks in the NGO sector

 Procurement (tenders, staff recruitment, goods procurement)

 Donor Requirements (tax, unbudgeted expenses)

 Abuse of cash resources (travel allowances, cash to beneficiaries, foreign currency arbitrage opportunities)

 Abuse of goods in kind (goods not reaching intended beneficiaries or misuse)

What makes grants management complex

In a typical NGO, there are support departments such as finance, procurement, human resources and administration. Support departments help programme teams which include monitoring and evaluation. Our focus is on the grants management department which is responsible for oversight of funds channelled to support partners.

The grants management unit is sometimes a standalone department or can fall under the finance department. When it is a standalone department, there are several benefits such as working closely with programme and supporting teams. As a strategic unit, it has its own strategies, resource allocations and is subject to strategic review. Major roles include budgeting, donor compliance, risk management, monitoring and evaluation and partner management.

The department works effectively when structured like an internal audit department, but few organisations have independent grants management departments. The most common approach is to place grants management functions in the finance department. Once placed in finance, the grants management functions will suffer from being consumed in financial operations such as financial and management reporting, taxation and other administration functions.

The language becomes internalised financial management, creating loopholes in grants management oversight. The major reason for incorporating the department into finance is financial considerations but trouble often follows when funds misappropriation start to emerge from partners’ financial mismanagement.

Grants management require more than financial management and some of the key skills include:

Strong programme development and management.

Strong risk analysis and management especially tracking of key macro and micro risks. Strategic partnership management including capacity building. All of these key skills are not necessarily found in the finance department. The finance department can do a good job of partner visits and voucher verification, but this is low-level risk management which does not include strategic management, monitoring and evaluation and capacity building.

A number of local NGOs made headlines when funding taps where switched off by donors and a closer look shows lack of strong grant management approaches. These include weaknesses of donor agencies and INGOs and local NGOs themselves… it’s a complex world.

Some of the leaders of the local NGOs cited clean external audit reports having been issued, but in the complex world of grant management, audited reports are not enough. External auditors do not adequately review this field because they are mostly finance professionals with little appreciation of programme management, monitoring and evaluation and complex donor requirements. They should be worried that after issuing unqualified audited reports, donors move in and withdraw funding due to gross funds misappropriation.

Recommendations

Every organisation involved in grant management should critically assess its business model and capacity.

Grant management strategies:

Do you have a strong grant management strategy? Are you involving partners, auditors and other stakeholders in the development of a grant management strategy? Do you have grants management manuals and systems? (few organisations have this in place). Grant management systems: Do they have more than finance skills in grant management? How are they developing skills? Do they have strong induction programmes for new personnel? Do they have strong performance management systems for the function? Are you benchmarking your departments to world best practice?

Grant management skills: How are you developing and reviewing grants management skills? Do you have strong in-house grant management inductions? Are you allocating sufficient resources in the development of grant management skills?

Risk management skills: Do you have strategies to review partner risks? Are you involving internal and external auditors or risk management professionals? Are you reviewing and analysing trending risks in the economy? Are grantee partners, donors and beneficiaries involved? Are auditors’ role simply carrying out external audits at the end of the financial year? How is monitoring and evaluation involved in risk management?

Capacity building skills: Do you have a strategy for identifying capacity gaps and plugging them through formal capacity-building? Do you have resources allocated for building capacity-building skills? Are you reviewing capacity-building initiatives? Do you have case studies of successfully completed capacity-building initiatives?

Donor funds are taxpayer funds and they monitor their use and whenever reports of abuse emerge, they mostly respond with calls for their cut. With most Western governments dealing with their own economic challenges, the calls to cut donor funding are getting louder and this is increasing the pressure for transparent and effective use of donor funding. While some gaps in grant management are due to lack of resources and knowledge, there are also cases where gaps are deliberate in order to facilitate fraudulent activities and this is not surprising given Zimbabwe’s ranking on the corruption index.

It’s therefore important for organisations handling donor funds to critically analyse their grant management strategies, systems and skills with a view to strengthening them for more donor funds abuse means increased lack of trust and a cut in funding or closure of organisations.

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