The OHF Approach to maximising the benefit to cost ratio requires:
- Detailed operational recording and planning especially of costs.
- Regular analysis of cost to ensure that market prices are used.
- Purchasing is done by several people rather than one or two individuals.
- Checks on purchased item by admin personnel and or supervisor.
- Long-term analysis of cost to determine reasonable benchmark.
- Receipts are not to be 100% trusted.
- Financial control is beyond book keeping which are receipt based accounting.
- Active involvement from HQ staff through regular operational visits.
Direct control over long-term programmes
The need for direct control cannot be underestimated. If you are a grantmaker and supports a project done by a local NGO, the most you can do is to withdraw your funding from that NGO. However, if you are under pressure to spend a certain amount of money in a country, you may be forced to look the other way and accept a lower standard of accountability. OHF’s preference is for managing via our own local staff over whom we have direct control. In other words we are both the grant maker and grantee. We raise our own funds and execute the programs ourselves.
Grantmakers partnering OHF can be assured that their grants to developing countries are used for the purposes as defined by the grant.
A very hands-on approach
OHF brings a unique approach where we combine the discipline of a developed country with the capabilities of local staff in a developing country. Proper management requires regular reports, check lists and street smart processes as highlighted in the section on OHF Model. Hands-on micro management is needed at least in the initial phases to ensure processes are understood and the discipline to execute them consistently is in place. There cannot be MACRO MANAGEMENT when the MICRO MANAGEMENT processes are not in place.
Hands-on approach requires intimate knowledge of local prices and rules. For example, while receipts are accepted with no doubt as to their accuracy in developed countries, we know that in developing countries the vendor often ask the buyer what prices they want to put on the receipts! In developing countries, relationship is very important and it is very hard not to buy at higher prices from a relative or friend!
Our processes have to go down to micro management level and not just at the macro level where the focus in on broad statistics. We often ask HOW something is done and not just WHAT is done.
There are different meanings attached to the words “hands-on”. By hands-on, we mean a very practical approach to understanding how cost is derived.
What do we mean by hands-on?
OHF has a menu system where for each dish we list out the exact ingredients by weight and their cost. The exact amount of rice per child is also determined. We do not accept lump sum figure stating the amount that is spent on food. The costing for food is derived from the menu system which lists down the cost and weight of every ingredient used on a per child basis. This is multiplied by the number of children eating that particular dish.
How do we know what food is purchased? Every wet food item is weighed in the presence of an admin staff. Food purchases are made by different people .A schedule plans who is doing the marketing each day.Having different groups do the marketing makes it harder for food prices to be fraudently recorded.
The food bought is recorded daily and pivot tables extract the average cost per kilogram of the items purchased. Every six months, this average cost per kilo will update the cost in the menu table. The average cost per kilogram of the various items are periodically checked against market prices by the supervisor or HQ staff. A great deal of detail work is involved and recorded which makes fraud very hard to hide. The latter is easily hidden if only lump sum figures are provided.
The International Journal of Not-for-Profit Law, Volume 6, Issue 3, June 2004 writes:
Donors must develop an independent test for determining that an organization is credible, transparent, and honest before disbursing funds, in order to avoid the much-taunted misallocation of resources that can result in financial misappropriation. In order to avoid misallocation, donors must look before they leap. Donors must also realize that NGOs need help if they are to be successful in waging war against the miscreants in their midst by sharing information about the reputation of other NGOs.