Archive for February, 2011

Oh, these donor driven directors!

Friday, February 18th, 2011

Are you a donor driven director? Take a look in the mirror and try to be honest. Do you see the typical characteristics of a donor driven director? Here they are:

 Yes, in my face, I notice this certain expression that can never say NO to a donor. I start to argue with myself: “What’s wrong with taking money? – I mean, if they want to throw money at us from a helicopter, why should I not take it? Times are not so easy. There is no reason to ignore existing funds. Why not to pick up a bread crumb that is lying in the street? Who will take care of these funds, if not our organisation?”

And then, I started to think a bit about how to interpret our mission in a different way: ”Well, of course our mission is the protection of HUMAN rights, especially the freedom of speech. So, where are the arguments why we should take care of an ecological project? Mmmh, let me think. What was the name of the project? “Save the Okapi” – well, we can say that okapis also have rights – rights that have to be defended. It is not exactly our favored theme – ”the freedom of speech”, but after all, the voice of the okapi should also be heard!”

Thus I stopped worrying and learned how a donor driven director should think.

 

A donor driven director is a person who values the ability to attract funds higher than the mission of the organisation. In other words, the NGO does not follow its own path, but acts more like an agency that realizes – on demand – different projects. Even very big supranational organisations could be donor driven: They put into practice what the funding organisations have ordered them to do.

The opposite of the DDD – donor driven director – is the MMM – the mission minded master. Are you a mission minded master? Take a look in the mirror and try to be honest. Do you see the typical characteristics of a mission minded master? Well, it is easy: the mission minded master puts the mission higher than the possibility to get quick cash. The mission minded master makes a strategic plan how to get cash for a certain idea or project. He does not streamline the organisation for any old project/whatever objective is expected.

A donor driven approach can have very bad results:

1.      It could be that management is tempted to realize projects that are irresponsible or counterproductive. If the NGO had had the opportunity to design the project outlines, the project would never have been realized. There is a risk that projects are only realized because there are funds for it.

2.      In these cases, there is a always a tendency that middle management would try to re-allocate the funds to the “true purpose” – this could result in a very volatile or liberal interpretation of the contractual requirements.

3.      The project could be counterproductive.

4.      Employees lose the track of the mission.

Okay, you might say: Yes, we understand this. But, what has this to do with accounting?

 

The answer is: all management issues and all management styles leave an imprint on accounting. In this case, the DD-Directors have sometimes a very bad influence on accounting. Why? Because donor driven directors tend to organise accounting only according to donors, but rarely according to organisations.

 

For instance, it could be that an organisation prepares only project reports to the different donors, but not balance sheet or income statement is prepared. In other words, every donor receives his piece-meal statement, but even management has no overview on the financial position of the organisation. On the long run, this is not only unsatisfactory for auditors, but also for management and donors. Why? Because, without overview, donators cannot be sure that their portion of funds still exists either.

For many directors, this comes as a shock: many DDDs think that accounting is ONLY done because external parties need this. This is a complete misunderstanding of the nature of accounting: There is no good accounting without motivation for accounting. Okay, I agree, In the profit world, this is a more evident picture: it is the profit motive that makes us count.

However, the conclusion that in the non-profit world there is no profit and consequently also no motive for accounting is wrong. The mission takes the place of the profit motive. Thus, the master plan for good accounting is always to start from the mission: What would we like to measure? Which figures do we need? Which figures do our stakeholders need – not only donors, but also members, board members, employees, beneficiaries?

A simple technical approach to accounting – without an understanding of the mission of the organisation – will end up in dead number crunching. This is not what we want from accounting.