Kids Aid Tanzania attempt at controling finances

48.Main Street, Etwall, Derby, DE65 6LP, United Kingdom

Email: info@kidsaidtanzania.org.uk Tel: 01283 733001 www: kidsaidtanzania.org.uk


8 November 2010

Financial Transparency at Hisani

This letter is addressed to known overseas funders of Hisani and comes from Kids Aid Tanzania, a charity registered in England and Wales which has been the main overseas supporter of the orphanage in Buswelu since 2005 and the author if its first development plan. You can find out more about us on our websites, www.kidsaidtanzania.org.uk and www.africaorphanagevolunteering.org.uk , and in our Annual Report and Accounts on the website of the Charity Commission of England and Wales at http://www.charity-commission.gov.uk/Showcharity/RegisterOfCharities/CharityWithoutPartB.aspx?RegisteredCharityNumber=1111220&SubsidiaryNumber=0

I assume that you are aware that there is no transparency in how Hisani uses the money which is given to it. It has no auditable accounting system. Further, it neither follows its Constitution, nor the law governing NGOs in Tanzania with respect to the annual submission of audited accounts and fees to the government. In the past, this has not been a cause of major concern to Kids Aid Tanzania (KAT). We had a reasonable understanding from another orphanage with developed accounting systems, together with historical information provided by Hisani, of what the cost of running an orphanage like Hisani’s in the Mwanza region should be – around 30-40,000 Tz shillings per month per child cared for. We knew that our grant, together with income from the volunteering programme we promote, did not exceed this.

The situation has now changed as others have become more involved with Hisani, a development which we are pleased to see and has enabled more children to be cared for. However, this has taken place in a manner which has given rise to even less transparency than there was before. In particular, several different bank accounts are now in use which have the effect of hiding from individual funders the total income actually received from overseas.

It has always been a condition of KAT’s monthly grant that Hisani provides us with information on money it receives from overseas through sending us its bank statements each month. This is to enable the trustees of Kids Aid Tanzania to determine whether the needs of Hisani justify the use of charitable funds raised in the United Kingdom. Only recently did we discover that additional bank accounts were being used apart from the official Hisani account at CRDB Bank. Fred has now provided us with statements for all of them.

We have said to Hisani that the amount of money currently being received through its different bank accounts does not allow us to continue to provide funding without a proper accounting system being established and monitored by a registered accountant. Fred has agreed to this and we are working towards its full implementation during the coming months.

I am contacting you, as one of the organisations or individuals who has provided a significant amount of support to Hisani in recent times, to help us achieve an outcome which meets the needs of all funders for an accounting system which is fully transparent, and to further the growth of Hisani. Kids Aid Tanzania was recently offered £10,000 towards a Hisani building project but this offer was withdrawn because of Hisani’s lack of audited accounts. This demonstrates clearly that it is in Hisani’s interests to implement sound accounting practices as well as those of its overseas supporters.

You may wish to see the information which has given rise to our concern.

Hisani’s overseas income

Hisani’s income for the period 1st January 2010 to September 2010, based on the bank statements we have been given, has been nearly 68 million shillings, made up as follows:

Tz shillings

Kids Aid Tanzania 25,234,488

L’Associazione Filippo Astori 25,488,610

Canadian former volunteer 10,323,075

Other funders 6,653,205

Your browser may not support display of this image. 67,699,378

In addition to this, there is locally generated income from a lorry and two minibuses supplied by overseas funders, and volunteer payments. The lorry, which KAT supplied, has provided a further 9,000,000/= over this period, and 2 minibuses, provided by two former Hisani volunteers, at least this much again. Volunteer fees will have added a further 5,000,000/=.

Thus Hisani’s known monthly income is currently in the region of 9,000,000/=. This is around double the amount of money needed to support an orphanage which presently cares for, according to Fred’s latest figures, 84 children in Buswelu and 46 at Lukobe. However, we anticipate that some of this income may be being provided for building projects or for secondary school fees. Also, we have not taken into account the expenses associated with the vehicles (drivers’ wages, fuel etc) or the running costs of the volunteer compound. These unknowns are illustrative of the transparency problem.

Hisani Schools Ltd

An additional complication is that Fred and Grace have set up a commercial company called Hisani Schools Ltd. This has yet to trade. Despite its name, its Articles of Association give the running of schools as only one of its 21 permitted activities. The remaining 20 cover everything from banking to retail. It is not linked in any legal manner to the work of the Hisani Centre for Women’s and Children’s Rights and its profits go to the shareholders, of which Fred and Grace are the only two at present. There is nothing wrong in this. However, overseas funders may feel, as KAT does, that the case for a transparent accounting system to demonstrate that money given for the benefit of the children is used only for this and does not find its way into a commercial enterprise, is strengthened even further.

This need is given further emphasis by the manner in which the different bank accounts are used. In western countries, different bank accounts may be held for different projects. A measure of management control is provided by using only the cheque book relating to a specific account for making


payments relating to that project. This is not Hisani’s practice because cheques are not widely trusted. The first thing Fred does on receiving money from overseas – as the bank statements show - is to withdraw it and to keep the money as cash at the orphanage. This involves millions of shillings. As one bank note looks very much like another, the possibility of using money raised for one purpose being used for another is very real.

KAT’s present support for Hisani

In the interests of completeness I will list the extent of KAT’s present involvement with Hisani

* We provide a monthly grant of £1,000. This is reviewed every 6 months. The future of this grant will depend on our success in implementing a proper accounting system. We are prepared to provide Hisani with the software necessary for this and will give training in its use when we return to Mwanza early in 2011. We will require Hisani to provide us with monthly accounts which have been checked by an auditor, together with bank statements as at present.



* We provide fees for the first two Hisani children who went to secondary school, Rose and Nelson. Their 4 years of schooling ends this year and their school reports make it unlikely that we shall extend our funding for them further.



* We promote volunteering at the Hisani orphanage and were responsible for the initial funding and furnishing of the volunteer compound. We provide intending volunteers with detailed notes on what to expect, current entry visa and volunteer work permit regulations etc. However, we do not take bookings. These are made directly with Fred. Volunteers pay Fred a fee of $350 a month to cover accommodation, meals and a donation to the orphanage. They often bring extra money with them, as well as donating to KAT.



* We do not presently fund any building activities. In the past, we paid for the water tank and tower, and the shower/toilet block.



Bank accounts examined

I will also list the bank accounts which we have examined.

* The CRDB Bank account was agreed with Hisani to be its bank account some three years ago. It is cheap to operate and efficient for the transfer of money from overseas. At present, only KAT is using it. There is a monthly fee of 8,200/= and a charge of 7,000/= to process overseas transfers



* An account at Standard Chartered. This year it has been used by L’Associazione Filippo Astori, a Canadian former volunteer and some miscellaneous donors. When KAT began funding Hisani it was through Standard Chartered. This was changed at Fred’s request because of its expense. Earlier this year Fred told us that this account had been closed! Its monthly operating costs are currently 20,000/= and it charges 15,000/= to process an overseas transfer. It is more than twice as expensive as CRDB and we don’t know why it is still in operation.



* Dollar and Tanzanian shillings accounts at the Diamond Trust Bank in the name of the Lukobe Organisation. This NGO was set up as a collaboration between a former Hisani volunteer from Canada and Hisani to develop a community project at Lukobe, an area about a 15 minute drive from Buswelu, which we have visited. This project has been wholly funded from money provided from Canada either directly or through a Canadian charity Global Peace Network. Further information will be found on the following websites www.lukobeproject.com and www.globalpeacenetwork.ca . Sadly, relationships have broken down over Hisani’s inability to show, to the satisfaction of the Canadian funders, that all the money sent was used for the purposes for which it was sent. The result has been a withdrawal of further funding from Canada and a court case instigated by Hisani to prevent recovery of assets funded by the Canadians. Because of this, the bank statements show no transactions since the beginning of the year. The project now seems to be functioning solely as a branch of the Buswelu orphanage.



* Savings & Finance Commercial Bank account belonging to Hisani Schools Ltd. This account held 96,000/= at the beginning of the year and 23.500/= at the year end. There was no activity on this account other than bank charges.



We enquired about any accounts relating to Hisani’s venture with the Asante Sana Organisation relating to the health centre project. Fred has told me that at present all costs are being dealt with by Asante Sana but that this will change when the centre becomes fully operational. This has the potential to reduce transparency even further, as the source of the money for running this venture is not evident.

In conclusion

KAT can only continue to fund Hisani if a satisfactory auditable accounting system is introduced and we are working with Hisani to meet this. As well as meeting our needs, this system will also enable Hisani to satisfy the requirements of the Tanzanian government and its own Constitution. Other benefits to Hisani will be the ability to access overseas funding not previously open to it and the avoidance of the concerns which led to the withdrawal of Canadian funds for the Lukobe project.

We intend to move ahead on this and provide accounting software to support the change.

To simplify the systems which provide input to the accounting system we are recommending to Hisani that:

* Only one bank account should be used, that being the CRDB account. The others should be closed.



* All activities related to the orphanages, local communities and the health centre should be operated in accordance with the Constitution of Hisani Centre for Women’s and Children’s Rights. The Lukobe Organisation should be closed.



We would welcome your own views on what we have written. We will forward to you shortly the accounting system needed to meet KAT’s requirements, which we will be happy to modify if you have any requirements to meet your own needs.

(Dr) Colin McArdle

Chair of trustees

Kids Aid Tanzania

Reg Charity No. 1111220