Finance and Accounting in Uganda

[A version of this CIMA article Oct 2010 in Financial Management appeared in Financial Management magazine, published by CIMA, in October 2010.]

Quite a bit gets written about Finance outside of US or Europe.  However, the focus has been on the big trans-national businesses, the IBMs, HSBC’s.  Even the big Non-Governmental Organisations (NGOs) like Oxfam and SCF seek to standardize procedures and norms across different nations.  But down at the level of local NGOs and faith based bodies, what’s it like?  What does financial management look like in the rural hospital or tropical urban slum?

My wife and I went out to work in a hospital in rural Uganda in 2008 to 2010.  I had worked abroad before, in Pakistan and Nepal, but have done many years in UK universities and colleges.  With parents gone and grand-children not yet here, it was a window of opportunity as Christians to make a big difference.

Though quite remote, the Hospital was not a small place.  It comprises of a 240 bed general hospital, 300 staff, a primary school, a school of nursing, a hydro-power company, a large child sponsorship programme, and sundry other smaller projects.   I was responsible for group finances, some HR and some IT. I sat on the management board.

Hands On?

Cash management here can be literally hands-on. My hands got filthy counting piles of small value grubby notes, for the end-of-day cash reconciliation.  Every 30 minutes someone was at the door with a claim, invoice or voucher for my signature and rubber stamp, regardless of how small.  And often there are claims of “I need it now” (doesn’t everybody!).

A supporter who worked for a major UK media conglomerate said they used just one bank account for all daily business.  Not us – we’ve a dozen or more.  Many donors and government agencies demand their own bank account for their own project, often linked with Government signatories and complex claim forms.  This means more bank charges, more cheques to go astray, more chasing of Government signatories up and down the District.  It could be worse, as in some other local NGOs, the Chairman of the Board of Governors is a mandatory signatory.

Hands On – The Till?

The reason for all these Bank accounts, signatures and cash counts is the fear of fraud.  Though fraud is less than you’d imagine, the fear of fraud is universal.  From that follows all the control measures.  Then there are anxieties about these very control mechanisms.  Who are to be signatories?  Who is to have the safe keys?    Indeed, I had colleagues and senior staff who refused to have the safe keys when I was off site, for fear that if anything went wrong when I was away, they would be blamed.

Giant Cash Book

The Hospital accounts are run like a giant cashbook.  It’s largely cash accounting.  Please be assured – they know who owes the Hospital money, whether patient debtors or staff loans.  And the creditors don’t let the Hospital forget them either….. it is more a case that they do not get recorded on the QuickBooks accounting system.

This is less silly than it seems.  Staff record what is owed in various books and they chase these debts.  Indeed, there are three locals, ex-policemen, who are debt collectors, paid by commission.  But to record as income in this situation, something that might well never come is to err on the side of optimism (hardly “prudent”). Sure, in theory it is better to record as income and then make provisions against that debt rather than not record in main ‘books’ at all, but that entails making sure reverse entries should we get the debt settled. Just another entry to be made, to get wrong.

Another consequence of treating the accounts as a super cashbook is that everything is treated as income or expense.  Nothing is capitalised, or treated as fixed assets. It is important to know what our fixed assets are, such as what equipment do we own, how much it is worth, and what kind of depreciation should we record.  It has been done in the past, but that was a while ago, and now it needs to be done again – this time for an organisation that’s bigger, more complex.  Receipts and invoices have been ferreted out of old dusty files.  The bowels of the Finance Safe Room were excavated in the search.  People’s memories here are long, and just as well, for we travelled quite a lot down Memory Lane to figure out what was recorded in old old audited accounts  so that we can now reconcile these  with the realities as we see them now.  A professional property valuation report from 2007 was found and pressed into use.  Bit by bit the list has together.  Like lost sheep, capital related costs are shepherded into the right place, and depreciation is introduced as an appropriate expense.

Keeping Donors Sweet

The Chair of the Board of Governors was the local bishop.  He was a good man and did not try and make the Hospital a cash cow for the diocese (what cash?).  On the other hand, his diocese had no capital to offer us either.  Total Hospital group income was around £800,000.  The group has made losses in recent years, more so in the Hospital itself, offset by surpluses on the other activities. Money came from patient fees as well as donors.  Patient fees provided 45% of group income, which was really good considering the low income of the local community.  Donors provided 35% of income, and Government of Uganda sources 10%.

Managing donors in a medium sized faith based body will put you in touch with two worlds of donors: big institutional donors and small church and personal givers.  With institutional donors like USAID, DANIDA, etc, we had spate bank accounts, clear targets, distinct reporting systems, and precise reporting timetables.  This will be familiar to quite a number of readers, but in rural Uganda, this way of doing things did not come readily.  But like all things, where jobs are at stake, it is surprising how much people can adapt.

The church givers and one-man-band charities in UK/USA/Eire also wanted to know where the money was going.  Some were happy to give towards the general running of the Hospital.  Some wanted to give to “special projects”.  The problem with “special projects” was that we had to scratch around of a special project for each would be donor.  Email and internet enabled would be donors to peer into the very mechanics of running places like ours, and to influence/direct our spending priorities.  Do not be put off from giving towards “general running costs” to places like this.  Remember, my staff in Uganda might have been regarded as mere overheads by donors in UK, but without them the place would not run.

A third category was “the alumni”, people who’ve visited or worked here before.  Who wanted to give old friends and acquaintances they knew in, or around, the Hospital.  So the money was in fact just passing through my hands to a large number of (genuinely needy) individuals.   The problem with all this was that the Hospital itself did not benefit from this “conduit funding”, not even a transaction deduction.  Also, it encouraged an attitude of dependent paternalism from well meaning Westerners.

Budgets And All That

Ah, budgets…. Like food, we may not cook them up but everyone has an opinion on them.  Budgeting petered out, though I revived it a bit.  You might ask “how can you control expenditure when you’ve no budget?”  Actually, having no money in the safe wonderfully focuses the heart on aorta-busting priorities!  The word “no” I could use in 7 languages, 3 were used frequently here.

The trouble with budgets is what to do when say your drugs budget runs out?  Stop treating people?  Little of our day-to-day expenditure is discretionary.  Furthermore, like in retail, income varies by the volume of customers, our patients.  Why not “flexible budgeting” or even “Activity Based Budgets”?  As I’ve done some of that in my previous job, I’d love to do it here too.  It would require creating a financial model of the Hospital.  Like in much retail, our range of services is enormous, and our price list is 16 pages long.  This kind of work would require years more here.

Peering Into The Past…and The Future

That is what all financial managers must do, with prior year analyses and financial forecasts for senior management.  Will I have enough cash next year?  Or even next month?  Managing the cash flow during the time I was there was been essential to avoid bankruptcy. Finances deteriorated because a key donor suspended donations and coincidentally the medical insurer halted payments. The reserves tumbled.  It was all hair-raising.  I had two “near-misses”, months when payments to suppliers ceased and sacks of cash were hurriedly driven from a bank two hours drive away to the site. Thankfully there are signs of this easing especially by the time I left, as the key donor has agreed to resume donations and there will be improvements regarding medical insurers payments.

I restarted monthly financial reporting, on cash, reserves and major creditors and debtors has resumed.  Regretfully I did little on proper financial forecasting by the time I left, but perhaps that reflects the uncertainties of life here.

On Your Own?

Thankfully no.  I had five staff in accounts and four in general and medical stores.  The level of knowledge was adequate but the level of application was often short.  I did talk though tricky questions on say foreign exchange revaluation or asset depreciation with staff, which is the way I liked to do things, but they were less actors and more audience.

That’s all then?

Not at all.  I was involved in payroll, audit, accounting procedures and Ugandan law, the vagaries of drug (non)supply, IT policy and hospital website plus blog.  Once at a conference in UK, I was told that Medical Superintendent at another hospital in rural Africa “did the books” after he did his surgery.  Well, good luck to him.  But this Hospital and many others like it have long since grown out of the stage of being just up-country clinics.

I was once told that if the finance manager in Africa was a popular man, then people should be worried.  Worried about favouritism; worried about fraud; worried about procedural laxness.  On that basis, they didn’t have to be worried about me.  Nevertheless, people here highly prized equal treatment and fairness.  Should you go to a place like this, they too will appreciate your seeking to be fair to all, whatever age, grade or status.

Bill Lovett

Hospital: What’s In It

A 240 bed hospital; primary school, school of nursing, hydro-power company, child sponsorship programme and 6 other on-going projects.  +300 staff.  16 acres, 70 buildings, a waterfall and a forest.

Finance: What’s in it

Staff, 6 in accounts, 4 in general and medical stores.  Bank accounts: 10 in Uganda, 3 in UK. Computerised accounts run on Intuit’s Quickbooks, using 360 account codes.

Financial Results

(Ugx M)    Group  Hospital  Other

Income       2460      1390        1070
Expend’      2490      1530          960
Surp/Loss    -30      -140        +110

 “Other” has many Restricted Funds, and surpluses are not re-assignable.

Average bank balances; in UK = Ugx100m; in Uganda = Ugx110m.  Cash cover = 2.3 weeks with Ugandan accounts, 4.4 weeks with both UK and Ugandan accounts.

Income & Expenditure

Income

Donations                    37%
Fee Incomes                47%
 Government Grants   11%
 Other sources            5%

 Expenditure

Salary & related       47%
Medical Supplies       13%
Works.  Equipment   8%
Pupil. Sponsorship     12%
Other costs               19%
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