Auditing is Awesome

As we told our Board, auditing is awesome. Graham even ran a workshop with the Board members to teach them how to complete this crucial governance task during the year – they need to complete one full Bank audit in November for GIVE. We have taught the Board a very simplified version of how to audit that boils down into one sentence: what Maurice has recorded that we have in the Bank, and what the Commercial Bank Account says we have. Easy, yet elegant.

Our Bank runs on economies of scale. It is too expensive for the majority of the villagers to travel to Kisumu to deposit their money into a commercial bank. Not only is the cost of travel too high for most, but also the fees incurred when setting up an account, or meeting minimum deposit amounts is beyond the scope of the villagers financial powers. Our Bank acts as a middleman, who collects all the villagers’ deposits then only makes one trip into Kisumu for 300 savers each week. [side: the average deposit is about 100 KSh. That’s $1.30. The average Bank account holds about 600 KSH].

So we set up this lovely equation. All of the files are paper based, and kept in three binders that Maurice carries to and from the Bank each operating day. Step one: total up all of the recorded client deposits from the client files. Add to that amount the amount of Project Money that GIVE holds in the same commercial bank account in order for Maurice to pay for expenses associated with the Bank. Next, subtract all of the expenses that have been incurred in the period. This is done by comparing all receipts to Maurice’s expense book. This equals A. Step two: Take the commercial bank balance. Remove all interest that has been added to the sum, and add back any tax and fees deducted. A should equal B.

Only problem with this entire procedure is that the commercial bank account does not fulfill one of the two jobs that it was set up for. Yes, all of the client money that has been deposited is safe and sound, and so is the project money. The problem lies in trying to withdraw the project money. This ‘feature’ hasn’t worked since February, and Maurice has been spending his own money in order to cover all expenses that the Bank has had. This completely messes up the entire equation. It did not make any sense to the Board members as to the way that we had to bypass this error (by only counting the expenses that were able to be paid for with those withdrawals).

THANK GOODNESS FOR FREDRICK

Fredrick has been jumping in to explain concepts to the Board whenever we have needed him. Which seems to be a lot, since a lot of the concepts become lost in translation, whether it is from our side explaining a term, or from the clients asking questions. Fredrick would just jump in, say something intelligent in English, then go right on explaining it to everyone in Luo. If there was a way we could grade the Board on their skills, he would get a mathematical A+.

Even with Fredrick’s explanations, Graham and I aren’t one hundred percent convinced by their ability to complete the entire thing on their own. We’ll be creating a step-by-step auditing procedure in their manuals. We are also hoping that Fredrick spearheads this one