Financial statement analysis techniques in Non-Governmental Organizations in Nairobi

Abstract

The number of NGOs in Kenya has continued to grow both in numbers and also in the amount of financial resources that these organizations control. With the opening up democratic space in Kenya, there has been a massive increase in NGOs with an estimated growth rate of 400 NGOs per year since 2001. By June 2010 the board had registered a total of 6752 organizations country wide and 2677 in Nairobi. The research sought to look at financial performance measurement in NGOs in Kenya with a bias for Financial Statement Analysis (FSA).Its aim was to find out the extent to which FSA techniques are used and the factors affecting choice of technique? It also sought to establish whether with the increased demand for documentation of performance by funders; there has been any requirement for NGOs to tailor their financial reports in a way that allows for FSA to be conducted. Are the determinant factors in anyway related to their funders who are their key stakeholders? Based on its findings, this research has concluded that though conducted, FSA is limited, scarce and not done conclusively. Financial reporting and analysis lay emphasis on project and funding based as opposed to the overall analysis of the entire firm. Funders are a key influential stakeholder of NGOs and increasingly demand detailed documentation on the use of funds However, while conducting FSA, ease of use and conceptual clarity of a technique is a more influential factor than the funders’ requirements.