An analysis of the challenges that multi-funded NGOs in Kenya face in financial reporting

Abstract

Financial reporting generally involves the public issuance of financial statements and their related notes and disclosures as set forth in accounting standards and requirements. NGO financial statements provide insight into the sources of funding, the cost of service delivery, and an organization's ability to operate in the future. The purpose of this study was to analyze the challenges multi-funded NGOs face in financial reporting. The study adopted an explanatory research design on a sample of eighty six senior finance personnel in multi- funded NGOs. Primary data was collected using questionnaires and data analyzed using descriptive and inferential statistics (t-test and chi-square test). In relation to donor requirements, the entire respondents acknowledge that donor requirements are not similar and all of them expect the organization to meet their (donor) requirements. From the findings, most donors require an annual audit of the funds donated. The analysis shows that varying donor and regulatory requirements create challenges in financial reporting. Varying submission of financial reports time-lines also creates challenges in financial reporting. From the findings, qualification inadequacy of the accounting staff will result in financial reporting challenges. All the respondents strongly agreed that investing in a good accounting system ensures good financial reporting. The findings indicate that inferior financial accounting systems will affect financial reporting and varied transaction and reporting currencies create challenges in financial reporting. The findings illustrated the need to incorporate the Standard Operating Reporting Procedures in financial reporting in NGOs to reduce these challenges. Further studies are recommended in finding out more challenges that affect financial reporting in multi-funded NGOs in Kenya as well as studies that will ascertain the effectiveness of Standard Operating Reporting Procedures in Kenya.