Use of Donor Fund Managers: a new strategy by US and European Union Donors in Uganda
If you are a Non-Governmental Organization (NGO) and have donor support from funders in United States or European Union, chances are that your company directors/ founders are no longer sole signatories on your NGO bank accounts.
You now have a fund manager, usually a partner in a local firm affiliated to an International firm, as a co-signatory on the bank account into which donors deposit the money.
This development has come following increased accountability issues over the use and application of donor funds. As African countries get on the spot light over misuse of donor funds for personal benefit by the NGO directors and financial managers, donors are implementing some controls to ensure value for money or make it difficult for NGOs to steal the funds.
Donors think that by having a partner or a senior staff of a local firm (affiliated to an International firm) e.g. Ernst & Young Uganda or KPMG Uganda audit partner providing fund management services on behalf of the Donor under a monthly retainer fee arrangement is the best and cheaper option.
The case for this is twofold;
A local firm partner is a Certified Public Accountant in good standing with the local accountancy body. It is easier for the donor to seek redress from the accountancy body in case the Fund manager is found to be involved in malpractices.
Donors prefer to use International audit firms with presence in Uganda due to the reputation of such firms. Of course, donors don’t know of powerful local firms, which can also do the job.
To tap into donor money as a fund manager and or auditor, you must have a very strong brand name.
For most international companies, a brand is everything when it comes to auditing and funds management services. Sometimes the donors themselves must be accountable to third parties in which case a big name firm comes in handy.
Once they mention that an international audit firm X, Y or Z did the audit or manages the fund in Uganda or Kenya, everyone already knows that name for quality services in their country, and are made to believe right away that the services are superb and their money is safe. Unlike local firms where someone has to get alarmed, the big name audit firm is already known for quality (even if they don’t offer that kind of quality on the local assignments).
How to tap into the opportunity
Local firms must be affiliated to big multinational companies if they are to tap into such advantages. If one is involved in auditing or funds management services, they need to aggressively explore international affiliation. Many international companies and organizations do auditing and funds management services for validation and NOT quality services. Of course to them, a big name firm means quality services which might not always be the case.
The success of big audit firms in the local markets is not that the employees are exceptionally better than their peers who own local firms. The audit firms are successful because they are given a lot of referral business from their affiliate firms or head office.
A case in point:
During the acquisition of Warid Telecom Uganda by Bharti Airtel of India, Ernst & Young were appointed the transactions advisor for tax purposes. In India, Ernst & Young India provides tax advisory services to Bharti Airtel. So, they approached them to help handle the Ugandan transaction.
Since Warid’s operations were based in Uganda, Ernst & Young India contacted Ernst & Young Uganda (as the latter know the local tax regime well) to provide the services and bill them (Ernst & Young India), who then have their client (Bharti Airtel) cover the bill. They have an option of adding their own margin.
It is natural for E&Y India to call E&Y Uganda to offer such services. And that is how all the big four firms get international business.
It will get tougher for local business
When it comes to offering auditing services to big companies and multinationals, it is unlikely that any local firm, even if they have the expertise to handle, will ever get the job.
For example, if KMPG UK or US audits a company interested in setting up new operations in Uganda, they will naturally contact KPMG Uganda to provide services such as due diligence or recruitment. Local firms have no chances of knowing about such deals.
The unfortunate bit for the accountancy and auditing profession, there is no serious ‘ring fencing.’ It is common for consultants to travel from India or US to Uganda to work on a client and return on completion without having used the local resources for skills transfer. All they need is to operate under the global audit firm name while in Uganda.
However, such a thing is a rare occurrence in legal firms, if at all possible. You must be a member in good standing to practice law in Uganda. As a result, local law firms are affiliated to big name legal firms. That is why you have not had about international law firms establishing local offices – they do it through local firms, and this has facilitated growth, through skills transfer and training.
Because of the connected nature of referral clients, local firms in auditing and accountancy must identify a strong global brand name providing auditing and assurance services like funds management, due diligence and recovery services and explore affiliation opportunities or operate their organization under the international brand name. Although this opportunity comes with its own limitations, it enables fast growth, repeat business, and good clients immediately the office is opened.
Consulting services is a new ball game
Unlike audit that is based on certain rules and principles (IFRS, Accounting policies, etc) consulting is all about value delivery and improving the clients’ condition.
As founder and CEO at Summit Consulting Ltd, big name audit firms, although have advantage to market due to their strong brand, they lack the in-house capacity and resources to provide quality consulting services.
You see, audit requires models, methodologies and templates. Although one audit methodology may apply to all bank clients, not with consulting services which include but not limited to– risk management, fraud prevention/ investigations, ICT security and governance, among others
Not with consulting.
You need brains. Each consulting engagement is unique in its own way.
So, your big four or big name templates, tools and process don’t work. You must have the capacity to interpret the client’s condition and apply these tools so that their business is improved.
Of course some international firms and big clients/ NGOs have not yet realized this. It is your role as a local or private consultant to teach the client about it and change their mind set. It starts with you.
If you intend to tap into big business, grow your practice and get clients without even leaving the comfort of your office, identify a big name international firm and partner.
Otherwise, do consulting and be damn good at it. You will get there.
Copyright Mustapha Barnabas Mugisa, CFE. Your Success Partner. 2014 All rights reserved. You are free to share with appropriate attribution.