TT17 Assessing partners' finances

Guide to Financial Management

Top Tips 17

Top Tips for Assessing Partners’ Finances

As a grant-making organisation, you need to have confidence in the implementing partners you work with. You want to know if their financial management is strong enough to use and account for the funds properly.

But how do you go about assessing the financial management of a potential partner or even a longstanding one? Here are some top tips to help you:

1. Develop a partnership relationship from the start

An assessment should be the first stage in developing an effective and long lasting relationship between partners. Keep in mind the power dynamics that external funding can create and make sure assessments are sensitive to the local organisation’s priorities and constructive from their point of view.

2. Be clear about the purpose of the assessment

Do you see the assessment as a ‘test’ to be ‘passed’ as a condition for funding? If so, the grantee may not volunteer information about problems in case they ‘fail’.

Or do you see the assessment as a tool to identify opportunities for improvement? If so, be prepared to give your partner the chance to resolve any issues or even offer your assistance to help build your partner’s capacity.

If your assessment is aiming to do both of the above at once, have a list of minimum standards which must be met but also look at a wider range of financial management issues to identify areas for improvement. (see points 4 and 5 below).

3. Talk to a range of people in the organisation

It is tempting to think that you only need to talk to the finance staff when doing a financial assessment but financial management is for everyone. If possible, talk to the Executive Director, all Senior Managers, field staff and beneficiaries as well as the Accountant.

4. Assess the quality of relationships with their partners and beneficiaries

If your grantee is itself making grants, look at how it works with its own partners. Do they carry out assessments? Are there formal grant agreements? Are there reasonable reporting requirements to ensure accountability?

How closely do grantees work with the people they aim to help to ensure activities meet their priorities? Do they provide financial reports to communities?

5. Use Mango’s health check

Mango’s Health check is a tool for organisations to assess themselves against best practice and identify areas for improvement. It covers best practice in the ‘Four Building Blocks’ of good financial management: budgeting, basic accounting systems, financial reporting, and internal controls, as well as staffing.

6. Visit Mango’s minimum requirements checklist

Mango’s Minimum requirements checklist separates the ‘must haves’ from the ‘should haves’ which could assist you in deciding on your assessment priorities.

7. Assess governance issues

Good governance has a fundamental impact on the effectiveness of financial management. Find out: whether the Board meet regularly? Do they review budgets and financial reports? Is there anyone on the Board with financial knowledge or experience? Are there any conflicts of interest?

8. Review the audited financial statements and other financial reports

The audited financial statements give an independently verified picture of the organisation’s financial activities and balances. See our checklist for 20 Questions to ask when reviewing financial reports.

9. Don’t look at figures or financial systems in isolation

Avoid relying solely on checklists, tools or numbers to make an assessment decision. They all help you to gain an understanding, but it is important to consider each organisation in its own context.

10. Have a standard approach to ensure consistency and fairness

If your organisation has several individuals assessing many applications, it is important to develop a standard approach and tools or criteria, but leave plenty of room for flexibility and personal judgement by the assessors.
 

Also see: TT26 Building Partners' Capacity

Want to learn more?

Mango’s Training Course Assessing your partners' financial health builds the confidence and skills of NGO staff to assess and strengthen local partner NGOs' financial management systems and capacity. Why not join us on the next event and have your fear taken out of finance?

See our calendar of courses around the world here: www.mango.org.uk/training/opentrainingprogramme

Mango's Health Check can be downloaded for free here.  It is available in 9 languages. 

Mango's Minimum standards checklist can be downloaded for free here.

Mango's 20 Questions to ask when reading financial reports can be downloaded for free here.

 

See Mango’s Guide to Financial Management for NGOs for free advice and tools, including a section on giving grants. See: www.mango.org.uk/guide

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Mango helps NGOs to make more of their money by: running practical training, supporting people in finance roles, advising NGOs and donors, and publishing free tools and guides: www.mango.org.uk