Multi-donor budget monitoring, shared cost allocation and exchange rates

October to December (only A is active): 3 × 15,000 = 45,000, 100% to A.

January to March (A and B, 22 FTE): A = 15,000 × 14/22 = 9,545.45 per month, i.e. 28,636 over 3 months; B = 15,000 × 8/22 = 5,454.55 per month, i.e. 16,364.

April to June (A, B and C, 25 FTE): A = 15,000 × 56% = 8,400 per month, i.e. 25,200; B = 32%, i.e. 4,800 per month and 14,400; C = 12%, i.e. 1,800 per month and 5,400.

Check: 36,164 = 30,764 + 5,400. For B, 30,764 over 6 months against a budget of 6 × 5,000 = 30,000: a slight overspend (764) that can be absorbed.

Project C: its normal share is 1,800 per month, i.e. 21,600 over 12 months, against a budget of 12,000: a gap of 9,600 USD. This cost cannot be shifted to A or B (that would be an unjustified charge). Options: ask donor C for a budget revision, fund the gap from unrestricted funds, or review the allocation key if it is not representative (documented justification, applied to all). Lesson: shared costs must be budgeted with the real key from the proposal stage.

The correction must be made through a documented reclassification entry (calculation, key, approval), before each donor's next financial report, and not by simply changing the forecast.

Corrected line 4: recorded 98,836; July to September forecast 3 × 8,400 = 25,200 (not 45,000).

Burn rate: 798,836 / 1,170,000 = 68.3% for 75% of the time elapsed: slight underspending, consistent with the savings on kits. Without the correction, line 4 would have shown 180,000 (+ 50%): an incorrect report and ineligible expenditure.

Budget lines outside the 10% flexibility: staff (+ 11.7%, cause: 12% salary increase on 1 April) and activities (− 13.3%). A written request must reach the donor no later than 31 August (30 days before the end). Lines 3 and 4 remain within the margin.

Proposal: transfer 46,036 from line 2 to lines 1 (+ 42,000) and 4 (+ 4,036); the activities budget falls to 493,964. For the unspent balance (27,964), propose reprogramming it into additional kits if the needs are documented and the purchase can be delivered before 30 September; otherwise, accept the balance and refund it. Also check that the staff forecast does not include unbudgeted recruitment.

Weighted average rate: (43,500,000 + 296,000,000 + 229,500,000) / (30,000 + 200,000 + 150,000) = 569,000,000 / 380,000 = 1,497.37 NGN per 1 USD.

June expenditure: 420,000,000 / 1,497.37 = 280,492 USD. At the official rate of 1,560: 420,000,000 / 1,560 = 269,231 USD. Difference: 11,261 USD of under-reported expenditure.

Effect: donors reimburse the actual cost borne by the organisation. The official rate is not the rate at which the dollars were actually converted: the method breaches the internal policy, distorts the reports (expenditure understated by 11,261 USD in one month, i.e. a loss for the organisation, or the reverse if the rate moves the other way) and makes the amounts unverifiable by the auditor. An unexplained exchange difference is a classic audit finding.

Actions: correct the June entries at the rate of 1,497.37 before closing; value the closing balance (149,000,000 NGN, i.e. 99,508 USD) at the same rate for the carry-forward to July; document the rate calculation every month (exchange slips attached); train the assistant and have the calculation reviewed by a second person; check previous months and each donor's contractual rule, as some impose their own rate.

Sample answer: "Subject: project A, budget reallocation request. Dear Sir or Madam, at 30 June the project had spent 798,836 USD, i.e. 68.3% of the budget for 75% of the duration. The distribution targets remain achievable by 30 September. In accordance with the article on budget flexibility, we request your approval for two variations above 10%: (1) line 1, staff: + 42,000 USD (+ 11.7%), owing to the 12% increase in the national salary scale on 1 April, made necessary by inflation; (2) line 2, activities: − 46,036 USD, as the joint tender reduced the unit cost of the kits. We are also transferring 4,036 USD to line 4, within the authorised margin. In addition, we have corrected the allocation of office shared costs, which had wrongly been charged 100% to your project: 36,164 USD has been recharged to the other projects according to our FTE allocation key. The forecast unused balance, 27,964 USD, could fund additional kits (quantity depending on the unit cost obtained) for households already assessed on the waiting list; otherwise, it will be refunded. The revised budget and detailed calculations are attached."

Reply: a clear refusal. Charging A with a cost that does not benefit it is an unjustified charge, tantamount to fraud against the donor, even if the money stays within the organisation. Timesheets and contracts would not match, the audit would detect it (cross-checking of timesheets), and donor A could declare the expenditure ineligible, demand a refund or even suspend funding. This is also what the error on shared costs has just revealed: the same "it has the largest budget" logic has already cost a correction of 36,164 USD.

Solution: cost the shortfall of project C (salary, share of shared costs: 9,600 over the year), request a budget revision from donor C, look for unrestricted funds, or reduce the coordinator's level of effort on C and genuinely assign them to another project if they work on it (with real timesheets). A's balance is either reprogrammed with donor A's approval or refunded. If the head of programmes insists, I inform the country director and the headquarters finance director in writing.

Controls: (1) staff allocation plan approved each month by finance and project managers, reconciled with timesheets; (2) shared cost keys calculated by finance, never by the programme, and budgeted from the proposal stage; (3) monthly budget versus actuals ("BvA") review with each project manager and rolling forecast; (4) segregation of duties between data entry, cost allocation and approval; (5) reminder of the anti-fraud policy and the whistleblowing mechanism.