War Child‘s objectives require multi-year commitments. The level of income can fluctuate year by year, while multi-year obligations have to be fulfilled.
Managing financial risks
War Child deals with the risk of fluctuating income and the implications of this on the continuity of projects by:
- Spreading income: Income is obtained from multiple sources including individual donors, companies, the Dutch Postcode Lottery, institutional donors and government bodies.
- Optimising the availability of freely disposable income. To anticipate changes in programmes and countries, War Child seeks for a balance in earmarked and non-earmarked income. Earmarked funds have to be spent in a specific country or project, but by having sufficient non-earmarked funds available, War Child is able to adapt quickly to changes.
- Maintaining an appropriate continuity reserve: War Child’s continuity reserve complies with the demands of the ‘Vermogensnormering Goede Doelen’ committee (capacity norm for charities), chaired by C.A.J. Herkströter. The reserve is adequate to maintain obligations for at least six months so that some activities can continue even if sources of income are lost.
- Recruitment of structural donors: Structural private donors donate periodically via direct debit, and corporate sponsors are committed to War Child through multi-year contracts, safeguarding a proportion of War Child’s income on a longer term;
- Strict and cautious treasury management: funds will be deposited in a renowned bank. War Child has no stocks or derivatives because of the uncertainty of these investments. This strict policy has been effective: despite the financial crisis, the continuity of War Child programmes has not been at risk.
Best possible use of funds
War Child achieves the best possible use of funds through:
- Monitoring and evaluating its long-term strategy, annual plan and budget.
- Internal regulations and guidelines such as an authorisation scheme, an operational manual, procurement manual, Human Resources manual, Institutional Fundraising manual, Partnership Policy, and guidelines for Planning, Monitoring & Evaluation.
- Financial audits:
a) At the head office: interim and annual audits of the organisation’s functioning, internal administration and accounts by PricewaterhouseCoopers (PwC) Accountants.
b) Internal interim audits as well as external annual audits in War Child’s field offices.
c) War Child also requires large partner organisations to appoint local auditors approved by War Child for an annual audit.
- An active low-cost policy: By creating long-term partnerships with corporate sponsors, War Child produces structural support for its programmes. Furthermore, the efforts of many volunteers in War Child’s head office and in the field significantly lower programme costs.
- Evaluation: Through the continuous evaluation of programmes according to planning, monitoring and evaluation cycle requirements, results and expenditures are closely monitored and improvements are made when necessary.
Vulnerability to fraud
War Child has gained the trust of individuals, companies and other organisations that donate money, and regards it as its responsibility to ensure that money is spent properly. Despite this, there is always the risk of fraud, which would have implications for the implementation of projects as well as for War Child’s reputation and credibility.
War Child reduces the risk of fraud by:
- Monitoring compliance and implementation of segregation of duties through internal and external audits.
- Assessing partner organisations using strict guidelines. A new financial system rolled-out in programme countries can be monitored from head office providing more control over budget management.
- Implementing an anti-fraud and corruption policy, developed in 2012.
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