The effect of exchange rate volatility on budget variance of international refugee non governmental organizations in Kenya

Abstract

Most of the International Non-Governmental organizations in Kenya receive a significant portion of the budget funding in foreign currency contract. While the daily and monthly exchange rate in Kenya keeps on fluctuating each donor and organization has strict, different rules and technique in regard to the management of exchange rate gain or losses in the operation of its funds. The objective of this study was to establish the effect of exchange rate volatility on budget variance of international Refugee Non-Governmental Organizations in Kenya. A descriptive study was used with secondary data collected from the different Audited Financial statement of Refugee Non-Governmental Organization and part of the data relating to partner organization which was not available in the financial statement was obtained through questionnaire as primary data for this study. The exchange rate data was obtained from the Central Bank of Kenya website. The data was analyzed using a multiple regression model to obtain the coefficients of the variables. SPSS was used to analyze the data. Findings of the study indicated that exchange rates do indeed have a positive correlation to the budget variance. It is also noted in the findings that it was not the only factor affecting budget variance hence the study concluded that exchange rates has an effect on the budget variance besides the amount of funding in foreign currency contracts and amount of deviation in the budgets of partner organizations among other factors which were beyond the scope of this study. The study recommends policy formulation and implementation to control and ensure a reduction in the impact of exchange rates on the organization budget variance by the international organizations. The Government should formulate policy to improve on information dissemination to reduce exchange rate risk and allow for relative estimation and prediction of exchange rate to foster proper financial planning.