The effects of budget variance on donor funding in non governmental organizations in Kenya

Abstract

The purpose of this study was to investigate the effects of budget variance on the level of donor funding in nongovernmental organizations in Kenya. Organizations have an overall goal or vision that they are established to achieve. An organization must ensure that all its segments works towards a common goal. Since the performance of the various segments will be interrelated in many ways, each segment manager must know not only his/her own role but also how it interacts with the rest of the organization. Otherwise, inefficiency and ineffectiveness will develop in the allocation and utilization of resources. Budgeting is about making plans for the future, implementing those plans and monitoring activities to see whether they conform to the plan. Secondary data was successfully collected from a total of 17 NGOs out of a sample of 20. The findings from the study revealed that Non Governmental Organizations in Kenya have in place specialists (accountants and Finance managers) who handle all their financial activities. Budgeting was necessary and instrumental among the NGOs because it enables them to plan, make decisions, prioritize activities, guide operations, achieve transparency and accountability as well as obtain funding. A variation was observed in the number of old and new donors among the NGOs from the year 2010 to the year 2014. It was clear that there was a significant relationship between the level of donor funding and budget variance among the NGOs. A significant portion (74.3%) of the variance on the level of donor funding was explained by the budget variance. A strong positive correlation was established between the level of donor funding and budget variance. The respondents suggested that long term partnerships with donors will assist reduce the variance on old and new donors every year. It would also be important to carry out proper monitoring and evaluation to reduce wastage of resources.