Published: September 24, 2012
At CARE, we take very seriously our responsibilities to recipients of support and assistance, and the donors who make it possible for us to fulfill our humanitarian objectives. A vital way in which we can demonstrate accountability is the way that we manage our cash. We aim to demonstrate the highest levels of reporting and control, manage counterparty and operational risk, maximise the value of cash we hold, and ensure that funds are liquid and accessible to fund our projects worldwide. This article explores some of the current and planned initiatives that are helping us to achieve these objectives.
We have a central treasury function in Atlanta, Georgia; however, many cash and treasury-related activities had developed organically in-country, and bank relationships were often being managed locally. We recognised that this approach had limitations in terms of both counterparty and liquidity risk. Consequently, we have gradually been centralising bank relationships over the past few years, and we now have several banking partners covering each region. Some regions present more barriers in terms of pursuing a regional banking strategy because the projects we are involved in are often in the least developed (and least accessible) parts of the globe. We may therefore have several banking partners within a country, which can be challenging. For example, some of the small, local banks with which we work may not have electronic banking capabilities, which makes it difficult to automate payment processes and obtain account information easily.
Some donors have mandated that their funding should be held in separate bank accounts, in order to ensure full transparency over how cash is used. It is important to us that our donors maintain complete confidence in the management of their funding, so we have been willing to do so; however, the result is that we now hold many hundreds of bank accounts globally. This adds to our costs substantially, and it requires significant resourcing to administer and maintain accounts. Furthermore, this concession has led to large amounts of idle balances, i.e., cash that is yielding minimal returns while often subject to counterparty risk, sovereign risk, and, in the case of local currency balances, significant foreign exchange volatility. Security and liquidity of cash are very real concerns in volatile parts of the world. For example, during the on-going political upheavals in Cote d’Ivoire, the central bank, stock exchange and many international banks closed down for 10 weeks between February and April 2011, leaving organisations such as CARE unable to access cash to support operations in the country.
We have been pursuing an active strategy to address the cost and risk associated with our complex bank account structure, whilst fulfilling our obligations to donors and supporting CARE’s mission in each country. Firstly, we have stipulated that no new accounts should be opened, with few exceptions. Alongside this, however, we recognise our stewardship role over funds donated by individuals and institutions worldwide. Therefore, we are working closely with donors to demonstrate the level of reporting detail that we can provide, without the need for a separate account, and illustrate the financial controls under which we operate.
As a related initiative, we are seeking ways to consolidate accounts, as well as banking relationships, wherever possible. We are exploring how we can use branch banking in order to access one account from multiple locations, leveraging situations in which a bank’s footprint has a considerable overlap with our own. As every transaction is reported and accounted for in the same way, we benefit from greater consistency as well as improved visibility and control over cash.
Having achieved a streamlined account structure, we can then integrate bank accounts globally with our ERP (PeopleSoft Financials), to provide straight-through processing for both account information and payments or transfers. CARE is a SWIFT member, so we will be using SWIFT Corporate Access to achieve this integration through our service bureau, Expertus. The advantage of this approach is that we can leverage a single channel to access multiple banks, we benefit from robust security and we are able to support the reporting and financial control requirements of our donors. Achieving straight-through processing of transactions reduces manual tasking, supports financial controls through workflow-driven transaction authorisations, and facilitates exception-only account reconciliation.[[[PAGE]]]
Although bank and account rationalisation, and bank connectivity and integration are major projects, we recognise the importance of demonstrating best practices in cash and treasury management, and the cost and efficiency improvements that we will achieve. We have already made a start with banks such as Barclays, which is one of our key banking partners, with whom we pool cash into a header account in London. We are finalising the testing phase of SWIFT connectivity through our service bureau, which has so far proved very successful. We have benefited from significant expertise and IT support from Barclays which has accelerated and enhanced the process. Already we can see how resources that are currently dedicated to operational tasks can be redirected to tasks that enhance our ability to pursue our humanitarian objectives.
Looking ahead, depending on the country in question, it is our expectation that membership of SCORE (’Standardised Corporate Environment’) will be a key decision factor in our choice of banks. Other humanitarian organisations have been early adopters of SWIFT in emerging regions such as Africa, which will help to encourage further SCORE registration amongst the banking community. We hope to have implemented our SWIFT infrastructure fully, together with a rationalised bank and account structure within the next two to three years.
In addition to focusing on cash management and payments at an organisational level, we are also seeking to optimise the way that we execute payroll and accounts payable related to local projects. Although we have managed to implement electronic payments in many instances, cash continues to be the predominant payment type, such as in Africa. Although cash may be the most convenient payment method for recipients in some cases, there can be significant issues relating to security and transport costs. Consequently, we are exploring opportunities in mobile banking, although we have not yet defined a clear strategy. Mobile banking is already well-established in Kenya and becoming more prevalent in other parts of East Africa, and we can see considerable potential in many parts of the world.
CARE is an organisation committed to the highest possible standards of accountability, responsibility and cost-efficiency in the way that we fulfil our humanitarian objectives. Developing an efficient approach to cash and treasury management is essential in achieving this by reducing costs, managing financial, counterparty and operational risk, and ensuring reliable mechanisms to pay staff and fund projects in many of the world’s most vulnerable regions. Our primary banking partners, such as Barclays, continue to prove instrumental in delivering on our objectives, enabling us to meet the needs of donors and vulnerable communities.
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