Finance teams deliver the aid

The tsunami that hit East Asia shortly after Christmas has tested the contingency plans that relief providers have in place to cope with disasters. So far, such plans have risen to the challenge, but FDs may still face plenty of associated risks. Alex Haxton, director of operations at charity World Emergency Relief, says that the biggest problem is “committing funds immediately without knowing whether enough donations are forthcoming to cover the cost of the operation”. Bill Cottle, director of finance and services at Unicef (UK), says that his office had transferred about £2.5m within two weeks of the crisis to fund relief efforts.

Dominic Brain, head of programme funding and support at charity Christian Aid, says that all relief charities have contingency plans to enable funds to be directed to affected areas within one or two days. He adds that the bigger charities, such as Christian Aid, Oxfam and the Red Cross, have working arrangements in place with major airlines, travel operators and banks that enable relief workers to arrive at disaster zones as early as possible with funds and medical aid. Cottle says that Unicef has accounts with the Bank of England, which enable the charity to transfer funds and guarantee receipt in different currencies to banks anywhere in the world.

Brain says that one of the key financial risks for most charities is to keep accurate accounts of their cashflow. “Most of our relief work requires immediate cash payments. It is therefore essential to keep full details of all transactions so that our accountants can keep an accurate record of the money trail and make sure that the money donated is spent wisely,” he says.

“In fact, because of the sheer volume of payments typically made in any relief effort – such as chartering boats, planes, cars, trucks, finding accommodation, shipping blankets and medical kits, and so on – we send accountants out in the first wave to keep track of the funds,” says Brain.

But within a fortnight of the disaster, the French medical relief charity Medecins Sans Frontieres issued a public appeal to stop donations, saying it had received more than enough funding to enable its own share of the relief effort and that its finance team could not cope with the surge in donations.

Paul Anticoni, head of international aid at the British Red Cross, says that dealing with a huge surge in donations can present charities with a peculiar problem. “The funds raised for a particular crisis must only be used for that particular relief effort,” says Anticoni. “We believe that our share of the donations already pledged will fund our relief efforts in the tsunami affected areas for five years, even if the situation is safely turned around after three or four years. We cannot shift excess funds to other appeals, and there can be a danger that other worthy causes, such as Darfur, Sudan and Aids in Africa projects, can be overlooked and under-resourced,” he says.