Dear Friends,

We thank you for your ongoing support for impoverished children in Kenya through Friends of Ngong Road (FoNR). In 2016 we faced the challenge of a theft by the Ngong Road Children Association (NRCA) Executive Director and we worked hard to keep you apprised as we worked through that issue. Today we are pleased to provide an update on the results of our activities to strengthen governance and financial control in Kenya. 

NRCA has now received a “clean” audit opinion on 2017 financial results from Crowe Horwath, the Kenyan auditor for NRCA. Sammy Anunda, lead auditor has shared a summary of their findings which amount to, in Sammy’s words, “…normal housekeeping issues that management has expressed commitment to address.” He recognized NRCA’s significant improvements in internal controls through creation of an improved procurement process and minimization of cash handling. Crowe Horwath noted that there are no specific high-risk findings to bring to NRCA’s attention.

I wanted to update you on the changes we have made to NRCA’s financial infrastructure that led to this clean audit.

Independent Audit by a Qualified Firm
In 2015 FoNR insisted on the replacement of the existing auditor, a small local CPA firm engaged by the former NRCA Executive Director, with Crowe Horwath, an internationally recognized public assurance firm, to audit NRCA in Kenya. In the March 2016 audit exit interview, we learned that money had probably been stolen, and this conclusion was corroborated by results of a forensic audit in April 2016. Subsequently, three employees including the former executive director were placed on leave prior to the forensic audit and then terminated in May 2016.

Outsourced Accounting to a CPA Firm
After an RFP process, in August 2016 NRCA outsourced accounting to KKCO East Africa, a third party accounting firm in Kenya. KKCO helped NRCA establish sound internal control processes and is responsible for payroll, accounts payable, reconciliation, financial statement preparation and tax management for NRCA. This has added oversight and controls to the financial practices in Kenya, as well as independent insight into best practices.

In September 2016, NRCA created a structured procurement program with support and oversight from KKCO. A procurement committee and policies were created, instilling discipline into the process of making significant purchases of goods and services needed to deliver the program. Acquisitions for items such as uniforms, books, office equipment and services are approved by a finance committee after the procurement team has collected three independent bids and reviewed additional qualitative elements such as conflicts of interest with potential providers.

Stronger Governance in Kenya
Throughout 2016, the NRCA board successfully recruited new volunteer members. They meet monthly and have taken a more active role in oversight of program activities than the previous board. NRCA board members include:

• Rajpreet Bains is the NRCA board chair and owner of a human resources consulting firm in Kenya. Rajpreet was trained in the UK, bringing extensive human resources leadership experience. She has been instrumental in recruiting new board members.

• Judy Nyaga is the Regional Head of Subsidiary Governance for Standard Chartered Bank in Africa.

• Robert Murimi is the Marketing Director and Chief Trainer at Impact Change, Ltd., a management training company.

• Anupa Sanghrajka was trained at the London School of Economics and worked in the UK for several years at KPMG. Upon returning to Kenya, she assumed leadership of a segment of a family-owned business that operates in the home construction industry. She takes the lead in Kenya for financial review.

• Steve Makimei owns an insurance agency in Kenya and serves on the boards of directors of two schools, bringing thorough understanding of Kenyan education.

Qualified Personnel Experienced in NGO Leadership
Also in August 2016, the board chairs of FoNR and NRCA interviewed and hired a new program director, Maureen Mulievi. Maureen came to NRCA from Planned Parenthood Global where she managed programs in East Africa. She has brought integrity, effective NGO leadership skills and clear commitment to the mission.

Enhanced Oversight by Friends of Ngong Road 
In 2017, we created a finance committee to govern and oversee financial activities in Kenya. Committee members include the partner at KKCO (NRCA’s accounting provider in Kenya), the CFO, treasurer and accountant of FoNR, board members from both FoNR and NRCA and the program director of NRCA. The committee meets monthly to review actual results versus budget, major procurement requests from the NRCA procurement process, planned funding and necessary adjustments, potential control issues and proposed remediation plans.

To further strengthen our processes, FoNR hired a part-time, consultant CFO with experience working in the non-profit sector in the U.S. and internationally to ensure effective implementation of financial controls in Kenya and to monitor progress on audit findings from 2015 and 2016. She got up-to-speed on organization processes in September through November 2017 and spent ten days in Kenya in December 2017. During her seven month assignment she:

• Reworked the NRCA budgeting and financial reporting process to more closely mirror current management practices in Kenya.

• Strengthened the documentation and review processes for all key expenditures in Kenya, in which invoices are put on a shared drive and U.S. partners have visibility into them.

• Established electronic access to all financial tools in Kenya for U.S. partners to enable transparency and oversight of financial activities.

The clean audit results of NRCA’s 2017 finances are a welcome indicator that our leverage of highly qualified professional accountants and auditors, improved controls in Kenya and oversight from the U.S., engagement of experienced NGO leadership and more capable governance are working. We believe the environment now ensures all of your contributions will be devoted to the program you have so faithfully supported over the years.

We value your continued support and welcome any questions.

Sincerely,

Amy K. Johnson
Chief Financial Officer and Board Member

Karibu Loo (KL) has many exciting developments to report. Thus far in 2018, KL has gone from being a business struggling to secure long-term contracts to a business struggling with positive growing pains.

• Moving to profitability: KL has been profitable in each of the first three months of 2018, earning approximately $2,000 in January, $1,000 in February and $7,000 in March. April is on track to generate profits as well.
• Sound leadership from Maureen and Kenneth: The business has improved significantly due to more effective leadership (Maureen Mulievi), and the addition of a young, energetic sales professional (Kenneth Odongo). See all staff at Karibu Loo: https://www.karibuloo.co.ke/our-staff/
• Long-term business absorbing an impressive 46% to 94% of units: Maureen, Kenneth and the staff have been successful in securing more long-term contracts. The British Army (located in northern Kenya), has become an important client requiring extraordinary servicing and effort, contracting from 16 (currently) to 66 units at its peak in January. The construction business, with an April total of 17 units on monthly contracts, now includes Konza Construction, Nanchang Construction, TENSES, and Karen Construction. KL has retained the ongoing weekly Sunday-only rentals to three churches for seven units. Long-term rentals therefore absorb 17% (27% with the churches) of our units plus the highly variable British Army business, which puts absorption between 94% in January to 46% in April.
• More effective targeting: KL has learned that long-term rentals are primarily done by foreign corporations or government entities, and Kenneth is becoming effective at targeting important, long-term sales.
• Assets spread thin with inefficiencies costing over $15,000: Running the business has been a challenge as our assets are spread very thin. Current assets include 88 unit (including one VIP unit), a large truck, one exhauster and a pickup truck that can pull the VIP unit or the newly-built trailer to transport unit. KL had to pay for third-party trucks to transport the units to the British Army and is currently renting a large truck full-time (combined cost in Q1 was $14,000) to service the British Army business to which KL has dedicated the exhauster. All the units in Nairobi are serviced manually, which is unhealthy and unpleasant for our staff. The low number of available cabins has forced KL to rent units from competitors on occasion (Q1 cost = $615).
• Most urgent need – a reliable large truck. The biggest business challenge is currently the large truck, which has served KL well since the company’s inception but is now chronically breaking down. The portable sanitation business is not viable without a reliable truck and exhauster. We are working on plans to purchase a new truck, exhauster and 60 more loos and invite individual donations to make the purchase possible.

Today, KL employs five Ngong Road Children Association (NRCA) graduates full-time and has employed 57 high-school graduates part-time as Associates since inception. KL’s Associate Program allows recent NRCA high-school graduates to gain that very valuable first job experience and earn income. “Sales and Operations Associates” are hired to keep the cabins clean and stocked with materials at events and act as ambassadors for the organization. The Associates program teaches NRCA graduates how to be good employees – show up on time, do a good job, and dress properly – skills that students living in the slums never see demonstrated by adults in their lives yet are critical to the charity’s mission of transforming lives through employment. Associates make 500 Kenyan shillings a day plus transport and a meal. (For context, 500 Kenyan shillings covers about a quarter of a month’s rent in the slums). Almost 1,000 day-payments have been made, injecting $5,000 into the slum economy in earned wages.

In 2014 Jim Hacker was invited by his longtime friend, Bob Ackerman, to go to Friends of Ngong Road’s Annual Gathering to learn about a program Bob cared about. Bob knew the founder of the program, Paula Meyer, and had become a sponsor shortly after the organization was founded. Bob had told Jim several times about his involvement prior to the event, but Jim said it was like “reading readiness” for him that day – he was in the right mindset at the right time that year.

At the Annual Gathering, Jim was impressed with the transparency and strategy of the organization – to make a lifelong difference for students who otherwise wouldn’t have a chance. He saw an opportunity to teach his own granddaughters about the realities of global poverty and for them to potentially form a relationship with someone living a completely different life than theirs in Minnesota.

The day after the Annual Gathering, Jim went online to see the students waiting for sponsorship. He said that after reading their stories it would be hard not to do something. Having four granddaughters, Jim was drawn to sponsor Winnie. Winnie’s HIV positive mother was doing well on her antiretroviral medications, but the family was struggling to pay their rent, afford food, and send Winnie, her sister, and her two cousins who were also living with them to school. Her mother ran a fruit stand, and the few shillings she made each day could not keep up with the family’s needs.

Winnie started going to Jagiet Primary School. She made new friends both at the school and in the program who gravitated toward her and her sunny personality. At camp that year, she was seen with friends all around her and sporting a constant, joyful smile. Winnie for the first time felt like she belonged and had a group of friends and counselors who understood her.

In the U.S., Jim anxiously awaited Winnie’s handwritten letters that included hand-drawn flower borders and pictures. He loved to share them with his granddaughters on their morning drives to school. Jim admits that the relationship has not gotten as deep and communications not as frequent as he would like, but in Winnie’s last letter, she wrote, “You know, I am now twelve years old.” He thinks that is a hint that she is ready to move into more grown-up conversation.

Jim’s involvement in transforming Winnie’s life started by just saying “Yes!” to a night out with a friend. Since then, he has had a dramatic impact on one little girl’s life and encouraged his sister and son to also start sponsoring students. Jim is considering leaving a gift to Friends of Ngong Road in his will as he believes in the long term impact the program can have and wants the mission to live on well beyond his own lifetime.

Jim is a hero to Winnie and all of the students at Friends of Ngong Road. Thank you for your support, Jim.

2018 is off to a very strong start for Karibu Loo, largely due to several significant long-term rentals and having the right people in place. We are optimistic 2018 will be the year the business starts to earn profits and will pay a dividend to Ngong Road Children Association (our sister organization in Kenya). Here are the highlights:

• $2,000 in profit in January: The portable sanitation business in the U.S. is primarily based upon long-term rentals. It is virtually impossible to build a successful portable sanitation business by only supplying to events. However, events have constituted most of our business to date in Kenya. Long-term rentals are an essential ingredient to profits as they ensure a steady stream of revenue to cover costs.

In January, Karibu Loo rented out 66 of 89 units for about 15 days to a unit of the British Army that is training the Kenyan Army and another 10 units to a Chinese construction firm for the entire month. In addition, we have weekend long-term rentals at several churches. Together, these long-term contracts plus normal event business generated just over $2,000 of profit in January.

• Issues. As always, there are issues to be overcome. The biggest challenge faced by the business today is that our truck has become very unreliable. The truck has served us very well on treacherous roads since 2014 but is increasingly prone to breakdowns. We have had to outsource movement of loos and cleaning services when the truck was not functional, which cuts into our margins. We are building a new trailer that will be pulled by our pickup truck and can carry six loos.
  

A second challenge faced by the business is receivables. We have worked hard to reduce receivables, but getting customers to pay on a timely basis in Kenya is a recurring problem. We have the right staff and board in place to improve upon this issue in 2018 and beyond.

• Growing the business. We are preparing to order a new truck, as frequent breakdowns has become a real impediment to the business. Meanwhile, we are evaluating the long-term potential for the British Army business and will decide whether to order more cabins and an additional exhauster in April. Our sales leader is young, energetic and is getting results, so we must have loos available for him to sell. We are confident the business will contribute to our charitable mission of educating children in 2018 and that we will also be able to invest in growth.

If you are interested in supporting Karibu Loo with a donation to purchase the new truck and support business growth, please contact Development Director, Lacey Kraft, at lacey@ngongroad.org or 612-568-4211.

Paula Meyer
Founder and President