Podcast transcript
Accounting for non-profit organisations
Dr Petrus Usmanij
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Transcript
- Matt Smith
Hello, this is me Matt Smith, welcoming you, the listener, to this particular La Trobe University podcast, and to thank you, thank you, for downloading this. My guest today is Dr Petrus Usmanij, a lecturer of accounting at the Mildura campus of La Trobe University. He’ll be speaking to me about his work with non profit organisations, how accounting works with them and how they go about managing their funds.
- Petrus Usmanij
I'm focusing at the moment for one non profit organisation or NGO, non government organisation. This is Australian-based in Canberra and our project is mainly in the eastern part of Indonesia, in the islands of Nusa Tenggara, which is directly to the north of Darwin and the funding that we received mainly from AusAID and also from the members. So the name of the non profit organisation is NTA or Nusa Tenggara Organisation.
- Matt Smith
What does that organisation do?
- Petrus Usmanij
We develop villages. East Nusa Tengara is considered as the poorest area in the country of Indonesia. Number one is we would like to develop an increased level of living. What we do for example, in education, we help them to build schools and at the moment we are funding, we are paying teachers to teach at the kindergartens. Also in education we help them to build up libraries, we supply them with books, especially textbooks for students. We train teachers, we train librarians. In terms of a small infrastructure, we help them to build some basic needs, like they don’t have toilets, so we have to change the way they do the living there. We build toilets. How do we do it? Well, we don’t just give money but we also ask them to work together with us to supply labour. So they supply the labour and we provide the cement, and then we will get our sand from the beach.
We also help them with agriculture. They’ve got cocoa and cashew nuts, a big plantation, but old. So we do that to help them, we rejuvenate, by grafting we work with the agriculture institutes from the centre, the capital city, we import these people to come to Nusa Tenggara and teach them how to do proper rejuvenation if you like.
We help them also to sell. We teach them to do basic business. We give them a soft loan with no interest, help them with cattling, with vaccination, we train them how to look after cattle. We help them to build fencing. They don’t have fences. They didn’t initially. The cattle used to eat the vegetables that they grow. So we are fencing – it’s very low cost. We just use our local resources like the rocks or whatever they found.
The most important thing is that we build water tanks because this area is very dry, much drier than in Australia, and we cannot get water from the ground, because it’s not drinkable, so what we do is we capture rainwater. A simple water tank is made of ferrous cement, it’s about 50,000 litres for two families. And again, how we do it is we ask them to provide the labour, we provide the cement and then they use bamboo as a pipe. They can capture water for three months and they can live for another six months. For half the season they can use the water from the tank, but the other half they have to get water from about five to six kilometres, using a jerry can. When you saw kids carrying a jerry can, that’s real. But now it’s only half of the season, not a full season.
- Matt Smith
There’s a lot of projects going on there. You mentioned in amongst that though that you’re giving these as loans. How can you expect repayments on these kind of things when a lot of things that you’re doing you can’t put a hard monetary cost on those sort of things, can you?
- Petrus Usmanij
The expectation from the loan is not the loan itself, so we don’t expect interest, but the expectation here is more on the training and coaching of doing business. We receive the funding from AusAID and then we use that money for this kind of project. Let’s call it training. So we train them to do business. We can’t imagine the error when there is no money as the means of payment. They just do an exchange, or barter. Now that happens in these villages twenty-thirty years ago. So we changed that and we just teach them how to do business. We teach them to use money, step by step we apply the micro finance system but no interest. As long as they retain the principle, that’s good. And then we will ask them whether they want to do another investment. They will re-invest the money.
- Matt Smith
So you are lending to individuals there within this village, is that right?
- Petrus Usmanij
How it works ... it’s very hard to do it individually. We call it a kelompok, kelompok means group so in the village we divide them into clusters and clusters into groups.
- Matt Smith
So a little consortium of people. So this group of people wanted to borrow money in order to get cows.
- Petrus Usmanij
One group for example, group A consists of ten families, and one family, family number 1 wants to buy cows for example. And everyone will help, to get the cow and to look after and make sure everything’s going well, and then go to the next proposal. What’s next? Everything OK? And everybody’s helped. In the past we considered a toilet as a donation and then cattling, seaweeds, farming as productive activity. So if it’s not productive, they cannot use loan. Productive means they get the money from us, but they have to return the money. Unlike toilets, they don’t have to return.
- Matt Smith
In turn does the organisation have to be accountable to AusAID because that’s where the funds are coming from?
- Petrus Usmanij
That’s a good question. Back in 2006 AusAID had this accreditation scheme that we had to pass and initially NTA didn’t pass the first one, and then in 2006, we did. We passed the accreditation, we got the certificates from Aus AID and we are now a part of the international development aid under AusAID. And we are under the umbrella of the organisation called the Australian Council for International Development, the ACFID, and NTA’s on the list, one of the members.
- Matt Smith
Do you get allocated a certain amount of money then? Is that part of your job then?
- Petrus Usmanij
My role is specifically on audit and accounting training. So once a year I go there to join the monitoring team. I go with them, I check the projects physically. I normally do a desk audit so I ask them to report to me all of the disbursements, and then I check all the documentations, because this is all in the Indonesian language and I understand Indonesian. I summarise, I use my accounting skill to audit one by one. If there’s a miss or they didn’t put the document, I will go straight away and ask what’s happening. And if there’s some inconsistency, I’ll just check and ask them, they have to fix this, because this area is a third world country and they are very poor, they are not very literate as Australian. I tried to communicate their aspirations to the Australian agency, right? I know Australian accounting standards, and I know the Indonesian language and I know how to connect them. So that’s my role.
- Matt Smith
What happens then if a group defaults on a loan then? To the credit line, what happens to further lending?
- Petrus Usmanij
That’s part of my job as well. Every time we visit, we do a meeting on this village, we get all the people, all these kelompoks, these groups, when we come to one who’s not doing well, we have to investigate first. Number one, what’s the problem? Is it technical, or is it personal behaviour? If it’s personal, then everybody will report. The members of the group will tell me and the head of the group will tell us, this particular member is not good, is not behaving in accordance to the agreement. Normally, the default is we just stop funding to this particular member and we just warn this member, and he or she will not receive any more funding until a certain period. This is just a warning. So we teach them that as well. It’s not necessarily a penalty or punishment, we just halt. He or she is not in our priority. We look at that, we try to reward them if they’re doing good, we offer them more funding. If they’re not doing good, this is based on the bad behaviour, then we say no. We have to halt for a while. And it is other groups’ decision to decide what sort of penalty. So we’re not involved.
- Matt Smith
Is this a good way to manage this kind of aid, as opposed to just giving them money and setting them up with roads and toilets and building a school for them and not worrying about repayment schemes?
- Petrus Usmanij
Well, the way we work is, it’s progressive. Initially yes, most of the aid, the agencies, initially, in the first time they visited the area, they do only donations. What we do is progressively. We’ve been doing this for over twenty-two years now in that particular area and we can see development. So step by step we move on from donation to micro-financing and then step by step we move up to banking. For some of the big farmers, they are already reached banking so they know how to bank their money, they understand that there is interest, and there’s also tax, there’s also bank fees or bank charges. But for the lower level we still have to nurture them and help them, to push them up to micro finance, to rotating credit. We can just do all donation, or all micro finance or all banking, it depends on the situation, but if we can, we push them from micro finance to banking, and then we just leave them. Let them develop themselves. They’re quite good, but if they’re at the level of donation and rotating credit, we have to nurture them very very carefully.
- Matt Smith
So, what keeps you going back to this project? What keeps you involved? Have you gone there and seen a real difference?
- Petrus Usmanij
A very big difference. I joined this group in 2006. It’s only six years and I can see a big difference. According to ... this is only a couple of Australian NGOs in this area of Nusa Tenggara, and NGOs, one of the largest. We have done thousands of villages, over more than twenty-two years. My motivation is ... because I'm from Indonesia, I live in the western part. In my life, I’ve never seen this poorness in the western part of the country. Now when I went there for the first time in 2007 and then 9, I saw very very different situation, it made me sad at the time. Because I can speak the language, I'm able to bridge the two parties. The grass root, which is the people from Nusa Tenggara, and they don’t speak Indonesian very well. They speak their own language, and then the Australian, I do the best I can to understand what’s the real problem, and then now I’ve been going there for nearly every year. Every year I have to go and they’ve been expecting me. We have developed a strong bonding between us. The cure is trust. As long as there’s trust, everything will be OK. As long as we can trust them. So it’s mutual. I’ll give you an example. When we do the training for agriculture, for cocoa, there’s so many old cocoa trees. We brought instructors from Java. Java is the central island of Indonesia. We’ve had these experts in agriculture. We trained them for hours. They said, yep, they’re happy. And we left. Six months later we came back. They didn’t do anything. What’s the problem? Well, they said, we stick to our tradition. OK, this is not good. We’ve been paying lots of money for the trainers. What we did was we found someone, one farmer, local farmers who have been very successful. This old guy, he’s about, nearly 80 I suppose, and he’s very successful, very simple guy, he’s got many farms. And then we asked him whether he wants to be the example for us when we do the training. And then he spoke in the local language. And we did it, and it works. Everybody listens. They had the trust. This guy brought them to his farm and showed them, this is how I do it, da da da. I harvest this thing, I got this much of money, and they listen. So, to build that up, to get to that stage, it took years. And we have to learn and really understand what they really want, because aid alone or donations alone is not enough. We have to learn to change them and that’s the challenge.
- Matt Smith
That was Dr Petrus Usmanij, a lecturer of accounting at the Mildura Campus of La Trobe University. And that’s all the time we have for this La Trobe University podcast. If you have any questions, comments or feedback about this podcast or any other, then send us an email at podcast@latrobe.edu.au.
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