How exactly does Covalent Global Capital operate to prevent corruption? We take corruption seriously, because it is very real in Kenya. We have integrated many measures that help dramatically reduce the chance of corruption.

Grant distribution in phases

When a charity receives a grant they don’t get the whole amount in one lump sum. Rather the grant is distributed in phases (typically, quarterly) through the process of expenditure responsibility. The charity gets some money to start the project, sends reports on how the money was spent and how the program is going to Covalent, we use our distribution channel to forward this on to donors, and more money is sent to the charity. The grant cycles through in that manner: money, work, report, money, work, report, …, and so on until the grant is finished.

Community awareness

As a grant is awarded to a charity we first inform all members of the organization. That way everyone in the organization knows that this is what your groups is agreeing to do and this is how much they are receiving. You should expect to achieve *this*, *this*, and *this*. Then the community and the beneficiaries are made aware of the project. They know that, for instance, an orphanage has received money to cover school fees and meals for orphans. Only registered orphans are eligible and priority is placed on those kids already at the orphanage. As a community member you should see at least X number of orphans benefiting from this program, and as a community member you have a right to inquire about the work done by this project.

Covalent Global Capital is a long-run solution

Here is the typical process for funding from a foundation or large international institution. Announce an open process for proposals or partner with a large local NGO to solicit proposals. The process has a deadline and objective, say for instance is due in 6 months and must be related to HIV/AIDS. They are flooded with proposals. Groups may have changed their mission and current focus to chase this money, which they have to since there isn’t a lot of money out there. The organization scraps 98% of the proposals, discusses the 2% and funds 1%. That 1% may be really smart projects. That 1% may be destined to win through inside channels (corruption). You may not want to dole out to kith and kin, but in the effervescence of corruption you do not trust those who are not close to you; and so, this corruption, in one way, becomes a necessity.

But this is Africa, conditions are bad, and criteria selecting 1% is too high. We don’t need to swing for the fences when it is very easy to hit single after single. To continue this metaphor, In my view much of large aid hits foul ball after foul ball, and most often ends up striking out. It does hit home runs and that is worthy of cheer and praise, but we can’t count on that to win the game.

If a charity does receive support it is often only for a short time 6 months to 3 years. During this time they are told to build capacity and find other sources of funding. But there aren’t many sources of funding and they know soon their one source will end.

Covalent is different. We have no aid agenda; we aren’t looking to place $5 million in HIV/AIDS and agrofarming for a Green Africa. Projects that work in HIV/AIDS are ok, agrofarming projects are ok, and many, many other things are ok. We except it all, the key is that it’s charitable. And we do not funding projects; donors fund African-led charities directly. Covalent isn’t even a shell or pass-thru to channel the funds, like a “friends-of” organization. We allow grantmakers to make a grant they otherwise would not be able to. And we represent many different grantmakers. This means that once an organization is within the Covalent Network they are seen by many and can connect with a donor. The donor funds the project and when the grant ends that’s a good thing. Now they have shown they understand the system and can run successful programs. More donors are interested; they have built trust. After completing a grant a charity group should be able to fund new projects faster, fund bigger projects, or both.

I remember explaining this in Nakuru to about 8 charity groups. We rented a conference hall above a restaurant and after they realized this I got one question from a Muslim man who runs an orphanage largely affected by HIV/AIDS. He said, “Are you serious about this? Is this real?” “Yeah it has the potential to be real and I am working every day to see that is real,” I replied. “If this is not real or there is something you are hiding, just leave, LEAVE right now, we’ve had enough of you. I sat here, right here, below in the restaurant area with a man. He said he could support us. He took our information, took pictures, promised support, told us that he could get to donors. I told him that donors are up there and we are down here. We can’t get up there, that ceiling is concrete. And now you tell us we can get there,” with a laugh he continues, “you tell us, well just take the stairs, it’s that’s simple.”  I reply, “That’s how it should be. That’s how it can be, legally. And it’s what I want most in this world.” He continues, “Well then we are with you. When can we start? We are ready now.”

This simple long-run solution is at the core of Covalent Global and helps prevent corruption because our collective interests are not severed after one short round. This is not a one time shot at getting support. It’s many shots many times and they are ready.

Covalent Global Capital has a local presence

We work locally on a global scale. The local presence in Kenya with an office in Nairobi is essential to operations. It not only allows us to provide tremendous access. It allows us to prevent corruption. We check in on charities that have received grants once every two weeks. That way they can see our interest and support. It is not that money was sent, we forgot about them, and then expect a report in a year. These brief check-ins improve communication, which can be relayed to donors, and assure any problems are properly and promptly addressed before it becomes a big problem.

Due Diligence Standards

We conduct up front due diligence through our proposal application that in my opinion exceeds the quality of due diligence done by alternatives that often grant through equivalency determination. We track organizations, top officials, and members. And have anti-terrorism measures in place. Furthermore, we partnered with the NGO Council and KENGO (Kenya Network of Grassroots Organizations) to improve our due diligence perspective.

On-site visits

We are working to have most, if not all, first-time grants serviced by an on-site pre-grant inquiry from an independent agent. These agents are microfinance field workers, sources used by foundations, local paralegals, and others.

No Regranting, No Politics

Expenditure responsibility grantmaking restricts the regranting of funds. This works wonderfully to prevent corruption. Corrupt charities, typically NGOs use smaller community-based organizations (or local people) to create the appearance of grassroots community work to gain funds. They get the money, stiff the locals, and disappear. Organizations have gotten good at this, especially in and around Nairobi.

No Politics: Expenditure responsibility essentially bans politically focused projects including lobbying. This means the money cannot be used to pay for favors or influence elections.

Paid Salaries

The charity projects proposed have reasonable salaries/allowances for those carrying out the project. This helps avoid skimming from the project funds to meet the worker’s needs.  If you’re running a project that benefits the community by paying for school fees and supplies uniforms, this work should help you pay the school fees for your own children. That way, for instance, you are not tempted to bias the selection and allocation of funds. Similarly, you and your family should not go hungry because you’ve been working to improve your community all day.

Nonprofit work is very labor intensive with around 80% of costs attributable to personnel.  It simply doesn’t make sense to only cover just the cost of materials and expect an 80% contribution in free labor. Volunteer work is important and shows that a community supports your project, but you run into trouble when it is relied on too heavily.

Conclusion

I hope after all this you are saying sheeesh! Our perspective is that the important thing is not whether you have stringent criteria but that your criteria makes sense and is designed to fit your situation. We have designed these measures around grassroots charities in Kenya. For instance, community announcements of grants was a measure suggested by groups in Lakoni to prevent possible skimming by area chiefs of “quiet deals” in the community. This was then echoed as very important by the NGO Council, community leaders in Western Kenya, and others.

Another example is checking in on charities frequently. I run my organization in an open manner and invited all the groups to scrutinize my work and check in for updates on how it is developing. It turns out they would call about once every two weeks for updates. Not much changes in two weeks but it does show that they are interested and works to keep me honest.