The moment your organisation secures a grant or donor funding in Kenya, the journey is far from over. In fact, that’s just the start. For clients working with or in Kenyan organisations, understanding how to leverage grant/donor funding means mastering both reporting and compliance obligations so your funding doesn’t just arrive, but delivers impact — and remains sustainable. This article will walk you through what your organisation needs to know about compliance with the Kenya Revenue Authority (KRA), donor expectations, practical systems for reporting, and actionable steps you can begin implementing today.
When an organisation receives donor or grant funding, the tax and regulatory environment must be clearly understood. According to KRA’s published guidance on taxation for not-for-profit organisations, such organisations must still comply with filings, maintain records and ensure their accounts are transparent.
Furthermore, special rules now apply under the Income Tax (Charitable Organisations and Donations Exemption) Rules, 2024 which came into effect for charities and donations in June 2024.
Many grants to Kenyan organisations will carry conditions or expectations tied to public benefit. Under the Public Benefit Organisations Act, 2013 and related NGO law, organisations must operate in a way that aligns with their stated objectives, maintain governance structures and comply with donor and regulatory reporting.
Failing to meet reporting or compliance obligations isn’t just a paperwork risk — it can lead to:
funds being withheld or refunded;
future donors declining to fund your organisation;
legal or tax exposure under KRA’s exemption rules.
For example, one survey found NGOs that had pre-audit frameworks experienced 60% fewer qualified findings on external audits.
Donors will expect clear tracking of funds to the approved budget lines. In Kenya, experienced organisations emphasise:
A detailed grant register reconciling budgeted vs actual spend.
Supporting documentation (invoices, beneficiary lists, field logs).
Transparent explanation of variances (why you spent more/less).
Beyond the money, donors want to see results. Key elements:
Baseline data and clear metrics aligned to donor objectives.
Qualitative and quantitative evidence (stories + stats).
Visuals or infographics where applicable.
Meeting deadlines is critical. Organisations in Kenya with strong donor relationships keep:
Reporting calendars with internal and donor deadlines.
Standardised templates for narrative + financial reports.
If your organisation is looking for or has tax-exempt status, the changes in Kenya’s regulatory environment matter:
The Charitable Organisations & Donations Rules (2024) set out conditions for tax exemption.
Organisations must align governing documents, define charitable objectives, and show operations match those objectives.
Applications for exemption, renewal processes and submission deadlines all now have stricter requirements.
Create a calendar that includes:
Contract signing date, payment tranches, mid-term reports, final report / close-out.
Internal deadlines (e.g., 2-3 weeks before donor deadline) to allow review.
Audit submission dates and board reviews.
Include:
Financial report template (income/expenditure vs budget, variances, narrative).
Programmatic report template (activities, outputs, outcomes).
Checklist for supporting documentation (invoices, procurement records, beneficiary lists).
These reduce errors and increase donor confidence.
Key controls:
Segregation of duties (those approving budgets should not do payments).
Documentation of procurement in compliance with donor rules.
A grant register tracking each fund, budget, actual spend, and status.
Often program staff drive donor-reporting expectations while finance teams track spend. Encourage:
Joint planning sessions where program and finance map activity codes to budget lines.
Regular meetings to discuss “what’s happening” and “how we’ll report it”.
Use tools such as cloud accounting or grant-management software to:
Link program transactions to donor codes.
Automate templates and reduce manual error.
Track upcoming deadlines centrally.
Given recent changes in Kenya:
Update your governing documents (constitution, trust deed) to reflect charitable purposes clearly.
Monitor KRA notifications about exemptions and submissions.
If you have tax exemption, ensure renewals and compliance are timely.
Imagine your organisation receives a KSh 20 million grant from an international donor for a water-and-sanitation project in a rural Kenyan county. Here's how you apply the above:
Budget tracking: From day 1, tag each expense to budget code (e.g., “WASH - community borehole”, “WASH - hygiene training”)
Documentation: Every invoice for drilling, training or supplies is uploaded, supplier list logged, beneficiary names captured.
Mid-term report (6 months): You show you spent KSh 9.5 million out of KSh 10 million budgeted for the first period, explain the under-spend (supply delay) and show 1,000 households reached, 600 latrines built.
Tax/NGO compliance: Your organisation has a PBO certificate, your mandate is clearly defined in your governing documents, you’ve applied for the KRA exemption certificate under the 2024 rules.
Final report: You include both financial summary and impact story (e.g., Mary in village X now collects water 10 minutes versus 45 minutes), plus lessons learned.
Organisations doing this well in Kenya report higher donor renewal rates. For example, one source notes organisations with strong donor-reporting systems have a 67% higher chance of repeat funding.
When managing grant or donor funding in Kenya, even well-structured organisations can fall into a few recurring pitfalls. Understanding these common mistakes—and knowing how to prevent them—can save your organisation time, money, and credibility with donors and regulators.
One of the most common and costly errors is missing donor reporting deadlines. This can lead to serious consequences such as withheld disbursements, delayed renewals, or even requests to refund unaccounted funds. To avoid this, create a detailed internal reporting calendar that lists all donor submission dates and assign a specific team member or department to take ownership of each deliverable. Building in internal review deadlines—one or two weeks before the donor’s due date—can also ensure nothing slips through the cracks.
Another frequent issue is the mixing of funds between projects. This can easily result in audit queries or disallowances during donor reviews. Each grant should have its own clear financial trail. Maintaining a dedicated grant register, separate bank accounts for each donor (where possible), or unique fund codes within your accounting system helps you track expenses accurately. This not only satisfies donor requirements but also protects your organisation from compliance risks.
Missing receipts, incomplete records, or unorganised documentation are red flags during both internal and external audits. Donors can reject expenditures if there’s insufficient proof of how the money was used. The solution is to maintain a consistent documentation checklist—covering invoices, procurement records, beneficiary lists, and attendance sheets—and to train staff regularly on proper record-keeping procedures. Simple organisation tools like digital folders or shared drives can make retrieval quick and efficient.
With the new KRA Charitable Organisations and Donations Exemption Rules (2024), it’s essential for your organisation’s constitution, trust deed, or articles of association to clearly reflect charitable purposes. If they don’t, you risk losing your tax-exempt status or facing delays in exemption approvals. Regularly review and update your governing documents to ensure they comply with the latest KRA and NGO regulations. Consider consulting a tax or legal expert to ensure your documentation meets all the current standards.
Finally, one of the most overlooked challenges in grant management is the disconnect between program and finance teams. When these departments fail to collaborate, reports often become rushed, inconsistent, or inaccurate. The best way to prevent this is by organising joint planning workshops where both teams align their activity plans, budgets, and reporting codes. Regular review meetings help ensure everyone is on the same page and that program achievements match the financial reports submitted to donors.
Update your grants calendar: Add all active grants, donor deadlines, internal review dates.
Develop or revise your reporting toolkit: Create templates for donor reports (financial + programmatic), checklist for documentation.
Train your team: Hold a short workshop with finance and programme staff on roles and compliance obligations.
Review your governing documents: Check that your objectives align with charitable purposes under the 2024 KRA rules.
Set up a grant register: If you don’t have one, begin tracking each fund, budget line, actual spend, donor, purpose.
In Kenya’s dynamic funding landscape, knowing how to leverage grant/donor funding isn’t just about writing proposals and securing dollars. It’s about building systems, meeting compliance obligations (especially through KRA and donor requirements), and turning funding into reported impact. With the right reporting tools, governance alignment, and technology-enabled systems, your organisation won’t just comply — it will thrive and attract follow-on funding.
Now’s the time to strengthen your reporting systems, improve transparency, and secure your reputation with funders. Start implementing these best practices today to ensure your next grant not only gets approved—but delivers lasting impact.
If you need expert support in navigating Kenya’s evolving reporting and compliance landscape, get in touch with our team for tailored advisory and training solutions that keep your organisation compliant, credible, and donor-ready.