Transparency and Accountability in NGOs

Posted on 20 September, 2021 at 11:05

Transparency and Accountability in NGOs

Our experience with partnering and working with NGOs has availed that these organisations face rather complex requirements for financial control as their funding is donor or sponsor based.  Therefore, NGOs should voluntarily commit to high standards of transparency and disclosure of information with regards to their operations. With strict standards for transparency and accountability, these organisations more often than not find themselves highly challenged.

The need for transparency and accountability

The NGO sector is unique in that individuals and or organisations give funds without receiving a service or product in return. The absence of proper reporting prevents free flow of information as to how funds are used and this raises lack of confidence and skepticism from donors on whether funds are being directed and put to good use as per agreement. Falling short of the required standards of transparency and accountability  also erodes reputation and in some instances loss of funding from donors.

Transparency

This speaks to the ability to demonstrate how funds have been used and the accomplished results. Donors are also interested in the social impact delivered. Financial transparency requires reporting at the lowest level, how funds were used. At a minimum, the organisation must identify an expenditure with a specific program such that costs can be captured at program /project level. It is a requisite that organisations do not end up mixing expenditure from different programs in order to give an accurate report for each project.

Accountability

From a finance viewpoint, accountability refers to translating the governance structure into related or compatible workflows. The goal is to ensure that personel with the right skillset and authority are involved in making the right decisions. This speaks to controls and procedures, for example, project requisitions  require approval from the finance manager then authorisation from the managing director and a time stamp for strong audit trail. Having a strong governance structure is important to ensure that sound controls are in place to safeguard the use of funds.

Conclusion

NGOs should ensure that they conform to high standards of transparency and accountability in order to maintain or even increase donor confidence for funding and to maintain a clean reputation. NGOs should therefore always have regular reviews on:

I. Governance structure

To assess the adequacy of controls within the organisation

II. Skill set

To ensure that finance team is adequately skilled so at to enhance transparent and adequate reporting on projects or programs.