Trouble in Paradise: NGO Accountability & Corruption

‘Lies, damn lies, …  and NGO accountability’.

Sign showing accountability - NGOs and Charity corruptionIn the simplest of terms, the stability of the non-profit sector is based on a collective public trust, built on the innate belief that nongovernmental organisations (NGOs) are intrinsically trustworthy.  Just how warranted is this faith? Are NGO’s doing enough to merit the belief placed in them?  At the heart of these questions is the issue of accountability.

In the first of a series of three articles on corruption and the NGO/non-profit sector, I will explore the issue of NGO accountability, a concept that goes to the very heart of the sector’s legitimacy.

NGOs are now the size of small countries!

The past quarter of a century has seen a reduction in the size and role of governments around the world, leading to a growing gap in the provision of much needed primary welfare services. This gap is increasingly being filled by NGOs, whose numbers continue to grow exponentially, as has the scale of resources entrusted to them.  Mirroring the rise of multi-national corporations half a century ago, a number of them now control annual budgets the size of small economies! An example of this is World Vision International, who, in 2013, reported a total worldwide income of US$2.67 billion, a figure equal to Burundi’s economy, and higher then the GDP of twenty-nine other nation states! Other international NGOs (INGOs), such as Save the Children International (with a total 2013 income of US$1.9 billion), are key recipients of taxpayer funded overseas development aid, with 53% of their income sourced from governments. ActionAid, another INGO, have positioned themselves to take a key role in helping shape a number of nation’s policy formulation and service delivery. Given this size and influence, just how accountable are INGOs (and other) operating in the non-profit sector?

Accountable … to whom?

While accountability is an accepted principle for responsible NGO practice, a study by SustainAbility has found that as a whole, NGOs have tended to be less transparent and accountable then other sectors.  In cases where accountability does exist, research carried out by the Global Public Policy Institute has shown it to be limited to the traditional, and very narrow, ‘top-down’ approach. According to the strategic consulting firm: Oxford Analytica

The distinguishing feature of NGOs is that donors do not benefit directly from their contributions, with the benefit accruing instead to third parties targeted by the organisations or to society as a whole.  As a result, NGOs have traditionally been accorded the presumptions of moral authority, altruism and absence of conflicts of interest.  However, the NGO sector is now being viewed as a candidate for the same type of governance standards as the private, for-profit, sector.

Despite being subject to a growing level of scrutiny, Jon Entine (writing in the Ethical Corporation magazine) claims that many NGOs are unwilling to apply the same standards of accountability they expect from others.  This is supported by a University of Warwick survey (albeit carried out in 2003) of 600 NGO directors, in which most did not consider their own accountability. This is supported by the Global Accountability Project, which reported that many ‘Northern’ NGO directors considered the sector (in general) to be above such issues.

Quoting from a Michael Jennings article published in the Guardian:

With few legal and regulatory frameworks setting out how communities can hold NGOs to account, and with even less support for communities to engage in such a process, there is a significant accountability deficit at the heart of international NGOs.

Notwithstanding the above criticisms, there has been a growing awareness of the issue amongst the larger players, when in 2008, eleven INGOs came together to form the INGO Accountability Charter; (renamed Accountable Now) an initiative founded in direct response to increasing pressure for greater transparency, accountability and effectiveness.  Developed and owned by the INGOs themselves – a potential conflict of interest that may reduce the organisations overall effectiveness – the Charter (now with twenty-one full members) is designed to reflect the values and priorities of the NGO sector and aims to be “the voice of the sector in the public debate on NGO accountability”. Despite this, there is still no commonly agreed umbrella standard of accountability. As stated by Jeremy Hobbs, the former Executive Director of Oxfam International (and then Chair of the Charter at the time):

Success in determining the accountability agenda … [is] dependent on one essential change:  we need to unite collectively behind a commonly accepted umbrella standard of accountability … [as] a commonly agreed, convincing and challenging approach to NGO accountability would substantially improve the quality of our [i.e INGOs] work.

The lack of effective external oversight

While initiatives such as the INGO Accountability Charter help to foster a common understanding on the issue of accountability amongst its members, as they are also its shareholders, it does not address a broader problem faced by the sector: the lack of independent oversight, with many NGOs operating within relatively weak regulatory structures. In most countries, only basic legal requirements for the set up and running of NGOs exist.  This weak regulatory framework, and a lack of robust external oversight has resulted in the creation of two natural barriers in the NGO accountability stakes:

  • A propensity to be closed to external pressures.  As many NGOs are not imbedded into broader external processes, there is a natural predisposition for them to have an inwardly looking focus, and
  • A narrow frame of reference, with accountability primarily being enforced through self-regulatory mechanisms and internal rules and procedures. Unlike other development players who are subject to rigorous integrity regimes (such as internal and external oversight bodies), an NGO’s key for ensuring integrity remains the effectiveness of its governance and the robustness of its internal control framework.

The combination of the above factors has created a lack of overall checks and balances, a key factor in the fight against fraud and corruption.  Given the high levels of trust on which the sector is built, many NGOs (in particular smaller ones, and those indigenous NGOS operating in developing countries), fail to implement even rudimentary governance and control systems.  When combined with an inwardly looking focus, crucial corruption-risks can be easily ignored or down played; a phenomenon that I have seen and experienced first hand.

….. So what does this all mean?

Combining the lack of a commonly agreed umbrella standard for accountability, an over-reliance on self-regulatory mechanisms and a weak external oversight system on one hand; with an automatic presumption of “trust” and “moral authority”, a propensity to be inwardly focused, and being closed to external pressures, on the other; has inadvertently created a high corruption-risk environment. In the simplest of terms, viewed as an outcome, corruption is a “consequence of the failure of accountability”

While specific measures an NGO/non-profit can take to reduce fraud and corruption-risk will be covered in the next two blogs, below are a number of areas an NGO should consider when reviewing its level of accountability:

  1. Organisational accountability – Ensuring good governance:  Internal governance and accountability should not be seen as secondary to a NGOs overall mission.  As in any organisation, the basic building blocks of organisational accountability – in particular transparency of information, and effective organisational governance structures – should be appropriately implemented;
  2. Accountability Mix – Strengthening downward accountability: Placing undue focus on ‘upward’ accountability, based on contractual obligations to donors, can be counter productive.  Not only is it at odds with an organisation’s ‘mission-driven’ (or ‘downward’) focus, it overlooks a key asset that can be used to improve organisational accountability and reduce corruption: beneficiaries.  While as a group they traditionally have little influence, and no power over an NGO, they are a powerful tool to ensure an NGO is held to account. Refocusing an accountability system to include ‘upward’ and ‘downward’ accountability mechanisms provides an extra layer of checks-and-balances, while at the same time providing a 360-degree feedback on an NGOs actions
  3. Accountability Frameworks – Building an ethical organisation: An NGOs key asset are its employees, with organisational integrity directly linked to the ethical behaviour of its staff.  Implementing an integrated integrity and anti-corruption framework, with a clear code of conduct, and a strong internal control system, are key accountability tools; as they play a crucial role in reducing unethical and/or corrupt practices taking place. A clear accountability framework within which employees operate is a key cornerstone of ensuring overall accountability.
  4. Transparency  – Opening NGOs up to an appropriate level of scrutiny: With few legal frameworks capable of holding NGOs to account, and a general lack of ability to legally challenge an NGOs actions, basic principles and minimum standards can be insufficient to guarantee accountability.  In the absence of such legal protections, transparency plays a vital role in the process. An NGO needs to develop appropriate mechanisms to increase its transparency, by voluntarily making the details of its operations fully available to public scrutiny.  While this can be supplemented through industry self-regulation (an example being the INGO Accountability Charter), to be effective, there needs to be appropriate mechanism to sanction members for non-compliance.

Having covered the broad issue of NGO accountability, and raising the spectre of potential corruption-risks within the sector, Part 2 of the Blog will examine what we know about actual corruption within the sector itself.

Photo - Jeremy Sandbrook, CEO Integritas360About the author: Jeremy Sandbrook is the Chief Executive of Integritas360, a global social enterprise that helps charities and NGOs/NFPs  ‘corruption-proof’ themselves. An internationally recognised anti-corruption expert, he has spent the last decade working in the international development sector, predominantly in Africa, Europe and Australasia. Jeremy also lectures on the topic at the University of Sydney’s Centre for Continuing Education.