Thursday, December 15, 2005

transparency of ngo needs donor initiative

The role of NGOs since reform movement in 1998 becomes more important. Now they are involved in almost all aspect of our life. Unfortunately, the structural problem remains unchanged. Transparency of NGOs to their stakeholders is still far from ideal, especially financial transparency. Efforts made to promote this issue have been made but fail to record a substantial result.

Majority of NGOs financial sources are grants from grant making foundation (donor). They are international NGOs or multilateral development agencies. High dependency of NGOs to donors fund raise a challenging question. NGO is believed as representation of civil society, then why people do not contribute to NGOs’ operation? In other words, legitimacy of NGOs is questioned, whether they work on donor or public interest?

The answer is not straightforward. Some of them will say that as long as donor interest is in line with public interest, then no problem with accepting donor’s fund. It is assumed that donor’s money must be rejected when the interest is on contrary to what of public interest. In reality, it is not black and white. What public needs and perceived as the highest priority sometimes are not always what donor perceived. That makes the impact of NGOs works mostly hard to be measured to the people.

For decades, it’s hard to find NGOs that could access public funds, other than NGOs related to religion, ethnic and natural disaster activities. Recent survey mentioned that people in big cities do not want to donate their money to NGOs due to its credibility. They do not believe NGOs could manage their money.

Some regulations have available for transparency. Foundation law has asked financial transparency for those who received grants of more than 500 Million Rupiah. Indonesian Accountant Association has also issued a standard of financial reporting called PSAK 45 since 2000. Still those instruments could not push the NGOs transparency.

Donor’s role

Since donor’s fund plays an important role in NGOs development, initiative to promote financial transparency must come from them. Promotion of NGOs transparency is aiming at having NGOs that supported by its community.

Legal Aid Office (LBH) case is the best lesson learned. After decades of serving marginalized people in legal, human right and democracy, they ignored the importance of diversified source of fund. When donor’s grant stopped, their services decreased drastically.

Promoting transparency for NGOs actually uncovered some problems. First, donor is thinking about themselves only. Transparency of NGOs as their grantee to them is enough. Accountability for the money they granted has satisfying them. It creates some NGOs that established just to take the opportunity to have fund from donor. They are using NGOs as vehicle to raise money or power to the founders. As long as they could support each rupiah given by donors by financial evidences, then business is done.

Second, resources in non profit sector are limited. Transparency needs information to be published. Producing information needs human resources and infrastructure. Non-profit sector can not pay for the first class people, accountant for example, due to its low salary offered. While it has some uniqueness that needs a specific skilled people. Most financial business of NGOs are not taken care by competent people resulted from this condition.

Infrastructures such as accounting software, books, training centers, trainers that understand NGOs activities are also hard to find. Non-profit business considered as second class business, so at business and accounting school it never been taught. Or it is given only as introduction and using American text books and cases. Where the circumstances are totally different with reality here.

Third, financial transparency does not totally support the fund-raising activities. Being transparent make public know everything about them. Transparency is a must in fund raising activities. But it will not guarantee that fund will come. No incentives available from business sector and government sector as well for a transparent NGO.

When NGOs trying to find other than donor source of fund, it needs a lot of creativity, business senses, network, capital etc. Some of NGO successfully have their own source of income. They created program based income such as providing training, consultancy in their field of competency. The others run a totally different business, as a cash cow. But majority still think about donor’s fund and trapped into the obligation for being transparent to donor only.

Donor initiative must be directed to solve the uncovered problems above. First, donor must change they way they treat NGOs. When money granted they have to attach also a capacity building for developing recipient capacity in producing financial information. It will enable NGOs to be transparent and accountable to both of donors and public.

Second, donor must also think about NGOs as a whole, not only their grantees. Donor must allocate some of their fund to strengthen the capacity of NGOs thru financing human resources and infrastructure development. These efforts could not generate a directly identified output for them in short term, but if it is consistent and systematically executed, more and more healthy NGOs will be available as their partners in the future.

Third, incentives for transparent NGOs could be provided. Starting from donor’s community. They should agree not awarding any grants to NGOs who failed to show transparency and accountability after years of capacity building assistance. Exchange of information regarding NGO’s reputation could be avoided opportunistic NGO from moving around one donor to another.

Initiatives from donor side must be married with willingness from NGO. They have to understand about their weaknesses in being transparent and work together with donor to improve their transparency. Donor should not offer many capacity building trainings if the NGO does not feel that they need those. Soon after the NGOs both programmatic and financial are solid, then access to public fund could be started.

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