Corruption in NGOs
With increasing corruption at the State level, some would
argue that aid should be channelled through grassroots organisations
instead of through the state (i.e. budget support). I wonder
if you have any analyses or references about the state of
corruption in NGOs/grassroots organisations.
Purpose
The purpose of this inquiry is to facilitate understanding
and decision-making with regards to channels and forms of
aid.
Content
Part I (a) sets out information on forms
of corruption in the NGO sector and policy recommendations for donors
when channelling aid through NGOs and (b) lessons learned from some
examples of NGO service delivery.
Part II sets out issues concerning the
accountability of NGOs and recommendations of mechanisms to ensure
the accountability of NGOs.
Part III sets out further reading, including
selected literature found on the U4 website.
This query is concerned with channelling aid through grassroots organizations
(NGOs) and, further, the risks of corruption within NGOs. The query
requests analyses and reports about the "state of corruption"
within NGOs, which are provided below. The issue of corruption in
NGOs relates directly to questions concerning the accountability
of NGOs.
Wedo not attempt with this answer to discuss the pros
and cons of different systems of channelling aid. Since this query
was labelled "quite urgent", in the interests of a speedy
reply, we have taken less time than usual to compile our response.
Part I: Corruption within NGOs, Policy Recommendations and Lessons
Learned
As a preliminary comment, please note that there are many types
of civil society organisations, of which NGOs are one kind; and
that the distinction between international NGOs (INGOs) and local
NGOs may attract different donor concerns about an NGO's accountability
and responsibility to its beneficiaries. Part II will consider NGO
accountability in more detail.
A. Corruption within NGOs and Policy Recommendations
A 2000 paper by A. Clayton, P. Oakley and J Taylor for UNRISD (United
Nations Research Institute for Social Development), entitled "Civil
Society Organizations and Service Provision" sets out the
issues involved in channelling aid through NGOs. In brief, the paper
identifies and analyses the operational lessons concerning CSOs and
service provision, and examines a number of broader issues that can
influence the performance of CSOs in service provision.
A paper on "Corruption
and Civil Society Organisations in Indonesia", by Richard
Holloway, who worked as a Program Adviser on Anti-Corruption and Civil
Society Partnership for Governance Reform in Indonesia, may be of
interest. This paper, although focused on Indonesia, raises general
pitfalls and issues that donors should consider when channelling
aid through NGOs. In brief, the paper describes how NGOs can be "pretender
NGOs", set up by corrupt government officials to take advantage
of donor aid, how NGOs could be run for personal profit or for the
profit of the NGO, contrary to the social function of NGOs. Holloway
warns that donor practices can, paradoxically, encourage corruption,
for example when donors think in terms of
"projects (i.e. time limited, budget agreed, specific outputs
agreed in advance) ... (T)he will -in many cases - only pay for the
actual 'above the line' expenses of a project, expecting that the
NGO finds all the other expenses … from other sources. Donors
frequently say that they will not pay overheads (they do not,
however, say this to for-profit contractors). An NGO manager who works
in the real world with people who exist before and after projects,
and who wants his or her organisation to exist beyond a project, has
to find ways to spend donor funds to cover his or her real costs while
only reporting fund expenditure to the donors in ways that are acceptable
to the donor. In other words he/she starts to lie."
Holloway makes policy recommendations to the international
donor community:
understand the financial reality of running an NGO (as opposed
to a contracting company) and develop regulations and conditions
in ways that respond to the very real problems NGOs face. For further
reading on this point, see also A. Fowler, Chapter 6 , "Mobilising
Financial Resources" in "Striking a balance - a guide
to enhancing the effectiveness of non-governmental organisations
in international development" (Earthscan; 1997)
If foreign donors clearly established norms agreed between them
and the NGO sector for proposal writing, expenses to be covered,
and reporting requirements, and published these clearly, there would
be a great deal fewer need for, and attempts to "hoodwink the
donor"
Where corrupt practices are exposed foreign donors should document
them, expose them and publicize them - not just to protect their
own investment, but to protect the good name of the NGO sector,
and to warn off others who might be that way inclined. Most foreign
donors do not make such public proclamations - presumably for shame
at exposing their own shortcomings - and the sector is the more
vulnerable because of this.
NGOs need to have clear and publicly expressed "Codes
of Ethics" There is also a need for "corruption watch"
NGOs to monitor corruption in NGO sector.
Kitsing is primarily concerned with Central Eastern Europe. The article
describes concerns that criminal groups can infiltrate civil society,
refers to studies on this topic as well as the European Parliament's
public hearing on the awarding of EU contracts to NGOs
A Transparency International Issue Brief 1/2005: "Corruption
and Development Aid" (currently being finalised) has also
drafted proposed recommendations for action by development agencies.
This Issue Brief touches on NGO involvement in corruption but is not
the main focus. Further information may be obtained from Aled Williams,
Research Coordinator in the Policy and research Department:
awilliams@transparency.org
NGOs are often the primary conduits for aid in humanitarian emergencies.
Another Transparency International Issue Brief 1/2005 "Corruption
in Humanitarian aid" (currently being finalised) sets out
some of the corruption pitfalls in delivering humanitarian aid (including,
but not focusing on, channelling aid through NGOs). When humanitarian
disasters strike, local government structures and integrity systems
can be destroyed or severely disrupted. If aid is to have an impact
in such circumstances, it must be well targeted and quickly delivered.
NGO actors can often be sought out as implementing agents and may
have to deal with multiple donors and with multiple reporting requirements.
They may not have regularised internal controls, making them particularly
vulnerable to corruption. The Issue Brief sets out three approaches
to minimising corruption in humanitarian aid:Preventive
mechanisms; Enforcement Mechanisms; and Ownership-based Mechanisms.
It was drawn up in response to the tsunami disaster in South-east
Asia and the unprecedented flow of large amounts of money, goods and
services to the region and the related concerns about corruption in
the distribution of that aid. For more information, contact Aled Williams,
Transparency International-Secretariat, Policy and Research Department,
awilliams@transparency.org
On the theme of corruption and humanitarian aid, see also G. Cremer
"On
the Problem of Misuse in Emergency Aid (1)" in which corruption
amongst the deliverers of emergency aid is discussed. In a similar
vein to the above mentioned articles, the author recommends that the
assistance policy of foreign donors should leave their local partners
enough leeway to support the partners' necessary administrative
structure, and to pay qualified employees adequately.
Another theme that should be considered in the context of corruption
in NGOs is that of conflicts of interest amongst members of NGOs.
At the 10th
International Anti-Corruption Conference (IACC), a workshop entitled
"Conflicts of interest in civil society organisations: Can
they be managed?" was held. The main conclusions of this
workshop were:
NGOs need to recognize conflicts of interest and corruption as
real and likely problems in the NGO sector, not to ignore them as
being the problem of others, and work on ways to deal with such
problems.
NGOs need to set out clear standards and ethics for themselves
and for their sector which will guide people forced with possibly
questionable decisions and practices.
NGOs need to push for an enabling (rather than "un-enabling")
legal and external donor funding environment, so that NGOs are not
pressured into finding ways around difficulties, some of which bring
NGOs into questionable activities.
NGOs need to encourage people within their own ranks, and outsiders
to be whistleblowers in cases of NGO corruption or conflicts
of interest, so that it will become clear that corruption will not
be tolerated.
B. Lessons learned
This section highlights some lessons learned from country examples
in order to illustrate the issues that donors should consider in channelling
aid through NGOs.
NSDP - Bangladesh NGO
Service Delivery Program (NSDP) is a USAID financed program to
deliver high-quality, low-cost reproductive, maternal and child health
care in Bangladesh. The program is USAID's largest in Bangladesh.
35 NGOs manage 317 permanent clinics serving about 20 million people.
A further 8,000 satellite clinics and 7,000 volunteer community health
workers allow NSDP to reach the very poor living in remote rural areas
or urban slums.
NB: Bangladesh is widely cited as a country where donors have sought
to bypass a corrupt government by funding NGOs. On this topic, development
partners have emphasised that the process of selection of NGOs for
service delivery should be transparent. See for example the Report
of the Bangladesh Development Forum Meeting, Dhaka, 2004, which
involved government officials, bilateral development partners and
multilateral partners.
Brazil The Solidarity
in Literacy Programme was created in 1997 by the Solidarity
Community Council, a forum for the development of social actions based
on partnerships between the federal government, private organizations,
and civil society. The Programme is managed by a non-governmental
organization, the Association for the Support of Solidarity in Literacy
Programme and is coordinated by a team of around 200 consultants with
headquarters in Brasilia. "Solidarity in Literacy" spent
three years developing a software program that allows stakeholders
that have rights to financial resources or have provided financial
resources to the organization to trace the money flow throughout the
transaction. Teachers and students can at any time see where their
money is in the system and can hold administrators or municipal officials
to account when the money owed to them is "stuck". Donors
can trace how, when and where their donations are allocated or spent.
A hotline has been established to help stakeholders access resources.
The introduction of this transparency mechanism has helped SIL demonstrate
their accountability both to donors and beneficiaries with a single
tool.
Indonesia
The above-mentioned Holloway paper describes an example where "pretender"
NGOs were set up within the context of the JPS (Jaringan Pengamatan
Sosial) - Social Recovery Program. Funds from the World Bank are programmed
through the Government while Indonesian NGOs serve as monitors. Many
"plat merah NGOs" (pretender NGOs) were formed to handle
the monitoring. One of the grossest examples of pretender NGOs (in
a class of their own) were Suharto's infamous foundations (e.g. Dharma
Bhakti Foundation, Supersemar Foundation) which collected money (usually
from businesses as an informal quid pro quo for their licence to operate)
to supposedly perform social and charitable work. In fact, they were
engines to generate income for Suharto's enormous patronage network.
In some cases (e.g. Dharma Bhakti) they did some charitable work,
but it was a very small part of the whole, and the books were never
audited.
Part II: Accountability of NGOs and Recommendations of Mechanisms
to Ensure the Accountability of NGOs
To avoid corruption in NGOs, accountability mechanisms can be developed
and improved to bring about an ethical environment within NGOs. As indicated
earlier the accountability concerns surrounding INGOs and local-based
NGOs may differ because they have different constituencies, the beneficiaries
of their work varies and the relationship with donors is different.
There is a wealth of information publicly available about the accountability
of NGOs. Here, several clear, concise and well known reports are picked
out and summarised.
A very good overview of the accountability of NGOs is found in L. Jordan
"Mechanisms
for NGO Accountability" Global Public Policy Institute (GPPi)
Research paper Series No. 3.
Jordan points out that where NGOs have responsibility for delivering
public goods and services three types of accountability questions
arise:
1. The effectiveness of NGOs as a social service delivery
agent: that is to say how effective are they in delivering the quality
and quantity of services offered.
2. The independence and reliability of the organizational structures
of NGOs: for example, questions are asked of NGOs concerning the role
of the board, financial accounting, management structures, compensation
policies, hiring and firing practices etc.
3. The legitimacy of NGOs: questions concerning ties to the
public, transparency and adherence to the mission of an NGO, representative
status, the relationship of the NGO to the community served as well
as wider questions concerning the relationship between NGOs and democracy
or value to society as a whole.
According to Jordan, donors typically ask the first two types of
questions before channelling aid through NGOs.
Jordan goes on to consider mechanisms to ensure accountability, drawing
on an article by Alnoor Ebrahim. (A. Ebrahim "Accountability
in Practice: Mechanisms for NGOs", World Development, 2003,
vol. 31, issue 5, pages 813-829) Ebrahim's paper examines how accountability
is practiced by NGOs. Five broad mechanisms are reviewed: reports
and disclosure statements, performance assessments and evaluations,
participation, self-regulation, and social audits. Each mechanism,
distinguished as either a "tool" or a "process,"
is analyzed along three dimensions of accountability: upward-downward,
internal-external, and functional-strategic. It is observed that accountability
in practice has emphasized "upward" and "external"
accountability to donors while "downward" and "internal"
mechanisms remain comparatively underdeveloped. Moreover, NGOs and
funders have focused primarily on short-term "functional"
accountability responses at the expense of longer-term "strategic"
processes necessary for lasting social and political change. Key policy
implications for NGOs and donors are discussed in this paper.
Finally, with reference to Jordan's article, she also points out
the downsides to such accountability mechanisms as they can prioritize
the needs of the donor over those of other stakeholders within and
surrounding NGOs: "They do not always address the immediate knowledge
needs of the NGOs, they rarely reflect the value-base of NGO activities,
they can be quite expensive and when they become the standard for
the industry they can lock out smaller NGOs" (p.11)
HAP International
(Humanitarian Accountability Partnership - International) carries
out accountability projects to test the transparency and accountability
of organizations. An example of the work of a team in Sierra Leone,
between 2001 and 2002, that tested how in practice the transparency
and accountability of aid-providing organizations towards people affected
by disaster or conflict can be increased, is found at the link below.
This report
- Describes the approach that was to be tested;
- Describes major aspects of the HAP fieldwork process;
- Offers critical reflections on the HAP field work;
- Draws out key lessons and conclusions.
The Global Accountability Project (GAP) is part of the Accountability
Programme at the One World Trust which aims to generate wider commitment
to the principles and values of accountability. Its aims include enhancing
the accountability of international non-governmental organisations
(INGOs) to the individuals and communities they affect.
In essence the GAP Framework sets out guidelines for accountability
which are described in four dimensions: transparency, participation,
evaluation, and complaint and response mechanisms. Each dimension
lists a series of targets for all aspects of a NGO's operation. This
is a useful checklist or guide for donor's seeking to assess
whether to channel aid through a particular NGO. A
short version, as well as the complete version of the GAP Report may
be found online.
For an overview of academic and practitioner discussion of the issues
surrounding NGO accountability, see the proceedings of a seminar (in
which the views of the participants are recorded) entitled "An
Analytical Framework for Strengthening NGO Accountability", held
in the Philippines in 2003.
The paper that forms the basis for the above-mentioned seminar is
"Strategic
Accountability for International NGOs" by Brown, Moore and
Honan from the Hauser Center for Nonprofit Organisations at Harvard
University.
In this paper the authors focus on assessing the multiple accountabilities
of INGOs, and how they can be understood within a "public
value framework". An initial task in using the framework
is to recognize the value to be created by INGOs. This entails articulating
its vision and mission, specifying its strategies and strategic goals,
and defining outputs that lead to desirable outcomes. A second major
task is to gauge legitimacy and support for the INGO and its mission.
This requires focusing on and developing sources of revenue, mobilizing
volunteer energy and commitment, building legitimacy with the general
public or the media, dealing with government regulators, and managing
relations with other INGOs and civil society actors. The third task
is to measure operational capacity and organizational activities.
This involves assessing the operational resources of partners as well
as the INGO itself, focusing on capacity as both a stock and flow,
articulating output measures, producing measures of efficiency and
financial integrity, assessing staff and partner morale and capacity,
and assessing learning and innovation. The public value framework
integrates these ideas of creating public value, expanding legitimacy
and support, and building operational capacity. The paper also deals
with the challenges of constructing and implementing INGO accountability
systems on the basis of this analysis. It focuses on several elements
of this process:
Negotiating stakeholder accountability expectations, depending
on the forms of
accountability current in the relationship and the nature of the
INGOs mission;
Creating performance measurement systems that recognize the potential
contribution, so measures of processes, outputs, outcomes and impacts;
Communicating results and rewarding performance, so that relevant
stakeholders have access to the information they need to sanction
high and low levels of performance; and,
Using accountability systems to enhance performance management,
organizational learning and organizational legitimacy.
Mango is
an NGO that also deals with accountability issues: its mission is
to strengthen the financial management of NGOs working in humanitarian
aid and development.
Selected
Literature on the U4 Website: In the sections on non-governmental
oversight and civil society, there are several resources that deal
with the role of NGOs in combating corruption, as well as corruption
challenges within NGOs.
