Transparency and accountability have become the buzzwords among non-governmental organisations even as they grow in reach, relevance and importance in the development sector. Until recently they were exempt from conventional oversight; their do-good nature and the commitment of their participants were considered sufficient.

However, in the last few years, NGOs in India have been increasingly dogged by several allegations. For instance, recently the source of funds deployed by an NGO in its agitation against a nuclear power plant was challenged. Also in the news was the investigation of some NGOs tasked with running certain national-level programmes. This growing scrutiny of NGOs cannot be ignored, as it challenges the very basis of their existence.

voluntary accountability

Unlike the corporate sector, where transparency and accountability are prescribed by law in the form of Clause 49 of the Listing Agreement, the not-for-profit sector does not face the same degree of regulation, except for the organisations registered under Section 25 of the Indian Companies Act 1956. The possible reason for excluding NGOs from such a governance regulation can be their nature of work, which requires them to remain independent from the Government and be self-governed. The National Policy on the Voluntary Sector 2007 states that the voluntary sector is expected to set its own benchmarks in the areas of transparency and accountability.

Demand from donors

One cannot ignore the visibly declining foreign contributions in the Foreign Contribution Regulation Act (FCRA) annual report 2009-2010, which shows a 4.3 per cent decrease compared to the previous year. International donors are under pressure from contributors to ensure that every resource committed by them is expended in a transparent and accountable manner.

In the demanding political, economic and social environment prevailing today, NGOs are faced with the challenge to develop regulatory standards and adopt practices that other organisations can emulate. An NGO demonstrating its commitment to good governance will attract donors, as it will ensure better impact and value for their money.

Exemplary global practices

Globally, in addition to the regulatory initiatives on NGO accountability, the sector itself has been using a variety of voluntary mechanisms. “Whistle-blowing” is one such mechanism, which facilitates an inclusive approach in the fight against fraud and corruption by involving the beneficiaries, staff and the partners.

Several leading international projects such as The Global Accountability Project, which is part of the Accountability Programme at the One World Trust, the Humanitarian Accountability Partnership International Standards, and Philippine Council for NGO Certification have recommended a robust complaint handling mechanism as a critical tool for promoting transparency and accountability.

International organisations such as Oxfam, The Global Fund and World Vision have multiple whistle-blowing channels such as a toll-free 24x7 hotline number, email address, Web sites, and fax or post box numbers.

Lessons from corporate sector

In a recent Ernst & Young study based on India Fraud Survey 2012 — “Fraud and corporate governance: Changing paradigm in India”, nearly three out of five respondents said their organisation had been subjected to fraud during the past year. Around two-third said this fraudulent activity was exposed due to whistle-blowing.

In the corporate sector, whistle-blowing tops the list of methods employed by organisations to detect fraud. Credibility Alliance, an India-based consortium of voluntary organisations, also prescribes a whistle-blowing mechanism for promoting good governance standards in this sector. Such a mechanism will facilitate the transmission of critical information pertaining to fraud, misconduct, violation of policies and so on to the authority concerned. It can also become a critical success factor in an NGO's endeavour to detect fraud and promote ethical culture, while also following international best practices to enhance its anti-fraud and governance environment.

Undoubtedly, transparency and accountability facilitate the flow of information to stakeholders, increase public trust, improve development outcomes, and address developmental challenges such as corruption and mismanagement of project funds. Whistle-blowing mechanism can be an important indicator of an NGO's seriousness in addressing transparency issues.

The author is Partner and National Director — Fraud Investigation and Dispute Services, Ernst & Young Pvt Ltd.

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