NGO Governance Needs a Second Look

1
NGO Governance Needs a Second Look

• Presented by
• K SHIVAKUMAR
• Chartered Accountant
• Gandhigram

2
Need

• The second generation reforms combined with
  globalisation has raised a number of new issues
  and is demanding structural changes in the NGO
  sector and one of the main areas of concept which
  has received the attention is Governance
  pattern.

3
Impact Of Globlisation

• Globalization and Liberalization Policies
  together with the expectation of international
  donors, have driven NGOs at present to the dire
  need of equipping with a well set effective
  documented governance pattern.

4
We shall discuss

• Governance
• Why is it an Issue with NGOs?
• a. Culture
• b. Procedures needs strengthening
• c. Systems
• How does it work ?
• a.Efficient
• b.Inefficient
• c.So so

5
Governance Pattern

• Direction and control of organisations
• Three fundamental principles
• Transparency
• Accountability
• Clean
• Efficient compliance
• Rule of law legal framework for contract
  enforcement
• Independent auditor, Report
• Accountable to Donors for funds
• Selection of members
• Roles / Responsibilities Secretary / Treasurer
  / President / Chairman.

6
Contents

• The internal functioning
• Issues of Identity and policy
• Vision, Mission
• Future directions and strategic planning
• resources mobilization
• programming , Staffing
• Meeting statutory requirements
• Governing Structure Vs Management structure
• Relationship with external Agencies -

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Defining Accountability

• Requirement to explain and accept responsibility
• Commitment to accountability
• Organisational development
• Management practices
• Strategic planning

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Good governance - I

• Developing and implementing strategic plans
• Building legal regulatory framework and
  encouraging higher quality accounting practices
• Creating and maintaining an Information System,
  on the basis of net working with national and
  international donors according to their frame of
  reference.
• Listing of ethical standards and putting them to
  action in letter and sprit for effective
  management.
• Transparency in transactions.

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Good governance - II

• Its local stand could be an independent
  (representative) Board that will take care of the
  interest of the stakeholders, donors and state.
• Adopting and encouraging transparent practices so
  as to develop and ensures a sound financial
  information system.
• Monitoring and controlling of the funding and
  support to community based organization, and
  others.
• The Board could be either active, passive,
  representative professional and or other. There
  are various styles of composition and
  functioning of the Board depending upon the
  leadership style ranging from authoritarian
  (autocratic) to democratic leadership, periuly
  and the absolute and absolute style may also be
  created like the sleeping partners in partnership
  know of Rubber Stamp style - Board.

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Functional Governance

• A strong accountable Board
• Role clarity
• Blend of technical and non-technical
• Induction training to board members
• Legal requirement
• Ethical framework
• Dedicated and motivated

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Concentration of Board

• Retirement policy of the Board
• Induction of younger members
• Periodical performance of the members
• Involvement in crafting long term policies
• Facilitating decision making
• Discussing on second-line

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Guidelines to NGOs / Visa-vis Board members

• Performance evaluation
• Duties, responsibilities and powers as per law
• Should be independent, open-minded and feel free
  and be frank in giving expression to their
  opinions

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Governance and NGOsThe Governing Board

• Composition/ Selection Diversification from
  outside
• Composition
• Family Boards
• Invisible Boards
• Peer Boards
• Professional Boards
• Combination of (two or more of) the above

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Meetings

• Periodic / Regular
• Discretionary
• Paper / Circulation

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Discussions

• Seminars / Objective
• Programme Review
• Finance / Budget
• Internal Audit Reports
• Audit Statements Audit Committee Reports
• Budget Deviations
• Strategic Planning

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Framework

• NGO governance framework should make explicit
  (particularly the division of responsibilities)
  between the supervisor and / regulator/ and on
  the one hand and between both and the
  implementing authorities.
• The rights of stakeholders including those of the
  staff should be defined and a suitable mechanism
  be put in place for redressal of grievances in
  regard to violation of their rights.
• The NGO Policy should provide for disclosure and
  transparency of all financial and other knitted
  matters.
• The Board should lay bare its strategic plans and
  monitoring of management, and specify who is who
  in respect of their accountability.

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Financial Governance

• They should have a clearly enunciated Vision,
  arising there from an operational mission.
• There shall be a clear structure to help the
  decision making process ensuring internal control
  combined with a good management information
  system.
• The financial system should have good planning
  and monitoring and evaluation tool to analyse the
  input of funds, to achieve goals with measuring
  physical and goal monitoring

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Finance Committee

• Preparation of long term financial strategy which
  dovetails into long term vision
• Preparation and discussions on new project
  proposals/continuation of old Projects.
• Preparation of budgets, operational plans and
  effective implementation of budgetary control
  system, including capital budgets and updates
• Cash requirements and funds flow analysis
• Shaping of investment policies, creation of
  corpus, and investments of corpus fund
• Analyzing income generating activities/new income
  generation projects/strengthening of existing
  IGP's
• And other financial important points, which may
  be discussed.

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Audit Committee

• There should be minimum of three members An
  independent expert member from the board who will
  be the chairman for the audit committee and who
  will present the audited statements and the
  reports along with the discussions of the audit
  committee to the board and also in the annual
  general meeting
• One or two independent experts in
  finance/programmes.
• One or two from the beneficiaries/staff who are
  well-versed in financial matters.
• The internal auditor and statutory auditor will
  be ex-officio members of the audit committee.

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Terms of Reference (ToR) for Audit Committee

• Improve the quality of financial reporting by
  reviewing the financial statements and to ensure
  that the financial information presented is
  sufficient and correct.
• Reviewing the annual financial statements before
  submission to the Board, focusing primarily on
• Any changes in accounting policies and practices
• Qualifications and opinion of the external
  auditors and their reports.
• Significant adjustments/alterations in the
  statements, arising out of audit, if any
• Review of the reports of the internal auditors
  any significant findings and follow up there on
• Reviewing the adequacy of internal audit, their
  frequency, and internal check and control
  procedure
• Compliance with accounting standard and suggested
  changes, if any.

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ToR Contd

• Help the Director/Chief Functionary by providing
  a forum in which he / she can raise issues of
  concern and which he / she can use to get things
  done which might otherwise be difficult
• Strengthen the position of external auditor by
  providing a channel of communication and forum
  for issues of concern,
• Provide a framework within which the external
  auditor can assert his independence in the event
  of dispute with the management
• look at user maintenance of existing programmes
  to ensure that ownership is taken and the asset
  is sustained and prolongs over longer period.
• Strengthen the position of internal audit
  function by providing a greater degree of
  independence from operating management
• Increase public confidence in the credibility and
  objectivity of financial statements.
• Review the adequacy of internal check or control
  system on the basis of reports of internal and
  external audits.
• Looking at the long term sustainability and
  strengthening of networking.

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Powers of the Audit Committee

• Powers to investigate as per the terms and
  conditions laid down by the Board
• Authority to obtain expert legal opinion as well
  as opinion from other experts on matters
  recommended by the Board as and if needed, to
  invite them to attend audit Committee meet as
  special invitees.

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Functions of the Audit Committee

• Review annual financial statements and to
  recommend adoption by the Board after scrutiny
  and verification of the following with special
  reference to
• Correctness and credibility of statements, as
  well as major entries made in the statements.
• Spot lighting any changes in the accounting
  policies and procedures.
• Qualifications of Audit report along with the
  views and entries if any, together with
  adjustments/ passed as per the recommendation of
  the auditor.
• Compliance with accounting standards.
• Presence of any elite party transactions of the
  promoters / members of the Board.
• Image creation and building credibility of the
  organization.

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Functions of the Audit Committee Contd

• Recommending the appointment of Statutory and
  Internal Auditors on terms and references
  pertaining to their specialized areas as well as
  fixing their fees their status and role be
  hierarchically defined and the communication
  channel set as a step towards protecting their
  independence for effective management
  (governance).
• Reviewing with the management Internal and
  External Auditors views about Internal Check and
  Control systems and reviewing important aspects
  of report, and instituting necessary follow-up
  action.
• Compliance with legal obligations/ requirements.
• Reviving the NGOs financial and risk management
  policies.

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Other Useful Committees

• Human Resources Development committee
• Program Committee
• Resources mobilization committee
• To work out for increasing the present resource
  structure
• For creation of corpus and specific funds
• Analyse IG Activities

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Thank you

• For further information
• vkshiva_at_sancharnet.in