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Financial transparency in international aid


A funding stream is only as transparent as the last organisation in the chain

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Financial transparency in corporate and public international aid is currently a hot topic in both the media and politics: greater awareness of international development, along with economic austerity, has focused people’s attention on just how well international aid is being spent.

Ensuring aid is well spent relies on transparency and accountability in the international development sector, but there is an increasing concern that some of the monitoring and reporting measures in the sector are not fit for purpose.

This problem is illustrated by the example of Sister Mukisa* at Grace Children’s Home in rural Uganda. The orphanage receives restricted funds from a number of different international NGO donors. Each funding stream has its own separate reporting criteria and guidelines, and comes in a different currency along with specific restrictions on what the funds can and cannot be spent on. Without help, Sister Mukisa does not have the time or skillset to produce transparent and clear reports.

This type of example is repeated thousands of times over across the developing world at organisations such as health clinics, street child centres and schools which are the last organisations in the chain of funding.

The donating corporations (and the public) rightly want to know that their taxes and donations are being spent in an accountable way, and some people, frustrated by the lack of transparency in international aid, are demanding huge cuts to funding.

However, when you see the good work that Sister Mukisa is doing, and the many vulnerable children who need the shelter, education, and nurturing that Grace Children’s Home provides, it seems cruel to cut their funding. A better solution would be to ensure that local staff have the skills necessary to ensure clear and accurate reports.

The most effective way to build up the skills and improve the systems and processes at community based organisations is face-to-face coaching. However, obviously a street children’s centre in a Malawian slum or a women’s refuge in Cambodia cannot afford to pay for a financial consultant, so mentoring schemes rely on volunteer financial professionals.

Pro bono mentoring by accountants and finance professionals can have a huge effect on these small organisations. For example, Tasfa, a local agriculture organisation in rural Ethiopia, found itself close to losing its donor funding and even faced closing down due to a lack of transparent record keeping and poor reporting. Tasfa teaches smallholder farmers agricultural techniques to increase their food security and also protect their local environment.

The problem was not that the accountant or senior staff were defrauding the organisation or misspending donor funds, but that the finance officer did not have enough understanding as to how to set up appropriate accounting controls and processes, or how to follow a regular schedule of reporting.

A volunteer from Accounting for International Development spent four weeks training and mentoring the finance officer. The resulting strengthening of accounting systems increased the confidence of the NGO donor and Tasfa retained its funding.

Bo Women’s Justice Organisation (BWJO), a women’s empowerment organisation in Sierra Leone, was in an even worse situation. This charity rescues and rehabilitates victims of sex trafficking and protects vulnerable women who may be at risk of abuse. Despite such worth-while programmes, the organisation was marred by a previous incident of fraud.

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Chris Oliver said: I liked the propositon of your article -that accountants can be an agent for change to help those most in need The controls and practices that you outline are those that professional accountants take for granted and yet when these are absent suspicion and mis-trust can lead to withdrawal of funding by donors It is heartening to hear that the intervention of volunteers can set organisations back on trackin a relatively short timescale This is is worthy work and Im sure very satisfying Im considering volunteering through Chriss organisationOther interested should check the website wwwafidorguk

Alex said: Annie and Chris - great artcle explaining some of the challenges for NGOs with limited resources and the people involved Clearly many organisations would no longerexist if it wasnt for your volunteer program Cant wait to be a volunteer myself one day

Baptist Lobo said: I want to help as a volunteer How do I go about finding the recipient who needs help

Rachel Rank said: Your blog highlights issues that many development workers will be familiar with - that despite peoples best efforts small grassroots organisations such as Tasfa sometimes lack the required capacity or skills to properly manage the finance and operations side of their work These organisations are undertaking crucial work in their countries and quite rightly they want to focus on the delivery of that work rather than worrying about how to align their bookkeeping system with donor reporting templatesAfIDs mentoring scheme is an excellent idea but its not the only support the development community can provide Donors can also support these organisations by publishing their own information including on individual project funding disbursements contracts and results in an open and comparable format The International Aid Transparency Initiative IATI is a common reporting standard that allows donors to do just this IATI data is comparable across donors and its free to access meaning that anyone can use share and re-use itTo date 21 donors are publishing their aid information in this common format including some of the worlds largest bilateral and multilateral donors But more donors need to publish to IATI to make the data truly useful They also need to consider the burdens that their individual reporting criteria places on small organisations such as those AfID is working with If donors can develop a common standard for publishing their own aid information why not one for recipient reporting as well This would make it easier to track flows all the way down the chain from provider to implementer and at the same time open up the information for others to access and use for their own purposes

Financial transparency in international aid
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