Rethinking Accountability

From 19 to 30 January, Social Edge members joined together to discuss the challenges of civil society accountability and governance. In an online dialogue co-sponsored by the Skoll Foundation and Alliance magazine, key leaders from around the globe discussed with one another questions such as:

• Are we in a new era of scrutiny in the social sector, and if so, what does it mean for us?
• What can the corporate and NGO sectors learn from each other?
• Is the link between performance, resourcing and accountability adequate, and how should it be constructed within the social sector?

(Visit the complete dialogues at http://skoll.socialedge.org/Discussions/Events/Rethinking_Accountability...)

Accountability – yes: but what should it consist of, how do we do it and who is it for? These were among the critical questions raised by and explored in the debate. Some of the main views expressed are summarized below. Some salient points emerged:

• These questions are intimately connected. It is impossible to answer one without answering them all.
• The sector is so large and so diverse that accountability will mean different things to different organizations.
• Any form of accountability worth the name must give weight to beneficiary communities.
• The development of the internet is transforming the whole debate by making more information more widely available. NGOs are in a position to supply, and funders to demand, more detailed and pertinent information and the one will feed the other.
• Increased accountability is unlikely to happen unless all those with an interest in it – organizations, clients, funders – want it to happen.

Event Moderators
Alliance Magazine's Anand Shukla and Caroline Hartnell

Event Producers
Skoll Foundation’s Keely Stevenson and Phil Collis

Special Guests
Barbara Kibbe, Vice President of Skoll Foundation
David Bonbright, Director, Civil Society Programmes with the Aga Khan Foundation
Jan Masaoka, Executive Director of CompassPoint Nonprofit Services
Kumi Naidoo, Secretary General of CIVICUS
Peter Shiras, Vice President of Independent Sector
Simon Zadek, Chief Executive of AccountAbility, London
Woodrow W Clark II, author of Corporate Governance: the Enron fiasco in America
Marilyn Wyatt, a consultant who specializes in non-profit governance
Peter Reynard, Editor of Accountability Forum
David Kalete, Programmes Director, CIVICUS

What is behind the current debate on NGO accountability?

Participants cited a number of reasons why accountability in the non-profit sector is such a large and urgent question:

• The growth both in influence and in numbers of NGOs over the last 15 years or so. This has led, within the sector, to calls for increased responsibility and, from outside, to challenges to NGOs to affirm their mandate – they claim the moral high ground, but in whose name do they speak?
• The need to generate indigenous resources With the decrease in overseas donor funding has come the need to tap local resources. To do this, NGOs must demonstrate to the public that they are worth contributing to. Many, previously reliant on overseas funding, have concentrated on pleasing donors rather than local opinion even when such local opinion is that of their supposed beneficiaries.
• Some publicized cases of financial mismanagement or even fraud Though such scandals have been trifling in comparison with those in the corporate world, part of civil society’s stock in trade is its moral, not its material force and the public is therefore entitled to expect a higher standard of conduct from NGOs.
• The desire to take advantage of favourable tax regimes In a growing number of countries, there are tax concessions both for NGOs and for donors. In order to determine eligibility for such concessions, some form of accountability is customarily demanded by the state.

There is thus a sectoral consensus on the need for greater accountability, but this gives rise to a number of further, vexed questions. Two in particular prompted lively discussion among the participants: what form should it take? To whom, out of all the constituencies who might reasonably demand account from non-profits, should it be directed?

Limited awareness

Accountability is seen as both good sense and ethically right. One participant pointed out that a good deal of NGO money is public money in one form or another and therefore ought to be subject to account just like any other public money. Some felt that increased accountability, and the necessity of effectiveness this would impose, would give them the edge when it comes to fundraising and make their long-term survival more likely.

However, while the sector as a whole might be consumed by the accountability debate, individual NGOs often aren’t. Steve Rudolph (Jiva Institute, India) reported little awareness of the issue among NGOs or foundations. He believes that, if it is not being demanded of them, they are unlikely to embrace it. Ironically, he pointed out, this can mean that an NGO that is sold on accountability can be hindered when seeking a grant because of the conservatism of funders. Another point made was that a formal apparatus for determining accountability would be inappropriate for many small NGOs (for example, village-level organizations). NGOs may perfectly well be conducting their operations with integrity and efficiency, but they won’t feel they have to establish means to show this unless there is some motive for them to do so such as better access to local philanthropy or regulatory demands.

There was no clear agreement here, however. Some felt that the stimulus for greater accountability should be internal rather than external. As one participant put it, ‘accountability must start with us’. Others felt that the best guide is the moral sense of individuals and organizations in the sector.

The role of funders

While funders are in a prime position to demand accountability from NGOs, this often doesn’t happen. Echoing the point made by Steve Rudolph, Peter Tavernise argued that in many cases foundations don’t want to know what non-profits are doing with grant funds. Foundation trustees are volunteers who may not spend much time thinking about how the foundation operates and may not even read grant proposals. As for programme officers, they are often too busy with grant applications to read reports from projects. This means that much of the learning from projects, which would put foundations in a better position to demand some really worthwhile form of accountability, is lost.

The same respondent argued that another reason for foundations not wanting to grasp the project evaluation nettle is that the next logical step would be to evaluate the efficacy of their own decisions. In a sense the money they are spending is public money, however, and he suggests that it won’t be long before the accountability question comes knocking more forcefully at their own door. ‘Technology will lead inexorably to greater transparency’ (See also below The role of the internet) and when the public sits up and takes notice of the fact that foundations are spending public money, ‘there will be some hard questions asked’.

Still, their role is potentially crucial, not only in respect of demanding accountability from supported projects, but also in furnishing the means for it. NGOs, especially smaller ones, seldom have the resources to undertake time-consuming exercises in accountability, or to train staff in the necessary techniques. As Simon Burrall (One World Trust, UK) pointed out, funders will need to pay for any means of implementing increased accountability (such as initial research and documentation of the programme) or only the best-off NGOs will be able to afford it.

Accountability to whom?

Several kinds of NGO accountability were identified by participants – to donors, to state revenue services, to staff, to other similar organizations and to beneficiaries, but the main focus of attention was on accountability to funders and accountability to beneficiaries and the clash between the two. In practice, accounting to funders tends to be the most important (it is ‘skewed’ in that direction) – and this often at the expense of accounting to beneficiary communities. (Many respondents expressed unease that, even within the debate, fellow respondents did not pay enough attention to the needs of beneficiaries). It can therefore happen that an NGO that ‘shows good’ and knows what buttons to press and how to get ticks in the right boxes can benefit in the funding game rather than an NGO that is doing good work by the lights of its beneficiaries. Andrew Kingman (Allavida, UK), among others, suggested that funders themselves can help remedy this by adopting a test of accountability between the NGO and its beneficiary community when making grants. He suggested a number of questions to do with community involvement in and benefit from a project that a funder might put to an NGO when assessing a grant: has the NGO, for instance, worked with the community to map local resources that can be brought to bear on the project? What arrangements have been made with community representatives to monitor the project? Does the project’s management give adequate representation to the community and allow the community to raise concerns about it?  Have community leaders seen the project budget?

Another means of partly reconciling the two might be afforded by raising funds locally. Caroline Hartnell cited a recent Alliance article which suggested that NGOs that did so effectively increased their accountability because they were subjecting themselves to the ‘market test of local community acceptability imposed by fundraising’. Donors, in this case, might also be potential beneficiaries.

A complicating factor, as Paola Grenier (London School of Economics) pointed out, is that the notion of community will always be an elusive one and will be much less easy to pin down in some cases than others. In addition, an NGO might serve more than one ‘community’ and these might have interests that conflict with each other. Edward Self argued that sometimes the interests of the particular community might be at variance with those of wider society. He also suggested that donors have some right to demand accountability since paying the piper proverbially confers the right to call the tune. He suggested a balance be struck between being accountable to funders, beneficiaries and society at large.

The key question, identified by Simon Burrall, is how to convince funders that increased accountability between an NGO and its recipient community represents better value for money for the funder. The potential conflict between the various constituencies who might demand account from organizations could be overcome if funders, beneficiaries and NGOs themselves could see that, in some respects, their interests in the matter are identical.

Measurement and documentation

How do we know we’re doing well? This is clearly a difficult area. How can you find a means of comparing organizations doing so many different things in so many different ways? Yet, as Barbara Kibbe pointed out, ‘talking about how hard it is to prove results is not a good enough answer’. There is a clear link for many between performance, resourcing and accountability. David Bonbright talked about the ACCESS programme which aims to provide a generally accepted reporting standard for the non-profit sector, combining accountability, performance and resource generation.

Certain prerequisites were suggested: any standards framework, to be of any value, must be easy to understand and implement; affordable, and offering clear and significant benefits. It should also, argued one contributor, be framed in such a way that organizations use it because it is good business, not because they feel they have to – it should be the sweet, in other words, not the medicine.

One participant suggested what can be called ‘comparative recognition’, which means comparing a number of non-profits that have broadly the same mission as to how they use their resources to achieve that mission, bearing in mind the backgrounds against which they operate. This might allow consumers (among whom might be donors, volunteers and clients) to assess the value of these organizations. This, in turn, would move the organizations themselves to consider the information they provide. These consumer-style reports were also part of a broader comparison the debate drew between the non-profit and the business sector (see below).

But there are formidable obstacles to devising a set of ‘industry standards’ in a sector whose hallmark is diversity. In devising standards, it is important to concentrate on areas of work, since one size will never fit all. It is also important to subject any potential innovation to the test of appropriateness.

However, some expressed unease at the risk that, by boiling an NGO’s work down to targets and outputs, you might get a system that pays attention to the letter but loses sight of the spirit. Jan Masaoka makes the point that performance indicators are right and good where performance can be measured but should not be insisted on where they can’t be. Much of what non-profits do is unquantifiable. They provide an outlet for and example of the moral and creative forces in a community. What one contributor calls the magic won’t always be able to subject itself to measurement. While there was some agreement on the value of this ‘magic’ and that such magic is difficult to measure, that doesn’t mean we should not try to wrestle with the difficulty. David Bonbright’s final point is that what the sector obviously needs is much greater resources: if NGOs get better at measuring and communicating what they do, magic included, those resources will be forthcoming.

Accountability for accountability’s sake?

There were voices which, while not dissenting about the need for greater accountability, sounded warning notes about the headlong rush to it.

Is the accountability debate and the research it spawns taking on a life of its own which is independent of any benefit to the sector or to organizations in it? Is it worth it financially, asked one participant. It costs money to do research and this may be out of proportion to any gains. As one contributor put it, is spending 30 hours writing a report about how you spent $10,000 really a good use of time?

Similar disquiet was expressed not only about the danger of creating a system that is too unwieldy and costly, but also that the real significance and value of an organization’s work might get lost in what one participant called ‘the push and pull’ of evaluation as NPOs strove to juggle their accountability to their various stakeholders. Another felt that accountability should ‘come when it can’. As NGOs become more efficient, which is something they learn, only then should accountability be formalized. To do so any earlier risks forcing it and creating an inappropriate system.

The role of the internet
Clearly the rise and spread of the internet and its phenomenal capacity to provide information will be of the first importance in NGO accountability. It can make NGO transactions more transparent to donors and could permit a greater degree of donor choice based on first-hand knowledge. The technological capacity to provide more information on non-profit activities, Christina Kirabo (Lia4 Piecetrain) felt, increases the obligation to do so. The internet can become what she calls a ‘glasshouse of transparency’ – donors will see what organizations can put there and, in turn, will start to make demands as to what they do put there.

In fact, argued Peter Tavernise, IT will make the whole process of grant-making and grant-seeking more open and immediate. The rise of web-based grant application and web-based fundraising, accounting and grant performance evaluation will mean NGOs will be able to upload accounting information into tax returns and to GuideStar and other reporting platforms. Similarly, donors will be able to track their gifts, even to the extent of individual donors having access to stories relating to their beneficiaries.

Even with the possibility of this level of information, however, its use may still be limited. People have actually to want to know all this. Funders, from individual donors to foundations, will have to be prepared to delve into places they have not previously been prepared to go. At the NGO end as well, training will be needed if they are to identify and use the kinds of platforms that will enable them to inform donors about their activities and their needs. User numbers are often low because there is not enough information about the internet to the offline population in the developing world and it costs a good deal to learn. This was identified by Christina Kirabo as a critical gap.

The role of non-profit boards

The main locus of accountability in an organization, thought Marilyn Wyatt, must be the board of directors because only they are in a position to oversee efficiency (of resource use) and effectiveness (fulfilment of mission) and balance the two.

However, the oversight of non-profits is often in the hands of volunteers. One participant gave examples of founding executive directors of organizations whose board members are friends of the executive director and know little about board governance. This often happens with all parties behaving in good faith, but it can lead to the problem of so-called MONGOs (my own NGO), which one participant saw as a particular problem in Southern NGOs, where founder directors wield so much power that they control both the staff and the board of directors, whom they select to serve on the board. The relationship between boards and chief officers in the sector is often too cosy, with the balance of power decisively in favour of the latter. What is needed is a shift, as has happened in the business sector following recent soul-searching about corporate governance, so boards can fight their corners against CEOs.

Parallels between the non-profit sector and business

The drive for accountability in both the for-profit and the non-profit sector seems largely sprung from similar defensive motives – in response to scandals and ensuing criticism. Are there any other similarities and is there anything NGOs can learn from business in respect of accountability?

Does the notion of market forces, for instance, have any application to the non-profit sector? One respondent floated the idea of the ‘free social market’, where NGOs’ operations are driven by the demands of their stakeholders (in the same way, he argued, as a company’s first duty is to its shareholders). If they are doing what they are supposed to do – spending money as they said they would and achieving the aims they set, they will attract continuing support and will survive. Hence, good business in non-profit terms is a sufficient form of accountability. While there was some assent to this view, most felt that the parallel was an unsafe one. Shareholders are often ignorant of what businesses are doing, nor are their interests always first in the minds of those running companies. Corporates conform to standards more out of obedience to the law than out of some form of enlightened self-interest and market forces alone have been shown to be an inadequate way of regulating the market.

Another respect in which one respondent considered NGOs could adopt business practice is in consolidation. The vast numbers of NGOs in the US alone must be wasteful of resources. Surely there is a need for rationalization, especially in the face of dwindling resources. A counter-argument made was that it is often the case in middle-income countries (and in the UK) that the growth of an NGO tends to weaken its connection with the communities it serves, strengthening its bureaucratic element instead.

As suggested above, non-profits could take a leaf out of the corporate book by reaffirming the element of tension in relations between the board and CEO. This has become a feature of the new drive for accountability in the corporate sector and is seen as a healthy development.

Though there are things to learn from the for-profit sector, any borrowings need to be carefully thought about, argued David Martin (self-employed researcher), given that corporate governance has failed and continues to fail society.

Concluding

Overall, participants felt that their understanding of the issue had been deepened by the discussion and that it should both be taken forward in other forums and acted upon. Whether they felt that accountability should come from within or without, whether it is good business practice or ‘a discipline of integrity’, most felt that NGO accountability is ‘firmly on the agenda and has to be captured by progressive interests if it is not to be used to reduce our effectiveness going forward'.