Governance, Accountability and Fundraising- Hearing the voices of communities

Jaime Faustino and Barnett Baron

The increasing visibility of NGOs in national and international affairs is giving rise to ever more questions about their legitimacy and accountability. Who do they represent? To whom are they accountable? NGOs typically respond that they are accountable to their mission and the communities they serve, but this response begs a question: how, in fact, can or do the voices of beneficiaries influence the programmes and policies of NGOs? One usually overlooked way of increasing NGO accountability to the communities they serve is to encourage NGOs to raise funds locally.

In response to criticism, various mechanisms are being discussed and, in some countries, developed to improve NGO governance and accountability. These mechanisms – including a variety of new approaches to NGO self-certification and increased attention to NGO governance and accountability by governments and donor agencies – are useful but provide limited opportunities for ‘beneficiary’ voices to be heard.

By contrast, attempting to raise funds locally – both from individuals and from government, corporations, associations of individuals, etc – does have the immediate effect of increasing NGO transparency and accountability to the communities they serve. It means they have to subject themselves to the market test of local community acceptability imposed by fundraising. We view local fundraising not only as a way to raise money, but also as a vehicle for communicating with the communities NGOs purport to serve and a real-world incentive for NGOs to improve their governance, transparency and accountability to those very communities.

Three approaches to NGO regulation

In most developing countries, three approaches to NGO regulation are used in some combination: self-regulation, regulation by donors and increased government supervision. Donor regulation is probably the most prevalent since this is the price NGOs have to pay for obtaining grants and cooperative agreements. As vehicles for improving NGO accountability and transparency, all three mechanisms are less than optimal because the conversations they produce are generally limited to government bureaucrats, philanthropic boards and staff, and NGOs themselves.

Donor regulation
NGOs that receive donor funds typically operate under what scholars call ‘principal-agent accountability’. That is, they are primarily accountable to the institutional donors that fund their projects and must submit regular narrative and financial reports to them. While this is an effective mechanism to ensure the proper use of donor funds, the scope of accountability is limited and typically does not extend as far as the NGO’s governance, transparency or even project impact. Moreover, this type of limited, donor-oriented accountability, at least as practised by US donors, usually provides no opportunity for beneficiary input.

Similarly, donor-oriented accountability systems are generally silent regarding the public disclosure of NGO programmes and finances. For example, as part of a research project on financial sustainability, over 100 Philippine NGOs were asked to divulge financial information.[1] Fewer than 10 per cent were willing to do so – only their external donors had access to this information.

NGO self-regulation and government regulation
Government regulation is by its nature unlikely to make any provision for the voices of poor communities to be heard and self-regulation scores little better. A recent paper by Mark Sidel on ‘Trends in Nonprofit Self-Regulation in the Asia Pacific Region’, reviewed ‘experiments, initiatives and models’ in 17 Asian countries.[2] These include various types of accreditation and certification bodies, rating systems, codes of conduct, discussions of charity commissions, and several incipient ‘intranet’ peer discussion and self-monitoring systems. Only one, the GIVE Foundation in India (see below), includes explicit provision for beneficiary communities to participate in the assessment process.

The benefits of fundraising

For most people, fundraising is about money. While this is true, it is only part of the story. Fundraising from local communities is one of the most direct and effective mechanisms for improving NGO governance and accountability. The moment and process of asking provides a unique opportunity.

Asking people who are not in the business of giving away money is difficult. You are asking them to forgo something of direct personal value to them in order to help improve the community through an NGO programme. If the person thinks the programme is worth supporting, a donation is given. Some people will ask questions and explanations must be provided. If they are not convinced, they will not give a gift or renew their membership. In short, fundraising is a form of direct democracy, giving community members a chance to have their voices heard. Fundraising from the public and individuals is one of the most effective approaches to sustained and constant engagement with a community. It provides an avenue for 10 or 10,000 voices to be heard.

The implications of fundraising for an NGO can be far-reaching. For one, the nature of board participation changes. To raise money from individuals, members of the board have to set an example by contributing themselves. Another lesson is that poor governance and low accountability have direct consequences on the NGO’s ability to persuade others to contribute.

Potential contributors at the local community level need to be educated and convinced. They want to know why NGOs are involved, who their leaders are, whether they can be trusted and how the community will benefit from the NGO’s engagement. Fundraising from local communities requires NGO leaders to make their case in clear and persuasive terms, explaining organizational motivations and demonstrating direct benefit to the community. Potential contributors need to be guided through the stages of engagement, from overcoming ignorance (‘I have never heard of you and don’t understand how or why you help’), to increased understanding (‘I understand who you are and what you do, so here is a little donation’), to sustained commitment (‘I’d like to volunteer time and donate again for your cause’).

Is fundraising in poor countries possible?

There are several reasons why many NGOs in developing countries are not pursuing fundraising from local communities. For one, NGOs in many developing countries are sceptical about whether it is possible, but survey results from across Asia are beginning to allay such doubts. Investing in Ourselves: Giving and fundraising in Asia is a seven-country study conducted by Venture for Fund Raising on behalf of the Asia Pacific Philanthropy Consortium (APPC), with four principal objectives:

  • to build awareness of successful methods of fundraising employed by Asian NGOs and to identify innovative practices, even in relatively poor countries that do not share Western cultural traditions;
  • to increase understanding of the need for transparency and accountability among Asian NGOs if they are to be successful in fundraising;
  • to increase the capacity of Asian NGOs to mobilize resources;
  • to establish benchmarks against which to measure the nature and scope of philanthropic giving in participating countries.

The study produced 112 case studies of successful local fundraising in seven countries and household-level surveys of charitable giving in four of these.[3] The key findings validate the assumption that local fundraising for good causes is indeed possible even in poor countries. For example, in Thailand, the Philippines and Indonesia, the average amount given per capita was reported to be $546, $400 and $123 respectively. The success of fundraising campaigns depended at least in part on the community’s perception of the asking NGO’s accountability, transparency and effectiveness.

Why NGOs prefer grant funding

Another reason why NGOs have not paid sufficient attention to the potential rewards of local community fundraising is the higher rate of return on investments in grant-seeking from governments or institutional donors, where several weeks of proposal writing can translate into a multi-year grant. Fundraising from the community is a long and difficult process, requiring many organizational changes and producing relatively modest results over longer periods of time and investment. Moreover, it is a financially risky undertaking.

Given limited staff and budgets, the need to keep administrative costs down, scepticism about likely results, and lack of experience, many NGOs have calculated that grant-seeking is the best fundraising mechanism. There is limited accountability, almost no pressure on NGO governance and a fantastic return on investment. NGO dependence on grants has not happened by accident. It is the result of rational analysis and response to the signals of the philanthropic marketplace.

Is foreign funding sustainable?

But is foreign funding sustainable? Public and private foreign assistance ebbs and flows with the changing priorities of external donors. As the countries of South-East Asia continue their economic progress, they too will eventually be ‘graduated’ from foreign assistance programmes, as were their more prosperous neighbours in North-East Asia some years ago. As foreign assistance inevitably declines, NGOs will become increasingly reliant on the three other primary sources of funding available to NGOs worldwide: earned income, including service fees, sales and investment income; philanthropic contributions from local individuals, foundations and corporations; and domestic government subsidies and payments, directly in the form of grants and contracts, and indirectly through tax privileges. Over time, NGO financial sustainability will depend increasingly on the quality of the relationships that NGOs are able to develop with public opinion in their own countries and with their own governments. In the process, NGOs will have to become more accountable and transparent to these new and more demanding donors.

Moving forward

In most cases, philanthropic organizations support capacity-building for staff. Some support board development and the hiring of consultants. However, only a few currently encourage and support fundraising from the community. The failure to do this may actually undermine the prospects for better NGO governance and accountability. In many cases, donor grant agreements include a provision that ‘the NGO will endeavour to ensure the financial sustainability of the  ‘project’. In reality, neither the donor nor the NGO provide specific budget line items for fundraising.

Over the past few years, several pioneering philanthropic organizations, such as the Ford Foundation and Ashoka (as part of the Citizens Base Initiative), have embarked on programmes to prepare their NGO grantees to raise money from local communities. The programme components include:

  • staff training on fundraising;
  • board development to reorient, energize and transform board participation and engagement;
  • technical assistance to develop fundraising plans and campaigns;
  •  the actual implementation of fundraising campaign costs such as software, computers, mailing costs, board retreats, special events, etc.

In India, GIVE Foundation is pioneering an effort that explicitly links fundraising to governance and accountability.[4] It operates an online giving and reporting portal. To receive donations, Indian NGOs must qualify through a rigorous screening process. According to GIVE, ‘Accountability and transparency, and the willingness to provide feedback to individual donors on how their money was used, are the key criteria for selection of NGOs.’[5] The results of these experiments are encouraging.[6]

Fundraising is more than money. It is a multi-purpose activity that raises the resources needed to fulfil the NGO’s mission. It provides increased public information and advocacy on a social problem and its solutions. It is one of the most tangible signs of a constituency. And, as a means to improve NGO governance and accountability, it provides an avenue for other voices in the community to be heard by NGOs.

1 Investing in Ourselves: Giving and fund raising in the Philippines, Manila, Philippines: Venture for Fund Raising (2001).
2 Prepared for the recent APPC conference on NGO governance. Now available on the APPC website at http://www.asianphilanthropy.org.
3 Investing in Ourselves: Giving and fund raising in Asia, APPC (2002). This project was conducted by the APPC with support from the Asia Foundation, Asian Development Bank, Nippon Foundation and USAID. The seven countries covered are Bangladesh, India, Indonesia, Nepal, Pakistan, Philippines and Thailand. Household-level surveys of charitable giving were carried out in India, Indonesia, Philippines and Thailand.
4 GIVE is an acronym for Giving Impetus to Voluntary Effort.
5 See http://www.givefoundation.org/giveonline.htm
6 See Investing in Ourselves: Giving and fund raising in Asia and ‘Local NGOs Develop Creative Financing Strategies’, One World, 15 January 2003.

Jaime Faustino is Chair of Venture for Fund Raising and Barnett Baron is Executive Vice President of the Asia Foundation and a Council member of APPC. They can be contacted at jaimef@venture-asia.org and bbaron@asiafound.org

For more information
http://www.venture-asia.org
http://www.givefoundation.org
http://www.citizenbase.org/main/home.html


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