NGOs—who donors thought were better devils than government in financial management—appear worse, having failed to account for 90 percent of aid in the 2015/16 financial year.
The revelation, part of findings of a study by the NGO Board, creates a headache for development partners who chose to channel most of their official development assistance through NGOs after Capital Hill’s public finance management (PFM) system proved to be a leaking basket of fraudulent payouts dubbed Cashgate.
According to the board, out of the K146 billion funding that went to NGOs in the 2015/16 financial year, only about K15 billion could be accounted for, leaving 90 percent of the resources untraceable.
For government, studies have shown that it is 30 percent of the resources it manages that is not accounted for, which—while still high—is three times lower than the NGOs’ record so far.
The NGO Board report found that NGOs—now the major channel for off-budget support—have also failed to comply with the requirement to submit financial reports on their activities in the country, with only 25 out of 475 providing audited reports. That represents a compliance rate of just around five percent as of June this year, making it hard for independent players to monitor NGOs’ financial management, trace deliverables, monitor and evaluate implementation, including impact on beneficiaries, who are mostly poor people that donors want to reach with their assistance.
The board’s findings also mean that the 450 registered NGOs have contravened Section 22 of the NGO Act.
The section states that NGOs must file annually audited financial statements, annual reports outlining activities undertaken and source of funding.
A similar trend in accountability was noted in 2015 when only eight percent of the NGOs complied with the legal requirement to submit reports to the board as part of the registration process.
The revelations come against a background of the World Bank Malawi Economic Monitor third edition report, which estimated that off-budget financing, mostly channeled through NGOs, reached 70 percent in the 2015/16 financing year, in contrast to 51 percent prior to the Cashgate scandal exposed in September 2013.
The earlier findings by the NGO Board formed the basis of the NGO Accountability Conference held in Lilongwe yesterday with support from Tilitonse Fund.
Although the NGO Act empowers the board to withhold, suspend or cancel registration of NGOs in the event that they fail or refuse to comply with provisions of the Act, this year the board registered 475 local and international NGOs.
In his presentation on the mandate of NGO Board and status of NGO accountability in Malawi, the board’s executive director Voice Mhone said in 2015/16, compliance to the legal provision was low, but NGOs were not wholly to blame. He also blamed a weak enforcement regime.
He said: “The law is adequate, but enforcement is poor because of low capacity of the NGO Board apart from the NGOs themselves whose perception is that the government is trying to squeeze their space.”
Some participants at the conference felt that not all NGOs had the technical or financial capacity to produce audited statements and reports.
But the board countered that those who cannot afford to do so should not be running organisations for the benefit of communities and the country as a whole.
“If NGOs cannot produce audited reports then they should be running as community based organisations. Audits are usually five percent of the organisation’s budget, which should be feasible,” Hone said.
United Nations in Malawi resident representative Mia Seppo said with endemic corruption and its impact on society, civil society needed to demonstrate openness and scrutiny of how resources are used.
She said: “It is important that NGOs comply with international accountability standards and the reporting requirements in the NGO Act of 2001. Most of you agree it is a light reporting requirement, therefore, the low compliance is all the more surprising.”
However, Ipas Malawi executive director Chrispin Sibande said difficulties in accountability were arising from confusion created by several laws governing NGOs.
He said: “NGO Board needs to clarify where the problem of accountability is coming from. Is it that the law on enforcement is weak or it is the fact that different bodies require different things from NGOs?”
Minister of Gender, Children, Disability and Social Welfare Jean Kalirani expressed worry that in its current legal set up, the board cannot not sanction errant NGOs.
Tilitonse Fund programme manager Allan Chintedza said his organisation supported the conference recognising that Malawians have a right to take duty bearers to task.
University of Malawi economics professor Ben Kaluwa is on record as having said that the sharp rise in off-budget donor financing was frightening as the recipient country will not know the delivery effectiveness.
Since 2011, the country’s traditional donors have been withdrawing aid—mainly general budget support (GBS)—reducing the percentage from 40 percent to 10 percent before they completely put a lid on the aid pot in 2013 after the Cashgate revelations. n