Assessing the performance of NGOs

Written by Nik Mohd Hasyudeen Yusoff

Monday, 29 June 2009 23:44

MUCH has been discussed about the performance of our corporations — be it those that are listed on the stock exchange or private companies which are also contributing to the nation’s economic growth and employment opportunities.

The performance of not-for-profit organisations (better known as non-governmental organisations or NGOs), however, do not appear to be subject to much scrutiny and rarely attract much attention except of course when they are involved in controversy.

Given the maturity of our society and the complexity of the world we are living in, NGOs play an important role in developing civil society. A lot of NGOs complement the efforts of the government in nation building and some focus on specific areas such as health, education and other areas related to the well-being of the community.

As the name suggests, NGOs are established for these specific causes and monetary gain is not their primary objective.

However, this does not mean that money is not important as the projects and activities of the NGOs need to be funded. Otherwise, the primary objectives may not be achieved.

How do we assess the performance of NGOs?

NGOs cannot run away from practising good governance. This is particularly important as they are funded based on the noble objectives that they champion. Such a demand would require the appointment of the appropriate person to be in charge of governance.

This is where the leadership of NGOs should assess whether people from outside with specific skills and knowledge need to be brought in. The quality of an organisation is definitely shaped by its leadership and noble intentions alone may not be enough to champion the cause.

Every NGO should have a clear idea of its mission and vision and this should be further cascaded into activities which would lead it to achieve the objectives of its establishment. Specific targets and responsibilities should be assigned to people who have the capabilities to perform. This is where an honest assessment of the people and resources available is important as good intentions without effective execution would not guarantee success.

What if there are not enough capable hands within the circle of people that are running the organisation? Naturally, external assistance should be sought, either on a pro bono basis or through commercial arrangements. This is where upfront planning would enable the required resources to be worked out and avoid projects being abandoned half-way due to lack of funds or execution difficulties.

Communication with the stakeholders is another important element as society would be interested to know the developments of NGOs as well as assessing whether they are on the right track.

While most organisations technically are only accountable to their members, other stakeholders should not be left in the dark, especially when the issues that are being championed affect society at large. Effective communication through periodic reports and other platforms such as websites would provide visibility and garner further support for their causes.

In as much as profit is not the focus, NGOs could not be successful if sound financial management is absent.

This includes having budgets, proper costing of projects and activities, monitoring of revenue and expenditure as well as having a robust financial reporting process.

Given that NGOs normally attract people who share common objectives, those who are placed in charge of governance do not necessarily have financial management skills. However, if this is not addressed, the financial management quality of the organisations may not be up to the mark.

The leadership of the NGOs should not forget that they are holding the trust of the members and other donors and contributors and should ensure the financial resources are effectively utilised with full accountability.

Most NGOs are established under the Societies Act which does not specify the level of financial reporting apart from requiring societies to prepare financial statements to be tabled at the annual general meeting.

Given this position, the leadership of NGOs should adopt the appropriate financial reporting platform and put in place systems and resources to ensure financial discipline and accountability. Appropriate financial controls such as procurement processes and delegated authority levels must be established to ensure funds are allocated based on proper governance.

In addition to the above, certain benchmarks such as the percentage of administrative expenses to the total revenue and capping for capital expenditure should be ascertained to ensure maximum funding is made available to the core activities.

Given the nature of NGOs, their performance should be assessed on a wider basis which provides insight into the effectiveness of their operations and how efficiently their funds are managed. The challenge is always giving the right weightage to the performance measures that could be used. Definitely, the success of NGOs is very much driven by the governance and accountability framework exercised by their leadership.

Nik Hasyudeen is the president of the Malaysian Institute of Accountants. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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Last Updated on Monday, 29 June 2009 23:45

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