Guest Post: Corruption Among Development NGOs, Part 3–The Need for Collective Action by Funding Agencies

Roger Henke, Chairman of the Board of the Southeast Asia Development Program (SADP), a development grantmaker based in Cambodia, contributes the following guest post (the third in a three-part series):

Previous posts on development NGO corruption described a survey tool and its results in Cambodia and the conundrum of using the upward accountability relationship between local NGOs (LNGOs) and the grantmakers funding them for remedial action. The analysis of the report which underlies much of those contributions includes another foundational premise: Given the systemic functioning of Cambodia’s (and other countries’) LNGO sectors, anticorruption action to hold these LNGOs to account needs to be collective in order to be effective.

The characterization of the sector as “systemic” is meant to capture fact that nearly all LNGOs are funded by more than one, often five or more, grantmakers, while these grantmakers in turn, each fund many (sometimes more than 25) LNGO partners. To see why this matters for upward accountability, suppose for the moment that a given Grantmaker X takes seriously its responsibilities to diligently oversee LNGO Partner Y, and suppose further that Grantmaker X uncovers a problem. What happens next? The best case scenario is that the LNGO acknowledges the problem and fixes it, while the worst-case scenario is that both the LNGO and the grantmaker ignore the problem. Both of those happen sometimes. But the more common outcome is this: The LNGO fails to deal with the problem, and eventually Grantmaker X decides to stop funding it. But this affects LNGO Y only temporarily, because it has (or can find) other funders, many of which may not exercise the same degree of diligence as Grantmaker X. So nothing much changes. Even when Grantmaker X communicates with other co-funders about the problems, and more of them decide to question their support of LNGO Y, it takes a fair level of coordinated grantmaker disinvestment to put an LNGO out of business. That level of coordination is rare even in cases of obvious crisis, and absent during more mundane times.

What is needed, then, is more collective action. Many grantmaker staffs would agree with this in principle, but the dominant response is generally not action but resignation, dressed up as “realism”: “Why waste time on beating a dead horse? Even if local grantmaker offices were all willing to collaborate, aligning the diverse requirements regarding reporting, auditing, etc. of all the headquarters….forget it.” I reject this defeatism. One rarely knows that something won’t work until one tries, and my experience in Cambodia is that practical pilots are very rare. So, what would proper collective diligence regarding financial management imply in practice?

It would imply that, in addition to thorough pre-grant award financial system assessments and periodic follow-up compliance monitoring, there should be effective shared monitoring of financial management, shared reporting, and coordinated external audits among an LNGO’s funders. The grantmakers co-funding the same LNGO need to sit around the table and discuss at the most practical shop-floor level (1) what they collectively consider an optimal version of any of these elements, (2) to what extent current individual practices cover all or parts of this, (3) how collaboration could result in the full optimal package, (4) how each grantmaker can and should contribute to that package in staff-time and/or financial resources, and (5) what remains for each to do add to satisfy its own headquarters. Assuming willingness, it is very difficult to see impassable practical hurdles to this sort of collaboration.

Of course, “collective action” by itself is not automatically good. There is a real risk of harm if grantmakers improperly “gang up” against a partner LNGO. Nevertheless, however real the risks might be, not exploring and testing more collective grantmaker action regarding financial propriety of their LNGO partners, seems irresponsible. Moreover, given LNGOs’ perennial complaints about the administrative burden created by the uncoordinated individual barrage of grantmaker requirements that they have to live up to (see e.g. here), the proposed approach may prove attractive to LNGOs as well.

Given the due diligence deficiencies in the status quo, a coordinated collective approach holds the promise of significantly improved diligence, and thus improve accountability. Such coordination would not require a substantial additional investment of time or financial resources, but could potentially lead a significant decrease in the resources required. The only way to find out is to try.

2 thoughts on “Guest Post: Corruption Among Development NGOs, Part 3–The Need for Collective Action by Funding Agencies

  1. Pingback: Corruption Among Development NGOs, Part 3–The Need for Collective Action by Funding Agencies | Anti Corruption Digest

  2. Pingback: corruption among development NGOs, part 3 – the need for collective action by funding agencies | roger henke's fancies

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