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Module 3 Lecture Notes

Accounting Notes > Management Accounting, Financial Mgmt & Organisations (AC310) Notes

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MODULE 3: ACCOUNTING IN NGOS

Lecture 1 - What are NGOs?
Examples of NGOs Oxfam

* Makes grants to partners to run long-term development programmes, humanitarian emergencies, advocacy and campaigns

* Present in over 50 countries in Africa, Asia, Central/Southern America, HQ in Oxford

* Direct service provision in emergencies and campaigns on significant issues Amnesty International

* Focused on advocacy and campaigning in relation to political prisoners and human rights

* Global movement of over 3m supporters in over 150 countries

* Works by writing letters, campaigning, demonstrations, vigils, direct lobbying Brac

* Founded in Bangladesh, now 10 countries in Africa and Asia

* Development NGO dedicated to alleviating poverty by providing services, creating village organisations, social enterprises and micro finance Scope

* UK charity that provides support for disabled people by providing services (housing, employment, education and training) and running campaigns. Basic Needs

* Operates in 8 countries in Asia, Africa and Latin America

* Aims to change the lives of mentally ill people

* Provides access to community based treatment [avoid isolation] and campaigns. Labels

* Non-profits

* Charity

* Third-sector - first sector = business; second sector = government, third sector = NGO

* Civil society: Can include social movements, universities, etc. Characteristics

* Formal: Hold meetings, have an office

* Private:Separate from government

* Non-profit distributing: Financial surplus does not accrue to owners

* Self-governing: Able to control and manage their own affairs

* Voluntary:Some degree of voluntary participation in the conduct of organisation

* Diversity: NGOs are very diverse in their characteristics (refer to NGO examples above)

MODULE 3: ACCOUNTING IN NGOS

Lecture 2 - Complexities of Accounting in NGOs Social Goals Not Profits

* Lack of a single bottom line, making it difficult to assess overall performance, compare NGO - lack of standardised systems and procedures

* NGOs try to achieve goals 'outside' organisation
- The object of performance measurement is not only the NGO itself but those persons the NGO is aiming to assist
- Social goals may be affected by extraneous factors Diverse Stakeholders

* Stakeholders include funders,staff,volunteers, regulators, host-governments, beneficiaries, tax-payers, other NGOs, etc.
- Can lead to over-accounting: produce a multitude of separate accounts and reports (to serve the interests of different stakeholders)
- Susceptible to critiques over quality of accounts (under-accounting) Salience of Values

* NGOs are often categorised as value-driven such as justice, equality, etc
- High level of participation in decision making expected by NGO employees/volunteers.
- Absence of financial incentives and rewards
- MA need to express values
- Ideological rejection of business practices like accounting Culture of Action

* Intense desire to 'get out there and do something'
- Accounting viewed as paperwork and bureaucracy
- Little time devoted to planning, analysis of performance and strategic thinking Administration Viewed as Waste of Money

* Powerful public perception that development of an NGO should be cheap and ideally spend all their money on the cause and very little on admin costs/running costs - Low administration costs signal of good performance

* Accounting seen as waste of money - accounting approaches usually borrowed from private sector/government which may be unsuitable

* A culture of action and a view of accounting as administration can create a lack of investment/interest in accounting and its potential value for NGOs

* Different values, diverse stakeholders and the pursuit of social goals can make accounting itself much more difficult and complicated

MODULE 3: ACCOUNTING IN NGOS

Lecture 3 - What is NGO accountability?
NGO Accountability: Being required/expected to justify actions or decisions - individuals/
organisations report to a recognised authority and are held responsible for their actions
- Ebrahim (2003): Accountability is about being held responsible by others (i.e. it is relational) and about taking responsibility for oneself Locus of Accountability

* Upwards - donors, foundations, governments

* Downward - beneficiaries

* Inward - staff, volunteers Focus of Accountability (Ebrahim, 2003)

* Functional - accountability of resources/fund - how the resources were used and what effects they created in the short-term

* Strategic - long-term orientation Context of Accountability

* Governments primarily accountable to voters as can choose to vote for different party

* Businesses primarily accountable to shareholders (because they can sell shares/replace management) and customers (because they can stop buying the firm's product/service)

* Nature of NGOs makes accountability problematic as no voters and customers (i.e. beneficiaries) usually in no position to substitute NGOs product with alternative

* However, NGOs can be accountable to donors as they can withdraw funds - bias of NGO accountability towards funders. Accountability has a variety of meanings, whereby the context of NGO accountability is extremely complex and frequently changing - mechanisms can differ in the locus & focus of accountability

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