1.1 Introduction The wave of the growth of the NGOs globally also has crossed over Bangladesh. The fragile and fragmented development of the formal political institutions coupled with availability in donor aid, have driven the spectacular emergence and growth of a third sector in Bangladesh consisting of numerous NGOs during 1990s. During this period Bangladeshi NGOs expanded their activities at all levels of society to meet the needs of the poor. There are more and bigger NGOs here than in any other country of equivalent size. As the NGOs in Bangladesh have grown in scale and scope, there have been growing debates concerning various issues of NGO operation and performance and accountability. A number of laws exist under which NGOs can secure a legal identity with a recognized Government structure e.g. Societies Registration Act. 1861, Trust Act 1882, Cooperative Societies Act 1925, and Companies Act of 1913 (amended in 1994). THE FOREIGN CONTRIBUTIONS (REGULATION) ORDINANCE, 1982 and THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978. Some accounts related sections of THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978 are given in appendices 1. 1
Transcript
1.1 Introduction
The wave of the growth of the NGOs globally also has crossed over Bangladesh. The
fragile and fragmented development of the formal political institutions coupled with
availability in donor aid, have driven the spectacular emergence and growth of a third
sector in Bangladesh consisting of numerous NGOs during 1990s. During this period
Bangladeshi NGOs expanded their activities at all levels of society to meet the needs of
the poor. There are more and bigger NGOs here than in any other country of equivalent
size.
As the NGOs in Bangladesh have grown in scale and scope, there have been growing
debates concerning various issues of NGO operation and performance and accountability.
A number of laws exist under which NGOs can secure a legal identity with a recognized
Government structure e.g. Societies Registration Act. 1861, Trust Act 1882, Cooperative
Societies Act 1925, and Companies Act of 1913 (amended in 1994). THE FOREIGN
CONTRIBUTIONS (REGULATION) ORDINANCE, 1982 and THE FOREIGN
DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978. Some
accounts related sections of THE FOREIGN DONATIONS (VOLUNTARY
ACTIVITIES) REGULATION RULES, 1978 are given in appendices 1.
The NGO Affairs Bureau (NGOAB) was created by the Government in 1990 to meet
the need for a one-stop service to the NGOs. Located under the Prime Minister’s
Secretariat, NGOAB has been assigned all responsibilities to coordinate NGOs under the
1978 Foreign Donations (Voluntary Activities) Regulation Ordinance and the 1982
Foreign Contribution (Regulation) Ordinance. The Bureau enables the NGOs to obtain
their registration clearance, approval and permission through a single agency of the
Government within a specified time frame. The aim of NGOAB is to ensure quality
performance of the NGO sector and its accountability to the state.
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Functions:
• register NGOs, process and approve NGO project proposals, and disburse project funds
• approve appointment and tenure of services of expatriate officials and consultants
• Review and comment on reports and statements submitted by NGOs
• coordinate, monitor, inspect and evaluate NGO programmes
• identify and approve Chartered Accountants for auditing NGO accounts
• realize fees/service charges from NGOs
• carry out field level inspections of NGO income and expenditure
• maintain liaison with NGOs and donor agencies
Ordinances/regulations/circulars vest the NAB with all its responsibilities regarding
coordination, regulation and monitoring of foreign and foreign assisted non-governmental
voluntary organizations and individuals working in Bangladesh. While considering the
application for registration, the NAB is required to seek approval from the Home
Ministry.
Projects may be for one or multiple years. NGOs can submit a five-year project proposal,
commensurate with an identified priority area of the five-year plan of the state. The NAB
arranges approval and release of the funds on a priority basis for such projects. The
targets specified in the project proposal, however, must be achieved within the stipulated
period. Usually, funds for the following year can be released for the project if its
implementation strategy and achievement of target for the year is considered to be
satisfactory by the Bureau (Circular: Section 7(h): 1993).
The NAB communicates its decisions with 21 days from the day of the receipt of the
project proposal and forwards it to the relevant Ministry for its opinion. The Ministry
must send its decision to the NAB within 14 days (Circular:Section 7.1(b):1993).
The state and its machinery have from time to time introduced several rules and
procedures, but due to their complexity and the weakness of the state, NGOs can easily
evade them.
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The Association of Development Agencies in Bangladesh (ADAB), an apex body of
NGOs in Bangladesh has a self-regulatory code of ethics for its member NGOs.
Surprisingly, these codes are mostly directed towards downward accountability of the
NGOs. The code, entitled “Declaration Regarding Definition, Statement of Purpose and
Code of Ethics,” defines NGOs as nonprofit organizations committed to the development
of the underprivileged and undeserved. The code intends to establish self-regulatory
practices and norms for the member NGOs of ADAB in relation to the people for whom
they work, the government of Bangladesh, other NGOs, development partners, and their
own staff. Members must also be accountable and transparent to the government with
regard to their activities and use of funds. The members must also promote competence,
professionalism, and the highest standard of transparency and honesty. The code makes
explicit reference to the need to encourage democratic leadership, participatory
management, and transparency, including “to the people” (Karim, 1996). The code has
merits as it includes provision for both the upward and downward accountability
frameworks for the NGOs. However, the ADAB is yet to finalize monitoring compliance
and sanctions for non-compliant members. NGOs have formed the FNB (Federations of
NGOs in Bangladesh) as a counter organization of ADAB. But the FNB is yet to
reorganize its capability to play any role as like as ADAB.
From the above discussion we have a clear picture of the manner/procedure regarding the
way the state of Bangladesh regulates those NGOs which finance charitable work through
foreign donations.
The discussion and findings start from the accounting framework then the accounting and
internal control procedure of the one NGO named Swanirvar Bangladesh. The final part
of the article discuses issues relating to financial report and financial transparency of one
of the projects implemented by it. Some relevant recommendations are also placed at the
end.
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1.2 Objectives
The objectives of our report are confined to the extent of showing a clear picture of
accounting procedures followed by the NGOs of Bangladesh.
The objectives are:
To identify the relevant NGO’s recording process.
To show the flow of fund for the project.
To visualize the internal control system.
To discuss different accounting related aspects.
To discuss the reporting process.
To identify the auditing aspects.
To try to make an overall picture of NGO accounting practices in light of the
practices of Swanirvar Bangladesh.
To set some relevant and effective recommendations to improve NGO
accountability and operation to get the maximum benefit.
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1.3 Problem statement
In preparing the report, we have encountered a number of difficulties. The operation and
the total regulatory system of NGO working were found unstructured.
The problems we faced include:
Lack of available formal means to collect data.
One personal contact helped but the official was unable and unwilling to furnish information for secrecy or any other unexplained reason.
The available information was mainly on internal audit on a specific project called SNSDP required by the donor, but no set form, instruction, copy of books of accounts were available.
We had to rely only on some very restrictive verbal information.
We also faced the problem with the data collected as they were from the audit report.
No information were available regarding the compliance with the regulatory requirement of the Government.
The officer concerned made delay to furnish data, as a result, we were in short of time to compile, analyze, edit and prepare.
To conclude about the overall NGO practices by doing one case study was hard.
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1.4 Profile*
Name of the organization : SWANIRVAR BANGLADESH (SBD)
Compelled by financial struggles and cultural norms, girls in Bangladesh often enter into marriage well before their eighteenth birthday, sometimes when they are barely teenagers To address the problem of early marriage and the issues surrounding it, c Bangladesh designed the model program, Raising the Age of Marriage for Young Girls in Bangladesh. The three-year project was launched in July 2003 with support from an anonymous donor, and closed at the end of June 2006. Through education, the project empowers girls to take control of their futures. The three aspects of the program—primary and secondary school support, advocacy, and vocational training—combine to help girls overcome the hurdles that prevent them from finishing school, finding employment, and delaying marriage until they are ready. The project targeted the neediest girls within five upazilas (subdistricts) of Kishoreganj, one of the poorest areas of Bangladesh.
Stipends for School GirlsTo help transition girls from primary to secondary school Swanirvar supported 4,092 girls in the last three years of primary and the first year of secondary school, transitioning a total of 2,859 girls into secondary school.
AdvocacySwanirvar, held advocacy meetings throughout the project area. These meetings informed the girls about the benefits of education and delaying marriage and inspired hope for their futures
Paramedic Training Swanirvar supported three classes of 20 girls at the AITAM Welfare Organization in Dhaka, a paramedic training institute. The year-long paramedic training course prepares the girls to work in both clinic and community settings. They are trained in maternal and child health care, family planning, and other basic health services.
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2.1 Methodology
The methodology we followed in preparation of the report was to just finding the details
of the accounting and related aspects and not to evaluate.
Both secondary and primary data were collected. The numerical figures were found from
the internal audit report.
Case study Method
Another mention worthy dimension is that we followed the case study method to draw
conclusions and have tried to generalize the overall NGO accounting practices in light of
one NGO. The reasons for doing that is such:
There are no specific standards for preparation of accounts of NGOs.
NGOs differ roughly in terms of procedure followed
Projects undertaken differ in terms of accounting practice.
Time and Cost would be huge to analyze more than one NGO.
As the rationale for following case study method in analyzing above, we have tried to
generalize as much as possible.
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2.2 Data Collection
We have used case-based qualitative research framework and case data were collected
during the 04 to 14 of July,2008. The primary sources of data were observation,internet,
interviews and official documents.
Data were collected in the following manner:
Information was collected through inspection of official documents, that is,
accounting reports; internal audit report etc. of the selected ngo’s project.
Unstructured interviews with key NGO official were conducted.
Various laws, regulations, circulars were collected from internet, books.
Collection of information through observation, interviews and official documents
were centered on the following major issues:
What accountability requirements do NGO funding providers impose?
What accounting formalities are performed by these NGOs to meet the
accountability requirement?
NGO-specific accountability requirement of the Government of Bangladesh.
The accountability framework of the NAB for NGOs and its influence over the
NGO.
What process is followed for recording, internal control, reporting and auditing?
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2.3 Data Analysis
In analyzing the collected data, the annual report, the internal audit report and the
verbal information were compiled.
We analyzed the data with the objective of preparing the overview, not comparing
with any set of standards.
In analysis, we have used some estimation.
When analyzed, we also have considered the project nature, requirement etc.
Collected data were categorized according to the relevant field of accounting for
better understanding and conceptualization & organization.
Different diagrams were drawn for finding the interrelation and better analysis.
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Chapter 3
3.1 Findings
3.1 NGO ACCOUNTABILITY FRAMEWORK IN BANGLADESH
The NGO accountability in Bangladesh is expected to be centered round three groups of
stakeholders – the beneficiaries, the donors and the state. However, the requirements of
the existing NGO accountability frameworks in Bangladesh are skewed towards the
demands of the two influential groups – the donors and the state. The NGOs receiving
foreign funding are subject to the tight accountability requirements of the respective
donors. All NGOs (both foreign and locally funded) are subject to government control.
Those in receipt of foreign funds are subject to the Foreign Donations (Voluntary
Activities) Regulation Ordinance, 1978 and Rules under the Ordinance, administered by
the NGO Affairs Bureau (NAB).
. The voluntary organizations are subject to the Societies Act of 1961 and Rules made
under the Act. The Government’s regulatory framework is mainly concerned with
ensuring that NGO activities are lawful, and do not conflict with government policies
(The World Bank Country Study 2002). Funds from donors are sent directly to NGOs’
bank accounts , but they cannot be lawfully drawn on until the NAB has approved the
relevant project. NGOs are required to submit their project proposals to the NAB, which
consults with the relevant government ministries and gives clearance to NGO’s banks
holding donor funds to allow withdrawals. If a bank pays out without NAB’s approval, it
is disciplined through the Bangladesh Bank (the central bank of Bangladesh). There is no
doubt that this control function of the NAB is necessary to ensure legitimate sources of
funding. However, often it is observed that NAB extends its regulatory power to
determine which activities NGOs are allowed to pursue.
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Maintaining accounts of foreign donation:
The Rules require only double entry accounting, Cashbook and ledgers but NGO
practices are varied.
Some use cash accounting, some use accrual accounting.
Every voluntary organization would collect foreign donations through only one
bank account.
The vouchers of expenditure should be maintained safely for 5 years in the head
office and the field offices would do the same.
The books of accounts for foreign donations would be kept according to form FD-
5.
The books would be maintained half yearly; one form 1st july -31st December,
another from 1st January -30th june.
Submission of Annual Reports
NGOs are required to prepare annual reports on their activities within three months of the
end of the financial year and send copies to the NAB, ERD, the relevant Ministry,
Divisional Commissioner(s), Deputy Commissioners and the Bangladesh Bank.
The reports must hold the following information.
1. In the annual report, every project should be described individually. The real
outcome of the projects compared with the budgeted expenditure should be
disclosed according to District and Thana.
2. Full list of fixed and current assets including vehicles.
3. The details of sources of income and expenditure of the organization itself.
4. The description of traveling abroad of the employees of the organization.
5. The details of investment mentioning sectors of revolving credit fund .
6. Descriptions of the projects implemented through the agreements with different
ministries and departments of the Government or fund collected from any other
sources.
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7. In the annual report, a description of the employees(whose monthly salary &
allowances are 5000 or more or one time grant is 10000 or more) mentioning
name, position, age, nationality, total salary, allowances and duration of
employment.
Power of Inspection
The state may, at any time inspect the accounts and other documents of NGOs. The state
may require the NGO to submit a declaration as notified in the official gazette (Ordinance
No. XLVI- Section 4(l): 1978). Failure to produce any accounts or other documents or
failure to furnish any statement or information by the NGO is a contravention of state
regulations (Ordinance XLVI: Section 4(3): 1978). The NAB has the responsibility and
power to audit and inspect the accounts of NGOs (Circular: Section 10(a): 1993).
The Rules under the Ordinance have enumerated the books of accounts to be kept.
Annual accounts are required and audit is done by chartered accountants selected by the
NGO from a list approved under the Rules. According to the Rules, the audit reports are
due within two months of the end of each financial year. The Ordinance empowers the
Government to inspect NGO books and to carry out its own audits if necessary. Annual
reports must also be submitted to the NAB. Although NGOs are required to submit
annual reports to the NAB, the NAB is rarely concerned about the real outcome of the
project. On the other hand, donors do demand project-based accounting but they are only
interested to work out the use of their funds rather than the outcome of the use of their
funds.
NGOs in Bangladesh can be categorized in following 3 types (Bala and Mir,2005)
Category 1: One NGO whose majority of funding comes from foreign donors.
Category 2: Two NGOs whose majority of the funding come from their own sources.
Category 3: One NGO whose majority of funding come from local donors.
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Accounting Practices
3.2 Case Study
Swanirvar Bangladesh
Our specific study area of Swanirvar Bangladesh falls under the category 1 of above.
The discussion on the accounting practices of Swanirvar Bangladesh is mainly based on
the audit report of one of it’s major projects named Swanirvar NGO Service Delivery
Project.(SNSDP).
3.2.1 Accounting Procedure and aspects:
Accounting policies:
Budget is monitored in accordance with the donor guidelines. Swanirvar Bangladesh
introduced and implemented half yearly inventory system for proper inventory
management . Introduced Accounting Software package for smooth accounting system.
Swanirvar closely track cost and revenue for feasibility plan(HCM, Lab service and
contact physician scheme). Swanirvar complies with the audit findings at central as well
as clinical level. For smooth running of financial management Swanirvar arranges
refreshers training on “F& A” issues for all clinic managers and office assistants.
Basis:
Accounting is based on cash basis and reflects revenues when received and costs when
paid rather than when incurred as an obligation.
Preparation of Statements:
Accounts are maintained in 2 dimension in mind
Donor requirement
-Agreement
-Nature of the project.
-Specific Project based accounts preparation.
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Government Requirement.
-May be project base
-Mostly period base but project segmented.
Chart of accounts:
The first step taken by Swanirvar Bangladesh is to choose an accounting software
package(Tally) which is clear and concise and easy to operate and maintain the NGO
accounting. The second step of Swanirvar Bangladesh was to clarify purpose of
organization and reflect that in a clear and concise chart of accounts. It is important that a
chart of accounts reflect all the major functions and project operation of the organization.
Swanirvar Bangladesh has more than hundreds projects, it prepares charts of accounts
and codes them for computer aided soft ware. The coding of the account head represents
Figure: Overall accounting system of Swanirvar Bangladesh
-NGO name
-Project name
-item name
-no /quantity/value
For example, for assets
Name of asset Code used
Computer Sw/NSDP/Com-1-17
Telephone digital Sw/NSDP/PHo-1
Television Sw/NSDP/TV-1
Air conditioner Sw/NSDP/AC-1
Generator Sw/NSDP/G-1
Revenue Recognition
According to ISA-18, revenue should be measured at fair value of consideration received
or receivable. NGOs don’t have revenues like the normal business organizations, they
recognize grants as revenues. Swanirvar Bangladesh maintains a bank account for foreign
donors (According to: Foreign Donations Regulation Ordinance, 1978 (30) under sub-
rule (4) of rule 4) and revenue is recognized as the interest accrued and as per IAS-18,
interest revenue is recognized on a time-proportion basis using the effective interest rate.
The sources are
-Revenue Generation fund.(RGF)
-Revolving Drug Fund (RDF)
-Cash received from the donor.
-program income.
-Registration fees.
-Service charge (service type wise)
-Bank interest (on project wise fund, received from donor)
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Receipts
Receipts are two types:
Sundry receipts not to be utilized by the project but to be deposited to the Krishi Bank
Account:
1. In respect of each receipts of cash/cheque a money receipt must be issued. Money
receipt should be completed in all respect describing the precise nature of the receipts,
amount and figures and duly signed and dated. If for any reason a money receipt is
cancelled the original must be kept attached to the duplicate copy. Braches keep money
receipts with details of :
-Branch name
-Date
-Receipt no
-amount
The policy of Swanirvar Bangladesh is not to approve overwriting, using of correcting
fluids etc without appropriate counter signatures.
2. Receipts of funds for project expenses from donors:
Project’s bank account is credited for the amount received from donors with the total
amount With specific date.
Entry for cash transferred to branch
Journal entry in Brach
Detail debit credit
Cash dr.
Head office current A/c cr.
****
****
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Journal entry in Head office
Detail debit credit
Branch office current A/c dr.
Fund control A/c cr.
****
****
Cash:
Branches are to keep records and send report in the following format:
Name of the
branch
Bank name A/c no. cash at bank cash at hand total
The Head office maintains the total cash of all branches with the same details.
Bank Reconciliation:
Every Brach is to furnish Bank Reconciliation statement with the following
headings:
Brach
name.
Bank
name
A/c no Balance
as per
book
Outstanding
cheques
issued but
not
presented
to bank for
payment
Cheques
deposited
but not
collected
by bank
within
the
Balance
as per
bank
statement
at the
reporting
date.
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within the
reporting
period.
reporting
period
Accounting for disbursement:
No expenditure should be incurred or any commitment made to incur expenditure unless
it has been approved in the budget. Payment other then the petty cash must be made
through cheques. Authorized signatories must sign all the cheques. Before making any
payment t is essential o ensure that the expenditure is necessary for the project.
Heads of Expenditure
- Salaries- Benefits- Fees and honoraria- General administration- Expenses for local level activities.- Travel & associated expenses.- Supplies and equipment.- Purchased services- Education and training.
Bank account and cheque books:
Bank account n the name of the project shall be opened and operated by joint signature s
only. The PD and FAM shall be the joint signatories pf the accounts. Accounts may be
current account, STD account and fixed deposit account. At the head office such number
of accounts shall be maintained.
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Payment voucher:
For every payment a payment voucher shall be prepared. A cheque payment voucher
should be prepared in respect of each payment by a cheque. A petty cash voucher should
be prepared in respect of each petty cash payment. Each type of voucher must be given a
serial number.
Payment by cheques:
Bills/invoices for supply of goods and services are to be checked before payment for
expenditure authorization by the procurement committee and budget provision.
For purchases up to 25000/= approval of PD is required and for above 25000/= approval
of Finance director or Chairman is required.
For each payment a bank payment voucher shall be prepared by the accounts officer who
shall attach to the voucher all supporting documents. FAM shall examine the voucher and
PD will scrutinize voucher and then sign it.
Transaction flow chart:
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Flow chart- Donor contribution: Petty cash replenishment and maintenance
with in the head office:
Supplier’s invoice
Payroll register
Accounts officer/FAM Prepare and verify bills and Submit to PD
PD verifies and Gives sign
Issue cheque
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1.cash received should be recorded as receipt on the petty cash statement .2.when disbursement are made should be recorded as payment of the petty cash statement.3.petty cash statement is updated for each transaction.
Posting to general ledger:
All the receipt statements and disbursement statement shall be used as input source
document for processing the transaction through the computerized accounting system.
All transactions should be entered into general ledger.
Donor
Krishi bank a/c
Withdrawal by PD
Given to projects
Krishi Bank a/c
Withdrawal by PD from Petty cash
Receipts by Petty cash a/c
Payment from Petty cash a/c
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Petty cash voucher:
Small payments are made by petty cash. Petty cash voucher is prepared by accounts assistant. Petty cash voucher is reviewed by the FAM. Petty cash voucher is approved by PD.
Procurement :
Swanirvar Bangladeh has a high level procurement committee headed by executive
director of Swanirvar Bangladesh. Procurement is done by marinating procurement
Process such as need assessment, Competitive tender/ quotation, work order good
receive, stock entry, mode of payment etc. The head office provides approved list of
suppliers to ensure quality and competitive price.
Assets:
Branches need to keep record and send report of assets available there to the Head office
with following details:
Brach
name
Name of
asset
Identification
no. (code)
Date of
acquisition
Quantity Unit
cost
Value Condition
Austogram Generator Sw/NSDP/
G-1
19-11-
2005
1 60000 60000 Good
Condition can be
-Good-Working-Poor
A separate book is maintained for assets directly procured and provided by donors to the
specific project with the details:
- Name
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- Quantity- Cost per unit- Total cost - Reference no- Assigned branch.
Ending commodity stock value:
Branches give the details in following format:
Serial no Brand name quantity Unit cost Value
1 Cotrim 500 2 1000
-Head office segments branches in the following 2 types for this purpose only
-Urban branch - Rural branch-Head office treats the balance of all branches in Revolving Drug Fund calculation.
Payroll:
A personnel file should be maintained for each employee to record the under noted information: Employee ID
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Full name of the employeeFather’s nameAddressDesignationEducational qualificationGender Date of birth Date of employment Date of confirmationPosting Project activity allocation code
Payroll is structured as follows-
- Basic - Benefit 60% of basic - Bonus 1.5 times basicOnly one type of payroll register is maintained.
As per our informational limits, we would demonstrate one of the major projects of
Swanirvor Bangladesh named, Swanirvar NGO Service Delivery Project.(SNSDP) and
related accounting & control issuies:
3.2.2 Swanirvar NGO Service Delivery Project.(SNSDP).
3.2.2.1 Project in brief:
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Swanirvar NSDP is one of 30 NGOs supported by Ngo service Delivery Program
(NSDP) funded by USAID. Swanirvar Bangladesh operates various types of development
programs. SWV, Dhaka is providing family and health care services in Dhaka city
Corporation & 14 municipal areas through 50 Static clinics,129upgrade satellite clinics
out of 1557 Satellite spots, 309 Satellite teams & 1603 Depot-holders.
This organization started delivering Essential Services Package (ESP) under National
Integrated Population & Health Program (NIPHP) from September 1997 through 38
static and 1532 satellite clinics and 1619 Depot-holders in 36 rural Upazilas. It
expanded area coverage in the urban areas to provide the same services in 10 static
clinics since November 2004 and additional two static clinics in 2007.
Project implementation plan:
The project activities are implemented through two-tier management system. At the
central office located in Dhaka one Project Director (PD),Eight Monitoring officers
(Program-3 & Medical-5), two MIS officers manage the project. This group is
responsible for planning, supervision, monitoring and overall management of the project
The project finance is managed by the PD with the assistance of one Finance &
Administrative manager (FAM) and three Accounts Officers. An Administrative
Assistant, two Program Assistant, One Accounts assistant, one MIS Assistant, one
Driver, two Messengers and one Security Guard also support the central office. At the
clinic site overall activities are managed by Clinic Managers (CM), Medical Officers.
FWV/Paramedics are the key service provider assisted by Clinic Aides (CAs). At the 50
clinics, there are 50 clinic managers (CMs), 7 Medical Officers (MOs), 10 Service
Promoter (SPs), 24 Counselors, 23 Lab Technicians, 134 clinic aids (CAs) and 1649
Depot-holders (DH) (Volunteers with a very partly honorarium) are responsible for
running Swanirvar NSDP.
Types of clinical services provided by NSDP:
Family planning
Child Health Care Services including EPI
Mother Health Care Services
Anti Natal Care m(ANC)
Post Natal Care (PNC)
Tetanus Vaccination
General Health Care
Tuberculosis
Cost per unit of service (2006- 2007) TK16
Income per unit of service (2006-2007) Tk4
Funded by
--Pathfinder International. 9,Galen Street, Suite 217,Watertown,MA 02472,USA.
3.2.2.2 Internal Audit
Auditor –
Rahman Rahman Haq, Chartered Accountants 9,Mohakhali C/A, Dhaka-1212. Member firm of KPMG International, a Swiss cooperative.
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List of statement and aspects Reported:
1. Report on Fund Accountability statement.
2. List of fixed assets and non-expendable equipment.
3. Report on internal control.
4. Report on compliance.
5. Schedule of prior audit findings and status.
6. Schedule of findings and questioned costs.
3.2.2.2.1 Financial Statements:
Fund Accountability Statement: (Audit report 1,2008)
3 accountability statements have been prepared.
-consolidated
-Pathfinder Grants Contribution
-Program income
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Swanirvar Bangladesh
Fund Accountability Statement
For the period……….
Details Note Budget Actual Variance
Funds available
Beginning fund balance
RGF* Fund balance
Cash received from Pathfinder
international/NSDP, Dhaka.
Program income earned
Bank interest
Others
Total
Expenditure
Salaries
Benefits
Fees and honoraria
General administration
Expenses for local level activities.
Travel & associated expenses.
Supplies and equipment.
Purchased services
Education and training.
Total
**** **** ****
Ending fund balance **** **** ****
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* Revenue Generation Fund
The ending fund balance must agree to the guaranteed balance in Grantee Financial
Report(GFR) with the donor as per agreement.
Statement of Program income from sale of medicine (RDF) (Audit report2,2008)
Swanirvar Bangladesh Statement of Program income from sale of medicine (RDF) For the period……….Opening Balance Cash in hand and bank Commodities Total
Fund received from additional clinicsFund received from community for POPTransfer to NSDP
Add : Income earned during the period Bank interest
Expenses for feasibility plan
POP expenses
Closing balance
****Cash in hand and bank
Ending commodity stock value --RDF: Rural clinic Urban clinic ****
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3.2.2.2.2 Internal Control:
Swanirvar Bangladesh classifies it’s internal control structure in the following categories:
1. Cash receipts and disbursements
2. Payroll
3. Allocation of expenditure
4. Procurement
5. Asset management
6. Financial reporting
7. Program income
During internal audit, Two issues regarding the internal control system were identified
1. Overwriting/handwriting in the money receipts
-May provide chance to misappropriate
-Management has taken necessary steps to control that.
2. Medicine purchased from unauthorized supplier.
-May lead to purchase of low quality product with high price
- Management has taken necessary steps to control that.
Annual report to the Government.
Swanirvar Bangladesh send annual report according to the Government requirement and
related particulars as prescribed and to the designated authorities in the prescribed
format.
4.1 Limitations
Lack of accounting standards for NGO Accounting, reporting and auditing.
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After audit and inspection, if a complaint is lodged against an NGO, virtually no
appropriate action is taken. Usually a note is passed to the NGO to correct the
error, which is a trivial remedial measure. Due to the strong support of donors for
NGOs, in the recent past the state has had to scrap its own desire to withdraw the
registration of a number of NGOs and even had to change the head of the NAB
when that individual appeared tough with NGOs that had indulged in
irregularities (Hashemi, 1995).
As NGOs are heavily dependent on foreign resources, the flow of money from the
outside, in the absence of accountability, can make the NGOs corrupt,
controversial and autocratic .(Zarren, 1996). Despite the negative effects ,
ironically real in most cases, NGOs are accountable to the donor countries rather
than the state of Bangladesh.
In reality, the state is unable to control NGOs. The NGOs often work against the
directions and decisions of the state. Weak administration on the one hand and
strong national and international backing on the other encourage some NGOs to
defy the state and to work according to their own whims. In the recent past, the
registration of ADAB was cancelled by the NAB but reinstated within a few
hours. A powerful international lobby naturally achieved this. There is a tug of
war between the NAB and the Social Welfare Directorate which gives the NGOs
opportunities to break the rules .
Middle management capacity, retaining incentives, cost-effectiveness and
leadership succession are key challenges as NGOs deliver more complex services.
Legal framework (registration, oversight, tax) outdated and the multiple
Implementing agencies lack capacity.
Lack of co ordination between NGOs and the Government.
38
Laws relating to internal governance, accounting, disclosure and transparency are
rudimentary.
NGO Boards face similar corporate governance problems as corporate sector
(family members, lack of term limits, lack of role clarity)
Donor financial reporting requirements are questionable
Quality of external audits and public access to reports are significantly low and
vary from NGO to NGO in a large scale.
4.2 Recommendations
39
The following recommendations would improve the existing legal status of NGOs in
Bangladesh, by reducing bureaucracy, removing legal contradictions and making NGOs
more accountable.
State Rules, Acts and Ordinances should be replaced or modified to reflect the current
critical atmosphere.The state should remove all administrative and procedural bottlenecks
created through promulgation of various Ordinances and streamline the existing working
procedures, enabling NGOs to complete all formalities within the shortest time possible.
The state should evaluate the strength and weakness of current measures for regulating
NGOs and ensure promulgation of flexible and effective rules and regulations.
Improving NGO Efficiency
It takes more than two months to prepare renewal papers for an NGO registration,
which, in any event are not thoroughly scrutinized. Because the state has the
authority to cancel the registration of any NGO or stop its activities and inform
the donor, in any case of serious allegations, once a NGO is registered, renewal
procedures should be simplified.
Some of the Foreign Donation (FD) forms and procedures followed by the NAB
are complex and cumbersome. The application forms and procedures should be
simplified through discussion between the GOB and NGOs. With regard to
registration, the Home Ministry should grant approval or disapproval within sixty
days of receiving the application from the NAB. An application for the
appointment of expatriates or extension of tenure should be decided within
twenty-five days. The NAB should send reminders to the National Security
Intelligence (NSI).
Appropriate action should be taken by the administrative Ministries, Divisions
and Departments to give their advice to the NAB within twenty-one days with
regard to approval of NGO projects.
40
To enable NGOs to prepare budgets and implement projects within the time limit
of financial year, if the report about a particular NGO is satisfactory, then the
NGO could be given clearance for other projects in the same year without further
investigation by the NAB.
The existing procedure that requires projects and clearance of funds be annually
approved by the state should be changed. NGOs that have approval for a project
should be able to use foreign funds until the project is completed, without annual
renewal. Since the funds must be received through specific NGO bank accounts,
the state will be able to monitor the flow of foreign funds to the NGO sector and
to each NGO. It will be the business of NAB officials to check whether an NGO
has several bank accounts.
The National Security Intelligence (NSI) should be aware of each NGO's
activities so that it is ready to comment on an application without further inquiry.
If the NGO has done anything highly objectionable during the last 30 years, it
should be closed and the relevant donor informed.
For NAB approval of projects, NGOs should be required to submit the names of
its Board Members and/or Executive Committee and the number of staff positions
in each category. Staff names, however, should not be required.
Holding NGOs Accountable
The state audit system is ineffective. A mechanism must be developed under
which the state officials involved in the development process make regular field
visits to NGO programmes. Such officials should also conduct impact evaluations
upon the completion of a project to enhance the state's understanding of the
programme dynamics and the operation of NGOs.
41
Commercial activities of NGOs should be duly taxed and profits from them
should be used for development work. The law should be changed accordingly
and NAB should make sure that it is implemented properly. In conformity with
law, immediate legal action ought to be taken against the officials of several
NGOs who are involved in misappropriation, embezzlement or accused of
misconduct, irregularity or lawbreaking.
Theoretically, the state is accountable to Parliament and ultimately to the public
for its activities and programs, but NGOs remain unaccountable. This is
unacceptable. NGOs must be regulated by Parliament. If the government can
remain above narrow party interests and if the opposition party can remain strong
and responsible, then an effective parliamentary committee could be created to
scrutinize and evaluate the activities and programs of the NGOs.
Strategic recommendation:
Strong case for a focused scaling up of NGO activity through a mix of enhanced
direct provision and facilitating (local) Government and community provision so
that accountability relationships are strengthened
A ‘strategic compact’ between GOB, donors, NGOs and clients where each
improves certain aspects of its current practices could further enhance
development impact of NGOs
GOB part of compact could be (i) to oversee NGOs while not
impairing their ability to innovate (ii) withdraw from direct service
provision where NGOs have comparative advantage (e.g. micro-
42
credit) (iii) strengthen procurement and budgetary practices to
improve contracting and evaluation of NGOs
Donor role in ‘compact’ could be to support NGOs while ensuring
that accountability of NGOs to Bangladeshi stakeholders is
preserved. As contracting processes improve more donor funds to
NGOs, for social services, could go via Budget. Advocacy needs to
be funded directly.
NGO part of the compact could include (i) strengthening financial
management and corporate governance (ii) improving transparency
and active publicity about activities and finances (iii) carrying out
strategic reviews to determine scaling up or down of
programs/enterprises (iv) strengthening middle management and
succession planning
Clients can contribute to the compact by actively exercising their
power as consumers (eg vouchers), by monitoring service quality
and demanding information
4.3 Conclusion
43
In Bangladesh, NGOs play a pivotal and pragmatic role when the state does not reach the
poor and meet their needs. Despite their numbers, NGOs have brought little change in
levels of poverty. Even the largest NGOs in Bangladesh when taken together cover only a
fraction of the population- perhaps only 10-20 percent of landless households (Hasherm,
1995). This highlights the NGO need for reaching more poor and provision of services
given the limitations of the state and the laws. So, alleviation of poverty of the masses
should be at the top of the agenda of the NGOs, state and donors in Bangladesh.
However, the NGOs' umbrella body (which is required to elect its executive committee)
is not broad-based. Elections to the executive committee are often not properly held and
its membership is often confined to friends and relatives. This surely frustrates the
potential of NGOs as democratic voluntary organizations. Nevertheless, NGOs cannot
function in isolation from the mainstream of political, economic and social life in this
Country. They must conform to certain standards, adhere to state regulations and have
their work coordinated at the state level. NGOs can only complement the state's activity.
Under the current system, the state cannot ask NGOs to become more transparent and
accountable or to cooperate more with the state due to donor pressure. The state is very
weak in Bangladesh (Wood, 1997). Instead, the state creates undue hindrances which
only increase transaction costs of NGOs without encouraging or forcing the NGOs to
respond more to the needs of the poor. But still NGOs need to be transparent to their
clients, donors and the state both functionally and financially if they really want to
represent the interests of the poor or at least provide services to them.
4.4 Appendices
44
1.[Published in the Bangladesh Gazette Extraordinary, dated the 12th December, 1978]
GOVERNMENT OF THE PEOPLE'S REPUBLIC OF BANGLADESH
1{ PRESIDENT'S SECRETARIAT PUBLIC DIVISION NOTIFICATIONDhaka, the 12th December, 1978.
No. S. R. O. 329-L/78.-- In exercise of the powers conferred by Section 7 of the Foreign Donations (Voluntary Activities) Regulation Ordinance, 1978 (XLVI of 1978), the Government is pleased to make the following rules, namely:-
THE FOREIGN DONATIONS (VOLUNTARY ACTIVITIES) REGULATION RULES, 1978.
6. Maintenance of books of accounts. –
(1) Every person or organisation undertaking or carrying on voluntary activities shall maintain books of accounts –
(a) Where the foreign donation relates to articles only, in Form FD-5; (b) Where the foreign donation relates to currency, in the cash book and ledger book on double entry basis.
(2) Accounts under sub-rule (1) shall be maintained on a half-yearly basis, one for the period commencing on the 1st day of July and ending on the 31st day of December, and the other for the period commencing on the 1st day of January and ending on the 30th day of June.
(3) All books of accounts maintained under this rule shall be audited by a chartered accountant as defined in the Bangladesh Chartered Accountants Order, 1973 (P. O. 2 of 1973), and two copies of accounts so audited shall be furnished 29{along with a certificate from the auditors in Form FD-4, to the NGO Affairs Bureau with a copy to External Resources Division and the administrative Ministry concerning to the activity of the project}.
7. Bank accounts. –
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Only one bank account shall be maintained by every person or organization authorized under these rules for receiving foreign donations :Provided that separate bank accounts for separate projects may be maintained for internal transactions after the donations have been received through the only bank account opened under sub-rule (4) of rule 4.}
8. Seizure of books of accounts. -- (1) Every seizure of books of accounts and other documents under section 4 shall be made in accordance with the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898), as they apply to any search or seizure made under the authority of a warrant issued under section 98 of the Code.(2) The officer or officers responsible for seizure of books of accounts and other documents under sub-rule (1) shall return them if no action is taken as required by the Ordinance.
Bala,Swapan Kumar and mir, Monir Jaman ,“ ‘Overaccount’ to ‘Underaccount’? A Study of the Third Sector Accountability and Accounting in Action in a Developing Country”, ………………….
Hashemi, S. M. 1995. "NGO Accountability in Bangladesh: Beneficianies, Donors and State" in Edwards, M. and Hulme, D. (eds.) Non-governmental Organisations : Performance and Accountability Beyond the Magic Bullet. London: Earthscan Publications.
Karim, M. (1996), “NGOs in Bangladesh: Issues of Legitimacy and Accountability,” inEdwards, M. and Hulme, D., eds., Beyond the Magic Bullet–NGO Performance and Accountability in the Post-Cold War World, Kumarian Press, Connecticut, USA, pp.132-141.
World Bank (2002), Bangladesh-Financial Accountability for Good Governance, A World Bank Country Study, Washington DC.
Zarren, F. (1996). "The Legal Status of NGOs in Bangladesh: A Critical Assessment". Social Science Review. Vol. XIII. No. 2. pp. 67-90.
