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Logo of Phnom Penh Post newspaper Phnom Penh Post - Donor dollars and NGO accountability: getting the balance right

Donor dollars and NGO accountability: getting the balance right

Dr Kao Kim Hourn: "We need to have a code of ethics."

Ten years after Cambodia's local NGO sector took off, the eyes of those involved

with it have turned from ensuring its mere survival, to the ways it is run.

The ongoing fraud investigation at a local human rights NGO has brought to the fore

many questions about the operations of local NGOs, and the idea that they are now

facing a critical time is widespread.

The sector has certainly grown fast: a 2001 World Bank report on civil society stated

that almost 600 local NGOs were registered with the Ministry of Interior. Voluntary

sector professionals believe that number has very likely increased. The number of

employees of local NGOs reported by Pact as listed at the Cooperation Committee for

Cambodia, was 6,143 in 2001, up from 2,251 five years earlier.

Among the phrases used about the events at the Cambodian Institute for Human Rights

(CIHR) is that local NGOs have received "a wake-up call", "a clear

message" of their responsibility for donor money, and the idea that civil society

is "at a cross-roads".

"We have had several years of [local NGOs operating] and they should be moving

towards a more professional stage," says one long-term observer. "And that

is not happening."

There is no doubt that it needs to do so. Dr Kao Kim Hourn, executive director of

the Cambodian Institute for Cooperation and Peace (CICP), says that after a decade

of development, civil society must improve not just its standards of transparency,

but also the way it functions.

"Civil society in Cambodia is not at the beginning anymore," says Kim Hourn.

"What we will see from now on will be an important trend in the right direction.

It must aspire to higher standards - those standards include professionalization,

the right expertise, capacity building and greater [democracy]."

Dr Lao Mong Hay, another well-known figure in Cambodia's voluntary sector, says it

is commonly accepted that change is overdue. He echoes Kim Huorn's comments about

the need for profes-sionalization and says the sector has reached "another stage"

in its development.

The past

Cambodians were encouraged to establish or take over NGOs during the UN transitional

authority's tenure in the early 1990s. There was recognition that Cambodians knew

their own problems better than outsiders. Having Cambodians run NGOs was a logical


In the early days, the very existence of civil society was something of a marvel

coming as it did so soon after the end of communist rule. Donors were happy to support

local NGOs, and were more concerned to get the sector up and running than with issues

of transparency, accountability and management styles.

For numerous reasons, not least the impact of the Khmer Rouge on the country's educated

class, qualified experts were in short supply. The early 1990s saw the rise of the

so-called 'charismatic leaders', the men and women who grew their organizations from

small beginnings to the million dollar bodies some are today. Well-spoken and well-educated,

they were feted as representatives of Cambodian aspirations, though just how representative

is still a cause for debate.

The term 'charismatic leaders' was used in a series of reports by Sweden's aid and

development arm SIDA. The reports, which were published last year, evaluated local

human rights and democracy NGOs to see how well they were run.

The results were mixed: some NGOs had in place good financial management and staff

participation; others were hampered by weak financial controls and authoritarian

leaders unused to receiving suggestions from those beneath them.

Initially the vibrant, young sector was probably well-served by these strong leaders,

but as it has grown - and as their NGOs have grown - there has come increasing

awareness of the need for oversight and higher standards.

Mong Hay, former executive director of the Khmer Institute for Democracy (KID), stresses

that the issue of charismatic leaders is not specific to NGOs. It is also in government,

he says, from top to bottom. However, the domination of some NGOs by their founders

is problematic.

"They should be remembered and honored [for what they have created], but then

you reach a point in the terms of their mandate," says Mong Hay. "Personally

I felt that when I took over the directorship of KID, I should not stay there until

my retirement."

"I felt I should groom young leaders to take over, and I have been doing that.

And also delegating and decentralizing. At some stage you need to force yourself

to step aside. They need to think about their successors."

Dr Lao Mong Hay: "At some stage you need to force yourself to step aside."

Kurt MacLeod, country representative at Pact, says there is a difference between

good leaders and good managers. Both are necessary, but up to now the charismatic

leaders have taken on both roles. NGOs, he says, have become more aware of the difference.

"When you have charismatic leaders it can be an obstacle if they think they

know what is needed," he says. "But a good manager will put into place

a very open consultative process to decide where we are going in the next five years."

Mong Hay is also concerned at the motivations of some of those entering civil society.

Intellectual integrity and practical skills, he says, are essential assets, as is

what he calls a "missionary" spirit.

"Those who would like to work in the NGO sector need to bear in mind that they

cannot make money," says Mong Hay. "If they want to make money, go to the

government or the private sector. You have to want to do something good for society."

Some people, he says, have created NGOs for the salary it will bring, others simply

to have a job.

"NGO workers need to understand that they are not entitled to other countries'

tax money. Not many understand where the grants come from originally - [they feel]

they are entitled to foreign aid," says Mong Hay.


Present problems

At the heart of the current problems is good governance, a broad term that essentially

means running an organization properly. It encompasses the concepts of sound financial

management, devolved decision-making, internal democracy - to give staff their

say - and effective oversight of the NGO's operations.

CICP's Kim Hourn is wary of SIDA's generalizations about charismatic leaders, but

concedes that in terms of checks and balances on power, the agency's criticisms have

some merit.

"This is [one of the] lessons we have learned from ten years of the civil society

movement in Cambodia," says Kim Hourn. "A lot of progress has been made,

but there are still a number of problems. They have to reform."

One Western embassy official says it is time NGOs moved "away from organizations

based solely on charismatic leaders, to organizations with proper structures and

accountability of decision-making." Having an independent board of directors

that meets regularly and monitors the NGO is essential.

"No one can argue against that," he says. "If you have [an effective]

board of directors, you reduce many of the risks associated with strong personalities."

That view is certainly more common among donors in the wake of the events at CIHR,

most of whose board of directors live outside the country. Other questions donors

are raising are how effective the board is, whether it is advisory or has the power

to make decisions, and how often it meets.

Any board of directors, of course, requires a number of well-qualified people who

are aware of what exactly the job entails. And if that is hard in Phnom Penh, it

is even more difficult in rural areas.

"There are many difficulties in putting together boards of directors in Cambodia,"

says one development consultant, "because there are no examples here and there

is a shortage of neutral and educated people who can act on boards."

"Also, I think that Cambodians need to find a culturally appropriate way to

form governance structures, whether they are boards of directors or something different,"

she says. "If they don't feel the board structure is good for them then they

won't adopt it. There are plenty of examples of boards that only exist on paper - they

don't actually meet or have a role that has been defined."

In addition, says CICP's Kim Hourn, strong internal rules at an NGO would ensure

that one person does not dominate. The combination of rules and a board should bring

proper separation of powers, which is needed to retain the confidence of donors,

staff and beneficiaries.

"That is very important. I believe that donors are now looking at various local

NGOs to see that they have a board of directors, and that they are functioning,"

says Kim Hourn.

Donors have indeed been busy the past few weeks. Heads of several leading local NGOs

confirmed that they had spent time reassuring their funders that the problems at

CIHR were not present at their organizations.

Pact's MacLeod says one challenge is the fact that donor funds have not kept pace

with the increasing number of local NGOs. With donor money focused more specifically

on large NGOs, the same amount of money is funding fewer organizations.

"That doesn't match, so there are some challenges," says MacLeod. "One

of these is to start to think seriously about efficiency."

That can come in many different ways, he says, such as better use of financial resources,

and avoiding replication between local NGOs in particular sectors.

"There will be a time when Cambodian NGOs will need to think about consolidating,"

says MacLeod. "Not necessarily because people want it to happen, but if you

have the same amount of resources and continuing growth of the NGO sector and you

have donors channeling money into fewer NGOs, then that is what it will lead to."

Donor dollars

The ultimate responsibility of donors, says the Western embassy official, is to

their taxpayers. Monitoring how funds are spent has long exercised donors, who are

aware that there are limits to financial scrutiny. There is little point, says one,

in spending $1,000 on checking how $5,000 was spent.

"There is a lot of money [from donors] going around in Cambodia," says

the embassy official, "so you have to accept that some corruption will take

place. [To combat that] you have to put in place a system of checks and balances."

One recent improvement on the donor side, he says, is meetings between lower-level

Western embassy staff to discuss projects. At these meetings the coordinators at

different embassies assess the projects and look for possible overlaps.

The Donor Coordination Group includes representatives from Japan, Germany, Belgium,

Canada, the UK, Australia, and the EC. It is involved with small grants, around $500

to $50,000, and began life as an informal way for donors to share information on

local development projects and NGOs.

"For the most part we want to give each other warnings, or encouragement to

fund something or not. The idea is to avoid duplication," says Jane Fuller,

coordinator at the Canada Fund, which is funded by Canada's CIDA.

"There are different things donors can do, that support agencies [international

NGO partners of local NGOs] don't necessarily have a mandate for," says Fuller.

"What a donor in my view has a responsibility to do, is to set expectations

of that NGO and make those expectations clear when you fund them."

The Canada Fund, which has been in Cambodia for ten years, requires local NGOs to

outline the results they expect to achieve, and draw up measurable steps along that


"We have a responsibility to ask them to report on financial expenditures and

to check those financial expenditures," says Fuller. The fund examines the progress

at various points along the road to prevent potential problems arising during the

life of the project. And before granting money, the fund insists that the NGO shows

it has an active board of directors and is financially and administratively efficient.

There is little doubt that in the wake of CIHR, other donors are following suit to

ensure financial rigor. However, the case of CIHR, a human rights NGO, revealed one

area donors are less certain about tackling: its head told donors full human rights

were not exercised within its offices. How far are donors responsible for what goes

on within the organization?

Mong Hay says that clearly falls within the ambit of donor responsibility, and suggests

an enforceable code of conduct to keep management and leadership styles in line with

the publicly held values of NGOs.

"For instance with human rights and democracy NGOs - you need to have a

more democratic management style, not a dictatorial management style," he says.

"That is something donors can and should impose, to be consistent with what

those NGOs are doing."

However, Mong Hay acknowledges that monitoring is a delicate process. "The donors

have a balance to strike. If they control too much they will kill off the NGOs' initiative

and responsibility. Too loose supervision and monitoring would lead to abuses,"

he says.

He also feels donors are within their rights to insist that charismatic leaders train

staff to eventually replace them. That would also ensure the NGO does not rely on

a single person.

Donors are equivocal about what is admittedly a complicated topic. The Canada Fund,

for example, does not fund human rights NGOs, but does have expectations regarding

the promotion of gender equality in the projects local NGOs implement. Holding local

NGOs to that is a difficult and sensitive issue.

"What is it possible for a donor to do when it comes to the internal management

of a local NGO vis-à-vis discrimination on gender or sexual grounds? It would

be very difficult for us to hold accountable local NGOs on issues like that,"

he says.

The coordination teams and support agencies of local NGOs have a more direct and

involved relationship and are better able to enforce that, she says. That is particularly

true in the case of small donors such as the Canada Fund, which finances specific

projects, as opposed to operational and management costs of local NGOs.

MacLeod at Pact says both funders and support NGOs have a responsibility to ensure

that their monitoring of the projects they support runs more deeply than just checking

dollars and cents.

"However, there is a difference between international NGOs and donors, although

some international NGOs are donors for Cambodian NGOs," he says. "Donors

have their own overall objectives which include things such as transparency, accountability,

and internal governance structures that are participatory."

"However, [donors] are contracting an organization like Pact to make sure that

takes place," says MacLeod. "So are they directly involved in looking at

governance within an NGO? No - that's what they are asking us to do. So in that

sense we are much more responsible and accountable for making sure the governance

structures are in place for Cambodian NGOs than donors are."

Sound financial management is key to the success of any NGO. Kim Hourn says that

ultimately NGOs themselves must bear the responsibility for improved financial transparency.

If they do not retain the confidence of donors, he warns, they will simply stop funding


"For those NGOs that do not have the structures in place, their chances of getting

increased funding will be [reduced]," says Kim Hourn, adding that donors will

now likely step up monitoring of how money is spent. However, that requires spending

more money to see how funds are used.

"I think it would be wrong for donors to expect civil society organizations

in Cambodia to spend their own money to audit themselves," says Kim Hourn. "What

[donors] should do is, as part of any project they support, [allocate] a certain

percentage of the budget that goes to auditing."

Internal democracy

Giving staff some say in making decisions is also seen as an important step in

the development of local NGOs. At the moment democracy in many is limited, with decisions

handed down from on high.

The more employees that have a hand in running the NGO, the theory goes, the less

likely it is there will be problems with authoritarian leaders. Some NGOs, such as

KID, have a strong concept of staff participation, but that is unusual. More common

is an awareness of how important internal democracy is and how much it can affect

the NGO.

"You are talking about the relationship between the management and the staff,

the board of directors and the donors," says CICP's Kim Hourn. "So there

are a number of circles in that relationship and any time that one relationship is

not working very well, it will have an impact on the others."

"At CICP we do have on the one hand a professional structure, on the other hand

there is an informal operation in that everyone can come and see me. That is very,

very important," says Kim Hourn. "Staff can write recommendations and complain,

and we look at that carefully."

However, CICP has only 16 staff. The bigger the NGO, the more difficult it is to

keep it democratic. Mong Hay thinks that for this - and other reasons - NGOs should

follow the mantra that "small is beautiful".

"When NGOs are too big, the internal management and leadership finds it very

difficult to supervise the activities of their staff," he says. To counter that

Mong Hay suggests a limit on donor funding of $500,000 a year.

"This is a sector that can spawn new ideas and provide a lead in such areas.

When you are too big it is very difficult to [do that]," he says. Too many staff

leads to layers of bureaucracy and a greater distance between the goals of the NGO

and the decisions made by its leader.

Future potential

In the NGO world, as in the corporate world, credibility is key. Kim Hourn says

local NGOs risk losing that if they do not reform.

"We ought to have this culture of professionalizing the way we do things if

we want to have credibility. We have to be able to defend ourselves, particularly

in civil society," says Kim Hourn.

"Cambodia is no exception to other countries. [Civil society] is much younger,

but let's try to make [it] vibrant," he says. "To be vibrant, to be credible

it has to be clean. That's very important, otherwise it will negatively affect civil

society, and that will affect all. This is my main concern.

"If civil society wants government and donors to take civil society more seriously,

then civil society organizations will have to be more professional, more expertise

based, and more credible," Kim Hourn continues. "If you do not conform

to the emerging of professional standards, then you will become irrelevant."

That credibility extends further than simply donors and beneficiaries though. Both

Mong Hay and Kim Hourn warn that the current problems are a windfall for a government

that has no great love for the sector's independence. So is there a risk that if

civil society does not improve the government could exploit that to discredit it?

"Certainly, and not just the government," says Kim Hourn, "but parties

and individuals who would use the problems that have been coming out to fire back.

So there is a lot of introspection, of self-examination. I think it is good that

we should continue to accelerate the reforms in civil society.

"And I think there is a lot of will [to do so]. Money is drying up, and if institutions

want to continue to receive funding, they have got to be proactive," says Kim

Hourn. "Donors will not tolerate [low standards]."

"Most important is that we need to have a code of ethics. We should not be driven

only by our work. Those working in civil society should have strong ethics,"

he says. "If we expect this in the public sector we should also expect it of


It would be better to have Cambodian NGOs work that out for themselves rather than

having it imposed, the development consultant suggests.

"They could have their own code of ethics for their own organizations, or they

could as a community say that these are the standards that we want to set for the

NGOs working in Cambodia," she says, "and then using that as a basis for

how they shape the future development of NGOs and their work."

It is only natural that what is a young, thriving voluntary sector will face problems

in becoming more professional. Also, says Pact's MacLeod, the fact that problems

are coming to the fore is a positive sign.

"If there is one bad apple, it doesn't mean the whole barrel is rotten,"

says MacLeod. "Across the board in every country you are going to find something

like this. The fact that you're able to find it says something.

"As the sector progresses, there is a certain amount of standards and a certain

amount of learning by doing," he says. "As mistakes are made, hopefully

that says, 'How do we build a better, stronger and more accountable and more transparent

sector?' That's the way I would approach it.

"Some of the umbrella network organizations that have been working with quite

a number of Cambodian NGOs have been working quite aggressively on these issues ...

such as building organizational and financial sustainability," says MacLeod.

"There has been a learning curve and where [Cambodian NGOs] are now is much

more professional than where they were ten years ago or even five years ago."

"Civil society is at the cross-roads, and certainly we cannot go back,"

concludes Kim Hourn.

"This is an irreversible process and we have to look forward. That means that

there will be a greater demand for professionalism, for expertise, for greater accountability,

for credible work. Those who cannot live up to the demands will be out of the race."



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