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How Performance Auditing Can Help Your NGO

Tuesday, January 22, 2013 - 11:36

Non-Governmental Organisation (NGO) performance audits provide an impartial assessment of the compliance level of an NGO with international best practices and establish a framework towards continuous improvement.

The application of a voluntary standard of NGO accountability aims to assess performance and compliance levels against a comprehensive set of objectively measurable criteria, organised under different perspectives so as to be ‘readable’ by any stakeholder. Quantifying results enables progress measurements at regular intervals, and this can be translated into an internal management tool for continuous improvement purposes.

By applying such a system, the grantee can detect risks and weaknesses and correct them before it is too late. This should be paramount for those grantors preoccupied by the transparent, efficient and effective use of their financing.

Benefits of the NGO Benchmarking Performance Audit

Ensuring the transparency, integrity and performance of an NGO is of crucial importance to stakeholders such as donors, beneficiaries, contractors or local authorities. Second-party audits, where the auditors have a stake in the organisation they are auditing, do not always guarantee strict objectivity. A neutral third-party audit is the best way of providing an impartial, comprehensive understanding of an NGOs accountability.

The audit we conduct establishes a clear reference framework which can be used as the basis for future audits to measure how the NGO has improved. It can also be used to help position the NGO against other organisations working in the same sector or region.

The NGO benchmarking methodology

Our NGO benchmarking standard has been designed to provide independent assessment of an NGOs conformity to international best practice and to demonstrate its mastery of risk. We assess performance against 101 objectively verifiable indicators, which have been selected from international standards. We then group these into four key perspectives:

  • Dimensions of best practices:
  • Governing body;
  • Strategic framework;
  • Integrity management;
  • Communication, Advocacy and public image;
  • Human resources;
  • Financial;
  • Fund-raising, resources allocation and financial controls;
  • Operations;
  • Outcomes; and  
  • Continuous improvement.
  • Contributors’ expectations;
  • Management components; and
  • Continuous improvement.
Ratings are then provided for each indicator and consolidated by perspective in the final performance audit report. The scope of the audit is defined by the client, with on-site interviews and documentary checks conducted to generate the following results:
  • Detailed scores for each perspective;
  • Indication of strengths and improvement opportunities; and
  • Recommendations, corrective and preventive actions.
Before submitting the final performance audit report, we first validate all results with the audited organisation.

Contact us to find out more about how NGO Performance audit services can provide a comprehensive neutral assessment of NGO accountability, transparency and effective continuous improvement.

For more information contact:

Subash Singh
Manager: Internal Audit Services
E-mail: subash@ubac.co.za.

For more about UBAC, refer to www.ubac.co.za.

Comments

Hi Pieter, Please take note of the following below as well: A PBO wishing to secure recognition by the Commissioner: SARS must comply with the requirements contained in section 30(3) of the Act which are considered below. A PBO must comply with any conditions prescribed by the Minister by way of regulation to ensure that the activities and resources of the PBO are directed in the furtherance of its object. To date, no regulations have been promulgated under this provision of the Act. When the PBO applies for exemption it must submit to the Commissioner a copy of its constitution, will or other written instrument under which it was created. The Act requires that the PBO must have at least 3 persons, who are not connected persons in relation to each other to accept fiduciary responsibility of the PBO. Furthermore, no single person can directly or indirectly control the decision making powers of the PBO. The definition of connected person is contained in section 1 of the Act and is extremely wide. It is important therefore that the PBO ensures that, for example, where a family creates a charitable foundation that persons other than family members are trustees of the trust created failing which this provision will not be complied with. Furthermore, the PBO must be prohibited from distributing any of its funds to any person, otherwise than in the course of undertaking its activities. The PBO must use its funds solely for the object for which it has been established and is required to invest its funds with either a financial institution as defined in section 1 of the Financial Services Board Act No. 97 of 1990, or in any South African listed shares or in such other prudent investments in financial instruments and assets as the Commissioner may determine after consultation with the executive officer of the Financial Services Board and the director of non-profit organisations. Where the PBO acquired, for example, unlisted shares by way of donation, bequest or inheritance it is entitled to retain that investment. However, a PBO is prohibited, under the current provisions, from acquiring shares in unlisted companies or making other investments besides those listed above. If the PBO is dissolved it must transfer its assets to a similar PBO which has been approved in terms of section 30 of the Act or to any other institution, board or body which is exempt from tax under the provisions of section 10(1)(cA)(i) of the Act, which has as its sole or principal object the carrying on of any public benefit activity or to any department of state or administration in the national, provincial or local sphere of government in South Africa. In addition, the PBO cannot accept donations which are revocable at the instance of the donor for reasons other than the material failure to conform to the designated purposes and conditions of such donation. The donor making funds available to a PBO cannot impose conditions on the donation made available to the PBO which could result in the donor or any connected person in relation to such person deriving some direct or indirect benefit from the donation made. If the PBO wishes to amend its founding document it must submit a copy of the proposed amendments to the Commissioner for approval. The rules governing the investment of funds, dissolution of the PBO, nature of persons acting for the PBO and amendment of the PBO’s founding document must be set out in the PBO’s articles, deed or constitution. Other requirements A PBO enjoys a privileged position in that it is not subject to tax on the income derived by it. Thus the PBO must comply with the requirements for exemption on an ongoing basis and in addition comply with other requirements contained in section 30(3) of the Act. The Commissioner must be satisfied that the PBO was not knowingly a party to what can be described as a tax avoidance arrangement. If so, the Commissioner can review and possibly revoke the tax exempt status of the PBO. Further, the PBO must not pay remuneration which is excessive when reference is made to what is generally considered fair remuneration in the particular sector and in relation to the services rendered by the PBO’s office bearers. In addition, the PBO must comply with such reporting requirements as may be determined by the Commissioner. The PBO, once approved by the Commissioner, must submit an annual tax return together with supporting annual financial statements so that the Commissioner can ensure that the PBO has conducted public benefit activities in the prescribed manner for the particular year. In those cases where a PBO provides funds to an association of persons contemplated in paragraph 10(iii) of Part 1 of the Ninth Schedule of the Act it must take reasonable steps to ensure that the funds made available are in fact used for the purposes for which they have been provided by the PBO. Furthermore, the PBO must register in terms of section 13(5) of the Non-Profit Organisations Act No. 71 of 1997 within the time period prescribed by the Commissioner and comply with all requirements imposed under that Act unless the Commissioner in consultation with the director of Non-Profit Organisations otherwise directs. The PBO is not permitted to use its resources directly or indirectly to make funds available to a political party or to support a political party. This is because registered political parties enjoy tax exemption under section 10(1)(cE) of the Act and should not be funded by PBOs. Regards, Subash 073 360 8700
Hi Pieter, Apart from the normal admin and financial status of the NGO, no further reporting would be required. Sometimes funder's may would require your financial information to assess what has been done with the funds from time to time.
Hi I have been asked the following questions: An NGO does not receive any funds from Government, but from the private sector. They have an accountant and the accounts are audited by a firm of Chartered Accountants every year. These statements are submitted to the funders and the CA's submits it to the Receiver of Revenue. What other reporting has to be done and to which bodies? As it is also registered as a PBO, the questions remains the same. Please could you give us guidelines for reporting. Kindest regards Pieter Scholtz