NGOs need standards to improve good governance

NGOs need standards to improve good governance

Rustam Ibrahim, Senior Research Associate, Institute for Economic
and Social Research Education and Information (LP3ES), Jakarta

As one of the most important elements of the civil society,
thousands of new NGOs have cropped up in different provinces with
mostly two purposes: To monitor the government and other public
institutions and to take part in assisting different groups of
poor people who have suffered the most from the economic crisis.

We find today many "watchdog" organizations. They include
corruption watch, government watch, judicial watch, parliament
watch, police watch, army watch, media watch and so on which
could never exist in the New Order era.

The involvement of NGOs in poverty reduction programs and the
like has increased due to changes in the stance and policies of
the government towards NGOs.

Sometimes with the pressure from donor agencies, the
government has created more space for NGOs to take part in
government programs, notably those related to poverty
alleviation.

However, the freedom has not been supported by legal
stipulations and/or moral principles regarding NGOs' operation,
which is harming their image. There are three negative forms of
newly formed NGOs:

First, NGOs set up by government officials, business people or
people aiming for profit. NGOs are set up just to grab government
projects financed with overseas loans, as donor agencies require
that the projects should be carried out by NGOs.

Secondly, groups who claim to be NGOs and are very active in
practical politics. They are formed to support (or reject)
candidates for the posts of governor, regent or mayors.

Thirdly, "exploitive NGOs" who carry out control also with the
purpose for profits; their findings, related to irregularities
involving government officials or the private sector, are not
made public, and instead are used to blackmail these sectors.

Any organization should maintain at least five
characteristics. First, non-governmental; NGOs should be
independent, autonomous and separated from state or government
organizations. The question is whether NGOs formed and managed by
government officials still can be called NGOs.

Another issue is how the term "non-governmental" can be
translated into NGO governance and how to resolve conflicts of
interests. This is because the concept of conflict of interest
seems to be little known and neglected among many in Indonesia.

Second, non-partisan; NGOs should not be in any way related to
political parties. Many political party officials have formed
NGOs, and many NGO activists have become party executives.

Third, voluntarism. In any NGO, a number of people must
voluntarily contribute their views, time and energy, without pay.

They include the founders and members of the advisory board,
supervisory board, board of trustees, and board of directors.
They should be differentiated from NGO executives and staff who
are professionals and receive salaries.

But sometimes the board of directors also serve as executives.
Aside from the absence of effective control mechanisms (checks
and balances), this makes everybody in the organizations salary
people. The concept of voluntarism thus becomes vague.

Fourth, NGOs are non-profit organizations. A surplus of
revenue must not be divided among founders and members of NGO
executives. This differentiation from profit organizations must
be very clear.

But sometimes founders and board members form business
enterprises (with funds from their NGOs, aimed at making them
less dependent on donors) and later become members of their board
of commissioners or board of directors.

They receive big salaries and dividends. Unfortunately when
this business entity succeeds to make big profits, the profits
are not used to meet the needs of the NGO which set up the firm.

Fifth, NGOs must meet the needs of society, the poor, the
outcast and others whose rights are violated. NGOs help people to
develop their potential and fulfill their rights through direct
and indirect action. NGOs also air their concerns about
government policies and actions which affect society.

A lack of these characteristics show the problem in NGO
governance. Many NGOs do not have written standard operating
procedures which, among others things, stipulates salary systems,
rights and obligations of employees, procedures of goods
procurement, procedures of money spending, and so on.

Further, many do not have accounting systems in line with
generally accepted principles; many NGOs have never made public
their reports on their activities and financial reports.

Any programs or forms of activities carried out by NGOs should
be based on ideal values which are formulated into vision,
mission and goals of the organizations. They are called moral
values.

Several of the above points are now in Law No. 16 Year 2001 on
Foundations which became effective on Aug. 6, 2002 (But some
articles may be amended to be made effective next year). This law
affects NGOs because some 90 percent of NGOs here are legally
foundations.

Among others, the law regulates that annual reports must be
made public on the notice board at the foundation's office. Also,
any foundation which acquires funds from the state and from
overseas which amounts to Rp 500 million (US $60,000) or more, is
subject to making their annual report public through Indonesian
language daily newspapers. They are also subject to be audited by
public accountants.

An effective enforcement of this law would lead to good
governance among many NGOs which are legally foundations, though
strong criticisms are understandable from NGOs who see the
government is going too far in regulating NGOs.

The regulation would indeed entail uniformity in NGOs
organizational structure -- foundations must have advisory,
supervisory and management boards.

Also, the ruling that the legal status of foundations must be
ratified by the Minister of Justice has raised fears that this
will lead to red tape and further corruption, collusion and
nepotism (KKN), and target organizations which are disliked by
the government. This view cannot be separated from NGOs'
traumatic experiences in the New Order era.

Self regulation is another way to improve NGOs -- either by
efforts of respective organizations or that of NGOs as a
community which could formulate a code of ethics and standards
for activities and good governance.

The existence of healthy and strong NGOs -- in that they are
formed voluntarily, not oriented to profits, independent of the
government, transparently managed, democratic, accountable and
are oriented to and represent public interest -- has since long
been the concern in the international community.

Donor countries have placed an even greater emphasis on the
importance of involving NGOs in designing, planning and
implementing development projects by developing participatory
development systems.

The governments of borrowing countries are required to create
a conducive situation for the growth and development of NGOs by
formulating laws and regulations which can encourage NGOs to
increase their contribution to national development.

But governance reform must become an important focus for civil
society organizations themselves so as to develop NGOs which are
effective, efficient, professional, transparent and accountable.

The above is abridged from the writer's presentation at the
ASEAN People's Assembly earlier this month in Bali. The writer
was director of LP3ES from 1993 to 2000.