Corruption in NGOs: The imperative fortransparency and good governance

MANY in non-governmental organisations (NGOs) are unaware that the Malaysian Anti-Corruption Commission Act 2009 (MACC Act) applies to them if they are public bodies as defined under the MACC Act. For example, any society registered under the Societies Act 1966 and any sports body registered under the Sports Development Act 1997 are defined as a public body.

NGOs play a vital role in addressing social, environmental, sports and humanitarian issues worldwide and nationally. They have noble objectives. However, like any sector, NGOs are not immune to the scourge of corruption.

So why is there corruption within NGOs? And why is there an urgent need for transparency and good governance to restore public trust and ensure that these organisations fulfill their intended missions?

Corruption within NGOs encompasses various forms of unethical behavior, including embezzlement of funds, misappropriation of resources, nepotism, fraud, and the abuse of power.

Many overlook the abuse of power as an offence under section 23 of the MACC Act, for example, if the person uses his office or position for any gratification to benefit himself, his relative or an associate.

Corruption within these organisations can have dire consequences, undermining the very causes they were established to support. Several factors contribute to corruption in NGOs.

First is the lack of oversight or the existence of a mere semblance of oversight. Many NGOs operate with limited oversight or worse with dictatorial leadership, creating opportunities for corruption to go unnoticed.

Placing committee members who are financially obligated to the main player, for example, facilitates and promotes abuse of power. Subservient or apathetic committee members of an NGO promote abuse of power and corruption to occur. This is because inadequate financial and operational controls can lead to mismanagement of funds and resources.

Second, complex funding sources – diverse funding sources, including government grants, private donations, and international organisations, can make it difficult to track and regulate financial movements effectively. There is also the “hidden” benefit derived from sponsors or funders of the NGO which may be corruption or abuse of power.

Third is inadequate accountability: Some NGOs lack effective accountability mechanisms, allowing individuals to act with impunity. This can also exist when so called management or exco meetings are held merely to rubber stamp unethical or vested interest decisions already made with the assistance of salaried staff. In Malaysia, this is the common modus operandi in abuse of power cases charged in court. Another common cause of abuse of power is the use of the society’s facilities by family members or friends of the society’s officials without proper process. People in positions often forget that these facilities are funded by public funds and not their personal money.

Fourth is the overly complex organisational structures that can obscure decision-making processes, making it easier for corrupt practices to thrive. For example, the forming of another NGO under the main NGO to facilitate the transfer of funds and to ensure the placement of the main players in positions of power.

In response to these challenges, Malaysia’s Anti-Corruption Commission has been proactive in its efforts to monitor and combat corruption and abuse of power within NGOs. Among the efforts taken by MACC, other than enforcement, is to continue to educate and train NGOs to implement transparency and good governance in their management.

The MACC can be invited to conduct audits and inspections of NGOs to identify any irregularities in financial management, compliance with regulations, and governance structures.

In my own personal observation and experience in the legal area, the whistleblower mechanism has been an effective tool in the combating of corruption and abuse of power. The whistleblower mechanism also allows for a long-term process of data/evidence collection to take place within the NGO without the knowledge of the perpetrators.

Transparency is critical in the management of an NGO. Transparency is a cornerstone of good governance within NGOs. It ensures that these organisations operate with integrity and are held accountable for their actions.

Transparency and good governance operate best in meetings with a democratic atmosphere where committee members are allowed to express their concerns about important issues. The prevalence of recording unanimous consent by committee members on critical matters is often an indication of abuse of power in the NGO.

Transparency builds trust with donors and the public. When NGOs disclose their activities and finances, it reassures stakeholders that their contributions are being used for their intended purposes.

Moreover, transparent organisations can allocate resources more efficiently, ensuring that funds reach their intended beneficiaries instead of buying support within the organisation.

Transparency is also a deterrent to corrupt practices. Knowing that their actions will be scrutinised, individuals within NGOs are less likely to engage in corrupt activities.

Good governance within NGOs encompasses a set of principles and practices that promote accountability, responsibility, and ethical conduct. Implementing good governance helps eradicate corruption and ensures that NGOs fulfill their missions effectively.

Some key components of good governance for NGOs include –well-defined organisational structures clarify roles and responsibilities, reducing the likelihood of power abuse.

Independent boards and oversight committees are essential for scrutinising the actions and financial decisions of the organisation. NGOs must regularly disclose their financial statements, activities, and decision-making processes to the public and donors, especially to their stakeholders.

NGOs play a vital role in addressing some of the most pressing global and national challenges. However, corruption within NGOs threatens to undermine their impact and public trust.

Addressing corruption requires a commitment to transparency and good governance, which are essential to ensuring that NGOs operate with integrity, fulfill their missions, and maintain the trust of donors and the public.

While challenges remain, the continued dedication of NGOs to these principles will help combat corruption and ensure that their work leads to positive change in the world. In this regard, I commend the efforts of MACC and the political will of the Prime Minister in addressing corruption in the country.

Senior lawyer Datuk Seri Jahaberdeen Mohamed Yunoos is the founder and chairman of Yayasan Rapera, an NGO that promotes community-based learning activities and compassionate thinking among Malaysians. The views expressed here are entirely his own.