NGOs urged to adopt good governance practices

The Securities and Exchange Commission (SEC) has called on all non-governmental organizations (NGOs) to adopt good governance practices to ensure that they serve their purpose.

In a speech delivered before the Philippine Council for NGO Certification last week, SEC Chairperson Lilia R. Bautista said the board of directors or trustees of NGOs should ensure that these organizations operate in the public interest.

"It is often said that good corporate governance starts with the board of directors or trustees. After all, the legal responsibility for safeguarding the public trust lies with the board. It is the board which is ultimately accountable for making sure the organization remains true to its mission and safeguards its assets," Bautista said.

To ensure transparency, Bautista said NGOs should provide accurate and timely disclosure of information relating to their financial performance and operations.

Bautista said NGOs should adopt international accounting and auditing standards since a significant portion of their funding comes from foreign sources.

"I think that NGOs could benefit greatly from efforts to standardize financial reporting and improve the financial reporting framework," Bautista said.

A survey conducted by CODE-NGO and the Association of Foundations in 2001 revealed that less than half of the NGOs registered with the SEC complied with their annual reporting obligations in 1997 and 1998.

Bautista said resource constraints may have prevented NGOs from regularly fulfilling the disclosure requirements not just of the SEC but of their funders and other constituents as well.

She said NGOs should extend the coverage of its reports to include other relevant disclosures to stakeholders, such as management discussion and analysis and indicators of program activity.

Bautista also asked NGOs to deal with the adequacy of their internal control systems adding that many NGOs, which are relatively small and cash-constrained, are able to operate only with modest internal accounting staff.

"Strong financial management mechanisms not only look after the interest of funders, who want to make sure that their money is put to good use; they also safeguard the interests of the beneficiaries, who depend on the financial sustainability of their programs and projects," Bautista said.

The SEC has been pushing for good corporate governance reforms to increase transparency and accountability in company operations and strengthening minority shareholder rights.