Donors play a critical role in the operation and sustainability of NGOs in most developing countries. They are essential partners to NGOs whereby they provide: financial resources through funding, capacity building through training, long-term sustainability, and much more. In turn, the Donors expect from the NGOs; Financial accountability and transparency, clear reports, good governance, and ethical practices as well as compliance with Donor requirements and much more. Internal auditing comes to enhance Donor trust and ensure their expectations are met through;
Promoting transparency and accountability
This is where regular and comprehensive audits are conducted to ensure that NGO’s are utilizing financial resources for the intended purpose. An internal auditor will flag any discrepancies, mismanagement, and fraud matters, allowing corrective action to be taken promptly. With this, donors are assured of responsible stewardship of their contributions, enhancing their confidence.
Internal audit is an independent function that provides an objective and independent assessment of an organization’s internal controls, financial statements, and adherence to the applicable laws and regulations, organizational standards, and best industry practices. With the presence of an internal audit function in the NGO, donors are assured of rigorous scrutiny of the operations, hence reducing donors’ concern about potential mismanagement and in turn building donor trust.
Good governance and ethical practices
As part of the internal auditing process, assessing compliance to regulatory standards and frameworks is a key duty that internal auditors normally perform. Consequently, NGOs are required to ensure compliance with these standards, frameworks, and even donor requirements. Therefore, conducting regular audits ensures strict adherence, thus reducing the risk of legal and reputational consequences and consequently enhancing donor trust.
NGOs are struggling with new and intensified risks associated with personnel, operations, and the organization as a whole hence adopting a risk management framework. An internal audit function will objectively ensure that the risk management framework is operating effectively. The Donor will be pleased to see that the NGO has a systematic approach to risk management, which demonstrates a commitment to minimizing threats to their mission and objectives.
Clear communication and reporting
NGOs are expected to maintain timely communication as well as provide reports on the progress of their projects, how funds are being utilized, and the impact the NGO is making. Therefore, internal audit comes in handy to ensure that the reports are, accurate, timely, and are prepared as per the donor’s expectation and as a result enhancing donor trust.
In conclusion, Donor trust is a fundamental pillar for the sustainability and growth of NGOs, and as such it is important to seek the services of qualified internal auditors who will assist in enhancing and maintaining the trust.