1. Understanding Audit in Humanitarian Organizations
The audit ensures donor protection and control over funds. The engagement letter establishes rules for conducting the audit and expects accurate, timely reports. This builds trust and solidarity among stakeholders.
The audit of humanitarian organizations is part of monitoring the organization’s accountability and its compliance with donor and other requirements. Nevertheless, the audit reveals only limited aspects of an entity’s workings. Its interplay with compliance further demonstrates the prescriptive nature of donor-dictated rules, often accompanied by implicit penalties ensuring compliance. Auditors are obliged to ensure that an organization is in compliance with requirements containing the obligatory “shall” appearing in their engagement letter. They are then obliged to report to donors if these requirements are not met. The follow-up on these reports is a statutory safeguard for the legitimate interests of supporting parties to ensure that their donations will be used for the purposes intended.
2. Compliance Frameworks and Practices
Compliance practice follows strict regulations, linking authorization to regulations and funding. The need for complex compliance advice has encouraged new areas of professional practice which have not, in general, focused on adding value. It is proposed that the binary decision (of being ‘honest’ or facing the consequences) is non-complex and can be undertaken by the stakeholders. The problems in new areas such as sustainability and climate still need professional support, but the professional model needs to reflect the role of technological change and support engagement.
3. The Significance of Accountability
Answerability is a key part of accountability, as it involves being accountable to stakeholders and having access to reliable information regarding the organization’s stewardship and obligations. However, the ability to be answerable and have access to information is dependent on there being consequences, such as sanctions, for decisions or actions that go against the interests of users. This is what distinguishes answerability from accountability.
Humanitarian organizations must be accountable to stakeholders in a complex environment with rapid change and human rights issues. Receipt of large sums of money can lead to misuse of funds and power. Reassuring accountability is reactive, ensuring resources are managed properly and results are fair. But what about proactive decision making and assessing efficiency and effectiveness?
4. Interconnections and Relationships Among Audit, Compliance, and Accountability
The accountability of nongovernmental organizations (NGOs) comes under intense scrutiny as they are among those organizations which raise significant proportions of their income from government, public, and corporate donors, and that money is given for humanitarian and developmental purposes. (Schnable et al.2021)
The understanding reveals audit, compliance, and accountability as support tools ensuring that humanitarian organizations remain aligned with mission and stakeholder expectations.
Audit, compliance, and accountability are interconnected pillars of organizational governance that collectively ensure integrity, transparency, and ethical operations. Audits provide an independent assessment of financial statements, operational processes, and compliance with laws, highlighting areas for improvement and holding individuals accountable. Compliance programs establish and enforce adherence to legal, regulatory, and internal standards, preventing and detecting violations. Accountability mechanisms ensure that all actions and outcomes are transparent and justifiable, creating a culture of responsibility. Together, these elements create a robust framework for risk management and continuous improvement, fostering sustainable success.
(Breger et al.2020)(Tumwebaze et al.2022)
References:
- Schnable, A., DeMattee, A., Sullivan Robinson, R., & Brass, J. N. (2021). International development buzzwords: Understanding their use among donors, NGOs, and academics. The Journal of Development Studies, 57(1), 26-44. nsf.gov
- Breger, D., Edmonds, M., & Ortegren, M. (2020). Internal audit standard compliance, potentially competing duties, and external auditors’ reliance decision. Journal of Corporate Accounting & Finance, 31(1), 112-124. [HTML]
- Tumwebaze, Z., Bananuka, J., Kaawaase, T. K., Bonareri, C. T., & Mutesasira, F. (2022). Audit committee effectiveness, internal audit function and sustainability reporting practices. Asian Journal of Accounting Research, 7(2), 163-181. emerald.com
