An Assessment of Corporate Governance Practices in Selected Non-Governmental Organizations in Kenya

Abstract

Although the emergence and legitimacy of Non-Governmental Organizations (NGOs) has been well documented, little research has explored appropriate types and practices of accountability in NGOs. In particular, little has been done to examine this topic in the comparative text. Discussions on the growing influence of civil society organizations and their roles in democratic governance are not complete without an examination of accountability relationships. The main objective of the study was to assess corporate governance practices in selected NGOs in Kenya. Specifically, the study examined the roles and the function of the board of directors and senior management. The framework for this study draws from the seven principles of corporate governance as recommended by the Nolan Committee (1995) which includes transparency, integrity, accountability, selflessness, objectivity, honesty and leadership. The study, which combined both quantitative and qualitative approaches, was carried out among ten NGOs based in Nairobi. A total of 10 questionnaires were administered to the organization's directors with a response rate of 100%. Ten in-depth interviews were carried out on one board member of each of the organizations, giving a response rate of 100%. Desk review was also done on each of the organizations' annual reports, strategic plan and records of board meetings. The following were some of the key findings (1) some organizations have board members who serve long tenure; (2) board members of organizations deliberate on financial, strategic and operational issues, though not all of them deliberated on management performance and human resource issues. Fundraising which is a very important aspect of NGOs was not taken seriously by the board members as part of their duty; (3) in some organizations, the Chief Executive Officer (CEO) holds the position of the chair of the board; (4) an audit function exists in most of the NGOs and they report to the senior Financial Officer; (5) in most 30 Abstracts organizations an external auditor plays only one role of preparing the organization's accounting books although in some few organizations they provide evidence on tax matters. From the results, the following recommendations are made that board members serve on board for a short tenure; board members appraise performance and get involved in fundraising; the position of the chair of the board should not be held by the CEO so as to avoid conflict of interest; the internal audit should adopt a strategic focus and address stakeholders' priority and the external auditors should be made totally independent such that they do not provide other services besides audit.