VA
Insights

In 2012, invited by Jet Li’s One Foundation, VA independently evaluated 14 finalists of “Transparency Award” applicants.  VA conducted systematic interviews with NGO’s senior management and beneficiary representatives, reviewed project documents, and gave out an unbiased rating on four transparence dimensions:

• Vision and board governance
• NGO strategy and project portfolio design
• Financial monitoring and management
• Publicity: internal and external communication

We found that most finalists were able to regularly disclose their financial management results, mostly through official website and regular letters. However, only a small number of finalists were able to integrate their vision, strategy, and projects with financial outcome. If financial numbers are meant to explain the effectiveness of an NGO’s operation, yet the “connection” between NGO’s vision and its financials are not in place.

In VA’s observation, the “best” NGOs are those who can transparently manage their operations. As a result, their financial management is not only transparent, but also meaningful.

Perspective 1: Financial transparency is not an objective, but the outcome

Financial transparency has been a hot buzzword in China’s social sector in last two years. Where did the donation come from? Where did the money go? Nowadays, many NGOs have been trained to manage and publicize their financials – financial transparency more or less is becoming a must-achieve “imperative” for many NGOs

However, what happens when an NGO’s operation becomes transparent? During VA’s field evaluation, we were impressed by how Adream (真爱梦想) had applied ISO9000 principle in managing their projects. From screening of schools, to managing the library construction, and incentivizing teachers, process management was integrated seamlessly. In this case, financial numbers are no more an “objectives”, but rather a natural “outcome” of its operations.

Perspective 2: Beyond financial disclosure: trans-parent decision-making and process management

Financial disclosure is often taken as everything for transparency. When CCTV openly discussed China NGO’s needs for transparency, what it really talked about, actually was “financial transparency”

In VA’s views, transparency also means a fair disclosure on “how decisions were made” and “how operations were managed”.

• How did the NGO come up with the decision on its strategy and project designs? Do they really lead to the vision that the NGO early set and publicized?
• How does the NGO manage the project? Is project management managed in a transparent way: the objectives, milestones, progress, roles and responsibilities?
• What social impact have the NGO achieved out of the financial numbers? What Key Performance Index did the project set early, and what were the outcomes?

Transparency in NGO’s strategy and operation should not be overlooked. If financial transparency is meant to tell the public that money was spent in a “clean” way; the decision-making and operational transparency tells that the money is spent in a “meaningful” way.

In summary, transparency shall not be over valued; effectiveness is the ultimate goal

It is true that donors expect “doers” to give a clean and clear report on how money was spent. And those NGOs who can regularly publicize their financial reports are often regarded as most “trustable” NGOs.

However, VA believes that transparency is just a first step leading to NGO’s effectiveness. Beyond the question “how the money was spent”, the public also deserves to understand “what” and “why”:

• What are the expected social outcomes of the financial budget?
• Why was money spent on this project, not that project?
• Why was money budgeted this way, not that way?
• Why does the cost justify the outcome?

Indeed, those NGOs who can tell where money goes are not good enough to be taken as “the most trustable”. Nor are those who can spend least. Those who are bold and smart to spend should be trusted and respected. After all, money was donated to be spent on places where help is needed, not to be saved.