NGOs are self-governing private, not-for-profit organisations that are geared towards improving the quality of life of disadvantaged people. They collect funds from international donors, and act as coordinators between the smaller voluntary bodies and the foreign donor agencies. There are service NGOs like Oxfam and Red Cross who work for humanitarian aid, advocacy NGOs acting as advocates for beneficiaries like women and children (rights), and special purpose groups or environmental NGOs. There are NGOs who do micro credit and social business vis-Ã -vis humanitarian aid, advocacy, for example Bangladesh Rural Advancement Committee (BRAC). NGOs share most of (if not all) the following features: non-state actors, nonprofits, independent from government, act in the public interest, rely on volunteers (also have professionals). Foreign NGOs released nearly $1 billion in Bangladesh in the recent years. The figure is $100 billion worldwide.
This article would particularly look at whether NGO employees and executives consume excess salaries and perquisites received from the donors to be spent for public benefit. Possible measures for determining this objective are (i) the amount of employee salary and benefits, (ii) executive salaries and benefits, (iii) average salary and benefits of employees, (iv) salaries and benefits as a percentage of total revenue, (v) and executive-employee salaries and benefits ratio. Another possible way of fulfilling management self-interest is overspending on travelling. It will therefore (vi) evaluate the intensity of money spent on travelling expenses.
 The article is based on the most recent annual reports and in most of the cases it is 2017-18. Most of the NGOs disclose expenditure by (i) program activities, (ii) fund raising, and (iii) management and general expenses. Bangladesh Red Crescent Society Annual Report 2017 discloses establishment cost in place of management and general, but 2018 Annual Report does not even disclose that information. In some cases particularly American incorporated NGOs, annual report does not disclose detailed financial statements but their audited financial statements are publicly available. In such cases, required data has been collected from their financial statements but checked and verified from their filled in IRS Form 990.In IRS Form 990, detailed information are available, number of employees in Part 1(5), total revenue in 1(12), employee cost in 1(15), CEO or highest paid director’s compensation in Schedule J Part II, and traveling expense in Part IX (17). American Red Cross, Oxfam America, Pathfinder International, CARE, Red Crescent, Landesa fall into these categories. I tried to cover many international, Indian and Bangladeshi NGOs but their annual reports do not disclose full financial statements, particularly employment cost (the interest of the study) and so required data are not available.
Annual reports with notes and separate disclosure of employee salaries and benefits are available for 42 NGOs (18 Bangladeshi, 2 Indian, and 22 global).NGOAB has a list of 2502 national and international NGOs in Bangladesh but annual reports are available only for 18Bangladesh NGOs. Bangladeshi NGOs like BELA, BROTI, BWTP, Gonoshasthya Kendro, Suchana Foundation and others do not publish annual reports. Karitas Bangladesh Annual Report with TK 2091 million of revenue does not disclose employee salary and benefits. Annual report and accounts were found for 24 international NGOs.
NGOs have permanent employees and volunteers. Volunteers’ salaries and benefits are included in the program costs. Salary and benefits disclosed are exclusively for the permanent employees of the parent country and the countries where the NGOs work. Salaries and benefits include social security benefits and pensions. Many NGOs do not disclose number of employees in the annual reports and in such cases the data is collected from their other websites.
The NGOs pay 4.2 times of their country average pay. Only 5 pay less. Salary and benefits in the 18 Bangladesh NGOs range from TK152000 in Ain O Salish Kendro to TK 2500000 in BRAC. The average was TK 757219. Average remuneration in BBS was TK 113438. Average salaries and benefits in PLCs was TK 493442. Thus employee salaries and benefits in Bangladeshi NGOs was 1.53 times or (TK 757219/TK 493442) that of PLCs and 6.7 times or (TK 757219/TK 113438) that of BBS firms. If we adjust official CPI 170.2 in 2018 with 2012 index of 118.3 then the figure is 4.6 or [757219/ {113438(170.2/118.2)]. NGOs with foreign money (and also foreign organizations) pay more to their employees than local organizations.
Travelling expenses are taken as another proxy for managerial perquisites. Managerial salaries and benefits are not disclosed separately in most of our organizations whether these are PLCs, government agencies, or NGOs. One possible proxy for managerial perquisites is travelling expenses. Usually executives not the mid and lower level employees do the (foreign) travelling. Travelling expense however, was not disclosed separately for domestic and foreign purpose. They travel for purposes like raising of funds, attending meetings, doing agreements, and also for recreations. Managers in NGOs may choose travelling as a way of fulfilling self-interest at the expense of their organizations. Traveling expense to revenue in 10 Bangladesh NGOs is 1.7 per cent. In PLCs under the study, the figure is 0.39 per cent. Thus traveling expense as a ratio of total revenue in NGOs was 4.4 times that of PLCs. The result is similar for all 22 NGOs under the study (which disclose travelling expense) have travelling expense of 279m and relevant revenue 14717m. Thus average travelling expense to total revenue was 1.9 per cent.
As the NGOs are receiving funds for public benefit it becomes essential on the part of the NGOs to have greater financial transparency and accountability and observe sound financial management practices in their working. This paper makes an attempt to throw light on only one aspect of financial transparency and accountability in the use of public funds: salary and benefits and travelling benefits consumed by the employees and executives of large Bangladesh, India and international NGOs. The evidences show that employee benefits particularly salaries and benefits are higher in NGOs in developing countries than in the corporate sector. This finding is plausible because the large NGOs operating in the developing countries have foreign money and these NGOs have some elements of multinational companies and they pay employees in international or at least in the regional standards. In the developed countries however, particularly in the UK and USA-incorporated NGOs (which work globally) these benefits are lower than in the corporate sector public limited companies. But they pay more than their country average. Another important finding is that the ratio of salary and benefits of NGO CEOs are lower than in the PLCs. Thus both employee salaries and CEO salaries in UK and US NGOs are lower than in PLCs.
One possible reason for lower pay in NGOs compared to PLCs in the developed countries is that NGO employees and CEOs are relatively generalists whereas PLC employees and CEOs are specialists. Generally NGOs raise and distribute funds among the poor whereas PLCs raise funds, produce and market products and services with technical hands, distribute profits among stakeholders, and reinvest.
The most important finding is that there is detailed disclosure regulation on NGO executive remuneration in the developed countries. These disclosure regulations have been framed in line with those of the PLCs. These regulations are completely absent in the developing countries like Bangladesh and India. There are huge implications of this finding. Employee salaries and benefits are overwhelmingly decided by market mechanisms where abnormal premium in these benefits are unlikely. But a CEO has some charisma and therefore market mechanism is relatively less likely to fix his salary and benefits and therefore he has opportunities to take excess of these benefits. There comes the rationale for the necessity of detailed regulation on the disclosure of his remuneration. This will open a new avenue for information and a knowledge based society where debates, assessments, and evaluations are facilitated. The above managerial encroachment in PLCs had happened in UK and USA in early 1990s. Detailed disclosure of executive remuneration in UK and US PLCs was a result of this excess (Cadbury 1992) and the same detailed disclosure of executive remuneration for NGOs is regulated and is in practice in UK and USA. People are now raising voice in these countries against these excesses and this has been possible because of information and knowledge. In the developing countries such an information and a knowledge base is overdue. Developing country chapters of international NGOs do not disclose CEO salaries because there are no local regulations about this. But a good citizen (particularly chairman and CEO) or an organization is not merely guided by regulation but also by self-regulation, self-discipline, knowledge-basis, transparency, responsibility and accountability, and justice to the society. This is particularly important in organizations (no matter whether they are PLCs or government or NGOs) funded by and used for the public.
(The writer is Professor and Chairman of Accounting & IS, Dhaka University).
