We have met with a couple of NGOs that have already gone through their own audits before meeting with us. As would be expected some are more useful than others. Most audits are hybrids, but roughly, there seem to be three general types of audits in
The first – and most common -- type of audit is a “Financial Audit”. It aims to see that resources are properly accounted for and are used accurately. If the NGO has a limited number of accounts, these generally tend to be good. But if the NGO has multiple accounts and multiple ledgers – as many tend to have – the audits are too superficial to be meaningful. There needs to be a more thorough effort in many of these audits to compare expenditures and revenues across the accounts to ensure that there are not abuses (such as debiting one expense several times or paying salaries multiple times).
The second type is an “Organizational Review” – it tends to summarize what the NGO does and then tries to categories that information into categories so that the NGO can best see how to proceed, use resources, and what activities to more actively pursue. The primary use of this model is that it helps give context to a complicated organization’s operations. It does little, however, to help the NGO reflect on why it is doing something or how it fits into its overall objectives.
The third type is the “Strategic Review.” This audit tries to capture a mission statement and then look at what the group does and project a three or five year plan. While some effort is made at trying to identify the overall outcome the NGO wishes to achieve, it is not usually captured in terms of what is generally achievable. It is often too lofty. As a result, the three and five year plans sound great but are more often over ambitious proclamations than real strategies. They also tend to focus on scaling up without true thought on whether this it is in the organization’s best interest (or if it is, then if scaling up is done in an appropriate time frame or scope) and on increasing fundraising. In fact, almost every one of these “Strategic Reviews” has a sizeable section on increased fundraising.
What I think is the benefit of our process is that it offers very little in terms of advice on what changes need to be made or how to make necessary changes. Instead, it works as an organizational tool by helping NGOs see exactly what they want to achieve and what they will have to do to reach that (practically achievable) result.
This is supplemented by the reporting template Alex and I are developing. The report forces NGOs to identify their main activities, how successful these activities are and the evidence for these results, their overall strategy are following. This helps the NGO see what activities might not fit into their overall goals and where to focus resources. Further, by making sure that the NGOs clarify the overall environment and context in which they are operating, they are forced to make sure there activities are practical. Additionally, we require NGOs to explain and examine their finances more clearly. This works in combination with the organizational reporting sections to make NGOs consider whether they are using resources adequately. Once the report is completed, the NGO not only has a roadmap of how to achieve results it wishes to achieve, but also can see whether its current activities are helping it to reach those results. While we function as a sounding board, we leave the ultimate decision on how to make necessary changes in practices or strategy to the NGO (which best understands how to solve the problem). By doing so, we also avoid some of the really ridiculous solutions we have seen proposed by some outside auditors.