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NPO, Internal Controls, and Supervision Mechanisms in a Developing Country

An Erratum to this article was published on 01 April 2014

Abstract

The premise of this paper is that effective supervision and proper internal control system (ICS) can promote accountability and transparency, and this will attract more donors. However, in a developing country like Malaysia, it is common that proper accounting standards are not available, the laws are not enforced, and charities often struggle for survival. Debates on regulating nonprofit organizations (NPOs) have been sensitive to many and are often left unresolved, and some quarters believe that NPOs should be left to handle their own affairs. This paper provides evidence from a survey of 60 charities on the status of their ICS. It briefly describes the current state of regulations in Malaysia and makes a case for better monitoring of the sector, as this might be the reason NPOs are lacking in their ICS. We propose what type of regulation and assistance can be provided by the authorities to this sector, not only in Malaysia but also in other developing countries facing similar challenges.

Résumé

L’hypothèse de départ de cet article est qu’une supervision efficace et un système de contrôle interne (SCI) adéquat peuvent favoriser la responsabilité et la transparence, attirant ainsi plus de donateurs. Cependant, dans un pays en développement tel que la Malaisie, on trouve rarement des standards de comptabilité adéquats, les lois sont rarement appliquées, et les organismes charitables luttent souvent pour leur survie. Les débats sur la régulation des Organisations à But Non-Lucratif (OBNL) sont une question sensible pour beaucoup et restent souvent sans réponse, et certains pensent qu’il faut laisser les OBNL gérer leurs propres affaires. Sur la base d’une recherche empirique, cet article rend compte du statut des SCI de 60 organisations charitables. Après une brève description de l’état présent des réglementations en Malaisie, nous avançons qu’il conviendrait de mettre en place une meilleure surveillance du secteur, étant donné qu’il s’agit peut-être là de la raison pour laquelle les SCI des OBNL sont défaillants. Nous suggérons quel type de réglementation et d’aide les autorités pourraient fournir à ce secteur, non seulement en Malaisie, mais aussi dans d’autres pays en développement confrontés à des difficultés similaires.

Zusammenfassung

Dieser Beitrag geht davon aus, dass eine effektive Überwachung und ein angemessenes internes Kontrollsystem Verantwortlichkeit und Transparenz fördern können, was wiederum mehr Spender anzieht. In Entwicklungsländern wie Malaysia ist es jedoch allgemein üblich, dass es keine angemessenen Rechnungslegungsstandards gibt, Gesetze nicht vollstreckt werden und gemeinnützige Organisationen oftmals ums Überleben kämpfen. Diskussionen über die Regulierung von Nonprofit-Organisationen sind für viele ein heikles Thema und bleiben oftmals fruchtlos. In einigen Kreisen ist man der Meinung, dass man Nonprofit-Organisationen die Regelung ihrer Angelegenheiten selbst überlassen sollte. Der vorliegende Beitrag liefert Nachweise aus einer Umfrage von 60 gemeinnützigen Organisationen zur gegenwärtigen Situation ihrer internen Kontrollsysteme. Die Abhandlung geht kurz auf den gegenwärtigen Stand der Regulierungen in Malaysia ein und liefert Argumente für eine bessere Überwachung des Sektors, da dies der Grund dafür sein mag, dass es in den Nonprofit-Organisationen an internen Kontrollsystemen mangelt. Wir unterbreiten Vorschläge dahingehend, welche Art von Regulierung und Unterstützung die Behörden diesem Sektor bereitstellen können; nicht nur in Malaysia, sondern auch in anderen Entwicklungsländern, die ähnlichen Problemen ausgesetzt sind.

Resumen

La premisa del presente documento es que una supervisión efectiva y un sistema de control interno apropiado (ICS, del inglés internal control system) puede fomentar la responsabilidad y la transparencia, y esto atraerá a más donantes. Sin embargo, en un país en vías de desarrollo como Malasia, es normal que no se disponga de normas contables apropiadas, que las leyes no se apliquen y que las organizaciones benéficas luchen a menudo para sobrevivir. Los debates sobre la regulación de las Organizaciones sin ánimo de lucro (NPO, del inglés NonProfit Organization) son sensibles para muchos y a menudo se dejan sin resolver, y en algunos ámbitos se cree que debe dejarse que las NPO manejen sus propios asuntos. El presente documento proporciona pruebas de una encuesta de 60 organizaciones benéficas sobre el estado de su ICS. Describe brevemente el estado actual de las reglamentaciones en Malasia y defiende una mejor monitorización del sector, ya que esto podría ser el motivo de que las NPO tengan carencias en sus ICS. Proponemos qué tipo de reglamentación y asistencia puede ser proporcionado por las autoridades a este sector, no sólo en Malasia, sino también en otros países en vías de desarrollo que se enfrentan a desafíos similares.

摘要

本论文的前提是有效监督和适当内部控制系统 (ICS) 可以促进可说明性和透明度,同时这将吸引更多捐赠者。然而,马来西亚等发展中国家没有适当的会计标准,未执行法律,同时慈善机构经常都在为生存而努力。有关对非营利组织 (NPO) 进行监管的争论对于许多国家来说非常敏感,同时经常悬而未决;一些国家认为应让NPO处理自己的事务。本论文提供了来自60家慈善机构ICS状态调查的证据。其中简要介绍了的马来西亚的法规现状,并列举示例以更好地监督该领域,因为这可能是NPO缺少ICS的原因所在。我们不仅为马来西亚,而且为面临类似挑战的其他发展中国家建议当局应为该领域提供的法规和帮助类型.

要約

本論文の前提は有効な管理であるが、適切な内部制御システム(ICS)が責任と透明性を促進することができるため、多くの資金提供者を引きつけている。しかしながら、マレーシアのような発展途上国では、適切な会計基準が可能ではなく、法が励行されていないため、慈善事業を存続することに苦労するのが通常である。非営利団体(NPO)の規制に関する議論には多くが敏感であるが、未解決のままである。またNPOの実務への取り組みが蓄積されている。本論文ではICSの慈善事業60件の調査から実証する。マレーシアの規則の現状について簡潔に説明して、セクターをモニターするほうがよいことを主張する。これが、ICSがNPOに欠落している理由であるといえる。マレーシアだけではなく、同様の問題を抱える他の発展途上国で提供できる規則と支援できるタイプを提案する。.

ملخص

الإفتراض الأساسي لهذا البحث هو أن الإشراف الفعال والسليم لنظام المراقبة الداخلية (ICS) يمكن أن يعزز المساءلة والشفافية، وهذا سيؤدي إلى جذب المزيد من الجهات المانحة. مع ذلك، في بلد نام مثل ماليزيا، من الشائع أن معايير المحاسبة المناسبة غير متوفرة، لا يتم فرض القوانين، والمؤسسات الخيرية في كثير من الأحيان تناضل من أجل البقاء. المناقشات بشأن تنظيم المنظمات غير الربحية (NPOs) أصبحت حساسة كثيرا˝ وغالبا˝ ما تترك دون حل، وتعتقد بعض الأوساط أنه ينبغي أن تترك المنظمات الغير ربحية(NPOs) للتعامل مع شؤونها الخاصة. هذا البحث يقدم دليل من إستطلاع رأي من 60 من الجمعيات الخيرية عن حالة نظام المراقبة الداخلية (ICS)الخاصة بهم. فهو يصف الوضع الحالي للأنظمة في ماليزيا ويجعل حالة بالنسبة لرصد أفضل للقطاع، لأن ذلك قد يكون السبب أن المنظمات الغير ربحية (NPOs) تعاني من نقص في نظام المراقبة الداخلية (ICS) الخاصة بها. نحن نقترح النوع الذي يمكن توفيره من انواع التنظيم والمساعدة من جانب السلطات لهذا القطاع، ليس فقط في ماليزيا، ولكن في غيرها من البلدان النامية التي تواجه تحديات مماثلة.

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Acknowledgments

The authors’ value the help of Associate Professor Dr. Mohd Nizal Haniff in pre-testing the questionnaire process and Miss NurHamizah Mohamad in the initial stage of the research. The authors’ deeply appreciate the anonymous reviewers who have helped to improve this paper significantly.

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Correspondence to Radiah Othman.

Appendix

Appendix

See Table 10.

Table 10 Internal controls checklist (Duncan et al. 1999)

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Othman, R., Ali, N. NPO, Internal Controls, and Supervision Mechanisms in a Developing Country. Voluntas 25, 201–224 (2014). https://doi.org/10.1007/s11266-012-9335-4

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Keywords

  • Charities
  • Developing country
  • Internal control system