Establishing NGO accountability in developing countries: the case of Keystone Moldova

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Establishing NGO accountability in developing countries: the case

of Keystone Moldova

Name: Filip Sofia

Student number: 11881771

Thesis supervisor: dr. G. Georgakopoulos Date: June 25, 2018

Word count: 19,576

MSc Accountancy & Control, specialization Accountancy Faculty of Economics and Business, University of Amsterdam

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Statement of Originality

This document is written by student Sofia FILIP who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

As the NGOs become more and more involved in activities concerning the development aid, welfare, advocacy of human rights etc., their impact on society and the sheer volumes of funds involved grows exponentially. Despite that, the accountability mechanisms are not standardized and the NGOs themselves strive in satisfying all the stakeholders’ needs. Through analysis of a series of in depth interviews with a variety of employees, including project managers and personnel directly responsible for volunteers, supported by extensive analysis, this study investigates how the organizations interpret and implement various mechanisms to ensure accountability in the form and extent perceived by them as necessary and sufficient. The study revealed that a lot more attention is being targeted at upward accountability, in order to ensure a constant inflow of funds, while the internal and downward accountability are gaining considerable importance gradually. Balancing these types of accountabilities doesn’t mean diminishing the role of upward accountability to donors; on the contrary it is complemented with a comprehensive understanding of beneficiaries’ needs. The effects of evaluation on upward accountability leads to enhanced performance, the influence on downward accountability results in organizational learning, while the impact on internal accountability is neutral. The paper also addresses the possible implications of such approaches on the NGOs activity and future perspectives.

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1 Introduction

Over the past few decades, non-profit organizations have become more businesslike and got the status of so-called “corporate” organizations (O’Dwyer and Unerman, 2008). There are many reasons driving this change like the increase in revenues, professional workforce, and power to influence negotiations in areas such as environment, development aid, human rights, corporate governance and many more. In the same time, the rise of NGOs was accompanied by a growing responsibility towards donors and partners.

This study will explore how donors make their funding decisions and whether their requirements for accountability are satisfied accordingly. At their turn, how NGOs will face an increased pressure for accountability from multiple stakeholders? The two dimensions accountability mentioned above make reference to the part being held to account – the NGOs, and the part holding to account – the stakeholders.

This twofold analysis will be of interest not only to NGOs, but also to stakeholders such as governments, donors, funding corporations, partners, volunteers, beneficiaries and others. NGOs could improve their upward, downward and internal accountability (Boomsma, O’Dwyer, 2014) in a manner which will not prove counterproductive to the realization of the NGO mission and goals (O’Dwyer and Unerman, 2008). While different stakeholder could learn that there are different tools, forms and mechanisms of being accountable and all of them are important.

The recent years presented a high prioritization of upward accountability at the expense of internal and downward accountability. This happened because most of NGOs are dependent on the funds provided by the donors (Ebrahim, 2003) and as a consequence there is an increased competition for resources between organizations themselves. The powerful stakeholders prefer the indicators of efficacy to make sure that their resources have reached the “poor” or “persons in need” and this resulted in development of performance accountability indicators, which imply substantial effort and time to be implemented and limit the NGOs in their mission and objectives.

The current practices should not diminish the upward accountability per se, because the donors have a legal right to know how their resources are spent, but emphasizing this too much is detrimental to beneficiaries. The actual challenge consists in balancing the accountability to multiple stakeholders, which is not an easy task. The reframing of accountability towards

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long-term outcomes and organizational learning (Ebrahim, 2005) could represent a solution for many organizations.

What concerns beneficiaries, the main challenge is that they don’t demand accountability; however only including them in the cycle of accountability will prove efficient for the whole organization. Consultations by organizing focus group meetings, participatory reviews and also developing and monitoring complaint and response mechanisms and disseminating the results to them (O’Dwyer, Unerman, 2008) confirm that their needs and expectations are understood and will be implemented and that will lead to the achievement of goals and objectives.

There are multiple accountability mechanisms such as strategic planning, appraisal, monitoring and evaluation etc. in order to assess the activities of an NGO. For this particular study the author chose to use the mechanism of performance assessment and evaluation, as described by Ebrahim 2003 and 2005. This method helped to understand how the appraisal of NGOs results affects the different types of accountability present in the organization.

This study seeks to answer the following research question: How the mechanism of evaluation affects different types of accountabilities present in the organizations and how this is perceived by the managers of development NGO?

In order to answer this research question, 7 in-depth interviews were held at the premises of Keystone Moldova with project managers, legal advisers, financial manager and a volunteer coordinator. These interviews were supplemented by additional internal documents such as financial and narrative reports, logical frameworks and multiple indicators for measuring performance and demonstrating result.

Keystone Moldova was chosen for this study, as this organization is one of the biggest and influential in the social and development sector in Moldova. This NGO has an experience of 14 years in implementing social projects and dealing with very diverse funders and donors. It managed to gain the trust and confidence not only of donors, but also of central and local public authorities, beneficiaries, communities and volunteers. For several years continuously, this organization was leading The Alliance of Organizations for Persons with Disabilities. Also, this organization had a huge impact in changing the legislation and advocating for the rights of the persons with disabilities.

This study offers the following contributions. First, it addresses the calls for greater research focusing on accountability investigation within specific NGO settings (Hoopwood,

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(O’Dwyer, Unerman, 2008). Second, this study expands the literature on the NGO accountability by providing new insights from the relationship donor-NGO-beneficiaries impregnated with particularities of development and social environment. Third, this paper investigates how performance assessment and evaluation affect different types of accountability (Ebrahim, 2005).

This study is structured as follows. The next section provides an overview of the literature regarding the NGO accountability. This is followed by the presentation of the theoretical framework of the paper, which will explain how stakeholder theory is connected to NGO accountability. The following section describes the research method and design used to investigate this topic. This is succeeded by the case and the case findings discussion. The study concludes with a summary of the main ideas and several suggestions for future research.

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2 Literature Review

This chapter will present an overview of the relevant academic papers relating to NGO accountability. The first section will refer to the background of NGO accountability and more specifically how the concept evolved over time. The second section will discuss the challenges of operationalization of different forms of accountability in NGOs. The third section will continue with an in-depth analysis of evaluation as a mechanism of accountability. The next section will describe the theoretical framework which explains conceptually the research undertaken and will set the scene for the case analysis. At the end of the chapter, a short summary will highlight the main ideas.

2.1 The evolution of NGO accountability

The concept and importance of NGOs accountability gained traction along with the evolution of NGOs, the dynamics of the populations and the government’s level of reliance put on these organizations. As studied by Roel Boomsma and Brendan O’Dwyer (2014), the evolution of the NGOs was caused by their increase in the popularity along with the decreasing satisfaction of the public with conventional politics. This has caused a shift in global perception. The status of NGOs has changed significantly as to be recognized a “viable force in international business” (Doh and Teegen, 2002). From these affirmations, we can highlight some key concepts, in order to investigate and present the evolution of NGOs accountability. As mentioned above, the main points are as follows:

a) The NGOs evolution, including the concept of accountability, is directly connected to the general public’s level of satisfaction with the political climate;

b) From a chronological standpoint, the concept of NGOs accountability appeared later then the NGOs themselves;

c) After the popularisation of NGOs accountability concept, the NGOs themselves gained another status in the global politics.

In a broader way, the public, which includes the final beneficiaries of NGO’s services, is stepping in as a consumer. A citizen can either chose to approach a state service provider or an NGO one. In contrast with the authors’ affirmations, we conclude that the choice is heavily influenced by the political climate at the moment of the said choice. Even further, we can safely assume that the general populations care less about the image of the NGOs, when compared to the previously mentioned political climate. If we are speaking in a more specific way, the NGOs gained traction during 1980s, when many international companies were pressured to divest from

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South Africa. This was the moment when the NGOs shined by participating in negotiations over the development of conditions surrounding trade and investment rules (Doh and Teegen, 2002). This was not necessarily the moment that the NGOs started to be considered as an alternative social service provider by the individual citizen, but it definitely ensured the reliance of big corporations in the potential of the NGOs, which lead us to what we have today.

At a first glance, this may sound counterintuitive if we refer to the concept of accountability from one extreme to another, from zero responsibility to full responsibility. This was never the case. Instead, the accountability was further investigated along with the NGOs increasing effect and its importance for the general population. If we take a step back to look at this statement, we can see that the more diverse the services provided by the NGOs became, the more importance was being placed on the accountability part. In theory, this means that the responsibility of the NGOs was further conceptualised, in order to prevent lack of quality in services provided for the beneficiaries, proper disclosure and control over the funds for the donors, and proper monitoring for money laundering which is important for the society as a whole. In practice, this was done by implementing an international NGO code of conduct, humanitarian accountability program adopted to ensure common standards in accountability and quality management and the NGO accountability and self-regulation project, meant to ease the understanding of the NGO accountability processes and to identify any strengths and weaknesses in the NGO’s practices. There are plenty more solutions implemented over the last year, each with their own unique effect on the accountability. Even after all this, the said concept remained an area which receives, even today, various critical attention, both in practice and within the accounting and academic community (Oakes and Young, 2008).

The NGOs did not always have the status they have today. As previously mentioned, the opinion, at least the opinion of the international companies changed after the results obtained by these organisations during an international trade crisis. This ensured the possibility to grow and develop in something new which, as stated in the previous point, implies total reforming of the NGO’s accountability towards its donors, beneficiaries and peers. Other global examples of material effects include the area of humanitarian aid leaded by the International Red Cross; the area of human rights – Amnesty International; the area of environment protection – Green Peace; the field of health – Médecins Sans Frontières International etc.

As pointed above, the NGO accountability is quite complex and is still critically approached, even after all the achievements of the NGOs and the countermeasures implemented internationally. At this stage of analysis, the most important thing relating to accountability will be the following:

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a) The general directions of NGO accountability; and

b) The factors which define the complexity of NGO accountability.

The NGO accountability can be vectored in two opposite directions. The upward accountability involves a donor ensuring control, monitoring and reporting based on predefined guidelines, usually by an agreement signed before starting the project. The downward accountability is towards the potential and existing beneficiaries. This helps the NGOs in proper identification of the social needs and how well these needs are addressed by the current social service providers.

The complexity of accountability is defined by factors such as the number of stakeholders (Najam, 1996); numerous mechanisms and tools for assessing the accountability, which in practice prove more difficult to apply and various conflicting accountability pressures (O’Dwyer and Unerman, 2008).

The failures of non-government organizations to live up to public expectations (Ebrahim, 2009) more exactly the lack of proof of their effectiveness, the mismanagement of resources, misbehavior, unethical and dishonest practices lead to losing of public trust and consequently a more critical scrutiny of NGOs. As a result, NGOs were trying to regain the lost reliability by developing a series of accountability mechanisms and signing up to accountability charters, projects, such as INGO, HAP (Humanitarian Accountability Partnership), the Self-Regulation Project, The Global Accountability Project. These steps increased significantly the awareness of non-for-profit organizations for transparency and sustainable further development.

But that doesn’t mean that NGOs didn’t show any resistance to the enhanced requirements for accountability. Many of them didn’t have the necessary resources to implement systems of accountability, which implied automatically that they could not have been relied anymore and this enhanced the competition for funding amongst NGOs (O’Dwyer smd Unerman, 2008) and the desire to maintain their market share. Accountability was also considered a way to discipline NGOs by the governments, especially when their objectives were against those of the political regime in force.

The next section will briefly introduce the definition of NGOs and accountability, and will further present different classification of accountability. For many NGOs it’s a real challenge to balance the different forms and accountability and different stakeholders’ expectations and furthermore to follow their mission without constraints.

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2.2 Operationalizing the forms of NGO accountability

NGOs are organizations which are neither governmental (public sector) organizations, nor private (for-profit) commercial organizations, such as local and transnational corporations. Vakil (1997) defined them as “self-governing, private, not-for-profit organizations that are geared to improving the quality of life for disadvantaged people”. Later United Nations defined them as “a not-for-profit, voluntary citizens’ group, which is organized on a local, national or international level to address issues in support of the public good” (USAID). Most of the definitions didn’t present the NGOs from a holistic perspective, meaning they were either legal (emphasis on formal registration and status of organization), economic (focus on the sources of resources) or functional (depending on the field of activity of the organization). But what characteristics are specific to NGOs? Is it sufficient to be registered as an NGO under the law or the activities and operations delineate the profile of an organization? Salmon and Anheier (1992) proposed five key characteristic of third sector organizations, which help distinguish them: (1) formal, that is the organization is institutionalized; (2) private, meaning that the organization is separate from government; (3) nonprofit distributing, meaning not for profit purposes; (4) self-governing, that is able to manage its own affairs; (5) voluntary, that is done or given willingly for the organization. After defining the NGO and its key characteristics, it is important to focus on the definition of accountability which is presented as a “process through which an organization makes a commitment to respond to and balance the needs of stakeholders in its decision-making processes and activities, and delivers against this commitment” (Blagescu et al. 2005). Accountability can also be viewed as a matter of relationships –being responsible to others and it can be viewed as a matter of identity - being responsible to ideas, objectives and mission (Li, 2011). In this context, three factors of NGO accountability have been thoroughly analyzed, more specifically the subjects, the content and the method of accountability. The subjects of an NGO are all its stakeholders, both internal and external; the content relate to political responsibility, legal responsibility and responsibility of an organization’s own aims; whereas the methods refer to reporting mechanisms, behavioral norms and standards, participation, self-regulation, supervision and evaluation etc.

The complexities of defining the non-for-profit organizations and distinguishing them from other organizations increased in the context in which NGOs started to behave and incorporate business specific characteristics (O’Dywer, Unerman, 2008). It may be erroneously considered that corporate accountability and NGO accountability are very similar, but the ethos and resources of NGOs are of different nature. Therefore, the accountability mechanisms used by most corporations are not suitable for NGOs as these mechanisms can threaten the mission

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accomplishment (Unerman, O’Dweyer 2006). The approach of “quantifying” everything, making detailed reports, auditing the financial reports, calculating performance indicators may prove to be not only very expensive and time consuming, but also limiting the scope of NGOs.

The hierarchical forms of accountability to a narrow range of influential stakeholders (O’Dwyer & Unerman, 2008) such as donors, foundations, and governments, emphasize the short-term performance achievement of the NGO, which can be detrimental to the mission attainment, flexibility and relationships of the organization (Najam, 1996). The prioritization of powerful donors, also called upward accountability, compromises the right of other stakeholders to “make their voices heard” and to participate in decision making that affects them. In order to mitigate these unfavorable effects, the holistic forms of accountability were introduced gradually as a response for greater implication of a broad range of stakeholders, including beneficiaries, communities and environment, longer-term impacts of implemented projects and more comprehensive mechanisms of mission achievement.

Even though there is a demand for more holistic accountability (O’Dwyer and Unerman, 2008), the beneficiary-focused forms of accountability are considered more problematic particularly because of beneficiaries’ inability to express their expectations and interests in an understandable manner (O’Leary, 2016) and because it is much more complex to develop effective tools for measuring the impact of the activities on beneficiaries. The paradox is that despite many calls for enhanced downward accountability and greater engagement with beneficiaries, this is less feasible in practice due to lack of “substantive operationalization” (O’Dwyer and Unerman, 2010), huge amount of time, resources and experience required to measure the qualitative information, and because the systems and frameworks developed for improving the downward accountability are very specific for each NGO and cannot be standardized.

Either they are promotors of welfare, development, networking or advocacy (Vakil, 1997), NGOs struggle when it comes to accountability issues. Most of the times, the prioritization of upward accountability fulfill the requirements of powerful stakeholders providing key resources, but disregard downward accountability to recipients (Ebrahim, 2005). But do these NGOs have in place tools, processes, mechanisms that differentiate the needs of donors and beneficiaries?

The most commonly used mechanisms for NGO accountability are reports, disclosure, performance assessments and evaluations (Boomsma, O’Dwyer 2014). The above mentioned mechanisms contain mainly financial information, and are required by powerful stakeholders

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such as donors, partners and oversight bodies. These forms of hierarchical accountability don’t satisfy the informational needs of all stakeholders. For example, staff and board, members, volunteers and community partners (internal accountability) rely more on self-regulation, participatory review, training, social auditing etc. What concerns mechanisms used for downward accountability, they include focus group, participation, community consultation and dialogue, reports and documents, training of clients and beneficiaries and others (Boomsma, O’Dwyer 2014). These accountability mechanisms will improve transparency, critical learning, reflection and embracing failure (O’Dwyer and Unerman, 2008).

Ebrahim (2009) describes the concepts of imposed, felt and adaptive accountability regimes. Imposed accountability represents a formal oversight and control over organizations, which demonstrate their responsibility by providing justifying quantitative metrics to donors. Felt accountability is related to aligning organization mission and value with the personal values of people within the organization. Adaptive accountability represents the hybridization between imposed and felt accountability, balancing between the external and internal responsibility of the organization.

Accountability can also be conceptualized as an enactment of a specified promise, more exactly when an organization have first of all a moral responsibility to keep its promise at any costs and only afterwards a legal responsibility to satisfy that promise (Brown, Moore, 2001). This approach to accountability will definitely have transformational and social impact and will contribute at implementing strategic choices to better fulfill the promise.

After discussing in detail the classification and operationalization of NGO accountability, it is important to deepen our understanding of a specific matter in the complex concept of NGO accountability. This is why the next section will introduce thoroughly evaluation as a mechanism of accountability. This will reflect the relevance of assessment performed by NGOs both to fulfill the donors requirements and also to track the progress of own internal progress. This sub-chapter will underline the link of accountability with organizational learning.

2.3 Evaluation as a mechanism for accountability in development NGOs

Accountability is a complex and dynamic concept (Ebrahim, 2003), and it’s evolving in a distinct manner in different types of NGOs depending on their orientation, which can be development, advocacy, welfare, research, development education and networking. Vakil (1997) emphasizes that many organizations can have more than one orientation from those stated above

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and that they are not mutually exclusive. In recent years, development NGOs gained importance on the international arena and also extended their scope from service delivery to policy advocacy and capacity building. Particularly, Southern development NGOs (NCDO) context is of interest, because these resource-scarce NGOs receive their funds mostly from Northern NGOs, which at their turn collect these resources from public donations or their members.

Issues of development NGOs accountability depend on the relationship with the donor and as for many Southern NGOs, the foreign donors are the ultimate chance for survival, as a consequence more accountability towards donors is required. This type of responsibility comes at the expense of development NGOs acting as promotors of social change and progress. In practice, development NGOs accountability to other stakeholders, beside donors is very fragile.

Even though it’s considered that NGOs are more cost effective than governments in providing social services, are more experienced to reach the poor and represent a significant factor in democratization (Edwards and Hulme, 1996), these statements are difficult to prove in practice. This is the reason why constant evaluation of the NGOs in terms of accountability will not only enhance the performance per se, but also will develop the connection between accountability and organizational learning (Ebrahim, 2005).

Accountability comprises different types of evaluation, such as performance and impact assessment. Previous research (Ebrahim, 2005) discusses the three types of evaluations: external, internal and hybrid. External evaluation refers to the assessment supervised by donors to check the achievement of goals and objectives of the project or program implemented. These appraisals concentrate more on short-term outputs, and to a lesser degree to medium and longer-term outputs. Internal evaluations track both the accomplishment of objectives of programs funded by external donors and the internal progress towards goals and mission. Hybrid evaluations indicate the assessment of the program by the external parts together with the staff or members of the organization.

Performance-based reporting applies different mechanisms of accountability such as financial and narrative reports, logical frameworks and multiple indicators for measuring performance and demonstrating results. This accountability regime is called professional or technocratic, because it depends on technical skills linked to performance measurement, evaluation, assessment, indicator development. On the other hand, the stability of this regime relies on normative approach based on professional codes, self-regulatory standards (Ebrahim, 2009.)

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The scope of evaluation is either to assess performance and impact or to prove compliance to procedures. When the evaluation is requested by the donor, it focuses generally on cost-effectiveness and measurable indicators, while when it’s done internally it’s more flexible by using different methods and it influences the strategical decision-making (Riddell, 1999). Therefore, evaluation gets different connotations in different cases. However, framing the evaluation can be challenging at times and resulting in contrasting results, because the evaluator can use different basis and methods. There is also another challenge in assessing the processes, like “empowerment” or “advocacy” and products, such as houses built, number of children helped etc. because the donors tend to give privilege to more tangible results, which are mostly quantifiable and short-term oriented. This method is called logical framework analysis and prioritizes the hierarchical structures of the organization (Edward and Hulme, 1996).

Evaluations should be designed to take into consideration the preferences of different stakeholders and the particular context, size and capacity of the organization. But sometimes overwhelming requirements of donors, which consist of time-consuming and costly evaluations, can limit the organizations to spend the necessary time for project implementing, as a consequence the organizations concentrate on developing indicators and approaches to prove their legitimacy, and not on longer-term impacts and outcomes. Although, even after conducting evaluations, NGOs don’t use that information for the organizational change, more exactly organizational learning.

It is not enough to create knowledge in the process of evaluation, but it is more important to apply that knowledge in organizational practices. Just finding shortcomings in the performance assessment has no further implication related to improving the system per se. More simply stated, the organizations refuse to learn from their own mistakes and to implement effective practices in their organizational behavior.

Learning from failure is not taken into consideration by many NGOs, because only disclosing the failure will affect their reputation and the access to funds. But the benefits of this would be at least that the same problem doesn’t occur a second time and that there is a continuous improvement of processes in the organizations. So, learning from failure represents an opportunity for growth and not an error to be hidden. However, funders are less enthusiastic for the moment to support the costs for creating a culture of learning (Ebrahim, 2005).

As previously mentioned, the evaluation depends on context of the organization, and therefore if the results and outcomes are dependent on the availability of resources. Then upward accountability is involved; if the evaluation results are to be used in decision making, then there is

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a strong emphasis on organizational learning and if the evaluation focuses on feedback from stakeholders, it is then more inclined toward downward accountability. In the development context, it is a norm that donors concentrate on short-term measurable targets (formal evaluation reports) in order to control the organization (Ebrahim, 2005). The fact that evaluation reports of Southern development NGOs are mostly in English, means that their main user is the external donor, which requires an understandable communication of results.

Ebrahim (2003) suggests that many development NGOs use already exiting approaches and measurements of accountability, while NGOs who explore and develop more innovative and risky methods, most of times place their funding stability at risk. Even when the NGOs realize what kind of qualitative and quantitative indicators they need, the difficulty remains how to develop these indicators, especially if they cover a sensitive issue or area.

The big concern would be to balance the reporting and accounting requirements and to enhance the flexibility of NGOs to their mission and strategies. This would mean to align reporting systems created for assessing short-term results with those that promote longer-term impact and organizational learning. However, this should not come at the expense of upward accountability- obviously the funders should know how their resources are spent, but at the same time not neglecting the needs of communities and beneficiaries.

In the next sub-chapter, the theoretical framework of the paper will be presented. This entails the explanations of three theories on the context of NGO accountability: institutional theory, legitimacy theory and stakeholder theory, the latter being the one which explains better the findings of this paper.

2.4 The theoretical framework

During the current analysis, the characteristics of theoretical framework will be presented in order to have a proper introduction before the practical part of the thesis. This will be done by explaining what a theoretical framework is, which are the most dominant approaches in the professional field, which are the advantages and the disadvantages of the ones, which are considered to be relevant and representative for the thesis.

Theoretical framework represents the structure meant to hold and support a theory of a research study. The vast majority of the researchers agree that the framework strengthens the study, if the following steps are to be followed:

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o This allows the reader to evaluate the author’s assumptions and the thesis as a whole from a very critical perspective.

 Relevant, authentic and strong research studies should be reviewed beforehand. o This connects the researcher to various other conclusions and

assumptions, which dominate the field. Additionally, the author identifies new hypotheses/propositions and research methods.

 The author should give proper arguments, which answer to the questions why and how.

o This ensures that the author and the thesis itself depart from a simple description of the investigated phenomenon.

 Highlight the dominating theory, selected as the bedrock of the thesis.

o Having done this, the author is helped in identifying the limits to the generalizations in the field of study. This also implies that the author should specify which are the key variables and highlights the need to examine how those key variables might differ and under what circumstances (Corvellec, 2013; Jarvis, 1999).

After understanding what a theoretical framework is, what should the author of the thesis present and what should a reader expect in order for the thesis to be relevant and to have an input. In the next part of the current analysis, the author highlighted the three main and most dominant theories, relevant and representative for what the thesis is trying to investigate.

As such, the theories selected to be presented are as follows:

 Stakeholder theory;

 Institutional theory; and

 Legitimacy theory.

Even though three have been mentioned, not all of them will be relevant to the same degree for this thesis. The importance and relevance of these theories will be described below, starting with the least one.

The Institutional theory represents a theory which investigates how various structures, including schemes, norms, rules, which became established as authoritative guidelines, influence the deeper and more resilient aspects of social structure (Scott, 2005). This theory is very important for the thesis, because the activity of NGOs is heavily dependent on the above mentioned, established structures. In practice, it means that in order for an NGO to operate in a country, it has to follow

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the local rules, laws and social behaviors. Additionally, it has to cooperate to a certain degree with all the state authorities that are relevant for the regions where the NGO decided to contribute.

Besides the establishments, the institutional theory emphasizes rational myths, isomorphism and legitimacy (Scott, 2008). Isomorphism represents a trend for organizations in related fields of activity to endorse the same procedures and norms for obtaining legitimacy. Isomorphism can be coercive, when the organization is under the pressure of other organizations and society to follow some rules and norms; mimetic when organizations copy each other due to uncertainty; normative, when organizations embrace the rules and values of other organizations as a result of professionalization (Goddard, 2016). Isomorphism is extremely valuable in understanding the liaison between external and internal factors as accounting and accountability. Commonly, accountability was imposed to organizations by external actors, such as state and professional associations. When organizations prove that their mechanisms of accountability are efficient they are considered legitimate. Nevertheless, this accountability can be apparent and not changing the actors’ practices from the roots. This perspective is further used by other researchers, which offered additional insights and concluded that the key aspect of the establishments is their inclination towards imitation, rather than optimization (Marquis, Tilcsik, 2016). This means that the public institutions are more reluctant on changes followed by additional new decisions, practices and structures. In practice, they would rather imitate the examples that worked in the past, than to optimize and to do something new. This is a subject which can and will be further discussed with the interviewees.

The next theory, Legitimacy theory talks about a supposed generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions (Suchman, 1995, p. 574). In practice, the organizational actors adopt and implement innovations because of their legitimacy and efficiency. Furthermore, this theory is based on three pillars, which are a) the regulations; b) moral base; and c) cognitive-cultural base (Scott, 2005 ). Here we can see that, compared to the previous theory, a wider, or at least a more balanced attention is given to the legal, moral and, most importantly, the social aspects of an NGO project and/or collaboration, if we speak from the perspective of this thesis.

Furthermore, the researchers even further investigate the social pillar. It became more and more evident that the population’s opinion is a very important part in conducting any, profit oriented or not, business activity. The social approval is even more important for an NGO because of the nature and reliance on the general population and their trust. This will be

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discussed as well with the interviewees in order to indirectly confirm the conclusions made above.

The last but the most important theory is the Stakeholder theory. It is obvious that the stakeholder and the management are those interest groups and actors who affect, or in turn, are affected by the corporation. This is true for the NGOs, which as any other company, has management positions, shareholders, donors or other forms of financial responsibility towards counterparties considered material. As such, the theory’s main efforts are to develop typology for classifying stakeholders. Additionally, the theory looks into the ethics which suggests that the purpose of a business is to create value for its stakeholders. In this category can be identified those who influence or are influenced by the achievement of organizational goals and objectives (Freeman, 1984) and this group is not limited to shareholders, but also refers to employees, customers, creditors and suppliers.

Taking into consideration that an NGO may have multiple stakeholders, it becomes more difficult to ensure proper communication with all of them in an effective manner, so that their voices are incorporated in the organizational practices (Hall, 2015). Additionally, the NGO itself is a non-profit organization, which in the context of having multiple stakeholders may create confusion, miscommunication or contradiction of visions between the interested parties. As such, the following solutions have been created. There are two phases of communicating with them: “listening to stakeholders” and “talking to them”. In the first phase, the management finds out more about stakeholders’ needs, interests and tries to incorporate in practice, while in the second phase, the management responds to these needs appropriately and demonstrates the value creation by producing accounting and accountability reports. This is all very important in order to ensure that the mission of the company is in line with the stakeholders objectives and that the company’s results are understood and communicated to the stakeholders.

As such, this theory highlights the importance of a proper vision of the company, which should correspond to its mission and purpose. This is especially true for NGOs, which cannot suddenly decide, by either their stakeholders or interest parties, that it will deliver services of a different nature. Various contractual contingencies, social obligations and expectations bind the company to certain limits, at least in the near future. The practical part will heavily rely on the assumptions made according to this theory. Various specifically designed questions will be asked to ensure that the shortcomings described above are properly covered.

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2.5 Chapter Summary

This chapter discussed the previous academic works on NGO accountability and prepared the scene a for the case study analysis, going from general presentations to specific classifications and concepts.

The first section described the evolution of NGO accountability from both a conceptual and chronological aspect. It provided the background of the NGO sector, in which civil society organizations gained the trust of people and proved to be more cost-efficient than governments. Afterwards, there was a period of decline, when NGOs were suspected of corruption and unethical behavior, which lead to the calls for more accountability from their side. The second part investigated the operationalization of accountability from both NGOs and donor perspective. Not only upward, downward and internal accountabilities were examined, but also the challenges encountered in organizational practice.

The third sub-chapter outlined evaluation as a mechanism for accountability. Even though there are multiple mechanisms such as strategic planning, appraisal, monitoring and others in order to assess the activities of an NGO, evaluation presents the advantage of organizational learning.

The forth section introduced the reader to three important theories of accountability, more specifically institutional theory, legitimacy theory and stakeholder theory. The last one suits better the context of this study and explains that stakeholders are central in the analysis of accountability.

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3 Research methodology

The previous chapter presented a review of academic papers related to NGO accountability. The proper conclusions and future assumptions have been made in order to obtain relevant and impartial evidence for our study. An important premise for doing so is to select and implement a sound and established research method, along with all its components and to take into account all of its advantages and disadvantages.

Furthermore, during the current chapter the author will mention and describe the currently available two groups of research, quantitative and qualitative. For each category, examples, advantages and disadvantages, application, limitation is examined. For each step, the author will answer what, why and how related is to the selected method.

The final part of the chapter will consist of a general overview of the process and what assumptions and expectations the author has made for the future chapters.

3.1 Research method

As mentioned in the in the introductory subchapter, there are two approaches to research: qualitative and the quantitative. A short description will be provided bellow, in order to distinguish them and make the selection using a sound judgement.

The quantitative research method, compared to the qualitative one, has a more quantifiable nature. It tends to create a way in order for the researchers to obtain raw information, which can be transformed into statistically usable data. It is more cost efficient to use this method for bigger testing populations as the information can be aggregated and generalized, in order for more sound conclusions to be made. Compared to the qualitative methods, the quantitative is more structured and practical. As a result, this method formulates facts and helps in uncovering patterns. In practice, the various methods included in the quantitative category are various forms of surveys – online surveys, paper surveys, mobile surveys and kiosk surveys, telephone interviews, longitudinal studies, website interceptors, online polls, systematic observations etc. (Ridder, 2017).

These methods offer the possibility to access a wider range, which means more potential respondents; the costs and time invested in obtaining this information are lower, compared to the resulted volumes of data and the data generated is easily convertible in statistically sound information, which eases the work of the researchers and saves time and money. Depending on the nature of the results to be obtained, assumptions to be made, the target audience and the necessary information, the researchers may use this category as their main research method.

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Saunders et al. (2009) outlined several limitations and weaknesses of the quantitative research, such as improper representation of the target population, lack of resources for data collection, inability to control the environment, difficulty in data analysis, expensive and time consuming. Despite this, the quantitative methods are extensively used in both research and practice.

The qualitative research method is expected to be the opposite of the quantitative one. It is defined by Miles and Huberman (1994) as “a source of well-grounded, rich descriptions and explanations of processes in identifiable local contexts.” Furthermore, this approach also gives an understanding of underlying reasons, opinions and motivations for a focus group smaller than the target population. In a simpler way, this method gives to the researchers to dive deeper into the already known problem in order to identify uncovered trends in thought and opinions. Qualitative data collection methods vary using unstructured or semi-structured techniques. According to Bryman (2012) the main qualitative research methods are participant observation, qualitative interviewing, focus groups, discourse analysis, conversation analysis and the collection and analysis of documents.

The qualitative methods mentioned are very dependent on the nature of evidence to be obtained by the researchers. In participant observation, the researcher has the opportunity to get to know and understand thoroughly the individuals from a particular setting, their habits, behaviour and reactions, such a way gaining appreciation of the social group. This method requires extended periods of time spent in the same setting together with the participants in order to comprehend them better; due to the lack of time, this method is not suitable for this study. Qualitative interviews provide a great opportunity for the researcher and participants to interact that is the reason why this method was chosen for the purposes of this study. It is often considered as the best data collection method. Semi-structured interviews deal with a situation where the topics and issues to be covered, sample sizes, people to be interviewed and questions to be asked have been determined beforehand (Ghauri and Gronhaug, 2005). At the same time, the semi-structured interviews allow a lot of flexibility in the conversation, because there is not a rigorous set of questions to be followed, but on contrary, it is an open interview, which gives the opportunity of new ideas, thoughts and arguments to be expressed as a result of what the interviewee previously mentioned. Therefore, the specific topics to be examined should be structured in an interview guide, so that they can be modified according to the context or the persons interviewed.

Document analysis is a method of investigating the external and internal documents which relate to the organization, in this case accountability. This can make reference to the financial

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reports, codes of conduct, studies or research published, contracts, media materials etc. They enhance the way in which the organization is perceived by the governments, donors, partners, beneficiaries, communities, volunteers etc. The previously mentioned documents were used to achieve a better comprehension of the organizational situation.

As such, some characteristic of qualitative research can be outlined:

 The information obtained is very different, more complex and selective, compared to quantitative evidence;

 The costs and time is exponentially more material, as the surveyed number of individuals is usually a lot lower. Instead, the respondents are carefully selected beforehand, to ensure that they are representative and proper evidence can be obtained;

 The questions asked are complex and focus on an issue. The responses are not general and as easily convertible to statistical data.

 The researchers spend more time on preparing for evidence gathering activities (reading, analysing, comparing) than on the interviews themselves.

Qualitative research has its limitations such as extended period of time spent on data collection, overload of data, researcher bias, generalizability of findings, processing and coding data, the credibility of conclusions (Miles and Huberman, 1994), but nevertheless it’s a unique method of researched highly appreciated for presenting the context and “thick” descriptions for a better comprehension of different issues.

As such, we have explained the differences and the advantages of each research method. In the future subchapter, the selected method will be mentioned, explained and its relevance for the research will be proved.

3.2 Case study method

3.2.1 Case study theory

For this thesis, the qualitative method was selected because qualitative research is a method of data collection, which is characterized by emphasis on understanding, observations and measurements in the natural setting, explorative orientation, and process oriented. Miles and Huberman (1994) suggested that researchers should use qualitative research designs when there is a clear need for deep understanding, local contextualization, causal inference, and exposing the points of view of the people under study.

The selected research method is Case Study. In general, this qualitative method is described as an up-close, in-depth, and detailed examination of a subject of study. This is particularly

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appropriate for the study of NGO accountability, given the need for detailed, contextual descriptions of development NGO activity. Therefore, the research method chosen for this paper is a case study, because it better addresses the ‘how’ question and will provide new insights into the financing process of NGOs and mechanisms of being held accountable.

As such, the case is the main subject. It may be an individual, organization, and event, actions, which can be described in a time and space period. However, a case can also be a distinct claim, proposition, or claim, which can be studied through both quantitative and qualitative research methods. In our case, the methods used are of a qualitative nature. In practice, the case study can be used through specific and distinct designs (Eisenhardt, 1989). The researchers recognise the following three types, which are as follows:

 No theory First;

 Gaps and Holes; and

 Social Construction of Reality.

The No theory First scenario implies that the researcher should not limit him/herself to the guidelines of a theory. The need for data guides the researcher, which uses his personal professional judgement more, instead of the theory itself. “Thus, investigators should formulate a research problem and possibly specify some potentially important variables, with some reference to extant literature. However, they should avoid thinking about specific relationships between variables and theories as much as possible, especially at the outset of the process” (Eisenhardt, 1989). From this we can understand that a potential bias of the researcher may represent a problem. However, this risk is mitigated through the appropriate methods.

In practice, the cases are selected for theoretical reasons, one of which is the probability that they might offer insight into the investigated phenomenon. The approach deemed to be acceptable is sampling. This is done because in the majority of cases, the researcher cannot physically and financially investigate the whole population. In order to ensure that the effectively tested populations are representative and inclusive, the sampling is done without bias and self-interest, besides other criteria. The data collection is based on triangulation, where interviews and observation of documents are often combined. A combination of qualitative data and quantitative data is possible as well (Eisenhardt, 1989).

The Gaps and Holes scenario targets the said gaps and holes in the selected theory and tries to cover them by further research (Ridder, 2017). All of this is done in order to answer the how and why questions, relevant to the case. Compared to the previous scenario, this one allows a form of biased sampling, only if the case is very rare and unusual. The most important data

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collection method for this scenario is the interview. Furthermore, this is confirmed by the fact that this offers multiple points of view and multiple measures of the same phenomenon.

Last but not least, the Social Construction of Reality approaches the cases through a more philosophical point of view. The real world is formed by socially and historically related interchanges amongst people. “The meaning-making activities themselves are of central interest to social constructionists/constructivists, simply because it is the meaning-making/sense making attributional activities that shape action or (inaction)” (Guba, Lincoln, 2005). That is why, this scenario emphasizes the fact that the researcher does not look after objective data or facts, or patterns. On the contrary, the evidence to be gathered is more subjective, tied to specific actions, places and times.

In practice, this is done through several qualitative data analysis methods, which are direct interpretation and categorical aggregation. The direct interpretation manifests itself in an obvious way. The data is analysed and very vast descriptions are offered. The final conclusion is left to the reader’s interpretation, which may generalize the data according to his/her personal and vicarious experiences, referred to as naturalistic generalization. The categorical aggregations may appear more objective because it combines the understandings and relationships in categories, and the focus is on how the same phenomenon exists across several cases.

3.2.2 Case context

The NGO Keystone Moldova is the subject of this case study. This particular non-for-profit organization was chosen for the research because of the following reasons. First of all, the fact that this is a Southern NGO operating in an ex-Soviet union country and struggling with an environment of political, economic and social uncertainty makes the setting very particular and as a consequence the findings are directly affected. Secondly, organization is one of the largest in the field of not-for-profit organizations in Moldova, with more than ten year in working with different donors; as a result it has more experience with different stakeholders and types of accountabilities. Thirdly, this NGO has a good reputation at all levels: public authorities, donors, beneficiaries, communities etc. and it strives constantly for marinating its leading position in the sector.

Keystone Moldova is a NGO founded in 2004 by Keystone Human Services International and aims for the social inclusion of individuals living in difficult social situations, including persons with disabilities. The organization focuses on three main areas of activity: supporting the central public authorities in the development of the legal and normative framework. They support the Ministry of Labour, Social Protection and Family to improve the regulatory

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framework for the social protection of persons with disabilities, with the goal of successfully implementing the UN Convention on the Rights of Persons with Disabilities and social inclusion. The second area is the development of social services such as community houses, sheltered homes, mobile teams, family placement for adults and specialized parental assistance. In 2014, began the accreditation of social services, meaning that there were introduced some quality standards that organizations need to satisfy in order to provide services for the beneficiaries. The third area concerns continuous methodological support to the specialists regarding the provision of services. Keystone Moldova is a member of Alliance of Organizations active in the field of Social Protection of Child and Family (APSCF), Alliance of Organizations for Persons with Disabilities (AOPD) and European Association of Service Providers for Persons with Disabilities (EASP).

3.3 Research design

3.3.1 Interviews

The main source of evidence of this paper represents the 7 in-depth semi-structured interviews held with key employees working for Keystone Moldova. Four out of 7 interviews were held with project managers, one with the financial director, one with the legal adviser and one with the volunteers’ coordinator. More information about the length, the location and the language of the interview is provided below in the Table 1.

The access to this organization was facilitated by a manager coordinator, who introduced me to other employees. After presenting the theme and research question of my thesis, the other employees accepted to take part in my research. Before the interview, each participant received by e-mail the main topics which will be discussed during the meeting. Each interview was tape-recorded with interviewees’ prior consent and fully transcribed initially in Romanian, afterwards translated in English.

The author used an interview guide, which was prepared upfront, it contained four main sections. The first one was about the participant and the general information about Keystone Moldova. The second part concentrated on discussing upward accountability as it is manifested the organizations. The third part focused on mechanisms, tools and processes of downward accountability, while the last section discussed internal accountability toward beneficiaries, communities, volunteers, etc. The guide can be find in Appendix A.

Regarding the questions, they have been prepared before the interviews and had an open-ended answer. During the interview, these questions were not followed in the predetermined

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order, as to not deteriorate the flow of the discussion. Depending on the context and on the positions, some questions have been added. Some of the questions have been skipped as they have proved to be irrelevant during the discussion or the interviewee did not have time.

The author used triangulation of data, meaning the use of multiple sources of evidence in order to avoid subjectivity as much as possible. This study is based on semi-structured interviews, participant observation and documentary analysis (financial and narrative reports, grant contracts, budget structure, publicly available information from the web-site, media reports on Keystone, different articles, sociological research developed by Keystone, internal documents concerning the mission and strategic objectives) in order to achieve triangulation. The semi-structured interviews allowed some sort of flexibility and the interviewees felt more comfortable to express their thoughts, and even deepen some ideas important for a better understanding of the research question. Field notes were also taken during and after the interview.

Table 1: Overview of interviews

Interview

Nr. Position Interview Date Duration Interview location Evidence 1 Project Manager 17-Apr-18 01:42:19 Chisinau Recorded & _transcribed

2 Project Coordinator 18-Apr-18 00:49:21 Chisinau Recorded &

transcribed 3 Financial Manager 19-Apr-18 00:33:27 Chisinau Recorded & _transcribed 4 Legal adviser 20-Apr-18 00:27:42 Chisinau Recorded & _transcribed 5 Volunteer coordinator 23-Apr-18 00:18:48 Chisinau Recorded & _transcribed 6 Project Manager 24-Apr-18 00:40:50 Chisinau Recorded & _transcribed 7 Project Manger 25-Apr-18 00:31:58 Chisinau Recorded & _transcribed *All interviews were held in Romanian and afterwards translated into English

3.3.2 Data Analysis

In order to analyse the data, three phases were used: data reduction, data display and conclusion drawing/verification (Miles, Huberman, 1994; O’Dwyer, 2004). In the following section, the author will describe the details of each phase and how it was accomplished in the case of Keystone Moldova interviews and documentary analysis.

Data reduction refers to “the process of selecting, focusing, simplifying, abstracting, and transforming the data that appear in written up field notes or transcriptions.” (Miles and

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Huberman, 1994) After collecting the data, the author began to process the information, that means reading the collected documents and transcribed interviews in order get rid of less important data. Some schemes and connections were made at the initial stage. Data processing can be described through the process of coding. This process was executed manually on the papers. Through cyclic reading and rereading, I structured each interview and code it to facilitate within-case as well as subsequent cross-case analysis.

The analysis resulted in the identification of common themes and topics. This newly obtained data are structured and displayed in a matrix (Appendix B). The matrix is used to make the connections between codes and patterns.

The final step, which is interpretation, consisted of observing the results obtained through the previous steps, documenting all the relevant evidence and advancement of a final opinion. The assumptions made before starting the thesis will be challenged and the final conclusion will be made.

3.4 Chapter Summary

This chapter has accustomed the reader to different research methods. Furthermore, the author of the thesis has explained thoroughly the importance of the qualitative research, more specifically the case study, which suits the best the undertaken research. There were mentioned all the resources used in order to make a comprehensive picture of the case study. It was discussed the data collection process, meaning the interviews which were translated and transcribed. Afterwards, it was shown how the detailed information obtained in the interviews and from other sources was reduced significantly, so that the main ideas and concepts prevailed; this was done by the process of coding. After analysing the data, the author interpreted the data and highlighted four main findings, which will be discussed in the next chapter.

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4 Findings and discussion

This section will analyze and discuss the main findings of the paper. For the beginning, an introduction about the development NGO under study will be presented in order to understand better the particularities of the field and of the organization. The findings section will be split into four major themes and that are of major importance to the content. To each of these themes, affirmations and quotations from interviews will be provided to confirm the theory and to deepen the implications of this case.

The field of non-for-profit, civil society organizations is continuously evolving. This domain emphasizes the important issues on international arena, for which NGOs try to come up with viable solutions. For example, the field of social entrepreneurship got a lot of attention in the recent years; another category is vulnerability and disability, lobby and advocacy, and inclusion. Until, 2010 inclusion was the main and most important field, this allowed organizations to gain experience in “empowering” beneficiaries. Since 2010, the trend has changed a little bit and the emphasis was on vulnerability and disability and advocacy and lobbying. This step made the NGOs more public, acting as promotors of change and human-rights protection. Several years later, the concept of social entrepreneurship has been introduced and as a response NGOs focused on creating businesses, which will earn money for supporting regularly the beneficiaries, in this way to limit the dependence to the donors. The social entrepreneurship can include all those three major directions, but the only disadvantage would be that in some developing countries, such as Moldova, there is no preferential legislation, or social economy, that means organizations have to develop the branch of social entrepreneurship as a legal entity and to pay the same taxes as a business.

4.1 Upward accountability through the lens of Keystone Moldova

Keystone Moldova has numerous stakeholders, that is why sometimes it can be a challenge to report equally to donors, beneficiaries, staff and volunteers. In this sense, one project coordinator said that:

“Responsibility towards the constituents is very important and we need to demonstrate that we have achieved the objectives, first of all, on behalf of our team, then beneficiaries, governments, donors to increase their credibility and confidence.”

In this section, the particularities of upward accountability will be presented and thoroughly discussed. Since the beginning of the project, the conditions and requirements of a donor are known, for example some documents should be prepared early on, such as narrative

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project or the description, the budget, the logic framework, also called matrix and the timesheet of activities. The financial manager added that:

“We know the donor's requirements for timely reporting. Some requirements are known from the time the project proposal is launched. They also make public the guide for the applicant so you can see certain moments about the subsequent reporting, after which, if we as an organization get the project, donors generally organize information sessions on the implementation of the grant, how to write the financial and narrative reports, the frequency of

reporting vary from monthly, quarterly to semi-annually or annually. That is why you have to

be very well organized and the activities need to be very well thought.”

Usually, donors require an established set of documents that are justified because they secure the financial transparency of the project. The reports submitted to the donor constitute a register of what the organization has accomplished and learned in the project. These reports also help donors to set their funding priorities and conditions in the future.

“When we prepare the final reporting, some donors require the copies from all the accounting documents, such as: the bank statement, contracts, invoices, so all the documents are scanned and annexed to the financial report where are stated all the expenditures. Not all the donors require all the documents, all the contracts and so on. The situations are very diverse.”

Ebrahim (2003) states that donors require regularly reporting from the organization funded by them and that these reports vary among funders and project. Every donor has a specific form of reporting ranging from very simple to very complicated and mostly they request these reports with all the expenses which took place during the project period or during certain periods. Many donors give all the money in advance, but not all of them; for instance, EU prefers to divide its grants into installments and sent the money when they receive the corresponding reports and make sure that the project is being implemented.

“The reporting requirements are different for each donor. Some donors ask for to describe the activities very thoroughly, to argue very clearly, which was the goal, if the goal was achieved, plus to come up with all kind of evidence. You should present the participants' lists signed by each participant, you come up with the agenda, which has been translated. The whole package of documents must be in Romanian, English and Russian, which includes the materials that were used such as PPT, textbooks, photos, and videos. So, they try somehow to monitor if the activity was carried out and if there is enough evidence for this.”

Establishing NGO accountability in developing countries: the case of Keystone Moldova