CHAPTER ONE GENERAL INTRODUCTION
Background
Financial management of organisations revolve around the investment, financing and working capital decisions of an organization (McMenamin, 2002). It is concerned with decisions relating to the acquisition of real assets (quantity and type), raising capital for assets or investments and, managing the affairs of the firm in order to maximise value (Brigham & Houston, 2011). Financial management is essential for profit organisations, non-profit organisations as well as, government institutions (Brigham & Houston, 2011) and the absence of sound and effective financial management usually results in failure or breakdown of institutions (McMenamin, 2002). Effective and efficient financial management is vital to the development of an organisation. This has resulted in stakeholders becoming highly interested in solving governance and accountability issues (Zadek, 2003).
Non-Governmental Organisations (NGOs) are significant actors in economic, political and social development within the civil society (Brown & Kalegaonkar, 2002). NGOs are organizations that are not government owned or private for profit organizations (Unerman & O’Dwyer, 2006). NGOs are one of the major non-state actors who via local participation contribute immensely towards the development agenda in most countries (Dugle, Akanbang & Salakpi, 2015). The role of NGOs are very key to development, and due to their rapid growth, NGOs form a crucial part of civil society as their activities fill the vacuum for government failures (Goddard & Assad, 2006; Hearn, 2001; Kamat, 2004; Lewis & Kanji, 2009; Lloyd, R., 2005; Sommerfeld & Reisch, 2003). Recently, the swelling role of NGOs and issues of mismanagement of donor funds has led to an increase in
1
management and accountability issues among the donor community and other stakeholders (Edwards & Fowler, 2002; Jordan, 2005; Murtaza, 2012; Unerman & O’Dwyer, 2006).
Statement of Research Problem
Just as in other countries NGOs as actors of civil society contribute towards the development agenda of nations, NGOs in Ghana bring substantial input towards socio-economic development especially in deprived communities by providing clean potable water, clinical services, credit facilities and many more (Dugle, Akanbang & Salakpi, 2015). Ghana is one of the significant recipients of donor funding through NGOs globally (Hearn, 2001) and as such, the stakeholders of NGOs seek to know and understand how these donor funds are disbursed and utilised. However, the weak accountability and poor management practices amongst NGOs (Edwards & Fowler, 2002; Unerman & O’Dwyer, 2006), has made it imperative to investigate how these large funds are used and the financial management practices employed by NGOs. Furthermore, it is necessary to assess the utilization of funds and management practices of NGOs as there is insufficient regulation and monitoring of expenditure and receipts, which may result in haphazard and unprofessional access to, and disbursement of financial resources. Consequently, this affects the existence of the NGO and the efficiency of its project execution (Oxford Analytica, 2005; Murtaza, 2012).
The literature shows that not much work has been done globally on NGO financial management, financial sustainability and accountability (Fiador, 2013; Lewis, 2001; Unerman & O’Dwyer, 2006). This study seeks to explore and focus on NGO financial management in Ghana and to contribute to the knowledge repository. This research joins the few papers that focus on financial management and accountability of NGOs by using qualitative methods such as surveys, interviews,
discussions and questionnaires (Hearn, 2001; Jordan, 2005; Lewis, 2003; Unerman & O’Dwyer, 2006) to address the issue of financial management of NGOs.
In conducting their research, most papers studied and focused on NGOs as a group (Edwards & Fowler, 2002; Fiador, 2013; Jordan, 2005; Scholte, 2003). This paper seeks to conduct an in-depth analysis of a particular NGO in order to understand and describe its financial management, and relate the findings to certain generalised propositions on NGO financial management. The research uses a case study approach to explore and examine the financial management of Central Aid, an NGO in Ghana.
Research Purpose
This study explores the financial management as practiced by Central Aid in Ghana, to assess the determinants of financial management within the organization, and identify any challenges associated with its financial management. This research also seeks to identify the factors that affect financial management decisions within the NGO.
- Research Objectives
- To ascertain the nature of financial management practiced in Central Aid.
- To ascertain the factors that influence the financial management of Central Aid.
- To identify any challenges that may be affecting the financial management decisions of Central Aid.
Research Questions
- How does Central Aid engage in financial management processes?
- What does Central Aid consider in its financial management practices?
- Does Central aid face any difficulties in executing its financial management practices?
Proposed Research Methodology
The proposed methodology for this research is a qualitative study. The research strategy will be a case study in order to explore NGO financial management, an area in which little is known or not much research has been done (Fiador, 2013; Lewis, 2003, 2001; Sama, 2015; Unerman & O’Dwyer, 2006). A case study will make it possible to conduct an extensive and a comprehensive analysis into the various financial practices and management systems, and the factors that influence the case NGO’s management. It seeks to use a descriptive research design to assess the nature of financial management and to identify the factors affecting the NGO’s financial management using primary and secondary data. The data collection instruments to be used for primary data are interviews, and secondary data will be obtained using the case NGO’s reports and any other documents they may have available. The data collected will be analysed using thematic analysis following the model of Braun and Clarke (2006) and Atlas.ti, a qualitative analysis software.
Significance of the Study
This study contributes to future research, policy and practice. In research, this study contributes to the body of knowledge on NGO management and accountability. It joins the few papers that adopted qualitative measures to address NGOs accountability and management. Additionally, most research papers conducted on NGOs in Ghana studied the organisations collectively but this study conducts an in-depth analysis into one particular NGO. To the best of the author’s knowledge, financial management of individual NGOs in Ghana has hardly been researched into as such, this paper pioneers literature in the area.
For policy, this study proposes certain financial management regulations that the government can incorporate into its existing NGO policy guidelines to ensure transparency in the financial affairs of all NGOs.
In practice, this study assists the case NGO, Central Aid, to ascertain the effectiveness and performance of its financial management practices and helps put in corrective measures if necessary. The study also provides recommendations that the NGO can adopt to improve their existing management systems.
Scope and Research Limitations.
The scope of this study is a single organisation. This presents a limitation because the study focuses on a faith based organisation (FBO) and does not cover the many other forms of NGOs in the country. As such, the results of this research can only be used to back prevailing explanations of how FBOs operate and to refine knowledge, but not for generalization of financial management practices of all NGOs.
Chapter Disposition
This research is organized in five (5) chapters. Chapter one (1) provides the history and overview of financial management of Central Aid and an introduction to the research work. It consists of the background to the study, problem statement, research purpose, objectives and questions, proposed methodology, significance and limitations of the study. Chapter two (2) presents a review of literature and focuses on providing theoretical and empirical literature on financial management, NGO management and practices, financial management and accountability of NGOs and the factors that tend to affect NGO management. Chapter three (3) explains the methodology used in
conducting the research. It shows the research method, the research strategy, data type and source
of data used, and the research instruments and approaches employed in gathering the data and conducting data analysis. Chapter four (4) analyses and explains the results obtained from the data, and highlights, discusses and compares the results obtained with literature. The last chapter, chapter five (5) contains the findings, conclusion and recommendations of the entire research work.
