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
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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.
