Guidelines to Effective Governance for Non- Governmental Organization

In recent times, NGOs have come under scrutiny due to instances of misuse for money laundering, lack of transparency, and other governance issues that risk damaging their reputation and eroding public trust.

Ensuring robust governance practices is vital to safeguard the credibility and effectiveness of NGOs, allowing them to fulfill their missions and serve their communities with integrity. This article outlines key guidelines for assessing and improving governance within NGOs, helping them navigate the complexities of legal compliance and organizational management.

LEGAL COMPLIANCE

1. Registration
Ensure the NGO is properly registered under relevant Malaysian laws, such as:

• Societies Act 1966
• Companies Act 2016
• Trustees (Incorporation) Act 1952

2. Annual Reporting
Verify if the NGO submits annual reports and financial statements to the Registrar of Societies (ROS) or the Companies Commission of Malaysia (SSM).

3. Tax Compliance
Check if the NGO has obtained tax-exempt status from the Inland Revenue Board of Malaysia (LHDN) and complies with relevant tax regulations.

GOVERNANCE STRUCTURE

1. Board of Directors/Trustees
Ensure there is a clear and functional governance structure with a Board of Directors or Trustees who are independent and qualified.

2. Roles and Responsibilities
Verify that the roles and responsibilities of the Board members and key management personnel are clearly defined.

3. Meetings
Check the frequency and documentation of Board meetings to ensure regular oversight and decision-making processes.

POLICIES AND PROCEDURES

1. Code of Conduct
The NGO should have a code of conduct or ethics policy that outlines expected behaviors and practices.

2. Financial Management
Ensure there are robust financial management policies in place, including budgeting, accounting, and auditing procedures.

3. Conflict of Interest
Verify that there is a conflict of interest policy in place to prevent and manage any potential conflicts.

TRANSPARENCY AND ACCOUNTABILITY

1. Public Disclosures
Check if the NGO publishes its annual reports, financial statements, and other relevant documents on its website or through other public channels.

2. Donor Communication
Ensure the NGO provides regular updates to donors and stakeholders about its activities, expenditures, and impact.

PERFORMANCE MEASUREMENT

1. Objectives and Goals
Verify that the NGO has clear, measurable objectives and goals.

2. Monitoring and Evaluation
Check if there are systems in place for monitoring and evaluating the effectiveness of programs and initiatives.

RELEVANT LAWS AND STANDARDS IN MALAYSIA

1. Societies Act 1966 – Governs the registration and regulation of societies, including NGOs.

2. Companies Act 2016 – Governs NGOs registered as companies limited by guarantee.

3. Trustees (Incorporation) Act 1952 – Governs the incorporation of trustees of NGOs.

4. Income Tax Act 1967 – Relevant for NGOs seeking tax-exempt status.

ISO STANDARDS

While there are no specific ISO standards exclusively for NGOs, the following ISO standards can be applicable for ensuring good governance and management practices:

ISO 9001: Quality Management Systems

What is ISO 9001?
ISO 9001 is a globally recognized standard for quality management. It helps organizations of all sizes and sectors improve their performance, meet customer expectations, and demonstrate their commitment to quality. Its requirements define how to establish, implement, maintain, and continually improve a quality management system (QMS).

Why is ISO 9001 important?

With more than one million certificates issued to organizations in 189 countries, ISO 9001 is the most widely used quality management standard in the world. Business benefits include:
1. Customer confidence: Ensures robust quality control processes, leading to increased customer trust and satisfaction.
2. Effective complaint resolution: Offers guidelines for resolving customer complaints efficiently.
3. Process improvement: Helps identify and eliminate inefficiencies, reduce waste, streamline operations, and promote informed decision-making.
4. Ongoing optimization: Encourages regular audits and reviews to continually refine quality management systems.

ISO 37001: ANTI-BRIBERY MANAGEMENT SYSTEMS

Transparency and trust are crucial for credibility. ISO 37001 helps organizations prevent, detect, and address bribery by adopting an anti-bribery policy, appointing a compliance overseer, conducting training, risk assessments, and due diligence, and implementing financial and commercial controls. It demonstrates a committed approach to stamping out corruption.

ISO 26000: SOCIAL RESPONSIBILITY

Provides guidance on how businesses and organizations can operate in a socially responsible way. It clarifies what social responsibility is, helps translate principles into effective actions, and shares best practices relating to social responsibility globally. It is aimed at all types of organizations regardless of their activity, size, or location.

By adhering to these guidelines, NGOs can enhance their governance, ensure legal compliance, maintain transparency, and achieve their mission more effectively.

You may contact us for an appointment for further understanding. We are happy to assist you and ensure your organization is well-managed and compliant with all governance standards.