Sunday, November 2, 2008

NGO's ACT 2002

TABLE OF CONTENTS




1. EXECUTIVE SUMMARY…………………………………………………… 3


2. BACKGROUND INFORMATION ABOUT NGO………………………… 4


3. LITERATURAL REVIEW……………………………………………………… 7


4. FINDINGS INFORMATION ABOUT NGOs ACT 2002……………………10


THE TANZANIA CODE OF CONDUCT OF THE NGOs …………………11

CONCLUSION …………………………………………………………….. 14





















1.0 EXECUTIVE SUMMARY:
NGOs have an annual budgets in the hundreds of millions or billions of shillings. Funding such large budgets demands significant fundraising efforts on the part of most NGOs. Major sources of NGO funding include membership dues, the sale of goods and services, grants from international institutions or national governments, and private donations. The introduction of activity based budgeting that money should be tied to purposes and the evaluation of the results of expenditure are clearly welcome. Similarly welcome in principle is the new split between the functions of budgeting, auditing and financial management. As concerns grants, that their award shall be subject to the principles of transparency and equal treatment and that they may not have the purpose or effect of producing a profit for the beneficiary. In this paper I tried to go around NGO Act of 2002 and analyse it critically whether it is adequate to express financial matters in NGOs in Tanzania.







2.0 BACKGROUND INFORMATION ABOUT NGO.
A Non Governmental Organization (NGO) - is a legally constituted organization created by private persons or organizations with no participation or representation of any government. In the cases in which NGOs are funded totally or partially by governments, the NGO maintains its non governmental status as far as no government representatives are part of the organization. A non government organization is an association which is based on the common interests of its members, individuals, or institutions, has no governmental status or function, and is not created by a government, nor is its agenda set or implemented by a government.
International non-governmental organizations have a history dating back to at least the mid-nineteenth century. However, the phrase "non-governmental organization" only came into popular use with the establishment of the United Nations Organization in 1945 with provisions in Article 71 of Chapter 10 of the United Nations Charter for a consultative role for organizations which are neither governments nor member states. The definition of "international NGO" (INGO) is first given in resolution 288 (X) of ECOSOC on February 27, 1950: it is defined as "any international organization that is not founded by an international treaty".
Globalization during the 20th century gave rise to the importance of NGOs. Many problems could not be solved within a nation. International treaties and international organizations such as the World Trade Organization were perceived as being too centered on the interests of capitalist enterprises. Some argued that in an attempt to counterbalance this trend, NGOs have developed to emphasize humanitarian issues, developmental aid and sustainable development.
Apart from 'NGO' often alternative terms are used as for example independent sector, volunteer sector, civil society, grassroots organizations, transnational social movement organizations, private voluntary organizations, self-help organizations and non-state actors (NSAs).
A long list of acronyms has developed around the term 'NGO'. These include INGO stands for international NGO, such as Doctors Without Borders / Médecins Sans Frontières; BINGO- business-oriented international NGO, or big international NGO; ENGO- environmental NGO, such as Global 2000; GONGOs are government-operated NGOs, QUANGOs are quasi-autonomous non-governmental organisations, such as the International Organization for Standardization (ISO). (The ISO is actually not purely an NGO, since its membership is by nation, and each nation is represented by what the ISO Council determines to be the 'most broadly representative' standardization body of a nation. That body might itself be a nongovernmental organization; for example, the United States is represented in ISO by the American National Standards Institute, which is independent of the federal government. However, other countries can be represented by national governmental agencies; this is the trend in Europe.) TANGO, short for technical assistance NGO;
NGOs have an annual budgets in the hundreds of millions or billions of shillings. Funding such large budgets demands significant fundraising efforts on the part of most NGOs. Major sources of NGO funding include membership dues, the sale of goods and services, grants from international institutions or national governments, and private donations.






LITERATURAL REVIEW:
There are numerous classifications of NGOs. The typology the World Bank uses divides them into Operational and Advocacy. The primary purpose of an operational NGO is the design and implementation of development-related projects. The primary purpose of an Advocacy NGO is to defend or promote a specific cause. As opposed to operational project management, these organizations typically try to raise awareness, acceptance and knowledge by lobbying, press work and activist events.
NGOs exist for a variety of reasons, usually to further the political or social goals of their members or founders. Examples include improving the state of the natural environment, encouraging the observance of human rights, improving the welfare of the disadvantaged, or representing a corporate agenda. However, there are a huge number of such organizations and their goals cover a broad range of political and philosophical positions. This can also easily be applied to private schools and athletic organizations.
Non Governmental Organization is one part of Non Profit Organization. Is an organization established not for profit making but for service delivery. Other type of Non Profit Organization are General Government which includes central government, city, municipal, town, villages etc, Education that include public schools, community colleges, public universities etc, Health and welfare that include hospitals, health centres, dispensaries etc, Religious and charitable organisations and Civil societies and community based organisations.
Non Profit Organization established because of the following reason, political, social and economic factor, for financial management Finances often more complex than comparable sizes private business and for provision of employments opportunities. The bulk of the public money that NGOs receive comes from national governments, regional and local authorities, and quasi-governmental organization operating at national, regional or local levels. It is not difficult to come across fraud and lack of self-confidence within a NGOs. The prevention of fraud, the enforcement of accountability are the result of introduction of greater transparency. The introduction of activity based budgeting that money should be tied to purposes and the evaluation of the results of expenditure are clearly welcome. Similarly welcome in principle is the new split between the functions of budgeting, auditing and financial management. As concerns grants, that their award shall be subject to the principles of transparency and equal treatment and that they may not have the purpose or effect of producing a profit for the beneficiary.
There is a similarities and different between NPOs and Business Organisation. Some of similarities are Integral part of economic system, they acquire resources to provide goods or services they follow financial management processes, they a applying Financial/Accounting information systems and they always make cost analyses, control and evaluation techniques. Different are as follow, Organizational objectives, NPOs provide services permit, expend resources to serve constituency and operate on year to year basis while business organisations have profit motive, seeks to increase wealth and focus on net income and automatic allocation and regulation device. Sources of financial resources: NPOs have do not make distinction between capital and revenue transactions, owner investments do not exist, depend on taxation (governmental) and grants.





4:0 FINDINGS INFORMATION ABOUT NGOs ACT 2002
The NGO Act was enacted by the Parliament of the United Republic of Tanzania in November 2002, the act provide procedure for registration of Non Governmental Organizations and coordinate and regulate activities of Non Governmental Organizations. The NGO Act of 2002 has seven parts. Part I shows preliminary provision (short title and commencement and interpretation) Part ii explain about administration and coordination of NGOs, Part iii show procedure for registrations of NGOs, Party iv explain about levels of registration, Part v gives details about accountability and self regulation of NGOs, Part vi explain about offences and penalties and part vii explain about miscellaneous provision.
NGO Act 2002 expressed about financial matter of NGOs in section 8(1) & (2), section 9(1) & (2), (3), (4) and section 10(1). Section 8. -(1) The Act explain about source of funds of the NGOs as follows- (a) any sums as may be appropriate by the Parliament; (b) funds or assets which may vest in or accrue to the Board from other sources by way of fees, grants or in any other way (c) any sums which the Board may borrow for its own purpose, (2) The Board may- (a) invest any of its funds in securities in which the trustees may, by law deal in any trust fund or in any other securities, which the Board may determine; and (b) deposit with a bank any money not immediately required for the use by the Board. 9. -(1) The Board shall, before the commencement of a financial year, cause to be prepared, estimates of the revenue and expenditure for that year (2) The annual estimates shall make provision for all estimated expenditure of the Board for a financial year concerned, and the Board shall in particular, approve recurrent and development expenditure. (3) The annual estimates shall be submitted to the Minister who shall cause them to be laid before the National Assembly within three months from the date of their submission to him. (4) No expenditure shall be incurred for the purpose of the Board except in accordance with the annual estimates. 10. -(1) The Board shall keep proper books of accounts.
THE TANZANIA CODE OF CONDUCT OF THE NGOs:
The Tanzania Code of Conduct of the NGO made pursuant to section 27 of the NGOs Act number 24 of 2002. The Code of conduct bearing in mind about NGOs self regulation, improvement of NGOs image to the public, equality of NGOs in status, right of existence for every registered NGO, importance of each NGO. Section 6.2 of NGO Code of Conduct state that a nonprofit organization in its capacity as both applicant and donor, complies with generally accepted funding principles, uses only justified and transparent budgets and avoids duplication in funding.

Section 7 explain about responsibility and accountability of NGOs as follow a nonprofit organization is accountable its activities and is responsible to the founders, members, stakeholders, supporters, donors and the general public. A nonprofit organization considers important readiness to account for its activities, achieved through professional management, internal accountability and pursuing generally accepted accounting principles. A nonprofit organization discloses a report of its activities and finances at least once a year.

IMPORTANCE OF ACCOUNTING IN NGOs
Accounting is used to facilitate long term and short term decisions through provision of information to those responsible for managing organisations. Long term decisions (involves capital investment decisions) are those where the time value of money becomes significant. Short term decisions (involves output, product mix, inventory level and pricing) those that can be altered within a time span where the effect of time value of money can be neglected.
Accounting is the process of identifying, measuring and communicating information to permit informed judgments and decisions by users of the information. Accounting is a language of business because people in the business world – owners, managers, bankers, stockbrokers, investors all use accounting terms and concepts to describe the resources and the activities of every business, large and small. It provides an accurate record of what has happened to a business over a specified period of time. Information helps the owner or the manager operate the business much more effectively.
As long as NGOs are receiving fund from different sources and as long they are required to use that funds in a specific issued NGOs are required to keep records concerning finance through accounting principles. To capture information concerning revenues (receipts) and expenses (payment voucher), organizations have to maintain records.
For a small organization (NGOs and other NPOs) simple bookkeeping system may be appropriate but as organization grows and takes on a number of projects and having different sources of funding accounting system will become more sophisticated, Accounting records falls into two categories - Supporting documents & Book of accounts.










CONCLUSION:
NGO Act of 2002 provide procedure for registration of Non Governmental Organizations and coordinate and regulate activities of Non Governmental Organizations. The act express financial matters in NGOs in Tanzania, it give detail about source of funds, preparation of estimates of the revenue and expenditure, restriction to make NGO spend their funds according to annual budget and restriction that NGO Board shall keep proper books of accounts. The problem of the act is that the regulation and standard laid down are not performed by the NGOs. Great Numbers of NGOs are mushrooming for the purpose of taking care the needs of the people. But most of them are existing for the benefits of the founder members, now days NGOs are established to give employment to the graduates and sometimes are used by the donors staffs as the means of making money. The act didn’t mention about the legal action toward those who use funds directed to the community for their person use. Most of NGOs have no even an office where they can operate but they receive a lot of money from donors, some are operating in a family basis. NGO Act 2002 doesn’t show standards form of NGO that why whoever wish to establish that organization can start it without any critical restriction. That is to say NGOs Act is their but it is not sufficient in supervision of NGOs and its financial matters.

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