MAKERERE UNIVERSITY

ACCOUNTANTS PROFESSIONAL ETHICS AND FINANCIAL ACCOUNTABILITY

IN NON-GOVERNMENT ORGANISATIONS

CASE STUDY: USAID AND WORLD VISION IN KAMPALA DISTRICT


BY

NALUBEGA ESTHER
REG NO: 11/U/7396/EXT
ACCOUNTING OPTION
FACILITATED BY MR.KAJJUMBULA RICHARD





A CONCEPT PAPER SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
COURSE WORK RESEARCH METHODOLOGY (COX3221)




BACK GROUND OF THE STUDY
In a review of not for profit accountability literature, brody (2001) defines financial accountability as fiscal
honesty and avoidance of fraud therefore professional ethics and financial accountability are strongly related.
Kogan (1986) equates financial accountability to financial reporting, he argues that it is through financial
reports that organizations portray their financial accountability
Non-Government Organizations (NGOs) are not- for- profit civil society organization created with the mission
of addressing the underserved aspects of national life and development,NGOs have taken an increasingly
prominent role as development assistance implements in recent years especially in fragile states where they
often provide essential services which are traditionally under the responsibility of the public sector .With the
growing influence of the non-profit sector over service delivery as well as their increased involvement in the
development of national and international policies, the transparency and accountability of NGOs have become
an emerging area of concern
The code of ethics and conduct for NGOs which is defined as a set of fundamental principles, operational
principles and standards to guide the actions and management of Non-Government organization was formulated
by the international committee for Non-government organization
Many donors view NGOs as better alternative to governmental agencies in getting services and assistance to
those in need especially in countries that are burdened by political favoritism and corruption, cook (2003).
However NGOs have also been involved in scandals that are a result of having less credible governance
structures, poor financial accountability and so many other scandals. Some of the examples of NGOs the
researcher will study are world vision and USAID both of which are international organizations but operate in
many countries including Uganda and the researchers emphasis will be put on NGOs based in Kampala district
since it considered to have a big population and the capital city of Uganda
The United States Agency for International Development (USAID) which was formed by President
John.F.Kennedy in (1961) is the united states federal government agency primarily responsible for
administering civilian foreign aid .USAID seeks to extend a helping hand to those people overseas struggling to
make a better life ,recover from a disaster or striving to live in a free democratic country. It operates in Africa,
Asia, Latin America and Europe
PROBLEM STATEMENT
Funded NGOs have laid down procedures and systems to enforce quality financial accountability process but
some NGOs are not able to produce timely and satisfactory accountability to funders. Despite the formation of
the Code of ethics and conduct for NGOs to provide guidelines, principles and standards to actions and
management of Non-Government organization, principles of altruism and voluntarism remain key defining
characteristics of NGOs. The probable cause of the unethical professionalism in financial accountability is
unclear but thought to be a result of poor and less credible governance structure of NGOs, most NGOs are not
audited. And if the above persist, Accountants for NGOs will probably present insufficient data or reports to
their funders which may lead to distrust of the accountants by their funders, decline in accounting as a
profession and to a large extent may lead to the collapse of most NGOs
This therefore overwhelmed the researcher to carry out this research aimed at analyzing the relationship
between accountants professional ethics and financial accountability in NGOs.
RESEARCH VARIABLES
Control variable is the Governance of NGOs, which may be referred to a system by which companies are
directed and controlled.
Dependent variable is financial accountability which includes timeliness, Reliability, Understandability and
Relevancy of financial reports.
Independent variable is professional ethics which include openness, Honesty, Reliability of accountants.
Intervening variable is the Accounting system which is the way of keeping a written record of transactions and
may be viewed as the procedures, accounting records and the tools used in accounting
Extraneous variable is leadership, NGOs require a governing body to provide strategic direction and
leadership and this may be seen as board/management committee independence, board/management
effectiveness and NGO management effectiveness

CONCEPTUAL FRAME WORK
This conceptual framework was developed based on the study done by Keating and Frumkin (2003) on Non-
profit making organizations with adjustments made to fit the NGOs as proposed by the researcher that is
USAID and World vision in Kampala. Their study showed that financial accountability helps stakeholders such
as donors, clients, government and the public assess the financial credibility in the use funds, which increases
public confidence in the governance of the NGOs. The assessment assists stakeholders willingness to support
or participate in the organizations future.
A research made by Independent Sector (2002) showed a strong connection between the NGOs being perceived
to have an organizational culture of honesty and being ethical in use of funds as reflected in the quality of
financial reports and high levels of public confidence in the governance of the NGOs. However, for this study,
these factors such as organizational culture, corruption and political interference were held constant.














Source: Based on Keating and Frumkin, (2003)
Control variable
GOVERNANCE
Independent variable
PROFESSIONAL
ETHICS
Intervening variable
ACCOUNTING
SYSTEM
Dependent variable
FINANCIAL
ACOUNTABILITY
Extraneous variable
LEADERSHIP
OBJECTIVES OF THE RESEARCH

To establish the level of quality of financial accountability of funds in NGO
To establish the level of professionalism of accountants in NGOs
To establish the relationship between the NGO leadership and the quality of financial reports of the
NGOs.
To establish the relationship between the accounting systems of NGOs and the quality of their financial
reports.
To examine the relationship between NGO transparency and ethics and the quality of the financial
reports of the NGOs.

RESEARCH QUESTIONS

In order to gain a better understanding of the stated problem and to achieve the above objectives, the study will
be guided by the following research questions

What is the level of quality of financial accountability of funds in NGOs?
What is the level of professionalism of accountants in those NGOs?
What is the relationship between leadership and the quality of financial reports of the NGOs?
What is the relationship between the accounting systems of NGOs and the quality of their financial
reports?
What is the relationship between NGO transparency and ethics and the quality of financial reports of the
NGOs?

METHODOLOGY
This describes the methodology that will be employed in conducting the study. It specifies the research design,
the study population or the area in which the study was conducted, the sampling design, the sample size, data
sources, data collection instruments and the validity and reliability of the data collection instruments

Research design

The study will adopt a cross sectional survey design. Quantitative and descriptive methods of data collection
will be used while carrying out the study. These survey designs will enable the researcher to generate more
detailed and reliable findings. Data collection procedure will involve interviewing selected respondents,
observation and review of the available literature so as to generate substantial, reliable and credible field data.



Sample size
In this study a sample size of 30 NGOs will be taken to represent the population of NGOs in Uganda. One
hundred and seven (107) respondents will be selected from 30 NGOs to represent the different levels of NGOs
management and the stakeholders who will review the NGOs financial reports as shown in Table. The
selection of the respondents will be randomly based on availability and willingness to respond to questions of
the researcher

Category of Respondents

category Total respondents
Board of directors 60
Representatives of local governments 9
NGO management and staff 30
Representatives of donors 8
Total 107

Sampling design and procedures

Stratified random sampling design will be used for this study. The NGOs in Uganda will be grouped between
local and national NGOs.10 NGOs will be randomly selected from three districts to come up with a total of 30
NGOs. From each of the district, 8 will be local and 2 will be national. This will be based on the proportionate
size of the type of NGO in relation to the population.

Data sources

Both primary and secondary data collecting methods will be used. The primary methods will be used to collect
data in the field while secondary data collection methods will be used to review the already secondary sources
of related data. The secondary data collection methods to be applied will include library search and Internet
surfing while primary data collection methods will include both written and oral interviews, observation as well
as questionnaires that will be used to answer the research questions

Survey population
The study will be conducted in Uganda and the respondents will be obtained from three districts, Kampala
being the capital city of Uganda has got many NGOs, the case study will be based in Kampala which will make
it easier for the researcher to gather information required for this research. The researcher intends to visit
world Vision offices and USAID among others.

Research strategy
To examine the relationship between Accountants professional ethics and financial accountability in NGOs.

Data collection methods and tools

1. Questionnaires The research instruments will include structured questionnaires with pre-coded
answers administered to the respondents. The instruments will be pre- tested and discussed with relevant
research experts and the supervisors

2. Leadership This variable will be measured using an instrument developed under the guidance of my
effectiveness.

3. Transparency This variable will be measured by asking questions that aim at establishing the level of
openness, honesty and reliability of the staff and management of the NGOs.

4. Accounting System This variable will be measured by asking questions aiming at establishing the
quality of internal procedures, accounting records and tools.

5. Financial Accountability The variable will be measured by asking questions that aim at establishing the
quality of financial reports.


Data processing and Analysis

After collecting and cleaning the data it will be entered in a computer using Statistical Package for Social
Scientists (SPSS). Various statistical tests will run to analyze the data. These will include the factor analysis,
multiple regression analysis and correlation analysis.















REFERENCES
AIM, (January, 2006), Quarterly Report for October December, 2005.

Annon, (2003) NGOs, Far Eastern Economic Review, Hong Kong, Vol. 166 No. Aug, 2003.
Asian Development Bank, (2005), Governance: Sound Development Management: The Good Governance, retrieved
on 29 November 2005 at www.adb.org/Documents?Policies?Governance/gov350.asp?=policies.html

Australian Accounting Research Foundation (1990), Qualitative Characteristics of Financial Information.
Voice, J. (2004), The Accountability, Accessed on 21 July 2004 at
www.afpet.org/contentdocuments/marap04cover.pdf

Brody, E. (2001), Accountability and Public Trust, in the state of Americas Nonprofit sector, Aspen Institute and
Brookings Institution.

Brown D. and Moore M. (2001) Accountability, Strategy and International Non-Governmental Organizations,
Hauser Centre For Non-Profit Organizations, Harvard.

Centre for African Family Studies (CAFS) (November 2001), A situational Analysis of NGO Governance and
Leadership in Eastern, Southern, Central and Western Africa,.

Cutt, J. (1998), Performance and Accountability in Nonprofit Making organizations: Concept and Practice: Centre
for Public Health Studies, University of Victoria, Victoria B. C.

Cohen J. (2003), Governance by and of NGOs, Institute of Social and Ethical Accountability, UK.

Cohen, Krisnamoorthy and Wright (2004), The Corporate Governance Mosaic and Financial Reporting Quality,
Journal of Accounting Literature,