Development partners Britain and United States of America (USA) have justified direct funding to non-governmental organisations (NGOs), saying they closely monitor the finances to enable swift action in the event of financial mismanagement.
The donors were responding to a report which the NGO Board submitted to Parliament highlighting that close to K1 trillion of social development aid passes through NGOs in the country, 30 percent of which is from local bilateral and multilateral partners.
The NGO Board told The Nation last week that only 170 of the country’s 680 registered NGOs submitted financial reports as required by the NGO Act.
The US government has said it has been transparent on how much funding it provides off budget through the Aid Management Platform of the Ministry of Finance, Economic Planning and Development which tracks donor funding, including through NGOs.
When queried what the development partners’ fallback plan would be if the NGO system were to fail like the government did in 2013, US Ambassador Virginia Palmer said they had confidence in NGOs.
“We are confident in the continued, important roles NGOs will play in supporting Malawi’s development agenda,” she said in a response to a questionnaire.
The envoy added that the US government consistently evaluates projects it funds to improve effective use of resources.
Said Palmer: “All US Government-funded contractors or grantees, both international and from Malawi, must agree to rigorous financial management, transparency, and ethical conduct policies, which the US Government strictly enforces.”
She said they would continue to coordinate activities with ministries and councils to ensure that development investments in Malawi achieve intended results.
The Ministry of Finance, Economic Planning and Development has not fully agreed with the system, arguing it violates the aid effectiveness principles which encourage the use of country systems in the delivery and management of aid as a best practice in development cooperation.
However, in a questionnaire response, the British High Commissioner Holly Tett said the United Kingdom and others have always used a mix of instruments in line with the outcomes of the Financing for Development Conference in Addis Ababa, Ethiopia.
She said this is done while ensuring that whoever handles UKAid money, be it a Nations agency, NGO or others, have to abide by strict financial management and accountability terms.
“The UK works closely with partners to monitor and track all spending to ensure every penny is being used most efficiently and achieving maximum results for Malawi and for the UK. We have zero tolerance for any mismanagement of funds and take swift action if any such activity is suspected,” she said.
The amount of off-budget funding has increased since 2013, when Cashgate was revealed, from 55 percent to over 80 percent.
According to the 2018/19 financial statement, disclosed off-budget support amounted to K61.8 billion.
In their report to Parliament, the NGO Board observed that the huge amounts of money that NGOs were handling did not translate to a change in the socio-economic livelihoods of Malawians.
It is from the financial reports of the 170 NGOs that NGO Board estimated that the NGO sector is worth more than K1 trillion a year, slightly less than the 2018/19 government budget of K1.3 trillion.
Out of the 79 international NGOs that submitted reports, 20 had spent a total audited expenditure of K202 billion in the year 2016 alone.
“About 30 percent of the donation to the 20 NGOs came from the local donors/development partners who are on a bilateral and multilateral arrangement called Official Development Assistance,” the report to Parliament read.