SGS NGO Benchmark Audit

1

Who are we, What do we do?

InspectionInspection, Testing Testing and CertificationCertification stock-listed company.

52,000 staff, 120+ countries.

Independence and Third-Party:

We verify compliance of Agreements between business partners

Quality, Quantity, Price

We hold accreditations (80+ countries) to certify entities / products against national /

international standards

We support Governments and IFIs to implement "Good Governance" measures

Optimal use of resources, Accountability, Transparency, Revenue enhancement

We aim to offer trust and confidence

Aid Efficiency ServicesAid Efficiency Services

(Governments & Institutions Division)(Governments & Institutions Division)

Geneva HeadquartersGeneva Headquarters

3

““To verify the proper use of To verify the proper use of

grants and loans provided for the grants and loans provided for the

betterment of Civil Societybetterment of Civil Society””

Our Mission is

4

Aid Efficiency Services

Documentary Checks Documentary Checks Of Procurement StepsOf Procurement Steps

« No Objection »« No Objection »

+ By-Products+ By-Products

------Project

Implementation Monitoring

Risk Profiling

of Development Partners

(PEs, PIUs etc.)

Independent

Procurement

Reviews

EvaluationEvaluationPreparationPreparation ExecutionExecution

NGO Benchmarking

+ Technical Assistance / Capacity Building

5

We provide Answers tothe following Questions:

NGO Benchmarking Are You Truly Accountable?

Risk Profiling Are You Fit For The Job?

Project Monitoring Are You Doing Things Right?

Documentary Checks on Procurement Steps

Are You Playing By The Rules?

Independent Procurement Reviews

Have You Done The Right Things?

NGO BenchmarkingNGO Benchmarking

« Getting the Seal of Good « Getting the Seal of Good HousekeepingHousekeeping » »

7

No formal definition of a “Nonprofit”…

Independent, voluntary association of people

Acting together on a continuous basis for a common purpose other than Achieving government office Making money Being involved in illegal activities

As “third-sector”, 4 distinctive features: Independent from any direct control of a public authority Non-profit making (in a private sector sense) Not constituted as a political party and Non-violent, non-criminal

NPOs, NGOs, CBOs, PVOs, CSOs etc. ICNPO Classification

8

Nonprofits

Extremely diverse: Managerial abilities Working capital ratios Effectiveness of operations Leverage at the Public or Private sectors levels Attitudes vis a vis grantors …

Is their growing influence matched by increased

ACCOUNTABILITY ?

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How to rise to the Accountability Challenge?

Self-Assessment: “We are very good”…1st Party

An interested party does the assessment

Each party has his own audit criteria. Multiplicity. Duplication

Focus is on projects > organization + potential Conflict of Interest?

2nd Party

3rd Party An independent body, referring to a Standard

10

TypicalTypicalAccountability FrameworkAccountability Framework

Proper accountability

Shall consider ALL stakeholders and

Be assessed by bodies that are no party to the “transactions”

NGO1st PARTY

“NGO Clients” 2nd PARTY

“NGO Clients” 2nd PARTY

Grantors Beneficiaries

Grantee

Surrounding Surrounding

?? Communities Communities

LocalLocal

?? Authorities Authorities? ? SuppliersSuppliers ? ? ContractorsContractors

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Purpose of NGO BM

Institutional Due Diligence:

Beyond programs & projects: Overall assessment to determine if leadership and management have the capacity, willingness and readiness to accomplish what they claim

i.e. To provide assurance to stakeholders that an NGO is – Fit for purpose– Accountable– Sustainable

…In reference to a consolidated Standard of Best Practices

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NGO BM Certification Audit

IS NOT:

An Impact Assessment of projects, activities

A financial or a management audit

A substitute for dialogue with Stakeholders

IS

A Measure of Compliance with International Best PracticesA Measure of Compliance with International Best Practices

……to be translated into an to be translated into an internal management toolinternal management tool

……for for Continuous ImprovementContinuous Improvement Purposes Purposes

DDesigned for the NGO to keep control over its processes / results, using it for the outside world, whenever necessary and appropriate.

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Referenced Codes and StandardsReferenced Codes and Standards

Grantors and civil society organizations have established International Codes & Standards for eligibility / funding purposes (25 today)

Based on their specific requirements Humanitarian principles Quality of Deliveries Finances Ethics etc.

None is truly comprehensive in terms of Accountability Risk Assessment

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Approach to these Standards: Our Rationale (1):

Focus on the RISKS an NGO could face and their consequences in terms of Image, Performance, Resource Allocation, Control Mechanisms etc.

Identified risks shall be assessed Comprehensively (scope) and At different time intervals (validity)

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Types of Risks

Management: Leadership

HR: Profiles in line with exigencies

Market: Stakeholders going to buy

Competition: Offering something similar/better

Funding : Fundraising ability to sustain itself

Insurance: Liability and property 

IP : Right to use the intellectual property it is using

Technology : Appropriateness

Projects: Reasonable, feasible, outcomes measurable

…

Awareness, through independent audit, and downstream Action shall minimize these risks and enhance the value of the organization.

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“IF YOU CANNOT MEASURE IT, YOU CAN NOT IMPROVE IT”Lord Kelvin (1824 – 1907)

Identify, in reviewed Standards, “Objectively Measurable Indicators”

108 criteria in NGO BM V1

Establish a rating system so that:

Clear identification of strenghts / weaknesses

Over time, improvements can be traced

Data bases for comparison purposes

Our Rationale (2):

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Standard DesignStandard Design

Nonprofit SectorCodes & Standards

“NGO BENCHMARKING”

STANDARD

108 criteria

ObjectivelyObjectively

Verifiable Verifiable

IndicatorsIndicators

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Perspectives

P1: Dimensions of Best Practices

P2: Stakeholders’ Expectations

P3: Management Components

P4: Continuous Improvement

Each and every stakeholder shall be able to Each and every stakeholder shall be able to

select his select his ““entry pointentry point”” into the results: into the results:

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P1: 9 Dimensions of Best Practices

Continuous Improvement

Fundraising, Resources AllocationAnd Financial Controls

Communication, Advocacy,Public Image

Strategic Framework

Board of Trustees

Human Resources

Integrity Management

Outcomes

Operations

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8. Outcomes:

9. Continuous Improvement:

Overall:

7. Operations:

42.2%

46.7%

88.9%

6. Fundraising, Resources Allocation and Financial

3. Integrity Management:

4. Communication,Advocacy and Public Image:

5. Human Resources: 12

15

18

100

90.7%

75.0%

88.2%

71.4%

17

7

8

74.3%

5

# of Criteria

12

694.4%

Score

58.3%1. Board of Trustees:

2. Strategic Framework:

25% 50% 100%0 75%

P1: Dimensions of Best Practices

A Certificate is awarded if (a) A Certificate is awarded if (a) 7070++ % % , (b) , (b) no major NCno major NC and (c) and (c) D1, 2, 6, 7 >50%D1, 2, 6, 7 >50%

Validity: 12 – 18 monthsValidity: 12 – 18 months

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P2: Contributors’ Expectations

3. Score by Contributors' Expectation

77.8%

Effectiveness Overall

75.8%77.3% 66.7%

EfficiencyTransparency

70%

100%

50%

25%

0%

# of Criteria: 50

70%

100%

50%

25%

0%

# of Criteria: 16

70%

100%

50%

25%

0%

# of Criteria: 36

70%

100%

50%

25%

0%

# of Criteria: 102

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P3: Management Components

78.1%VM CR Total =

0%

20%

40%

60%

80%

100%

System Program/Project

HumanResources

Finance

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All organizations need a "feedback loop" to improve!

P4: 4 Steps towards Continuous Improvement

1.PLAN: Define / Prepare

2.DO: Apply /

Execute

3.CHECK: Confirm it works!

4.ACT: Modify / Adjust

Plan

Act

Do

Check

Higher QualityNGO BENCHMARKING

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P4: Continuous Improvement

78.1%VM CR Total =

0%

20%

40%

60%

80%

100%

Plan Do Check Act

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Continuous Improvement Recommendations

26

.

27

Certification Mark

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Consolidated Report

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

1 Board of Trustees 0.76 0.75 0.72 0.58 0.78 0.83 0.78 0.81 0.55 0.58 0.58 0.69 0.58 0.72 0.72 0.81 0.72 0.64 0.76 0.61 0.70

2 Strategic Framework 0.90 0.92 0.88 0.79 0.88 1.00 0.75 0.83 0.57 0.67 0.63 0.79 0.67 0.88 0.88 0.92 0.71 0.96 0.71 0.63 0.88

3 Integrity Management 0.23 0.78 0.67 0.49 0.78 0.90 0.60 0.55 0.29 0.21 0.33 0.31 0.18 0.29 0.23 0.60 0.27 0.71 0.07 0.02 0.27

4Communication, Advocacy and Public Image

0.80 0.87 0.80 0.87 0.93 0.93 0.53 0.87 0.33 0.47 0.67 0.80 0.40 0.67 0.67 0.87 0.47 0.87 0.87 0.60 0.73

5 Human Resources 0.86 0.81 0.72 0.70 0.92 0.94 0.83 0.83 0.19 0.61 0.78 0.89 0.42 0.58 0.58 0.61 0.39 0.89 0.97 0.33 0.61

6Fundraising, Resources Allocation and Financial Controls

0.73 0.76 0.64 0.78 0.92 0.89 0.70 0.71 0.48 0.33 0.48 0.52 0.40 0.39 0.44 0.73 0.51 0.91 0.70 0.44 0.76

7 Operations 0.95 0.90 0.80 1.00 1.00 0.96 0.84 0.90 0.45 0.67 0.84 0.93 0.65 0.84 0.71 0.78 0.69 0.98 0.85 0.83 0.88

8 Outcomes 0.95 0.86 0.76 1.00 1.00 0.90 0.67 0.52 0.24 0.57 0.76 0.95 0.62 0.81 0.67 0.81 0.43 0.95 1.00 0.86 1.00

9 Continuous Improvement 0.67 0.88 0.63 0.42 0.96 0.92 0.63 0.29 0.17 0.13 0.71 0.29 0.29 0.25 0.67 0.79 0.25 0.88 0.79 0.17 0.58

0.73 0.82 0.72 0.74 0.91 0.92 0.70 0.70 0.38 0.46 0.61 0.69 0.47 0.60 0.62 0.77 0.49 0.86 0.75 0.50 0.50

NOT CERTIFIEDCERTIFIED

1. Score by Dimension of Best Practices

Consolidated(Cells highlighted in light orange are those below the 70%

threshold)

Overall:

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Distribution of “low scores” by criteria

Proportion of respondents with a "0 or 1" score (from 0 to 3), for this criteria:

1

1. BOARD OF TRUSTEES Occurrence ratio

6 Is there a Register of Trustee’s interest? Is this Register reviewed on a regular basis (12 months or less)?

90.9%

10 Is there a periodic performance evaluation of the Board’s members? If so, is there a follow-up procedure on the results of such evaluation (training, coaching, etc.)?

72.7%

4 Is there a rotating policy for Board members, so as to avoid changing the whole Board at the same time?

27.3%

1

Is the Board of Trustees fully independent and voluntary? Are board members totally unrelated to each other? Are all board members unrelated to paid staff? Does the organization have a policy that addresses direct or indirect conflicts of interest for its Board of Trustees?

27.3%

5

Local/Transnational NGO: Is there a provision in the statute of the Board of Trustees that specifies the obligation of residency in the country for the majority of its members? Is that obligation complied with today? International NGO: Is there a provision in the statute of the Board of Trustees that requires a large diversity of national origins for the majority of the members (including overseas partners)? Is that obligation complied with today?

27.3%

9

Are newcomers to the Board of Trustees provided with written guidance about their role, responsibilities and legal liabilities? Does this guidance document(s) include information about financial obligations and specify the due diligence process when exercising their responsibilities?

27.3%

11

When nominating new Board members, does the organization have a written policy and procedure that ensures (a) fairness and transparency of the process and (b) that critical know-how, such as finance etc., are represented at all times?

27.3%

3 Is there a documented procedure to ensure a periodic change of its Board Members?

9.1%

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NGO BM Key Features

Consolidates and complements Best Practices from 25+ Standards / Codes towards a Due Diligence tool

“If you cannot measure it, you cannot improve it” Rating from different perspectives for various Stakeholders Enables to objectively trace improvements Mapping of strengths and weaknesses Action Plan towards Continuous Improvement

Generates a Data Base for Benchmark of benchmarks Identification of Recurrent non-conformities towards capacity

building for affiliates / branches

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Scope of NGO BM Certification Audits

Scope 1:  Headquarters only:

We refer to Operations & Outcomes Supervision

~ 5 manday-process incl ~ 4 mandays on the spot

Scope 2: Headquarters + a representative sample of branches / operations / projects

We refer to Operations and Outcomes

Duration depends on # sites + logistics

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Status as of August 2009

International Classification of Nonprofit Organisations. 1.Culture and Recreation, 2. Education and Research, 3. Health, 4. Social Services, 5. Environment, 6. Development and Housing, 7. Law Advocacy and Politics 8. Other Philantropic Intermediaries and Voluntarism 9. International 10. Religion 11. Business and Professional Associations and Unions 12. [Not Elsewhere Classified]

Certified NGO’s: 51.3%

Average score: 69.6%

Scopes: 1: 105 2: 12

Re-certifications: 27%

Continent Audits Performed ICPNO Codes*

Europe 15 3,4,5,6,8,9,11

Africa 33 3, 4, 7, 9,12

America’s 38 2,4,5,6,7,8,9,11

Asia 31 2,3,4,5,6,8

Total 117  

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Services provided under NGO BENCHMARKING

Design of

“Second-Party Standards”

based on

client’s by-laws or specific

requirements

+

application through audits

CONSULTANCYCONSULTANCYTRAININGTRAINING

NGOsTrainers

Coverage: The 50 most important

Best Practices criteria

2 to 3-day sessions

with case studies, exercices etc.

AUDITAUDIT

Self-Assessment (web)

Pre-Audit

Documentary Assessment

Certification Audit

ConsolidatedConsolidated

ReportsReports

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www.ngobenchmarking.sgs.com

Contact:Robert Jourdain

Aid Efficiency Services

Phone:   +41 22 739 94 26

Mobile:  +41 79 610 20 44

Fax:        +41 22 739 98 39

Email:   [email protected]

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ExampleExample P1 P2 P3 P4

Standard V1.01 (May 6th, 2005)Dimensions

of Best Practices

Contributors' Expectations

ManagementComponents

ContinuousImprovement

108 Objectively Verifiable Indicators

1to9

TransparencyEfficiency

Effectiveness

SystemActivities

HRFinance

PlanDo

CheckAct

Q:-----------------------------------------------

Q:-----------------------------------------------

SCORES SCORES SCORES SCORES

D

Q: Does the organization implement an impact assessment of each of its projects?

Q: Is there a specific Ethics / Conduct related clause in all employees and volunteers' contracts?

Q: Has the organization measured its cost of raising 100$?

TIntegrity Management

Fundraising, Resources

Allocation and Financial Controls

Outcomes

SC

OR

ES

CO

RE

SC

OR

E

ES A C

PHR

EY F

36

Process: Process: System Integration and Value AddedSystem Integration and Value Added

.

Site AuditAuditor’s Manual

Auditor’s Software

Main Software

E D TBenchmarking

Report

All

Audits Data Base: Benchmark of BenchmarksConsolidated

Report

+ Technical Annex+ Technical Annex

NGO NGO

StandardStandard

2-week preparation

AuditPreparation

Questionnaire/

Contract

37

Accountability

To Inform interested parties (Implies knowing them all)

To Listen to their concerns (Implies participation)

To Report i.e. to assume responsibility for the means and the results (Implies sound management practices)

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1. Code of Conduct for the International Red Cross and Red Crescent Movement and NGOs Disaster Relief

2. Inter Action's Private Voluntary Organization (PVO) Standards

3. Canadian Centre for Philanthropy: "Ethical Fund-Raising Accountability Code"

4. The Drucker Foundation self-assessment tool for non-profit organizations

5. Malcolm Baldridge National Quality Award, ISO 9000, SA 8000 and ISO 14000 Standards

9. National Charities Information Bureau standards in philanthropy

10. American Institute for Philanthropy "Charity Rating Guide"

11. Canadian Council of Christian Charities "Standards for Organizational and Financial Integrity"

12. Charities Review Council of Minnesota "Standards"

13. Guide Star database on non-profit organizations and performance ratios / Charity Navigator

14. Standards de la ZEWO (Bureau Central des Oeuvres de Bienfaisance)

15. USAID NGO Sector Strengthening Program

16. The SPHERE Project Humanitarian Charter and Minimum Standards in Disaster Response

17. Humanitarian Aid Office of the European Commission (ECHO)

18. ICFO International Committee on Fundraising Organizations International Standards

19. Maryland Association of Non Profit Organizations

20. Guidance Document to the Code of Ethics of the Canadian Council for International Co-operation

21. Global Accountability Project: Charter 99 / One World Trust

22. Charte de Déontologie des Organisations Sociales et Humanitaires faisant appel à la générosité du public

23. AUSAID Accreditation for Non-Government Organisations

24. Credibility Alliance Norms

25. Charities Review Council Standards of Accountability

Referenced Codes and StandardsReferenced Codes and Standards

39

“Money talks”

How to identify an organization that

– Is trustworthy, reliable, sustainable, compliant…

– Could make a difference?

Grantors (and any stakeholder) are entitled to receive

proper accounts on how their trust and money is being utilized

40

Comprehensive?

SystemActivities$HR

P3 P3 Management ComponentsManagement Components

Act

Check

Do

Plan

P4

P4

Con

tinu

ous

Impr

ovem

ent

Con

tinu

ous

Impr

ovem

ent Numerous criteriaNumerous criteria

VirtuallyVirtuallynonenone Virtually Virtually

nonenone

VeryVery

fewfew

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BENEFITS

CREDIBILITY REQUIRES AN INDEPENDENT THIRD-PARTY

Enhance Good Governance, Accountability to Stakeholders

Detect weaknesses towards corrective / preventive actions

Reduce / prevent reputation risks

Efficient processes lead to better results

Ensure stakeholders’ commitment

Comply with grantors’ growing demand for accountability

…

42

NGO BM vs ISO 9000

NGO BM

1. Specific to nonprofits

2. Organized along risks stakeholders may be confronted to

3. Performance criteria defined by the Standard (same for all)

4. Flexibility to integrate concerns such as sector specifics

5. Detailed Report with scoring from different perspectives (“Stakeholders’ entry points”)

6. Scoring enables to measure progress over time + compare results / identify patterns in a network of NGOs

ISO 9000

1. Generic across sectors

2. Provides means to implement, in a generic way (tool-box)

3. Auditee defines its own threshold (performance criteria are left for him to assess)

4. Flexibility achievable at cost

5. Pass or fail

6. No mapping for serial audits

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LEGISLATION

“Reactive” approach (CORRECTIVE MESURES)

MANDATORY(Laws and Regulations)

NGO BM

VOLUNTARY(“Market” laws)

MECANISMS OF COMPLIANCE TO BEST PRACTICES

“Proactive“ Approach (PREVENTIVE MESURES)

VOLUNTARY STANDARDS

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1. Consolidated Reports

To compare units / branches / affiliates To compare units / branches / affiliates within a networkwithin a network

To identify recurrent non-conformitiesTo identify recurrent non-conformities

To establish focused improvement To establish focused improvement programsprograms

To position an organization vs competitionTo position an organization vs competition

45

31 2 4

5 6 7 8

9 10 11 12

13 14 15 16

17 18 19 20

Consolidated # of Zero & One

NGO Benchmarking Certification Audits of Group of NGOs in Sectors / Countries

Consolidated Report

Dimensions of Best Practices

Contributors' Expectations

Mngt. ComponentContinuous

Improvement Steps

Operational Style

Operational Status

Number of years of field experience

Lead Auditor

ICNPO Group

Copyright © 2005 - 2009 SGS Société Générale de Surveillance S.A. All rights reserved.This spreadsheet has been designed by SGS Aid Efficiency Services, ROHQ Manila, Philippines.

Dashboard of Consolidated Results

46

Other features

Ranking

9

5

6

8

4

7

1

3

20.85

Correlation Factor (C.F)

0.86

0.85

0.79

0.76

0.83

0.79

0.74

0.83

D9 Continuous Improvem.

Dimensions

D5 Human Resources

D6 Finances

D7 Operations

D8 Outcomes

D1 Board of Trustees

D2 Strategic Framework

D3 Integrity Management

D4 Com. Adv & Pub Image

Correlation Between Dimension 1 & Overall Score

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Score in Dimension 1

47

Distribution of Management Component Scores by Organizations’ Size

Rating 1

Full staff members of the audited unit

SystemProgram/Project

HumanResources

Finance Overall Score# of Surveyed

NGO

1 to 9 80.7% 64.9% 47.7% 57.3% 59.8% 110 to 20 84.4% 92.2% 82.5% 76.8% 85.4% 121 to 50 67.5% 74.2% 36.9% 54.4% 58.4% 251 + 68.8% 78.0% 63.4% 65.9% 70.4% 7

Average score All NGOs 71.1% 77.4% 58.9% 64.0% 68.6% 11

Std 7.4% 9.8% 17.2% 8.7% 1

01

01

01

Mngt Component

Comparison by Full staff members of the audited unit per Management Component

Comparison by Full staff members of the audited unit under System

0%

20%

40%

60%

80%

100%

1 to 9 10 to 20 21 to 50 51 +

Comparison by Full staff members of the audited unit under Program/Project

0%

20%

40%

60%

80%

100%

1 to 9 10 to 20 21 to 50 51 +

Comparison by Full staff members of the audited unit under Human Resources

0%

20%

40%

60%

80%

100%

1 to 9 10 to 20 21 to 50 51 +

Comparison by Full staff members of the audited unit under finance

0%

20%

40%

60%

80%

100%

1 to 9 10 to 20 21 to 50 51 +

48

2. Second-Party Standard / Option a

To complement NGO BM with technical criteria (D10) defined by client

Objectively Verifiable Indicators and Rating

D10 is audited during NGO BM process

Separate Report, D10 certificate issued by client

49

Second-Party Standard / Option b

Based on client’s own By-Laws and objectives Based on client’s own By-Laws and objectives

Towards more specific compliance expectationsTowards more specific compliance expectations1.1. Establish structure of the standard Establish structure of the standard

2.2. Translate requirements into objectively verifiable indicators + Translate requirements into objectively verifiable indicators + ratingrating

3.3. Design analytical and reporting frameworkDesign analytical and reporting framework

4.4. Test, validate, final versionTest, validate, final version

Standard is client’s ownershipStandard is client’s ownership

Audits performed by SGS, certificates issued by the clientAudits performed by SGS, certificates issued by the client

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3. Training in Best Practices

OBJECTIVE :OBJECTIVE :

Is NOTIs NOT to tell NGOs what should be their normative model of Good to tell NGOs what should be their normative model of Good Governance and Accountability!Governance and Accountability!

To provide an overview of generic Best Practices requirements as To provide an overview of generic Best Practices requirements as underlined in today’s Accountability principles set by donor agencies, underlined in today’s Accountability principles set by donor agencies, public authorities or private foundations. public authorities or private foundations.

To enable participants to identify the risks attached to non-To enable participants to identify the risks attached to non-compliance as well as shortcomings that may jeopardize sustainable compliance as well as shortcomings that may jeopardize sustainable development of a NGO. development of a NGO.

Geared towards a reinforcement of their capacities towards better Geared towards a reinforcement of their capacities towards better Compliance with the exigencies of Best Practices. Compliance with the exigencies of Best Practices.

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Training in Best Practices

OUTLINEOUTLINE

The 50 most important criteria are selected across the 9 Dimensions The 50 most important criteria are selected across the 9 Dimensions of the NGO BM Standard and explained along the following headers:of the NGO BM Standard and explained along the following headers:

DefinitionDefinition Risks of non-complianceRisks of non-compliance Benefits of complianceBenefits of compliance References of Best Practices from agencies, states, foundationsReferences of Best Practices from agencies, states, foundations Case studies.Case studies.

52

Training in Best Practices