Talking point - Open books

Non-Governmental Organisations (NGOs) are not bound to file financial statements with any public authority.

Hence, unless provided for by their own statute, such financial information is not accessible as would be the case for limited liability companies. With the introduction of the Voluntary Organisations Act this situation should be partially addressed. However, to date, members of certain associations can only access such information if the statute covers this possibility.

NGOs that choose to act professionally do provide such information annually to their members and on a more regular basis to members of their council. This is even more so when public funds are involved.

Other NGOs act differently and sometimes try to make it uncomfortable for members to access such financial information. This in spite of the fact that the entities claim such information is accessible.

Some interpret the fact of seeking financial information as an attempt to put the organisation in bad light. Personally, I believe it is the other way round; not providing the information makes one think there is something wrong.

There are various reasons why one might want to have access to the financial information difficult. Among other things, accounts, records and accountability per se are necessary to protect the assets of the organisation.

They can also throw light on the independency and objectivity of the organisation. Properly-compiled financial information would, in addition, indicate whether the membership levels claimed by an association are realistic or not. Too often, associations, unions and similar organisations mention membership levels that are contradicted by others. To be fair, some of the claims made are totally illogical and simple arithmetic would show that certain organisations are trying to look stronger than they actually are. If the financial statements are public, one would soon realise whether the claimed membership numbers are reasonable or not as these should match the fees paid by members.

Furthermore, one would be able to analyse whether such organisations are heavily dependant on any other type of financing (apart from membership fees). Any such dependence might make the organisation in question lose objectivity in expressing itself.

The financial statements should be prepared in accordance with International Financial Reporting Standards (IFRS) to ensure that certain transactions are disclosed, such as dealings with related parties. There are various organisations in Malta that voluntarily adhere to this but, not all do.

It is a pity that the proposed new law requires voluntary registration of financial statements. There would obviously be the cons of having mandatory registration. At least however, those benefiting from public funds should register. Hopefully, as is the case with the Registrar of Companies, the new Commissioner for Voluntary Organisations will ensure that organisations falling under his wing are adhering to the requirements of their respective statutes.

If one takes stock of the prevailing situation one may realise that the state of affairs in certain organisations is not all that rosy.

Members should seek to have a copy of the financial statements of their organisations and should then go through them.

Personally, I believe many would then look at certain organisations in a different light with regard to notes demands by the IFRS.

The proposed new law can be used by genuine NGOs as a public relations exercise as they would be more transparent. It all depends, however, on whether the commissioner will have the necessary resources to run a strong and sound operation, as is the case with the Registrar of Companies.