Steering International NGOs through Time: The Influence of Temporal Structuring in Government Accountability Requirements

Introduction

The prevalent interconnectedness of government and nonprofit organizations has taken root and with it, long-standing tensions between government funding practices and the behavior of nonprofit organizations continue to dominate the literature (e.g., Kramer 1985; Smith and Lipsky 1993; Froelich 1999; Smith 2006; Jung and Moon 2007; Verschuere and Cortes 2012). Often, these tensions have been viewed from the vantage point of how government can effectively hold their nonprofit partners accountable and by extension, how these partners retain their autonomy in the design and implementation of the funded programs (Frumkin 2001; Toepler 2010; Verschuere and Corte 2012). Hence, government–nonprofit relations are characterized not only by the degree of nonprofits’ dependence on public funding but also by the accountability requirements attached to that funding (e.g., Toepler 2010; Verschuere and Corte 2012).

Focusing on international nongovernmental organizations (INGOs), the general consensus is that, current accountability practices applied to these nonprofits have become overly complex, cumbersome, and tedious (e.g., Edwards and Hulme 1996; Cutt and Murray 2000; Brown and Moore 2001; Ebrahim 2002, 2003a, 2003b; Alexander, Brudney, and Yang 2010). For instance, being largely entrenched in a classical principal–agent relationship, government accountability requirements have been described as bureaucratic hurdles or, worse, as threats to the achievement of INGOs’ missions (Bendell 2006). Furthermore, as key nonstate actors with capacity to promote and shape social, economic, and political developments in the international arena, INGOs have gained prominence, consequently attracting more funding from multiple sources (Edwards and Hulme 1996; Ebrahim 2003a; Bendell 2006). This increased visibility and clout has been met with increased demands for oversight and INGO regulation (Brown and Moore 2001; Ebrahim 2003a). However, establishing just how much accountability is sufficient and how much is too much can be challenging (Ebrahim 2003a).

Addressing the influence of government requirements, Verschuere and Corte (2012) found that Belgian nonprofits not held accountable (for service quality and quantity, financial reporting, administrative reports, and target audience) by the Flemish government reported being able to act autonomously. While this establishes a negative correlation between government accountability requirements and nonprofit autonomy, it is unclear in this study what the process(es) are by which accountability requirements undermine autonomous decision making. A more in-depth inspection of government accountability requirements can thus inform our understanding of how funders control and steer their grantees and the extent to which this influences their autonomy.

Temporal structures and the practice of accountability

Numerous conceptual frameworks have been used to capture and describe the nonprofit accountability environment (e.g., Kearns 1994; Edwards and Hulme 1996; Najam 1996; Brown and Moore 2001; Ospina, Diaz, and O’Sullivan 2002; Ebrahim 2003a). Benjamin’s (2008) account space framework, in particular, allows for an exploration of the complex environment of nonprofit accountability from the vantage point of the circumstances under which nonprofits give accounts. The framework draws from institutional research on how organizations give accounts in response to environmental pressures or to prevent conflicts, in an attempt to reinstate their legitimacy (e.g., Scott and Lyman 1968; Giddens 1984; Feldman and Pentland 2003).

In particular, Benjamin’s (2008) framework underscores four key areas: when nonprofits give accounts; the purposes of those accounts; when such accounts are accepted or rejected by funders; and how all this shapes a nonprofit organization’s practices (the consequences of the accounting process). As such, the framework is well-suited for discerning the conditions or circumstances under which accounts are given and with what consequences on nonprofits’ decision-making processes. The framework, therefore, allows for the identification of the sources of tensions between accountability systems and how INGOs conduct their work, tensions that potentially alter their behavior (Ebrahim 2002, 2003a; Benjamin 2008; Verschuere and Corte 2012).

The account space framework also underscores two important accounting processes that funders use to implement accountability: explanatory and verification accounts (Benjamin 2008). Verification accounts consist of descriptions of a nonprofit’s actions that serve to authenticate that it has met the agreed-upon expectations (e.g., compliance with a set of regulations, or specific programming requirements, etc.). Explanatory accounts consist of descriptions of actions that provide explanations or rationalizations to restore the donor–nonprofit relationship equilibrium when a nonprofit has failed to meet implicit and explicit expectations, or when its practices have deviated from them (Scott and Lyman 1968; Benjamin 2008). In other words, when there is disconnect between nonprofit actions and donor expectations, a space necessitating explanatory accounts develops (Benjamin 2008). Distinguishing between these two accounting processes, as well as how they relate to each other enables a deeper understanding of just how funders’ accountability demands can alter and shape nonprofit decisions and actions.

For instance, Benjamin (2008) found that funders have a higher propensity to demand explanatory accounts when their expectations have high specificity, although grantees also furnished verification accounts. And where expectations were relaxed, funders were less likely to require explanatory accounts and more verification accounts. However, in the case of open expectations where grantees participated in the design of the outcome measurement framework for example, the explanatory accounts furnished served a different purpose. Explanatory accounts served to surface any conflicts between grantees’ practices and the initial outcome measurement framework (Benjamin 2008).

Additional purposes for furnishing verification accounts include substantiating that nonprofits have met the agreed-upon commitments. And if carefully constructed, such accounts also helped to shield nonprofits from having to supply explanatory accounts or additional inspection (Benjamin 2008). Furthermore, nonprofits also supplied “explanatory accounts not [only] to ensure the continuity of a relationship within the confines of an existing set of expectations [that is, normalizing deviant behavior], but rather, to challenge and change the expectations that necessitated the account in the first place, often with the hope of furthering understanding about their practices” (Benjamin 2008, 212).

This article builds on the account space framework articulated above; however, two important differences require elaboration. First, contrary to the framework’s focus on foundations (as funders), this research examines the emergent account space in an INGO–government-funded relationship. The literature contends that different funding streams exhibit differential behaviors and impacts (Froelich 1999; Foster and Fine 2006; Young 2006). For instance, government funding comes with more strings attached (Rushton and Brooks 2006), demanding a great deal more reporting requirements than earned income which tends to be unrestricted and hence permits more flexibility.

Second, this article emphasizes that when nonprofits provide or are expected to furnish accounts has important implications on their practice. Benjamin (2008) only captured an event-based temporal notion (Orlikowski and Yates 2002), where “time is in the event” (see Clark 1985, 36, cited in Orlikowski and Yates 2002). Such a temporal orientation captures only the circumstances or conditions under which nonprofits furnish verification and explanatory accounts and not necessarily the timing of accounts.

In considering the types of administrative controls employed by the federal government, Thompson (1993) noted the existence of controls executed prior to spending the award, that is, before-the-fact management mechanisms such as rule enforcement and compliance. The author also noted the existence of after-the-fact controls such as sanctions or rewards, which are executed after the subject acts. This article expands Benjamin’s (2008) concept of when to incorporate Thompson’s (1993)clock-based temporal structure, whereby time is considered to be objective and therefore “independent of man,” although there is clearly a dialectical influence (see Clark 1992, 142, cited in Orlikowski and Yates 2002).

This nuanced distinction recognizes that time influences decision makers’ choices and prioritization (Mosakowski and Earley 2000; Orlikowski and Yates 2002). For example, the mental considerations given to long- and short-term goals may influence present behavior and choices (Nuttin 1936). Although referring to individual behaviors, Nuttin (1985) explains that a temporal perspective “… is implied in the achievement of major projects where long-term instrumental steps are required and where the regulating impact of a goal is necessary from the very beginning of the enterprise” (p. 11, emphasis mine). Hence, before- and after-the-fact controls serve to motivate and compel service suppliers to make decisions that are more desirable to the funder, with after-the-fact controls squarely placing the responsibility for the consequences of the decisions on the service providers (Thompson 1993).

Temporal structuring is evident in that, government’s accountability requirements are also largely centered on INGOs’ accounting for inputs, activities, outputs, and, to some degree, on outcomes (e.g., Cutt and Murray 2000; Brown and Moore 2001; Ebrahim 2003b). Examples of the results of accountability mechanisms entrenched in government funding include the creation of red tape (Bozeman 1993), exhausting paperwork, constraints on accessing the provided resources, and stringent standards of eligibility for government grants and contracts (Knusten and Ebrahim 2010). Mechanisms (controls or levers) refer to “distinct activities or processes designed to ensure particular kinds of results” (Christensen and Brower 2006, 196).

This article focuses primarily on the nature of the temporal structures in government accountability requirements and the expectations behind these temporal structures, as well as their impact on nonprofits’ decision making and actions. Hence, this article takes into consideration that INGOs’ decisions and actions can be shaped by both clock- and events-based temporal structures. In other words, when it comes to accounting for government funding not only do the circumstances or conditions under which accounts are given matter, the timing of when accountability requirements have to be met also engenders real checks and balances that can effectively serve to slow down or delay the organizational decision-making processes, all in an attempt to minimize any decision ambiguities, among other purposes.

While Verschuere and Corte (2012) found a negative correlation between government accountability requirements and nonprofit autonomy, the processes by which these requirements undermine autonomous decision making remain unclear. This article contends that, embedded in accountability requirements are important and powerful temporal structures (circumstances and timing) that engender a unique environment which prescribes or dictates when verification or explanatory accounts or both accounts are required. The article concludes that temporal structures effectively serve to steer and control INGOs’ strategic decision making with respect to resource allocation and use and operations, by altering, redefining, and conditioning the parameters and hence, the environment within which strategic decisions are made.

Methods and data analysis

Data for this research consist of 2008 qualitative interviews collected from three U.S.-based relief and development INGOs selected using convenience sampling ^[1] based on their level of dependence on government funding. (Real names are withheld for privacy and confidentially reasons.) The three cases were selected using literal (or direct) and theoretical replication logics (Yin 2009). On the one hand, all three cases had to operate in the same subfield of relief and development to allow for cross-case analysis. The preference for relief and development INGOs was influenced by the fact that government funding, especially The United States Agency for International Aid (USAID), tends to support INGOs engaged in international relief (Kerlin 2006; Reid and Kerlin 2006).

On the other hand, the theoretical replication technique allowed for the deliberate selection of cases in order to offer contrasting scenarios (Yin 2009), based on their differential levels of government support. To identify potential candidates, this research relied on USAID Volag 2006 data, from which a list of 108 relief and development INGOs was generated. Although the three INGOs in this research were selected because of their willingness to participate in this research, the INGOs had to demonstrate differential levels of dependence on government funding. Hence, as a selection criteria, an INGO’s share of USG funding had to constitute less than 20%, nearly 50% or over 80% of its total revenue and support.

The use of three distinct cases also allowed for the adoption of a multiple case design, which in turn permitted the use of cross-case synthesis, a technique that consists of aggregating key findings across all three INGOs (Miles and Huberman 1994; Yin 2009). The research design and cross-case synthesis technique also allow one to treat each case as a separate case study, thus allowing one to keep an eye out for unique contextual influences and experiences. Generally, findings from cross-case analyses are deemed more robust compared to findings from a single case (Yin 2009). They increase generalizability, thus reassuring researchers that the observed events, processes, and emergent themes and findings are not simply idiosyncratic (Miles and Huberman 1994).

As shown in Table 1, although Humanitarian Action Movement is the smallest of the three, with a budget of $29 million, on average, 94% of it consists of USG funding ^[2] channeled through Contracts (48%), Donated Food & Freight (23%), and Grants ^[3] (29%). Of the three INGOs, Hearts for Humanity is the largest with an annual budget approaching $656 million, of which 41% comes from the USG, channeled through Grants (69%) and Donated Food & Freight (31%). With a budget of approximately $38 million, Children First receives the least amount of USG funding (9%), all of which comes in the form of Grants.

From these three INGOs, a total of 19 participants were interviewed face-to-face and/or via telephone. And based on the cross-case synthesis technique, of the 19 participants, 18 directly discussed USG funding and/or had experience handling or dealing with government funding. And of the 18 participants, 2 participants were from Humanitarian Action Movement, 8 (out of 9) from Children First and 8 from Hearts for Humanity. This analysis is therefore based on these 18 participants.

Furthermore, to boost the reliability and validity of the findings, the analysis also relied on the process of data triangulation (Miles and Huberman 1994; Stake 2006; Baxter and Jack 2008; Yin 2009) and the pattern matching technique (Strauss and Corbin 1998). Hence, in addition to the interviews, the analysis also included a review of the requirements embedded in a grant and a cooperative agreement supplied by Hearts for Humanity (two of the INGOs were unwilling to share these documents). Additional documents obtained from the USAID’s website included The Code of Federal Regulations Part 226 (CRF 226) and Automated Directives System (ADS) 303, and ADS 591. Whereas The CFR 226 governs the administration of assistance awards to U.S. INGOs and other partners, the ADS 303 documents the USAID-specific “internal guidance, policy directives, required procedures, and standards” governing the administration of grants and cooperative agreement awards (USAID 2009, 4). The ADS 591 “provides the policy directives and required procedures for planning and conducting financial audits of USAID-funded contractors…” (USAID 2013, 4).

The data analysis was conducted using NVIVO 10, a qualitative software package that allows one to track the level of triangulation and pattern matching across all data sources. This software is recognized for its organizational and data management capacity, attributes that help improve the quality of qualitative data analysis by allowing for a systematic analysis (Ozkan 2004; Bazeley 2007).

Findings

While Verschuere and Corte (2012) found a negative association between government accountability requirements and nonprofit autonomy, this article identifies some of the processes or mechanisms by which that autonomy is undermined. Overall, this article finds that, embedded throughout the lifecycle of government-funded programs are time-sensitive ex ante, mid-course, and ex post reporting requirements and expectations that essentially (re)shape the environment in which INGOs make financial and operational decisions. Additionally, the analysis also demonstrates that the provision of explanatory and/or verification accounts by fund recipients is also influenced by these temporal structures.

Locus of accountability: resource allocation and use

Consistent with the general tendency of government funders to require predominantly functional accountability (Ebrahim 2003b), all the accountability requirements imposed on the three cases studied centered around controlling and influencing INGOs’ resource and input allocation and use. They represent an attempt to induce third-party financial integrity and stewardship of federal dollars. For instance, INGO recipients were required to provide “written procedures for determining the reasonableness, allocability, and allowability of costs in accordance with the provisions of the applicable Federal cost principles and the terms and conditions of the award” (CFR 226.21 (b) (6)). As a result, “INGOs are expected to demonstrate good business integrity characterized by reasonable internal controls, accounting, recordkeeping, procurement and overall financial management systems” (USAID 2009). INGOs have to demonstrate this in their applications in order to be eligible for USAID funding. Also, drawing a link between accountability and INGOs’ operations, INGOs are required to “relate financial data to performance data and develop unit cost information” (CFR 226.21 (b) (6)). See, for example, the following comments by two of those interviewed:

The largest constraints are often over some of the financial reporting and the booking side of it, they (USAID) want to see very detailed records of how the money was spent. (Director of International Support, Hearts for Humanity)

… There are very specific rules about how you use the government’s money, when you use it and all sorts of crazy stuff… It can’t be co-mingled with other funds, so when you draw the money down, it has go into an account that is specifically set up just for government funding. You can only keep the money for a certain amount of time and you are not supposed to draw down – I think the rate is more than a week’s worth of funds – most people do it on a monthly basis. So you can’t draw down more money than you need; it has to be in a bank account that doesn’t bear interest – they don’t want you to make a profit from (the) money. Every quarter, you have to complete a special form that essentially shows how much is your starting balance, how much you drew down and what the ending balance was. So they try and keep pretty a tight track of it. (Director of Grants and Contract Compliance, Children First)

In general, the emphasis on accounting for resource allocation and use impacts INGOs’ autonomy in managing its finances, both at the organizational level (through the expectation to install reasonable internal financial control systems), and at the funded program level (by stipulating where to spend federal dollars as demonstrated by the Fly America Act and Act and the USAID Eligibility Rules for Goods and Services of April 1998 noted below).

For new prospective recipients, the preaward ex ante requirements noted above imply that INGOs have to get their internal controls in place in anticipation of a preaward survey by USAID. This preaward survey seeks to “determine whether the prospective recipient has the necessary organization, experience, accounting and operational controls, and technical skills” (USAID 2009, 34), needed to fulfill the objectives of the funded program. However, at the discretion of the USAID Agreement Officer, an award can still be made “with special award conditions” for such “high risk recipients” (USAID 2009, 36, CFR 226.14). This translates into additional requirements if it is determined that the INGO can remedy its deficiencies in a timely fashion.

Emphasis on controlling INGO resource allocation and use is also exemplified by such requirements and regulations as The Fly America Act and the USAID Eligibility Rules for Goods and Services of April 1998. The former requires INGO workers to use U.S. Flag Air carriers when traveling abroad on missions, with the latter requiring them to purchase only U.S.-made supplies unless prior approval is sought out and granted. These federal government requirements fall under the umbrella of reasonable internal control systems that ensure the “segregation of duties, handling cash, contracting procedures, and personnel and travel personnel” (USAID 2009, 35).

Such requirements have implications for an INGO’s autonomy in managing its finances as they influence how the organizations can and cannot utilize federal resources. Such procurement rules serve to outline how federal funding can be spent, even when they do not always guarantee the most cost-effective prices on travel or on U.S.-made supplies. In some cases, U.S.-operated airline options and supplies may actually be the most expensive, thus compelling INGOs to spend more money when they could achieve efficiency by shopping around. As noted by some participants, The Fly America Act is…

…an old relic from the Cold War... You know now with international corporations, cost sharing, and everything else, it’s ridiculous that we have to fly on United, when we could fly on other airlines which may be cheaper. (Grants & Contract Director, Children First)

In my opinion it is ridiculous. Irrespective of cost, if a US carrier is available, then you must use the US carrier, even if that US carrier is twice the cost. (Internal Auditor, Hearts for Humanity)

In addition, to ensure detailed and more accurate verification and explanatory accounts for the funded programs, all three INGOs had to implement organizational structural and process adjustments consistent with Froelich’s (1999) and Gronbjerg’s (1003) observations. The more mature (measured by age) and well-staffed INGOs, Hearts for Humanity and Children First (see Table 1), responded to increased accountability demands by setting up Compliance units or departments for the sole purpose of executing such internal controls. On the other hand, Humanitarian Action Movement, which is relatively younger and understaffed with only four employees, opted to retain an on-site lawyer instead. However, this decision appears to be influenced more by a negative experience with a failed contract that resulted in sanctions against the INGO.

Well, Children First only started taking government grants about 10 years ago and as we won more grants and they were bigger – larger sums of money and they became more complicated, though the government’s regulations are constantly becoming more complicated. Now most organizations have a compliance unit just to keep up with government regulations. It’s the price of doing business you know. (Director of Grants and Contracts Compliance, Children First)

… There are a lot of technical things that some people prefer not to pay attention to, as a result our compliance people are the ones that are paid to pay attention to that stuff. (CFO, Children First)

Apart from the quarterly, 6-month or annual reporting requirements, INGOs also made reference to other changes in process when handling USG funding. As noted earlier, INGOs had to ensure that USG funding did not comingle with other funding sources. In addition, they were required to withdraw only the amounts they needed for the month, in addition to completing a special form that showed beginning balances, amounts withdrawn, and ending balances.

Changes in processes are also exemplified by the mandated A-133 Audit of financial statements for INGO recipients of $500,000 or more in federal funding. This audit seeks to verify recipients’ compliance with the federal government’s spending rules and regulations, ex post.

No major organization can escape being watched for compliance because you are required to do what’s called an A133 Audit and we have both our own internal auditors and external auditor (work on it)…. (Director of Government Grants and Contract, Hearts for Humanity)

The process (A-133 Audit) is very rigorous and tends to be very specific in that at times evidence of reports submitted as well as, the reception of that report is required by these external auditors. [We] also do [our] own independent audit of all the projects as well as, an internal risk assessment that also includes an analysis of how the organization is spending the funds received (from government) and whether it is managing contractual compliance. (Program Director, Children First)

I would say there is quite a bit of compliance. (CEO, Humanitarian Action Movement)

They (The external auditors hired to conduct the A-133) look at … our own indirect cost rate – are we charging the correcting amount of indirect cost to our grants? They look at all the draw-downs – the way it works is that we have a Letter of Credit (LOC) – are we drawing down from that LOC correctly? They look at our budget (compared) to actual, for each grant – so are we spending according to the budget? They also look to see if we have any income that we are making off of these grants. They look at all of our reports – we have something like over 140 different reports that we will do this year (to all government funding). And then they will do a direct costing where they… pick out 3 or 4 of our projects and really scrutinize them in a detailed manner. They go out to the field and look at detailed expense reports and individual vouchers and things like that…. (Director of Grants and Contract Compliance, Children First)

Resource dependence theory would argue that an organization’s degree of dependence is based on the importance and concentration of particular resources – hence, requiring organizations to manage their dependencies (Pfeffer and Salancik 2003; Froelich 1999). Indeed, the above statements demonstrate that, as the share of government funding begins to grow, the more INGOs feel the pressure to adapt their organizational structures and processes in order to fulfill embedded accountability requirements – thus, respond to government funding criteria for continued resource acquisition (Pfeffer and Salancik 2003). As the share of government funding begins to grow especially for the more mature and perhaps more professionalized (better staffed) INGOs such as Children First and Hearts for Humanity, formalizing compliance functions becomes essential.

The above findings also demonstrate the burdensome nature of government funding in that irrespective of INGOs’ relative shares of USG funding, INGOs essentially have to respond to similar accountability requirements and demands in order to obtain continued USG funding. For instance, the decision to establish Compliance units or alternative models does not seem to be induced entirely by the share of USG funding as only 9% of Children First’s budget comes from USG, while 94% of Humanitarian Action Movement’s funding come from the USG. In the case of Humanitarian Action Movement, the choice to engage an on-site lawyer was largely influenced by the INGO’s negative experience with a contract that went wrong, as noted above.

[C]ontracts are kind of more controlled – you need… more monitoring on a contract for compliance… We have had to hire a lawyer… That’s why we pay a lawyer more and more… We have a lawyer that is looking at all these contracts now; we always had a lawyer on the board, but now we have an onsite lawyer who does most of that …. (CEO, Humanitarian Action Movement)

The manner of structural adjustment is also influenced by other contextual factors including the type of funding tools used to channel funds to INGOs (e.g., grants, cooperative agreements, contracts, food aid), and negative or positive organizational experiences with government funding. Generally, contracts, grants, and cooperative agreements elicit different behaviors from INGOs (Salamon 2002a, 2002b). This is because the different sources of USG funds are associated with different degrees of interest by the USG in controlling the funded programs.^[4] For this reason, the more mature INGOs voiced a preference for less exacting forms of funding such as grants and cooperative agreements and have had relatively positive experiences with them. Humanitarian Action Movement’s funding portfolio, on the other hand, is largely dominated by government contracts (48%, see Table 1) which they find involves closer scrutiny and control by the USG.

Consistent with the literature on behavioral tools and third-party relationships therefore (see Ingram 1977; Schneider and Ingram 1990; Posner 2002), these findings indicate government’s desire to achieve rule and goal compliance over time, with an emphasis on safeguarding against abuse. This is done by enforcing strict rule compliance throughout the life cycle of the funded program, in order to improve mission performance (Thompson 1993). And consistent with the principal-agent theory, positioning accountability mechanisms as such seeks to avoid the collective action problems of moral hazard whereby the government cannot know with certainty that the INGOs will do their very best with the resources provided (Williamson 1985).

In general, INGOs recognize and appreciate the importance and necessity of accounting for donated resources; however, they also acknowledge the transaction costs associated with USG’s heavy compliance and reporting requirements.

… [S]how me an accounting process you have used to show that (it was) well and sound. I guess the problem is when some (government agencies) have onerous reporting requirements (that) almost cost so much that it takes energy… Why don’t (government funders), make life easier for people…, who have limited human capacity already..., If (only) we could streamline reporting from all the different donor agencies…. (CEO, Children First)

You know, these are public funds, so, there are a lot of strings attached to them, a lot of bureaucracy involved with spending public money…. (Director of Grants and Contracts Compliance, Children First)

Of course, of course, rules and regulations…, it could (be) done on a limited basis of resources and still achieve the same thing. And now we finding that they (USG) like to see bureaucracies created within INGOs, and it really doesn’t need to be that way, we can save a lot of money but (they think they have) served their purpose…. And there is nothing wrong with monitoring, it’s just that sometimes you could do the same thing with a fewer monitors than many monitors. Demands are higher, but (often) they believe that you should have a big staff to do these things. (CEO, Humanitarian Action Movement)

The compliance issues; they have become more onerous as time goes on. They require more every year. It’s getting to be us spend more time complying with things than we do actually doing (program-related) things sometimes. (Programs Coordinator, Humanitarian Action Movement)

Based on the above, INGOs are clearly not entirely autonomous entities with unlimited discretion (Pfeffer and Salanick 2003; Froelich 1999), especially with respect to resource allocation and use, as well as programming. As demonstrated above, INGOs are constrained by their resource environment and, in particular, the accountability requirements and expectations therein.

Discussion and conclusions

Although INGO–government relationships can be depicted in principal-agent terms, to some degree, the relationships are certainly not hierarchical in nature, but can be of mutual dependence (Salamon 2002a; Young 2006). Accountability on the other hand is clearly “a relationship of power” (Goetz and Jenkins 2002), where one party allocates responsibility and another accepts it with a promise to render an account for that responsibility (Cutt and Murray 2000). In light of the interdependence between nonprofits and government (Salamon 2002a; Young 2006), INGOs enjoy significant degrees of operational autonomy as experts in international relief assistance and development. However, the power structure in the accountability relationships between the two parties engenders scenarios where some of an INGO’s decisions on operational, financial, and personnel matters can be influenced in important ways. The timing of the accounts plays a critical role in steering, directing and controlling these decisions by signaling when to behave, as well as behaviors that are acceptable and unacceptable to government funders.

Overall, this article finds that the temporal structures entrenched in government accountability mechanisms, combined with the circumstances under which INGOs give explanatory and verification account, all serve the strategic governance purposes of USG funders. They serve as preemptive strategies against the accountability challenges associated with third-party government (Thompson 1993; Posner 2002). Specifically, government accountability control mechanisms activate a spatially and temporally confined environment within which INGOs must make their managerial and operational decisions. The accountability mechanisms therefore serve to signal acceptable behavior to INGO recipients through toll gates, incentives, and sanctions.

Practically, INGOs have considerable discretion in program formulation and implementation; however, once they decide to seek USG funding, this must be done in a consultative fashion, which requires the preview of resource allocation and use decisions by government funding agencies during the grant bargaining and negotiation process, as well as during the cycle of the grant life. Taking place within the general confines of government funding objectives, rules, and regulations, the negotiations and bargaining that occur before program implementation present opportunities for federal funding agencies to influence the outcome or the future consequences of INGO spending and proposed implementation decisions by enforcing efficiency and specifying government’s preferred outputs and outcomes in order to improve mission performance (Thompson 1993). Hence, ex ante and mid-course accountability requirements serve to solicit both explanatory and verification information to confirm INGOs’ decisions, as well as their compliance. This also explains why program designs that are closely aligned with government’s goals are adopted and funded (Kerlin 2006).

Overall, ex ante accountability control mechanisms (e.g., requirements for prior approvals and previews) motivate a scenario where INGOs supply government funders with both explanatory and verification accounts to justify programmatic choices and features, as well as budget allocations. Consistent with Thompson (1993) and Posner (2002), such arrangements provide government funders with some leverage and control over the negotiation process to ensure that the decisions include their policy or program objectives. Bear in mind here that, the voluntaristic participation by INGOs, that is, choosing to respond to particular requests for grants and proposals, “may in fact confer an advantage to the federal government, for it ensures that only providers with sufficient interest [or experience] participate” (Posner 2002, 526). Ex ante explanatory and verification accounts therefore serve as points to verify compliance and whether the funder’s interests and preferences have been and are being considered and addressed early in the life of the grant. As such, funders’ interests and preferences also serve as a baseline for comparison, ex post.

On the other hand, mid-course explanatory and verification accounts (e.g., field monitoring such as field audits, mid-course reporting such as quarterly reports, and requesting approvals for program and budget deviations, midterm evaluations, as shown in Table 2) are designed to militate against the problem of information asymmetry that INGOs (as agents) enjoy over government (as the principal) during the lifecycle of the funded program. Considering that some INGOs may also exaggerate their capacities and abilities in order to win a grant or contract (Bornstein 2006; Stake 2006), mid-course monitoring serves to re-enforce the agreed-upon requirements and agreed-upon program objectives (baseline) as the program is being implemented. They also serve to spotlight and communicate the extent of any program and budget deviations, coupled with the necessary justifications.

Finally, the validity of post-grant performance information provided by third parties is not always easy for government funders to ascertain (Thompson 1993; Posner 2002). In such cases, both ex post verification and explanatory accounts may be used to reduce such ambiguities. And because of the existence of the propensity to intentionally hide unfavorable information in principal-agent relationships (Frumkin 2001; Posner 2002; Bornstein 2006; Christensen and Ebrahim 2006; Stake 2006), ex post verification accounts through audits (e.g., A133 Audits for INGOs receiving $500,000 or more of federal funding), M&E reports, and annual reports all serve to validate information on actual resource allocation and use, and performance (relative to ex ante baselines). Hence, ex post controls compel INGOs to disclose key data with respect to budgets and performance.

Failure to provide key data on resource allocation, use, and results also activates yet another ex post control – the imposition of sanctions. For instance, a failure by Humanitarian Action Movement to furnish verification accounts to accompany their explanatory accounts for their failure to meet financial reporting requirements resulted in the INGO’s 1-year suspension, in addition to reparation payments to the Department of Agriculture (CEO, Humanitarian Action Movement). Hence, while sanctions can be regarded as a consequence of rejected accounts, the threat of sanctions can also function as important ex post control mechanisms. In other words, sanctions introduce a measure of risk in receiving federal funding, the type that can serve to minimize opportunistic behavior among INGOs, thus compelling INGOs to critically assess their decisions and choices in the present (ex ante, mid-course).

Overall, accountability requirements emphasize the USG’s concern with ensuring the “proper accounting and legal expenditure of public funds” (Posner 2002, 524), and that government’s interests, outcomes, and preferences are being considered and promoted throughout the program design and implementation phases (see Posner 2002), through mid-course and ex post explanatory and verification accounts. Thus, the combination of temporal (ex ante, mid-course, and ex post) and circumstantial elements (explanatory and verification accounts) essentially serves to establish a continuous information feedback loop between grantor and grantee throughout the lifespan of the grant. As a result, the tedious paperwork and red tape all serve to keep government’s interests and preferences in the forefront of INGO work throughout the grant or contract life, from start to finish.

From a policy perspective, it is laudable that government funding agencies attempt to pay attention to USG-funded programs in order to ensure and verify “proper accounting and legal expenditure of public funds” (Posner 2002, 524), and that such coproduced programs are implemented and delivered according to federal and legislative requirements. However, government accountability requirements and their temporal structuring result in both positive and negative consequences for USG implementing partners – INGOs. On a positive note, embedding temporal structuring in accountability through ex ante, mid-course, and ex post requirements and expectations engenders temporal pauses that INGOs can take advantage of, for purposes of conducting honest self-reflections, assessments, and improvements, with respect to their own capacities, programming strengths, and weaknesses, as well as progress on outcomes production and delivery. Such temporal pauses can also serve to slow down the process enough to allow government, given its fiscal challenges and other limitations, to also conduct its own independent checks on INGO progress by following the paper trail.

Nevertheless, temporal structuring within accountability requirements also appears to be adding additional temporal and human resource constraints on INGOs, constraints that could generate tensions between effective implementation of public policy programs and INGO efficiency (creativity, innovation, responsiveness, and the absence of bureaucracies). Hence, by slowing down the implementation process, government also undermines the very characteristics that make INGOs attractive implementing partners.

Consequently, several research lines emerge. As noted earlier, opportunity costs associated with staff time can generate programming–accountability tensions. Also observed is that INGOs’ work can effectively be prevented or hindered by the branding requirement. In light of this, more nuanced data are needed in order to comprehensively explore the nature and impact of the relationship between government accountability requirements and INGO performance. Second, there is evidence to suggest that government funding alters the behavior of nonprofits. Hence, additional research is needed for in-depth exploration of whether different government funding tools (contracts, grants, cooperative agreements, etc.) result in adverse changes in INGOs’ strategic goals and preferences. Third, an in-depth study exploring possible differentials in the application of accountability requirements by different U.S. aid agencies (e.g., USAID, USDA) is also needed; although limited, some interviews alluded to this phenomenon.

Finally, this article has adopted an objective-based perspective of time as an external force that can shape nonprofit behavior. In reality, there is a dialectical relationship between people’s experiences of time and how, through human activity or action, it shapes or alters temporal structures (Orlikowski and Yates 2002). Future research should therefore seek to understand the dialectical nature of temporal structuring in accountability requirements and nonprofit behavior, ^[8] in other words, how are nonprofits responding to temporal structures embedded in government accountability requirements?