Financial Management Practices and Sustainability of NGOs in Pakistan

Abstract

Much is being heard of the kind of funds financial management plays in the maintenance and operation of non-governmental agencies (NGOs) in Pakistan which are giving special attention to the relief of disaster, development and social work, and are gaining momentum in Pakistan very fast. While they have a strong grip on the ground, most NGos face issues of sustainability in Pakistan because of lack of proper financial controls, irregular budgeting, weak accountability and donor dependency. This is a research paper on empirical investigation of financial management practices (budgeting, internal control, financial reporting and audit compliance) on sustainability of NGO working in Pakistan. is positivist thesis and it can be said applying the theories of Resource Based View (RBV) and Stakeholder Theory, it is deductive axiological research using quantitative research type. The questionnaire was undertaken in a systematic manner targeting management officers and the finance experts of the 250 registered NGOs including the ones working on Disaster alleviation, Education, Healthcare etc. Purposive sampling was used to collect data which were then subjected to SPSS and AMOS. The techniques used to test the proposed relationships were descriptive statistics, reliability analysis, exploratory factor analysis, correlation, multiple regression and structural equation model (SEM). With regard to analysis, budgeting, internal controls and financial reporting showed a high and positive relationship to the sustainability of an NGO, while compliance was a strong predictor. Model fit was excellent (CFI = 0.94 and RMSEA = 0.05) indicating that the proposed constructs related to financial management are indeed strongly associated with sustainability outcomes. Financial transparency, too, was identified as a mediator between financial practices and sustainability, highlighting the importance of technical and ethical aspects. Results of the research benefit the theoretical literature and policy NGO management so far as it adds an objective correlation between financial management and sustainability. It ensures that good budgeting practices, integral internal controls and sanitation, frequent reports and careful audit procedures significantly increase the capacity of an NGO to survive, react and grow in difficult economic times. The study also provides an empirically supported framework of financial sustainability of financial sustainability measurement in NGO and some practical recommendations to the researchers, policy makers and international donors for boosting financial sustainability of development organizations in Pakistan. However, the limitations of the cross-sectional design and the use of a purposive sampling design provide a foundation for future studies of this research that would include a longitudinal and cross country comparative design. The following details the thesis, which proposes the following measures to promote the long-term influence of NGOs and donor trust: executing a capacity-building model, implementing good financial governance policies and increasing investment in financial systems used in NGOs.