Amirah1*,
Chalarce Totanan2, Jurana3
Universitas Tadulako, Palu, Central Sulawesi, Indonesia1,2,3
Email: [email protected]1*, [email protected]2, [email protected]3
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ABSTRACT |
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NGOs,
Accountability, Environment Control, Internal Control. |
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This study aims to examine the determinants of
financial management accountability in non-profit organizations. Utilizing a
quantitative methodology employing Partial Least Squares (PLS) analysis, the
study assessed 14 hypotheses, relying on coefficient values and significance
levels for hypothesis validation. While the choice of analysis model and
rationale behind its selection were not explicitly elucidated, the study ensured
rigor through pilot testing of the questionnaire to establish validity and
reliability. From 140 distributed questionnaires, 87 were returned, and 79
met the inclusion criteria for analysis. The findings suggest a significant
positive influence of transparency, fund type, financial statement
presentation, and accessibility on financial management accountability.
Additionally, internal control factors such as transparency, fund types,
financial statement presentation, accessibility, and internal supervision
underscore the importance of these elements in bolstering accountability.
However, it is noteworthy that the direct impact of the control environment
on financial management accountability was not observed within the study's
context. While the identification and operationalization of the studied
variables were not extensively detailed, it is acknowledged that the
relatively small sample size and the focus solely on non-profit organizations
in Indonesia may constrain the generalizability of the findings. Nonetheless,
this research provides valuable insights into the factors influencing
accountability practices in NGO financial management, potentially benefiting
stakeholders and contributing to the existing literature on financial
management, particularly within the realm of non-profit entities. |
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INTRODUCTION
The field of
accounting has evolved to encompass a broader spectrum, extending beyond
conventional profit-driven entities to encompass government institutions and
societal organizations within the contemporary framework
Non-profit
organizations do not focus on making a profit but on serving the community and
realizing the welfare of the people
The 2021
Edelman Trust Barometer survey results show a low level of public trust in
non-profit organizations in Indonesia compared to other institutions. Trust in
NGOs only reaches 68%, while the media gets 72%, the government 70%, and the
corporate sector gets the highest trust at 78% (Edelman, 2021). In line with
the economic news revealed by Rustam Ibrahim in 2017, the low trust in
non-profit organizations is caused by the lack of transparency and
attractiveness to publish. Serlyeti Pulu, council director of non-profit organizations, also
stated that the reduced public trust in NGOs was due to non-profit
organizations' non-compliance with the principle of accountability. This
indicates that non-profit organizations have not adequately implemented the
principles of transparency and accountability in managing their programs
The
focus of this study is centred on the concept of accountability in the
financial management of non-profit organizations, taking into account the
previous phenomenon that indicates that public trust in non-profit
organizations is still low because the level of accountability of NGOs is not
satisfactory
Donors
expect NGOs to manage these funds responsibly, supported by a reliable
financial reporting and control system. This study investigates and analyzes the determinants that affect accountable NGO
financial management, including the type of tied funds, the level of
transparency, the presentation of financial statements, and the accessibility
of financial statements
Previous
studies obtained inconsistencies in the results. Some studies say that
transparency, accountability, type of funds, presentation of financial statements,
and accessibility affect the accountability of financial management On the
other hand, several results show that these four variables do not influence
management accountability
This
study added environmental variables of control and internal supervision as
moderation variables that researchers had never used. Researchers today use
quantitative methods through surveys with the help of questionnaires because of
their ability to use sophisticated statistical analysis. This allows
researchers to identify patterns, trends, and relationships between variables
with a measurable confidence level.
The
formulation of the research problem is expressed through the question: Is the
accountability of NGO financial management influenced by transparency factors,
types of funds, presentation of financial statements, and accessibility, and
whether the control environment and internal supervision moderate these factors
to financial management accountability? This research has the potential to
provide an in-depth understanding of the factors influencing accountability
practices in NGO financial management. It can also provide valuable insights
for stakeholders and contribute to the research literature in the financial
management of public entities, especially NGOs.
METHODS
This
study employed Partial Least Square (PLS) regression analysis to test all
proposed hypotheses. Each hypothesis underwent analysis utilizing a Structural
Equation Model (SEM) approach, facilitated by SmartPls
3.0 software, aiming to assess the relationships between variables. The
inferential analysis adopted in this study is path analysis. As described by Ghozali (2015), path analysis extends the framework of
multiple linear analysis, utilizing regression to estimate causal relationships
between variables, as established by prior theoretical frameworks. Path
analysis was chosen for its suitability in measuring moderation effects between
variables. The analysis aimed to discern the relative influences of direct and
indirect pathways, thereby determining the presence of mediating variables that
either reinforce or attenuate the independent influence on dependent variables.
A
total of 140 questionnaires were distributed to respondents between November
22, 2023, and December 15, 2023, resulting in 87 returned questionnaires. Among
these, 8 questionnaire responses did not meet the predefined criteria and were
consequently excluded from the study. Specifically, these 8 questionnaires were
completed by organizations that did not align with the study's criteria.
Therefore, the number of questionnaires eligible for processing amounted to 79.
RESULTS
The data analysis method used in this study
is moderation analysis using SmartPLS 4.0, which aims
to determine whether the moderating variable will weaken or strengthen the
relationship between the independent and dependent variables. There are three
stages in testing with moderation variables. Data analysis is carried out by
entering all financial statement data and testing convergent validity,
discriminant validity, and significance tests. Evaluation of the measurement
model is the evaluation of the relationship between the construct and its
indicators. PLS measurement evaluation models are based on predictive
measurements that have non-parametric properties. The measurement model or
outer model with formative indicators is evaluated with convergent and
discriminant validity of the indicator and composite reliability for indicator
blocks (Sholekhah, 2018).
Based on the output, an R-Square value of
0.798 indicates that the variability of the profit management construct can be
explained by the managerial ownership construct, the size of the board of
directors, the size of the company, financial distress, and its interaction with
79.8% for endogenous latent variables in the structural model identifies that
the model is good. While 20.2% was explained by other variables not contained
in this study (Testing through smartPLs is in the
appendix). After modifying the model to obtain the best model, the following
structural model is obtained:
Figure 1. Structural Relationship Model
Source: Smart PLS
processing results in version 4.0 (2023)
Table 1. Test the
Hypothesis of Patch Coefficients
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HYPOTHESIS |
Original Sample (O) |
Sample Mean (M) |
Standard Deviation (STDEV) |
T Statistics (O/STD) |
P Values |
KET |
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Transparency (Trans) -> Accountability |
0.335 |
0.309 |
0.100 |
3.342 |
0.001 |
Accepted |
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Fund Type (JD) -Accountability > |
0.245 |
0.268 |
0.086 |
2.839 |
0.005 |
Accepted |
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Presentation of Financial Statements (PLK) ->
Accountability |
0.182 |
0.176 |
0.082 |
2.219 |
0.027 |
Accepted |
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Accessibility (AKS) -> Accountability |
0.201 |
0.189 |
0.088 |
2.278 |
0.023 |
Accepted |
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TRANS*ENVIRONMENT -> Accountability |
0.243 |
0.213 |
0.096 |
2.524 |
0.012 |
Accepted |
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JD * Environment -> Accountability |
0.201 |
0.220 |
0.086 |
2.325 |
0.020 |
Accepted |
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PLK*Environment -> Accountability |
0.147 |
0.122 |
0.093 |
1.574 |
0.116 |
Rejected |
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AKS*Environment -> Accountability |
-0.317 |
-0.285 |
0.116 |
2.736 |
0.006 |
Accepted |
|
Trans*Supervision -> Accountability |
0.228 |
0.225 |
0.088 |
2.587 |
0.010 |
Accepted |
|
JD*Supervision -> Accountability |
-0.157 |
-0.157 |
0.129 |
1.217 |
0.224 |
Rejected |
|
PLK*Supervision -Accountability > |
-0.054 |
-0.024 |
0.098 |
0.558 |
0.577 |
Rejected |
|
AKS*Supervision -> Accountability |
0.272 |
0.223 |
0.111 |
2.452 |
0.015 |
Accepted |
|
Control Environment -> Accountability |
-0.022 |
-0.023 |
0.084 |
0.258 |
0.796 |
Rejected |
|
Internal Control -> Accountability |
0.205 |
0.219 |
0.089 |
2.294 |
0.022 |
Accepted |
Source:
Smart PLS processing results version 4.0 (2023)
Discussion
H1: Financial Management Transparency and Accountability
The significant positive
influence between transparency and accountability of financial management shows
that when an organization or entity implements transparency in its financial
reporting and financial actions, it will be easier for related parties, including
stakeholders, to understand and verify the financial information. Financial
management accountability increases because transparency creates a more open
and accountable environment, giving stakeholders confidence that funds and
resources are being managed honestly and effectively. In line with the research
carried out, the transparency factor positively affects the accountability of
village government
H2: Types of Funds and Accountability for
Financial Management
The existence of a significant positive
influence between the type of funds and accountability of financial management
shows that different sources of funds can affect the level of accountability in
financial management. Perhaps certain types of funds have certain requirements
or criteria that increase accountability. Accountability of financial
management may increase due to conformity and compliance with the specific
requirements of the type of funds used. This is
supported by the provisions of Foundation Law No. 28 of 2004. Like the party
responsible for funds, NGOs whose majority of funding comes from donors with
the type of tied funds will try to improve accountability of their financial
management so that stakeholder trust in NGOs is maintained. The use of tied
fund types as a new variable in this study has proven relevant as a determinant
of accountability for NGO financial management, aligning with the concept of
stewardship theory.
H3: Presentation of Financial Statements and
Accountability of Financial Management
The significant positive influence between
the presentation of financial statements and accountability of financial
management shows that the way financial information is presented plays an
important role in shaping perceptions about transparency and quality of
financial management. Financial management accountability can increase because
the presentation of clear and accurate financial statements can provide a
better picture of financial performance and fund management. The high quality
of the presentation of financial statements of NGO organizations can create a
high level of accountability for financial management. This is in line with
what was stated by those who provide evidence that the presentation of
financial statements positively impacts financial management accountability
H4: Financial Management Accessibility and
Accountability
The significant positive influence between
accessibility and accountability of financial management shows that the availability
of financial information to stakeholders can easily increase understanding and
evaluation of financial management. Financial management accountability can
increase because stakeholders can easily access and understand the financial
information needed to evaluate financial performance. In line with
research conducted by Dan, who argues that accessibility affects the
accountability of financial statement management
H5: A strong control environment can improve
an organization's ability to manage transparency, funding types, and
accessibility more effectively
With good internal controls in place,
organizations can ensure that policies related to transparency, funding types,
and accessibility are applied consistently, and this will be reflected in
increased accountability of financial management. A
controlled environment that does not moderate the relationship between the
presentation of financial statements and the accountability of financial
management can be caused by a lack of direct linkage between internal controls
and the practice of presenting financial statements.
Strong internal oversight can create an
environment where transparency and accessibility are easier to monitor and
implement. An effective internal oversight process can provide confidence that
transparent and accessible information is properly managed and accountability
is maintained. Internal oversight helps ensure
transparency and accessibility policies are effectively implemented, builds
stakeholder trust, and supports better accountability. Effective
internal oversight ensures that transparency and accessibility are implemented by
established standards and policies, providing a strong foundation for financial
management accountability. The internal control process is not specifically
focused on the type of funds or the presentation of financial statements, so it
does not moderate the relationship between these variables and financial
management accountability.
H6: Other factors such as transparency,
funding type, or accessibility
These factors have a more dominant influence
on the accountability of financial management. In contrast, the direct
influence of the control environment is displaced by the influence of other
more significant variables. A significant positive influence between internal
supervision and financial management accountability shows that a strong
internal control system can help ensure that the financial management process
is carried out effectively and following established policies and procedures.
Financial management accountability can increase because internal control helps
prevent or detect errors or violations that can harm the organization
CONCLUSION
This research demonstrates that transparency, types of funds,
presentation of financial statements, accessibility, control environment, and
internal supervision significantly impact financial management accountability
within NGOs. These factors play a pivotal role in enhancing comprehension,
verifying information, and improving the quality of financial management,
consequently bolstering accountability. Although the control environment
doesn't directly moderate the relationship with the presentation of financial
statements, internal control remains crucial in ensuring the effective
execution of financial management processes in alignment with policies, thereby
augmenting financial management accountability across different NGO settings.
Future studies could delve deeper into analyzing variables that potentially
moderate the relationship between specific factors and financial management
accountability, offering a more nuanced understanding of moderation's role.
Researchers have the opportunity to build upon this
groundwork, contributing further to the comprehension of the factors
influencing financial management accountability in diverse organizational
landscapes.
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Copyright holder: Amirah, Chalarce Totanan, Jurana (2024) |
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First publication rights: International Journal of
Social Service and Research (IJSSR) |
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