NPO,Internal Controls,and Supervision Mechanisms in a Developing Country

The premise of this paper is that effective supervision and proper internal control system (ICS) can promote accountability and transparency, and this will attract more donors. However, in a developing country like Malaysia, it is common that proper accounting standards are not available, the laws are not enforced, and charities often struggle for survival. Debates on regulating nonprofit organizations (NPOs) have been sensitive to many and are often left unresolved, and some quarters believe that NPOs should be left to handle their own affairs. This paper provides evidence from a survey of 60 charities on the status of their ICS. It briefly describes the current state of regulations in Malaysia and makes a case for better monitoring of the sector, as this might be the reason NPOs are lacking in their ICS. We propose what type of regulation and assistance can be provided by the authorities to this sector, not only in Malaysia but also in other developing countries facing similar challenges.