For many civil-society groups, when they hear the word “audit,” they immediately think of financial record-keeping or checks and balances, and rightfully so. For years, much emphasis has been placed by the donor community on the importance of non-governmental organisations (NGOs) and other civil-society groups having their accounts audited to ensure financial accountability and transparency. But what about social accountability and transparency?
Civil-society organisations are, for the most part, in the business of improving society. Whether it be through sport, music or youth development, or enhancing the socio-economic or natural environment, NGOs typically want to make a difference. The question is, how do they know and prove that they are making a difference?
Where financial accounting and auditing can facilitate objective verification of profit or loss made by the organisation, so, too, can social accounting and auditing facilitate objective verification of the socio-economic and environmental impact made by the organisation.
Without in any way undervaluing the importance of financial accounting and auditing, social accounting and auditing are quickly gaining relevance, as many organisations struggle to demonstrate how their efforts, and the resources they utilise, are in fact making a difference in society.
As in previous issues, reference is made to the 2007 report by the Energy Chamber (previously the South Trinidad Chamber of Industry and Commerce), “Mapping Corporate Social Responsibility in Trinidad and Tobago: Private Sector and Sustainable Development.” Here, it was reported that from 2001 to 2006, the total amount spent on external social and environmental programmes in the sample of 68 companies, was TT$54 million, and it is noteworthy that approximately half of this spending came from energy and energy-related industries.
It might be expected that most of this expenditure would have been subject to financial audit by the investing organisations to ensure financial accountability; but how many of the beneficiary organisations would have been subject to a social audit? The question is, what impact has this TT$54 million had on the socio-economic and environmental landscape of Trinidad and Tobago? Was it money well-spent? This is the value of the social audit which, according to well-established methodology, addresses certain questions: Has the expenditure actually had an impact? What impact has it had? And has that impact been independently verified?
Social accounting allows the organisation to collect, analyse, interpret and produce an account of its performance and impact from a socio-economic and environmental perspective using indicators based on the organisational or project objectives. This process is inherently iterative and participatory, involving significant stakeholder engagement. The social audit, similar to the financial audit, provides for independent review and verification of the social accounts at the end of the social accounting period.
The benefits of the social auditing accrue not only to the donor organisation, but also to the beneficiary, and not merely as an end product. Rather, the entire process allows the organisation to review and assess its organisational and/or project objectives, determine how these relate to their vision, mission and values, and analyse the relationship with current and prospective stakeholders.
As the local energy sector continues to grapple with falling oil prices, it is expected that budgets will continue to be cut in all departments, including, and perhaps especially, social investment and community relations. This, then, creates increasing pressure not only internally to achieve performance targets, but also externally on beneficiaries of grant and project funding to demonstrate financial prudence in their spending, and to prove that funds disbursed are in fact having the desired impact from a socio-economic and environmental perspective.