Foundations and transparency

The trend of setting up foundations in the name of current and former Members of Parliament will continue in Parliament this week with three new bills scheduled to be introduced in the House on Tuesday, which brings up the question of the transparency and accountability of these organisations and whether they are doing political work in the name of charity.

This week Parliament will move the Bill to incorporate the Maithripala Sirisena Lakdaru Diriya Foundation. It will be introduced by UPFA National List MP Malith Jayathilake. The other two bills are to incorporate the ‘Saravanapavan Foundation’ and the ‘Mahipala Herath Janasahana Foundation’.

E. Saravavapavan is TNA MP from the Jaffna District while Mahipala Herath is the Chief Minister of the Sabaragamuwa Province and a former Parliamentarian. This year alone several bills have been presented to Parliament to incorporate foundations in the names of lawmakers. They include the S.B. Nawinna Foundation, Sisira Jayakody Siyapatha Foundation, Rajitha Senaratne Foundation, Arundika Fernando Relief Services and Godfrey Fernando Memorial Foundation, Hisbullah Foundation, Susantha Punchinilame Foundation, Roshan Ranasinghe Janasahana Foundation and Sujeewa Senasinghe Foundation.

There are also bills pending to set up foundations in the names of two late MPs, Bertie Dissanayaka and M.K.D.S. Gunawardena.

Most foundations have social welfare activities as their objective and once enacted by Parliament they have the authority to receive or collect grants, gifts, donations, subsidies, endowments and subscriptions whether in cash or kind from donors in Sri Lanka or elsewhere. In a country where politicisation runs deep and there is no oversight on election campaign spending of individual candidates, the establishment of foundations by politicians can be problematic. With little accountability these foundations can collect and spend money on behalf of politicians with complete autonomy, setting a dangerous path for corruption.   Charities that are accountable and transparent are more likely to act with integrity and learn from their mistakes because they want donors to know that they’re trustworthy. Generally speaking, charities that follow best practices in governance, donor relations and related areas are less likely to engage in unethical or irresponsible activities. Therefore, the risk that charities would misuse donations should be lower than for charities that don’t adopt such practices. When examining accountability and transparency the same should be applied to these foundations. A diversion of assets - any unauthorised conversion or use of the organisation’s assets other than for the organisation’s authorised purposes, including but not limited to embezzlement or theft - also can seriously call into question a charity’s financial integrity. During the previous Government, the involvement of such organisations set up under top politicians or their wives were caught up in wrongdoing and without more robust accountability measures more questionable practices can take place.

Audited financials prepared by an independent accountant with an audit oversight committee would be one way to close loopholes. Audited financial statements provide important information about financial accountability and accuracy. They should be prepared by an independent accountant with oversight from an audit committee. The committee provides an important oversight layer between the management of the organisation, which is responsible for the financial information reported, and the independent accountant who reviews the financials and issues an opinion based on its findings.

Such reports would boost credibility and hold their founders responsible for their actions. It would mean that these foundations become better organisations of worth.