Saturday, January 29, 2011

The Importance of Financial Governance in Buddhist Institutions


Referring to the above link, I have always advocated that even in monasteries and Buddhist centres/associations, there is a need to have some kind of financial and commercial governance to deter fraud, money laundering and criminal breach of trust from happening in these Buddhist institutions. In the corporate world, we call it "corporate governance". In Buddhist institutions, it may not be appropriate to call it by the same name, although one could argue that some large Buddhist groups do function almost like a corporation. An example: FPMT. However, I would refer it as just financial and other commercial governance, to emphasise the need for internal controls in at least some aspects of the actitvities of our Buddhist institutions. And I would advice the governance activities be centered in key areas such as financial and other commercial activities. The latter would include purchasing and selling actitvities. These activities require some governance and over-sight because the financial and other commercial risks for these activities are the same whether it is in a typical multinational corporation or a monastery that collects donations from the public.

Many Buddhist institutions function largely on trust, especially in its financial and accounting aspects. They depend on only one or two persons with no check-and-balance. Sometimes the majority of a temple comprised of largely people from the same family or their close associates. When the donation box is opened, there is no requirement for witnesses and the key is held by only one person without any rotation or if this is not possible, other check-and-balance measures. In the eyes of governance and transparency, the lack of internal controls in Buddhist institutions is hardly acceptable. I do not know whether this is because we think Buddhists are incapable of cheating or that we just simply are ignorant on instituting these financial and other commercial governance internal controls. It is time to change such a mentality. The onus is on the ordained Sangha to insist on such internal controls and risk management being instituted into their monasteries and temples. Buddhist associations and centres headed by lay people could very well lead the way by having internal auditors do more work to assess the overall control and risk environment for the entire centre/association. They should come out with an annual audit plan and produce a report after each audit assignment just like in the corporate sector. Larger temples and monasteries with larger pockets could very well engage the services of a paid internal auditor, while smaller ones may ahve to depend on voluntery or only partially-paid auditors. But whether you pay for the services of an internal auditor or not, the reality is that not all check-and-balance or internal controls come with a huge price tag.  In some cases, you do not even need an internal auditor to check. Without an internal auditor, the internal controls present in any environment should be self-sustaining to prevent risks. You do not depend on an internal auditor. That's the measure of a good internal control. An internal auditor is merely an additional over-sight responsibility. For example, having another person to witness the opening of the donation box or requiring two signatories for a cheque issuance. These small measures do not cost much and could go a long way to prevent frauds.

Due to the commercialization of the world, where almost everything depends on financial sustainability, even temples and monasteries cannot escape from instituting some measures to have some sort of check-and-balance in its spiritual setting. It need not be a large scale check-and-balance but at the least, there should be some controls in key aspects.   

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