Better performing NGOs do report more accurately: Evidence from investigating Ugandan NGO financial accounts

Improving ways to assess development efforts is an important task. Yet, little has been done to understand the connection between the effectiveness of NGOs and their financial accountability. We use Benford's Law to assess accuracy of financial reports by a sample of Ugandan NGOs. We find 25% of the sample provide financial information that may be inaccurate to the true values. We find NGOs with better beneficiary ratings are more likely to submit credible financial data. This contradicts the belief that upward accountability demands crowd out serving the client community. We also distinguish between the decision to withhold some requested financial information and the decision to report inaccurately. We find no evidence that the two decisions are related, with the former decision due to limited capacity and skills. The results suggest a bigger role for beneficiary assessments in monitoring the sector, rather than an increasing demand for financial reporting.