Nonprofit organisations are grappling with stricter banking checks, regulatory demands and shrinking donor support, raising concerns about financial accountability, organisational survival and the future of civil society operations.
Uganda’s non-governmental organisation (NGO) sector is facing mounting compliance pressures as banks tighten scrutiny of financial transactions, regulators enforce registration and permit requirements, and declining donor support leaves organisations struggling to sustain their operations.
The challenges are exposing weaknesses in financial accountability, internal governance and regulatory compliance. The suspension of some organisations over alleged activities prejudicial to national security has also heightened uncertainty across the sector.
Although compliance has improved over the past decade, the National Bureau for NGOs says a substantial proportion of organisations still struggle to meet their legal obligations, putting their access to banking services, donor funding and operating permits at risk.
Dr Stephen Okello, secretary of the National Bureau for NGOs under the Ministry of Internal Affairs, said compliance had risen from 26.8% before 2016 to 62.4%, leaving many organisations yet to meet the required standards.
“Compliance is increasingly becoming a cross-cutting institutional responsibility, rather than a function limited to only registering an NGO and renewing their permit,” Okello said during an engagement with sector stakeholders.
Registration alone is no longer sufficient. NGOs must also meet their tax and employment obligations, comply with data protection requirements, maintain financial accountability and observe immigration rules and the governance provisions in their constitutions.
For commercial banks, gaps in NGO compliance create financial and regulatory risks, particularly when organisations fail to update their records or adequately explain the sources and movement of funds.
Alexander Mayanja, deputy secretary of the Uganda Bankers Association, said some NGOs had incomplete customer information, expired permits and gaps in documentation relating to donors and governing boards.
“Most of the NGOs still have data gaps; they are lacking data sets, especially where certain permits have expired,” Mayanja said.
He warned that organisations receiving substantial transfers without notifying their banks or updating information about their donors, leadership and operations risk delays in transaction processing and possible restrictions on their accounts.
Banks are required to comply with anti-money laundering and counter-terrorism financing obligations, including identifying customers, assessing risks and monitoring suspicious transactions.
Mayanja said failure to meet these requirements could expose financial institutions to serious consequences, particularly because of their dependence on international correspondent banks and payment networks.
“KYC is a living document. It transcends beyond just registration. It transcends beyond just account opening,” he said, referring to Know Your Customer requirements.
The warning highlights the need for NGOs to maintain accurate records throughout their operations rather than wait until they open bank accounts or renew permits to update their information.
Governance gaps expose NGOs to risks
Beyond documentation, the NGO Bureau has raised concerns about weaknesses in internal governance, including limited understanding of the constitutions and governing documents that determine how organisations operate.
Okello said about 95% of NGOs were not adequately familiar with their own governing documents, which establish board responsibilities, decision-making procedures and the distribution of authority.
Such gaps can trigger disputes between founders and boards, weaken financial controls and expose organisations to operational and legal risks.
The challenge is particularly acute for smaller, community-based organisations that may lack the resources to employ accountants, lawyers and dedicated compliance officers.
Although the law imposes obligations on NGOs regardless of their size, their capacity to meet those requirements varies considerably.
This presents regulators with a difficult balancing act: enforcing common standards of accountability while recognising the financial and administrative constraints facing smaller organisations.
Okello has also questioned whether some NGOs remain sufficiently accountable to the communities they serve, warning that donor priorities can sometimes take precedence over beneficiaries’ needs.
Weak governance and inadequate financial controls can undermine public confidence, particularly when organisations cannot demonstrate how donor funds are spent.
The compliance debate is unfolding amid concerns over the suspension of NGOs accused of activities considered prejudicial to national security.
Yona Wanjala, executive director of Civic Advisory Hub, said the suspensions had created uncertainty across the sector, forcing some organisations to halt operations and terminate staff as they await decisions on their cases.
“Even those ones that are not suspended, the biggest question is: who is next?” Wanjala said.
He called for fair hearings, transparent investigations and clear timelines for resolving cases involving suspended organisations.
According to Wanjala, prolonged suspensions risk destroying institutional capacity, disrupting employment and discouraging other organisations from undertaking legitimate civil society activities.
The allegations against affected organisations remain subject to the relevant legal processes, with some cases before courts.
The situation highlights the tension between the government’s responsibility to investigate suspected wrongdoing and the need to ensure that enforcement measures are proportionate, transparent and consistent with due process.
Mayanja said restrictions on NGO accounts could arise from regulatory inquiries, court orders or requests for information from institutions such as the Financial Intelligence Authority, Uganda Revenue Authority and Bank of Uganda.
He advised organisations facing account restrictions to contact their relationship managers to establish what documentation or other steps may be required. However, he cautioned that banks may sometimes be legally prohibited from disclosing details of investigations.
The concerns point to the need for clearer communication between NGOs, banks and regulators, particularly where organisations struggle to understand their compliance status or resolve restrictions affecting their operations.
Shrinking funding compounds the pressure
The situation is being aggravated by declining donor support.
Wanjala cited the withdrawal of United States Agency for International Development (USAID) support under the Trump administration and the departure of other funding partners, including the Democratic Governance Facility, as developments that have placed additional pressure on civil society organisations.
With fewer resources available, NGOs must meet increasingly complex regulatory requirements while trying to retain staff and sustain programmes.
Smaller organisations risk becoming trapped in a cycle in which funding shortages weaken their ability to maintain proper financial and administrative systems, while compliance failures threaten their access to banking services and the funding needed to continue operating.
Wanjala said organisations could consider income-generating activities to supplement their resources, provided the activities and use of proceeds comply with the applicable legal framework.
Okello urged NGOs to strengthen board oversight, recruit competent leaders and improve their understanding of emerging obligations, particularly those relating to beneficiaries’ personal information and digital systems.
The government is reviewing the NGO Act and national NGO policy, according to Okello, creating an opportunity to address weaknesses in the regulatory framework and improve the implementation of compliance requirements.
However, the effectiveness of any reforms will depend on whether organisations can understand and meet their obligations, regulators apply the rules fairly, and enforcement decisions are communicated transparently.
For Uganda, the challenge is to strengthen accountability without unnecessarily disrupting legitimate civil society work.
NGOs need to improve record-keeping, financial transparency and internal governance to protect public trust and maintain access to banking services and funding.
At the same time, regulators and financial institutions face pressure to ensure that legitimate organisations are not left unable to operate because of unclear requirements, prolonged uncertainty or disproportionate enforcement.
As donor resources shrink and scrutiny intensifies, compliance is becoming more than a regulatory obligation. It is increasingly central to the survival of organisations whose work supports communities across Uganda.