Only small NGOs it seems are able to actually get out in the field and get their hands dirty making things happen. Past a certain size (what is that size?) the demands for official looking papers, reports, audits and the like overshadow the demand to actually provide aid. Large donors are just too caught up in the appearance of good business and good government. Form without substance.I agree that there is a problem here, but I'm not sure if I agree with his interpretation of the origin of the problem. In my experience, large NGOs and governments often run into a per diem issue where locals can have big expectations of field per diem pay. This can lead to massive overhead budgets. Small NGOs can get away with the argument that they can't afford to pay much, especially those NGOs run by locals, or volunteer international staff. The big guys, in the interest of "attracting the best people" end up with huge overheads.
I definitely don't buy though that "NGOs with barely enough budget to survive have little motivation and opportunity to corrupt the process". The NGOs may not, but the individuals, who are being paid very small amounts, definitely have incentives to be corrupt. Why aren't they then more corrupt?
I think there may be a causality problem here: individuals may be watched more easily in small NGOs, or perhaps better people are in fact attracted to the lower pay places. For example, there are a lot of NGOs in northern Uganda that I wouldn't work for at any price, but some of the smaller are full of dedicated people, but make half as much as everyone else. Because I know it takes a dedicated person to be paid so little, I am more likely to work for them. Low pay then becomes a signal.