Handwashing interventions are a priority in development and emergency aid programs. Evaluation of these interventions is essential to assess the effectiveness of programs; however, measuring handwashing is quite difficult. Although observations are considered valid, they are time-consuming and cost-ineffective; self-reports are highly efficient but considered invalid because desirable behaviour tends to be over-reported. Socially desirable responding has been claimed to be the main cause of inflated self-reports, but its underlying factors and mechanisms are understudied. The present study investigated socially desirable responding and additional potential explanatory factors for over-reported handwashing to identify indications for measures which mitigate over-reporting. Additionally, a script-based covert recall, an alternative interview question intended to mitigate recall errors and socially desirable responding, was developed and tested. Cross-sectional data collection was conducted in the Borena Zone, Ethiopia, through 2.5-hour observations and 1-hour interviews with the primary caregivers in households. A total sample of N = 554 was surveyed. Data were analysed with correlation and multiple regression analyses and dependent t-tests. Over-reporting of handwashing was associated with factors assumed to be involved in (1) socially desirable responding, (2) encoding and recall of information, and (3) dissonance processes. The latter two factor groups explained over-reported handwashing beyond socially desirable responding. The alternative interview question—script-based covert recall—reduced over-reporting compared to conventional self-reports. Although the difficulties involved in measuring handwashing by self-reports and observations are widely known, the present study is the first to investigate the factors which explain over-reporting of handwashing. This research contributes to the limited evidence base on a highly important subject: how to evaluate handwashing interventions efficiently and accurately.