Socio Research & Reform Foundation

Summary of the lecture by Mathew Cherian

Is financial viability of the Voluntary Sector a mirage? The way forward

PART-III

ACCOUNTABILITY AND TRANSPARENCY

We need to open our financials to scrutiny to the smallest donor, reporting bodies and to be accountable to the last penny. There is no escape from frugality and public inspection. I will give you a personal anecdote. In HelpAge or doors are open to all from IB inspectors to small donors.  One day as I came in the morning, I was pleased to see a well dressed gentleman waiting in the morning. He said his wife had given a donation cheque and she had requested him to drop it by. It was none other than the past SAIL chairman Mr Rungta. Something must have impressed him about helpage that he called me to his office a week later to give a CSR grant. It is very important that your reception is kept efficiently  and that even your peons/ staff know about your work. It is said that Mahatma Gandhi the best non profit fundraiser sat next to a window facing the gate both at Sabarmati and at Sewagram in Wardha. It gave a transparency to the leader to the public.

This brings me to the next point of admin costs to programme costs. While framing minimum standards for Credibility Alliance we have debated this ad nauseum. Most people are willing to fund projects but not to fund administrative overheads.  Even corporates who are used to high salaries will not give any funds for non profit salaries. You are supposed to live on love & fresh air! This is an area which needs donor education and is an area we all need to work at.

 Corpus is an area which all small and big non profits need to work on to improve their long term viability if the organisation needs to survive through bad times. Corpus in my experience needs to be built brick by brick and will serve the organisation in the long run. It is another tool for not just viability but independent functioning.

We have seen big companies like ILFS  go bust and so have many others. If we do not build up our internal viability based on internal fundraising and good governance then please do not expect to grow and prosper.

GOOD GOVERNANCE

Governance within the non profit sector has to also be strengthened.  Ensure good governance,transparency, grievance redressal mechanisms, open house sessions, regular audit and whistle blower provisions including prevention of sexual harassment.  It is also pertinent that Vijay Sardana in the last few years before he passed away was working on Governance standards along with Subash Mittal. It is probably his clairvoyance in non profit matters.

There is no magic mantra or a magic wand  for financial viability. It is simply hard work 

HOWEVER COMMITMENT TO A MISSION, ACCOUNTABILITY AND TRANSPARENCY ALONG WITH GOOD GOVERNANCE WILL TAKE YOU ON THE PATH OF VAIBILITY (CAG- COMMITMENT, ACCOUNTIBILITY AND GOVERNANCE)

I can offer you all a talisman “ Be good to your big donors who sometimes can be terrible as they can support large infrastructure and the other needs but be equally good to small donors and even the smallest donors , our school children, and some of them become future CEO’s and leaders and will remember your organisation with fondness. Small donors can be your most  committed regular donors and their money is most important.

I am often met by people from all walks of life who tell me proudly that they have fundraised for Helpage india as school children and still treasure a trophy or a certificate we have given them. Acknowledging all donors and keeping them informed about work achieved is critical.

Vijay Sardana showed a way both in financial sustainability and in governance and perhaps even had a price to pay for his stand.  I will never forget his birthday August 13 which he shared with my partner Amita and  we used to wish him regularly . I miss his soft spoken gentle presence and friendship and hope some of you will make the effort  to bring in transparency, good governance and accountability as civil society organisations viability financial and otherwise will follow if we are responsive, innovative and responsible recepients of public funds for public causes in a country where 30 % of our brethren still go to bed hungry in our villages and cities and live without basic amenities. May a 1000 thousand  flowers bloom in the non profit civil society space in India led by those who choose to stay idealistic, perhaps even hungry and foolish….. 

Summary of the lecture by Mathew Cherian

Is financial viability of the Voluntary Sector a mirage? The way forward

PART-II

The common thread is LOCAL vs INTERNATIONAL FUNDING. Out of the 3.1 million organisations, merely 50,000 organisations are the struggling ones (just  UNDER 2 percent).  The common thread among them is that they are all based on EXTERNAL grants. In my opinion it is local volunteers, local products, local markets or local fundraising, is the Key to the Viability of the sector.  They have proved that they can grow to scale. They also prove that solutions need not be small. It is not just  the corporate sector which can create jobs and when it does so it wrests major concessions from the Govt unlike non profits.

Yet, can smaller organisations working on critical issues for disability, the destitute, rehabilitation of beggars, homeless, manual scavengers, children exist, scale up and survive? Or is there a time when they too must call it a day? The dilemma for many organisations is whether to scale up or stay small & beautiful.  It is between the devil, in this case the regulating authorities, and the deep blue sea, which is freedom to work according to your passion “azadi”. We need to assess our true strengths and weakness, that is each one of us who run organisations in the sector on how we can become viable. The idea of freedom and “azadi” is very attractive but to make the organisation viable is hard work and a clear strategy is needed. There are no short cuts!

Assessment of real strengths and weaknesses of NGOs in  financial viability

Financial viability is perhaps the aspirational need of many organisations but it is also a strategic thinking for the future.  One has to be first viable and focussed in the work, COMMITMENT TO A VISION AND A FOCUS  THEN programmes and strategies WILL FOLLOW  to solve a developmental problem , There may be a need to reinvent , Take the case of HelpAge , which has just turned 41, It runs India’s largest mobile medical service and serves 2 million elderly in rural areas in a country, carries out 35000 cataract operations. About 15 years ago we started elderly self help groups as the country offers very little pensions in old age. These groups have now started Elders for Elders which is a viable organisation. To fight for pensions we have joined forces with pension Parishad with Aruna Roy,  Baba Adhav to advocate for  an universal pension for all the elders of this country and a minimum pension of 3000 Rs per month . Further acting as amicus to the Supreme court in a PIL for the elderly rights , we cannot work any more in silos and need to network, join associations push for change. There is strength in greater numbers than fighting it alone. All of our advocacy work is done through Indian funds.

The choice is in raising small amounts of resources both from local sources and the internet. Today we raise funds from 250,000 individual donors small to big. From children like my daughter who contributes 100 rs to a stockbroker who gives a crore for the homeless programme or the quiet Dr.Chottani who will quietly walk into my office and write out a cheque for 55 lacs. Crowdfunding like the Obama campaign is the way forward. Individuals contribute 60 percent of our 100 crore income in HelpAge India and foreign funds is under 1 % of the income. Local funding is the way forward as it connects us to local stakeholders and keeps us grounded.

Individual philanthropy in the country is more than 500 million USD and apart from it there are the big philanthropists like Azim Premji who have contributed into their foundations 400 million USD and companies such as HCL as well that gives large grants in a transparent manner.  There is a potential of 1000 million USD ( 7000 crores) available.

Corporate funding is about 10000 crores through the CSR route per annum.  I have some concerns on this form of funding though the 2 % CSR is an opportunity and also a threat to the viability of the sector, apart from the fact that it tends to co-opt the sector so that we are not a threat to destructive policies on environment, displacement and on energy and extraction/mining , land grab etc. Gandhiji famously said “Co-operate when you can, resist when you must”

However while looking for local funds, integrity and transparency are paramount. While raising funds on the internet either through crowdfunding sites your kite mark on credibility has to be recognisable. In the last 15 years I have spent time with others in founding Credibility Alliance, the first accreditation organisation and Guidestar the first transparent database of NGOS on the net with a set of minimum standards for the sector which can restore its credibility, Without transparency there can be no local funding.

It also takes a track record of the NGO for people to donate and you need to establish this on your website with a five year record of balance sheets and accounts on the public domain, the credibility or the impact you are making in your area of work.

Summary of the lecture by Mathew Cherian

Is financial viability of the Voluntary Sector a mirage? The way forward

PART-I

To begin with I would like to thank SRRF for the honour of inviting me to deliver the first Vijay Sardana Memorial Lecture.  I would like to remember Mr. Vijay Sardana, a gentleman and a noble soul, a fellow traveller whom I met 27 years ago when I was with Oxfam and he was with Plan International and a warm friendship we shared. I acknowledge the presence here of Mrs Sardana and family.

In his own quiet way, Vijay Sardana began by experimenting with an important area of financial viability by promoting “KOSH” in ASSEFA, Tamil Nadu, which was one of the big forerunners of the SHGs.  The KOSH savings movement predates Grameen Bank and other models which are popular now. Not much is written about it but is a working model. I am glad that Bunker Roy founder of SWRC Tilonia and my hero in the sector from my younger days is present in the audience. He should have been delivering this lecture.

Vijay Mahajan who set up BASIX said “he learnt all about microfinance from ASSEFA’s KOSH and its learnings”. This was about 30 years ago and the world was yet to know of the Grameen Bank model but it was done in India.  ASSEFA was one of the few organisations which reached viability and still continues its work in southern Tamilnadu around Madurai.

Vijay Sardana was a forerunner in his thinking on the viability of the sector much before his time.  I would like to commend him on his contribution and it is appropriate  that this memorial lecture is dedicated to viability of the sector.

Let us acknowledge the contribution of the voluntary sector which has grown from small beginnings into a huge sector in the new millineum. Indian freedom movement in 1857 got support from in the Indian gangetic plain from civil society as we know it, religious organisations both Muslim and Hindu. Societies Registration Act 1860 was formed to regulate these organisations.

I quote from my book on the non Profit sector “A million missions” “The sector has grown from these small beginning to 3.1 million NGOs and an annual income of Rs 72,792 crores and employs 2.7 million paid workers. The total workforce exceeds 18.2 million workers bigger than the entire public sector workforce in India. Civil society sector has benefitted from private philanthropy”. This data is from the Government’s study of Non profit establishments carried out in 2012 by the Ministry of Statistics and Programme Implementation.

While over a larger time-frame, the bulk of the sector continues to grow, but my observations over the last decade & case studies, point to the fact that non-profits are facing tremendous problems and the last 5 years of NDA rule it has been particularly distressing.

I quote 5 major news items to illustrate this point in the last five years.

1. Removal of 100 % tax exemption to NGO’s though the revenue foregone was a meagre 31.6 crores in a 3.1 trillion dollar economy which demonstrated the small minds of the present ruling dispensation.
2. Cancellation of 10,600 NGOs from the FCRA list in 2014 and another 5000 plus in 2017 .
3. 21 foreign donors placed on the banned list and an additional 15 of them on the watch list. RBI has become stricter than ever before on any foreign transfers to NGO’s. As a aside I think RBI should focus equally on banks & companies!
4. A Supreme Court case on stricter regulation and audit of the voluntary sector. It also relies on  some facts which are based on an ill informed PIL with little or no resistance from the non profits. There is a clear lack of advocacy by the sector which lacks the skill & PR of chambers of commerce like CII or FICCI.
5. The amendment brought in by a money bill that foreign company’s donations are no longer foreign money but Indian money that granted retrospective remedy to donations to political parties that recd these donations. I ask whether these rules could have similarly come to the rescue of non-profits? Clearly a case of double standards that only a ngo like ADR could challenge & survive.

The current discourse is anti civil society and the government increasingly paints the human right defenders as anti national, and coined a new word “Urban Naxal“. This makes working in the area of human rights difficult for many non-profits.  The regulatory environment has become stricter and scrutiny is growing I would say selectively. However my personal opinion is that it has made us much stronger.  

So why is the voluntary sector in India so critical?

We have had so many important achievements in the sector, some of which are ‘Right to Information (RTI ) Act’, in microfinance, in watershed programmes and livelihoods. Little is known that the ASHA worker is born of an NGO experiment, the Anganwadi worker came up from NGO work. The NREGA was a replication of “food for work“ programme organised by NGOs in 70’s and 80’s.  Very little is talked of the contribution of Aruna Roy in RTI and Nikhil Dey in MNREGA, Rajender Singh the waterman of India on improving watersheds in dry land areas and reviving old rivers. I can talk of several and even in Vijay Sardana’s days in AFPRO the India Mark 2 pump for drinking water was developed which is the mainstay in many villages in India, Africa and other SE Asian countries.  The Indian voluntary sector needs to be celebrated rather than be pilloried as being done today which along with democracy has kept our freedoms.

A historical look at the sector to understand the viability of the voluntary sector.

I would like to give four examples to prove my point.

 Lala Lajpat Rai started the Punjab National Bank in Lahore and this year they are celebrating 125 years of the Bank, When He migrated to India along with the Bank large parts of Lajpat Nagar named after him were given as compensation. However he set up a voluntary organisation called Servants of the people society to rehabilitate the refugees who came from West Pakistan and many activities were started. They were joined by Purushottamdas Tandon, Congress President and who served them for many years. The good library there is named after Purushottam Tandon and the Main office is called Lajpat Bhawan.  They raise funds through a Nature clinic, an annual fair, fees from the auditorium and also run a school for underprivileged children and sell products and masalas and have earned a huge branding for their spices.. This society Servants of People Society has survived for 70 plus years and is still serving the community. They also run a retirement home “ Godhuli “ in Dwaraka  which is a another fine institution.

A second example of a thriving non profit is an organisation called SPIC MACAY in the field of art and culture and carries out programmes on classical dance, music and also on specific cultural events. It is an organisation run by volunteers and most of the programmes are run on a voluntary basis. The founder Ashok Seth is a full time Professor in IIT Delhi.

A third example is ASSEFA,  a Gandhian Organsiation which originated from the Bhoodan movement, which was started by Acharya Vinobha Bhave . ASSEFA  runs schools in rural areas, organised several savings and credit organisations federated into Kosh and also a fine dairy plant near Madurai supplying fresh milk to the city.

The fourth example is one of the organisations started by HelpAge India called the “Elders for Elders Foundation” after the Tsunami in 2004 in Tamilnadu. It began with starting elder SHGs of the Tsunami victims and the savings were accumulated to begin livelihood enterprises. Today they are federated into 4 district federations and the EFE runs on viable funding from NABARD and NABFIN. Today it is a 30 crore organisation with no external funding and runs health programmes and micro finance programmes which are completely viable. We have proved that there is a second demographic dividend after 60 and elders can still contribute to the local economy and to the GDP. All the four examples of  organisations which run on internal funds raised within the country and are moving forward in their work including HelpAge India, my organisation

Dear All,

I would like to know about the FCRA Grant receiving before permission,

A organization applied for FCRA permission on July 2018 and received approved on March 2019, Can organization allowed to received FCRA Grant for the period of 1.1.2019 to 28.2.2019, is there any complication or any judgement regarding this matter.

Please suggest your view.

Thanking You,

Kamlesh Barmeda

Dear Members,

We are an NGO registered in Trichy, Tamilnadu. The founder trustee resigned and as a result I (Dr.Uma) ‎became the managing trustee henceforth. The Supplementary Deed was registered in Trichy district Sub-Registrar ‎office. Pl. clarify the following.

• Should I maintain an office in the place of registration (Trichy)
• Should I inform to the Income officials about our supplementary deed
• The trust has 12 a and 80 G validity.

Thanks and regards

Dr. Uma

Dear Respected Friends,

Greetings and New Year Wishes to you and to all SRRF team from Isaac Arulappan, Founder – Director of NGO namely Deva Kirubai Social Help Association managing an orphanage namely CORNERSTONE in a Village Mullippadi, Manapparai in Tiruchirappalli District – Tamil Nadu.

Now, I have a request.  Please help me have an answer to this Question

– Can one FCRA Holder/NGO be able to send money to another NGO with FCRA Registration?

Looking forward to receive your reply.

Thanking you in anticipation.

Isaac Arulappan

Dear Members, ‎

I am working on registering a not-for-profit which will involve itself into research activities in ‎technology. The outcomes will be mostly public goods, in terms of papers, open source code, etc. ‎At the same time, it may generate IP, income from licensing IP and ownership (equity) in ‎companies that come out of the work of the center. This will be used for sustaining the center. ‎

As far as I know, there is restrictions by the IT Act that organizations (for Section 8/Trusts which ‎have IT exemption) can’t own equity and also, their total income (from commercial activities) ‎should not be more than 20% of all receipts. ‎

‎- Does this mean that a not-for-profit cannot generate income to pay off for their expenses? If ‎that is the case, then how do not-for-profits become sustainable?‎

‎- Can NFP own patents or equity? ‎

Thanks for the help.‎
Varun

FCRA Dept made DARPAN ID mandatory for filing FCRA Annual Return (FC-4) for all organization, although several NGOs could not generate Unique ID from the Darpan website. FCRA Dept has now stated that on representation made by various NGOs facing difficulties in generating Unique ID under the DARPAN Portal , it has extended the last date of filing of mandatory FCRA return for the year ending March 2018 from 31st December 2018 to 31st March 2019 vide its notification No. II/21022/58(370)/2018-FCRA(MU) dated 29/12/2018.

This is for information and for some respite for organisations who could not comply with FCRA’s requirement of registration on Darpan portal.

https://fcraonline.nic.in/home/PDF_Doc/fc_notice_29122018.pdf

In Dec’17 FCRA Department had ordered NGOs to open their FCRA bank account with the banks integrated with Govt PFMS system within one month of its notice dated 21/12/2017. Most NGOs opened or shifted their bank account to PFMS compliant bank till June 2018, remaining NGOs were served a show-cause notice.

The FCRA Department has now come out with an order suspending FCRA of 156 NGOs for not complying with the orders. Their FCRA has been suspended for a period of 180 days.

During the suspension period, the NGOs cannot withdraw or deposit any foreign contribution in their bank accounts. Donor agencies funding these NGOs should not disburse any more funds till the FCRA registration is restored.

It also seems that some of these have already changed the bank, though the details have not been updated in FCRA database. FCRA Dept has stated that in case there are NGOs who already have migrated to a PFMS compliant bank and its name still appears on the list, they should send an e-mail to support-fcra@gov.in enclosing proof of bank letter.

In case NGOs have not done so, they can still do so, and then request FCRA Department to restore your FCRA.

https://fcraonline.nic.in/home/PDF_Doc/fc_order_12102018.pdf

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