Governance and Effectiveness of NGOs – The Way Ahead

January 2019

          Madhukar Kotwal                                 Vinayk Kelkar

             Rajendar Erande                                 Sidhar Jayraman

 

Acknowledgements

We would like to thank the following people for their time and inputs –

• Alok Kshirsagar • Prof. Kalyan Chakravarti                                            • Mr. Raosaheb Badhe
• Ashok Budhkar • Dr. Kiran Kulkarni                                                        • Ms. Rupam Nangia
• Ashok Kotwal • Mr. Luis Miranda                                                             • Mr. S. D. Pradhan
• Bharati Kotwal • Mr. Nitin Pawar                                                              • Adv. S. Y. Padhye
• Bina Joshi • Prof. P. Shahjahan                                                                  • Mr. Satish Khadye
• Bino Paul • Ms. Parinita Kanitkar                                                              • Ms. Shilpa Khangaonkar
• Bishnupriya Chakravarti • Prof. Pradeep Apte                                        • Dr. Sumita Kale
• Gauri Noolkar-Oak • Mr. Pradeep Lokhande                                          • Mr. Suresh Dixit
• Girish Kulkarni • Mr. Prakash Apte                                                           • Prof. Swati Banerjee
• Girish Sohani • Mr. Prashant Girbane                                                       • Ms. Usha Pillai
• Hitendra Singh • Mr. Prashant Kothadiya                                                • Mr. V. Rajagopalan
• Jaideep Gaikwad • Ms. Pratima Kirloskar                                                • Mr. Vivek Atre
• Jayant Shaligram • Dr. Rajeshree Joshi

Our special thanks to the Charity Commissioner of Maharashtra Mr. Shivkumar Dige for his greatly valuable inputs to the PIC Team.

We are especially thankful to Mr. S. Balasubramoniam for his valuable inputs to the Model Assessment Tool, and to Ms. Namita Joshi for compiling this paper. We are also thankful to Ms Manasi Apte for editing this policy paper.

We would like to express our gratitude to Mr. Vikas Deshmukh who had strategized and kicked off the initial work on this report before handing over charge of the Working Group to Mr. Madhukar Kotwal.

Lastly, we are immensely grateful to Dr. Vijay Kelkar, under whose guidance and encouragement the group has been able to put this report together.

Executive Summary

The NGO sector in India has grown exponentially in the last decade – there is one NGO for every 400 persons in India – but it has received relatively less attention in terms of governance. India ranks low on the Human Development Index as well as the Global Hunger Index; this underlines the need to review and reform India’s NGO sector in terms of efficiency and governance. India is currently home to 3.3 million registered NGOs, of which 25% cater to religious interests and activities, while about 40% are engaged in social service and educational activities. While many of the NGOs are highly motivated and actively pursue genuine causes, the same cannot be said for the rest of them.

NGOs in India can be classified as Operational, Policy Research and/or Advocacy, and Hybrid NGOs. Some NGOs have been making remarkable contributions to development at the grassroots level, providing cultural support, implementing many government schemes and utilising individual, government, corporate and foreign funds in a productive manner. However, key issues such as accountability, transparency, trustworthiness, organisational and financial efficiency, scalability and overall governance feature prominently in any analysis of the NGO sector.

With the objective of addressing these issues, PIC has been holding discussions with different expert and stakeholder groups. Through these deliberations, PIC observed that the Central Government and a few State Governments have taken several regulatory and legislative steps to ensure compliance and accountability. However, without simultaneous improvement in governance and efficiency of NGOs, these measures will not be able to sufficiently reform the NGO sector.

Based on PIC’s research and valuable insights provided by several experienced individuals and institutions, this policy paper is an attempt to analyse the challenges faced by stakeholders in the NGO sector and to make some concrete actionable recommendations for improving NGO governance and their effectiveness.

The major governance issues faced by the NGO sector include a lack of formal management/ leadership structure, training and capacity building at the middle and lower levels. Absence of formal and systematic processes for planning, documentation, performance assessment and quality control further increase governance challenges and ultimately impact overall performance and credibility of the NGO sector.

Following are the actions recommended to tackle the abovementioned issues –

a.   Reforms at the Leadership Level:

The trustees of an NGO are responsible for improving its credibility and governance standards. They should carry out this duty through well-defined, transparent and fair processes. Accordingly, some formal guidelines for trustees have been suggested.

b.   Establishment of indian council for Social Development (icSD):

A central-level Apex Nodal Agency should be established to create a common and open platform to facilitate better knowledge sharing across the country and to help NGOs in continually improving their governance & effectiveness. The ICSD should maintain a national database of registered NGOs, periodically share information on legal compliance requirements, government policies and schemes. It should select and authorize a suitable number of agencies to carry out social impact assessment and accredit NGOs. It should organize conferences and events on a national level to facilitate inter-state exchange of knowledge and information and encourage meaningful collaboration among NGOs. The primary focus of ICSD will be facilitation and information sharing, and not regulation or control.

c.  assessment and accreditation of NGOs:

To help increase the efficiency and accountability of NGOs, a formal assessment and accreditation process is crucial. A Model Assessment Tool (included in the paper), which considers both the size as well as level of excellence in governance of the NGO, is proposed for use first by NGOs themselves to carry out self-evaluation, and subsequently for external assessment to be carried out by an ICSD-approved agency. The NGO would be accredited by ICSD as per the results of the assessment carried out by the external agency. These results, over time, would be used as a qualifying parameter for NGOs to receive government and/or corporate support.

d.   Stimulus for Better Governance:

NGOs, especially the smaller ones, should be given suitable incentives to encourage them to go through a formal assessment process by using approved tools and through approved agencies.

These actions can substantially reform the NGO sector and accelerate sustainable socio-economic development in India. A stable, progressive and efficient development sector can go a long way in achieving the ambitious goals India has set for itself.

Governance and Effectiveness of NGOs The Way Ahead

Introduction

NGOs form the bedrock of organized social development in many countries. They play a vital role in converting policy directions and financial resources into tangible development on the ground. In India, although the NGO sector has grown exponentially in the last decade, governance issues related to the sector have received very little attention, unlike, say, in the case of Corporate Governance. Virtually left to itself, while the sector has seen phenomenal growth in numbers – an NGO for every 400 persons, the social impact created has not been commensurate with the number of NGOs and the resources available with them.

The NGO sector has the potential to reach out in depth to many areas where governments face difficulties. There are several examples of dedicated NGOs which have been carrying out commendable work in the fields of education, health, conservation of natural resources, environmental and wild life protection, heritage, and culture. However, what is worrisome is those NGOs which exploit their position to extract financial benefits while serving questionable interests. As a result of such elements, the positive contributions of the NGO sector as a whole have not received their due recognition.

The emerging opportunities for growth in our country need to be addressed keeping in view the rapidly changing aspirations of our young population increasingly exposed to the developed world through better education and communication. Simultaneously, the increasing gap between the standard of living of the under-privileged and affluent sections of society needs to be narrowed expeditiously. NGOs have a major role to play in this area.

Keeping in view the above factors, Pune International Centre (PIC) embarked on an endeavour to propose a set of implementable recommendations which can have a positive impact on governance of NGOs.

While covering the activities of NGOs in general, for this report, it was decided to exclude NGOs operating for Political or Religious purposes.

Section1

Overview of the Social Development Landscape

• The Global Scenario

Every country works on human development in its own way through initiatives that are sometimes similar to the ones in other countries and sometimes completely different, owing to the various socio-cultural and economic contexts.

According to the United Nations Development Program (UNDP) Human Development Report 20161, “Human development is all about human freedoms: freedom to realize the full potential of every human life, not just of a few, nor of most, but of all lives in every corner of the world— now and in the future.”

A few positive facts from the UNDP report reveal that “even though the global population increased by 2 billion – from 5.3 billion in 1990 to 7.3 billion in 2015, more than 1 billion people escaped extreme poverty (during this period), 2.1 billion gained access to improved sanitation and more than 2.6 billion gained access to an improved source of drinking water”.

However, there were also some stark realities that still prevail, and which cannot be ignored. For instance:

1. One person in nine in the world is hungry, and one in three is
2. Worldwide 18,000 people a day die because of air
3. HIV infects 2 million people a year.
4. Every minute on an average, 24 people are displaced from their
5. More than a billion people are estimated to live with some form of disability and are among the most marginalized in most
6. One-third of the world’s food is wasted every Just one-fourth of the wasted food, if recovered, could feed 870 million people.
7. The effects of deforestation and climate change are becoming increasingly

• Measures for Social Development It is necessary to investigate how human and social development is measured using established criteria, instruments and benchmarks.

As approved by the UN General Assembly on 25th September 2015, the group of nations has also accepted the following 17 ambitious but achievable goals for Sustainable Development as a part of the Agenda for 2030:

• End poverty in all its forms everywhere
• End hunger, achieve food security, improve nutrition and promote sustainable agriculture
• Ensure healthy lives and provide well-being for all at all ages
• Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
• Achieve gender equality and empower all women and girls
• Ensure availability and sustainable management of water and sanitation for all
• Ensure access to affordable, reliable, sustainable and modern energy for all
• Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
• Build resilient infrastructure, promote inclusive, sustainable industrialization and foster
• Reduce inequality within and among countries
• Make cities and human settlements inclusive, safe, resilient and sustainable
• Ensure sustainable consumption and production patterns
• Take urgent action to combat climate change and its impacts
• Conserve and sustainably use the oceans, seas and marine resources for sustainable development
• Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, halt and reverse degradation and halt biodiversity loss
• Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.
• Strengthen means of implementation and revitalize the Global Partnership for Sustainable

To achieve these Sustainable Development Goals (SDGs), it is necessary to evolve guidelines for the distinct roles to be played by NGOs in the domains they cover. Meeting these SDGs can also be greatly facilitated global knowledge sharing, efficient capacity building and more successful management practices. Sharing of experiences quoted in the UN Global Compact Case Studies can help India in enhancing compliance with SDGs. It must be recognised however, that there are many NGOs which might be working in areas at the periphery of the SDGs, not following the mainstream discourse of social work but still be addressing needs defined by the social realities of the current times. Such NGOs should be encouraged to pursue causes which might not be immediately mapped to current SDG goals, but would still contribute to society.

While some NGOs have been major contributors to development processes, efforts need to be directed towards enhancing the contribution of the entire voluntary sector to make it more measurable and effective. Although measuring social up-gradation and contributions to the social sector are subjective, quantifying them would aid in monitoring the efficacy and reach of NGOs’ work. Use of SDGs and the National Industrial Classification (NIC-2008) is recommended to generally align NGOs’ actions with global goals.

The issue of measuring contribution can be partially resolved through the concept of Solidarity/ Social Economy. This is an evolving concept which seeks to increase the quality of life of a region or community through local business and not-for-profit endeavours. It measures the contribution of social sector to economic growth and development. This approach has gained traction and is under research and practice in European and Western countries but is yet to gain ground in India.

• NGOs and their role

The term NGO – Non-Governmental Organization- was reportedly coined in 1945 as a part of the Charter for the United Nations Organization. An apt definition of an NGO in the Rai Technology University Report titled ‘Concepts and Functions of NGOs’ is as follows2:

“An NGO is defined as an independent voluntary association of people acting together on a continuous basis, for some common purpose, other than achieving government office, making money or (indulging in) illegal activities.”

The operational efficacy of NGOs lies at the intersection of technology, organizational structure, sector, financial feasibility and approval of impact group. Broadly speaking, NGOs comprise welfare organisations, service-deliverers and advocacy groups. However, a more detailed classification of NGOs will further clarify their roles. It will also help in identifying economic goals while at the same time addressing socio-cultural goals like education, health, environmental protection and human rights.

Over time, NGOs have mushroomed all over the world and have taken up work in various sectors for many different causes. A host of imaginative acronyms have emerged out of this development describing their scope. Some among them are:

INGO – International NGO BINGO – Big International NGO

QANGO – Quasi Autonomous NGO GONGO – Government-organized NGO MANGO – Market Advocacy NGO

PANGO – Party NGO (set up by Political Parties, disguised as NGOs)

It is no wonder that there are an estimated 10 Million NGOs registered world-wide3. Collectively if they had been a single country, they would rank as the 5th largest economy globally4!

Classification of NGOs is a rather difficult task given the wide spectrum of activities in which they are involved. A generally accepted broad categorization is given below

• Operational NGOs
• Policy research and/or Advocacy
• Hybrid NGOs – involved in both the above-mentioned

To capture the complexity of the NGOs, further sub-classification would be required. This is particularly important because the NGO sector is linked to global dynamics and operates in a rapidly evolving development space. A change in global dynamics leads to changes in the scope and roles of NGOs, needing more nuanced classification. For e.g. Amnesty International has evolved over the years in its scope and functioning since its inception. It started off as a fight against state persecution in the era of dictatorships, fallouts of the Cold War and ethnic tensions. Now it has evolved into a worldwide movement for protecting and recognizing human rights all over the world with focus on war crimes, future warfare, chemical weapons etc5.

There is a need to take into consideration the changing contextual environment 20-30 years from now and it is necessary to understand the engagement models and processes that will evolve between NGOs and their supporting agencies.In India, if a general classification is done based on the activities undertaken by NGOs, the following would appear reasonable, although the percentages shown might not be precisely valid today.

Dominant NGO activities in India6:

NGOs are also increasingly participating in conserving the environment and working for the preservation of forests, biodiversity hotspots, rivers and wildlife across the country. Be it participating in advocacy and policy research or running on-ground initiatives, environmental NGOs are fast occupying an important space in India’s social sector.

• The Present Scenario

India today is at a lowly rank of 131 among 188 countries in the Human Development Index (HDI), which measures the average achievements in three basic areas – health, access to knowledge and standard of living. This rank is the lowest among BRICS countries. As of last year, more than 37% of India’s population of 1.25 billion still lives below the poverty line (MPL defined as $1.90 per day on PPP basis). More than 22% of the entire rural population and 15% of the urban population of India exists in this difficult physical and financial predicament7.

In the case of the Global Hunger Index (GHI) developed by the International Food Policy Institute, India ranks 100th among 119 countries. Despite a significant improvement over the last 25 years, it is currently categorized as a country “at the high end of the serious category”!8

This data shows that India still has a very long way to go in terms of social development, as compared to the rest of the world9.

As per a recent study (covering 26 of the 29 States) conducted by the Central Bureau of Investigation (CBI) at the instance of the Supreme Court, India accounts for 3.3 Million registered NGOs. That works out to nearly one NGO per 400 persons! This does not include the unknown number of unregistered NGOs. Surely, if so many “not for profit” organizations had been operating effectively, suitably supported by the Government and other stakeholders, India would have been one of the most socially developed nations!

Currently, operational NGOs can be registered under any of three forms – Section 8 Companies, Societies and Trusts. The major differences between the three entities are summarized in the table below.

criteria	Section 8 company	Society	Trust10
Basic Registration Document	Memorandum of Association, Articles of Association	Memorandum of Association, Articles of Association	Trust Deed – which contains objects of the Trust &bye-laws
Formation	Relatively complex	Simple	Easy
Jurisdiction and registration	Registrar of Companies	Registrar of Societies, Charity Commissioner for Maharashtra	Deputy Registrar / Charity Commissioner
Legislation/Statute	Companies Act 2013	Societies Registration Act 1860	Relevant State’s Trust Act
Objects	Non-profit Activities	Literary, Charitable, Scientific and resource oriented	Social benefits and Charitable
Modification of objects	Complicated	Easy	Alteration only by the Founder. If the founder ceases to exist or is deceased, alteration of objects is impossible
Number of Members	Minimum = 7 Maximum = No limit	Minimum = 7 Maximum = No limit	Minimum = 2 Maximum = No limit
Stamp Duty	Not required	Not required	4% of Trust property Value
Name	Prior approval required from Registrar of Companies.	No approval required	No approval required
Managing Committee Members	Minimum 2	Minimum 2	Minimum 1
Succession in Management	By Appointment	By Election	By Election

 

Meetings	Quite Extensive as per the provision of Companies Act	Annual Meeting As per Law. Governing Body meeting as per the rules of Society.	No stipulations and as per the Trust deed
Legal Status	Full Legal Status	Full Legal Status	Limited Legal Status
Applicable statutes	Exhaustive	Limited	Limited
Admission of members	General Body/Board through issue of Capital.	Governing Body Control	Not applicable
Dissolution/Takeover by State	Very difficult	Possible	Possible
Payment to Members	As approved by Company and State.	Not restricted	As notified in Trust deed
Recurring Expenditure	Not significant	Negligible	None
Consolidation of Accounts	May be necessary	No consolidation.	No consolidation.

• SOCIAL ENTERPRISES – AN EMERGING TREND

Many NGOs these days introduce themselves as Social Enterprises (SEs), largely to attract funds. A Social Enterprise is a company which produces exclusive, cost-efficient, sustainable goods and services for the society for mitigating the exclusion or developmental gap.

Currently, there is neither a legal definition of SEs, nor a legal framework for the SE ecosystem in India. Hence, SEs, depending on whether they are for-profit, not-for-profit, or hybrid, register themselves typically as – Not-for-Profit Small Cooperatives, Profit Sharing Cooperatives, For Profit Companies, and Section 8 Companies.

SEs focus on management, efficiency and sustainability, which increases their credibility and helps them acquire funds from the corporate or private sector for furthering their cause. This has inspired more NGOs to move towards efficiency and management techniques in order to improve their sustainability.

SEs work directly for community development by creating jobs or generating awareness among people. Health, agriculture, housing, energy, water and sanitation, livelihood and financial inclusion are the major SE sectors in India (India Social Enterprise Landscape Report, ADB, 2012). SEWA and Kudumbashree (Kerala) are examples of NGOs which are also Social Enterprises.

The scope of this paper includes not-for-profit SEs.

• POSItIVE FACtORS

a.   NGO achievements:

NGOs have been making remarkable contributions and establishing best practices in various fields. In education, NGOs have contributed to skilling, alternative methods of learning, education of girl children, etc. Some advocate environmental conservation while providing environmental education to young rural children through awareness campaigns. NGOs engaged in healthcare have introduced mid-day meal schemes and preventive healthcare schemes. Some of these work to address the problem of non-availability and inadequate quality of healthcare personnel through research, training and service innovation. In the area of rural development, some NGOs foster rural entrepreneurship and women empowerment by supporting grassroots innovators and social entrepreneurs through organized knowledge sharing. These and many such examples underline the immense contribution of the NGO sector to the development of our country.

b.   cultural Support:

The huge network of NGOs across the country, sustained by the innate altruism embedded in Indian culture, offers a huge advantage in addressing the enormous unfulfilled need for development. This is exemplified through programs like the traditional “Langar” in Punjab or the “Daan Utsav” celebrated across the country with passion.

c.  Government Schemes:

Numerous Government schemes have been initiated in the recent past dealing with important areas of social development although the schemes often have an overlap in their focus areas. For example, just in the area of Skilling, the following schemes are in various stages of implementation:

• Deendayal Upadhyay Gram Kaushal Yojana
• Deendayal Antyodaya Yojana National Urban Livelihoods Mission
• Modular Employable Skills
• Aajeevika- National Rural Livelihood Mission
• Pradhan Mantri Kaushal Vikas Yojana

These are piloted by various agencies like National Skill Development Agency (NSDA), National Skill Development Corporation, National Skill Development Fund, 33 Sector Skill Councils, the National Career Services, etc. The Ministries monitoring these initiatives include: Ministry of Human Resource Development, Ministry of Rural Development, Ministry of Health & Family Welfare, Ministry of Urban Development, Ministry of Drinking Water & Sanitation, Ministry of Women & Child Development and Ministry of Skill Development & Entrepreneurship.

d.   Government funding:

Substantial government funds have been allotted for social development every year through schemes and policy initiatives. There has been criticism in some circles that the increase in Government allocation of funds for the social sector in the last budget has been insufficient, but there is no denying the fact that effective utilization of allocated funds in a genuine and transparent manner is the key issue.

e.   corporate funds:

Availability of funds for genuine social work has received a major boost with the re-enactment of the new Companies Act in 2014. This puts India in a unique position of being the only country in the world to have mandated corporate contribution for social development through legislation. As per the “India CSR Outlook 2017”11 report by NGO Box:

• CSR spend in FY-17 by BSE BIG companies included in the survey, has been over 68.2 billion (Rs. 6820 crores) as against the prescribed CSR of Rs. 76.26 billion (Rs. 7626 crores).
• These 300 companies account for more than 2/3rd of total CSR spend in
• 55% of these projects were implemented through NGO

f.   Foreign funds:

Foreign funds have been accessed in fairly large amounts by several Indian NGOs. In a statement given in the Lok Sabha on 26th July 2016, the Government declared that there were 33091 NGOs registered as of that date under the Foreign Contribution Regulation Act (FCRA), which had received foreign funding amounting to a total of nearly Rs. 510 billion (Rs. 51000 crores) in the preceding 3 years till July 2016. Through a recent notification in Oct 2017, all existing and new NGOs which deal with foreign funds have been asked to register themselves with NITI Aayog (through the NGO-Darpan portal) and obtain unique IDs.

In summary, whereas the need for social development is enormous, solid government support and sufficient funds are available. A tremendous resource comprising 3.3 million NGOs can be a real game-changer!

• tHE StUMBLING BLOCKS

A recent World Bank report warns that in playing their role, civil society actors need to ensure they retain their core missions, integrity, purposefulness and high levels of trust and highest levels of accountability12.

Although the Indian Corporate sector has to an extent imbibed the requirements of governance voluntarily or otherwise, a large majority of the NGO sector has remained “disorganized” or “insufficiently organized” in this respect. This has led to a lack of transparency and has caused a trust deficit in the minds of Regulators, Donors and even the Impact Groups. It is also one of the factors which adversely impact funding as well as implementation of social development projects. A healthy relationship between NGOs and Funding agencies is conceivable only when both parties share a common vision and objectives. Despite the major step to make Corporate Funding for CSR mandatory, not many NGOs have been able to get the benefit. One of the important reason is lack of adoption and internalization of ‘good governance’ practices by NGOs. Most corporates would prefer to donate only to NGOs which understand and practice good governance. A recent article has also brought out instances of misuse of Corporate CSR funding by directing it towards politically important programs13 rather than socially needed ones.

Lack of research on social economy i.e. contribution of NGOs to the Indian economy is becoming a hurdle in providing legitimacy to their work. Micro-data used for policy formulation is collected mostly by the government, e.g. by Ministry of Statistics & Program Implementation

– MOSPI. The National Sample Survey Office i.e. NSSO’s 73rd Round report on unincorporated enterprises provides data on Not-for-profits -NFPs, i.e. entities who do not work for any kind of financial gain. There is no mention of NFPs which have revenue generating projects or for- profit organizations.

There is an overall lack of research on variations in Not-for-Profit (NFPs) organizations (recreational, religious, think tanks etc). Much of NFP data comes from NGOs which are not registered, or which are created by ‘barefoot’ activists. Established socially-oriented organizations such as Azim Premji Foundation, Tatas etc. as well as reputed academic institutions can be repositories of such data. This data should be regularly collected, updated and validated.

In India, only 10% of NGOs file their annual income and expenditure statements14. In January this year, the Hon. Supreme Court, in response to a five-year-old PIL, directed the Central and State Governments to take urgent steps to ensure transparency in operations by NGOs. The Supreme Court directed Central and State governments to scrutinize accounts of lakhs of NGOs and voluntary organizations and take civil and criminal action against all organizations misusing the grants. It directed the Central Government to frame and submit for the court’s scrutiny a guideline on the procedure for accreditation of NGOs and voluntary organizations. Taking a serious note of the situation, the Hon. Supreme Court has remarked, “We cannot allow the matter to remain in a flux. We must take the case forward as it has remained stagnant for years.”

The Intelligence Bureau Report– “Impact of NGOs on Development”15 brought out in June 2014 stirred some controversy since it mentioned the adverse impact certain foreign-funded NGOs had potentially caused to India’s GDP through the misuse of funds in “anti-developmental” activities. In recent times, stringent steps have been taken against some of such NGOs including cancellations of their licenses.

Unfortunately, some segments of the NGO fraternity have been exploited to advance the interests of political parties, religious groups and unscrupulous elements involved in money- laundering and terrorism, which has led to a stigma around NGOs. Genuine and honest NGOs face the unpleasant consequences of such a stigma. Lack of strong governance among NGOs further exacerbates the scene. By no means is this purely an Indian phenomenon since there are several foreign extremist and terrorist organizations known to operate using NGOs as “fronts” for generating funds and gaining influence.

NGO establishments often tend to have high administrative overheads, as high as 60% of the project cost! In many cases, only 20% of funds are effectively used for development work.

Since the work being done by NGOs has a philanthropic “not-for-profit” perspective and is often driven by individuals with a passion for achieving their social goals which are not easily measurable, it is difficult for them to simultaneously incorporate a “professional” result- oriented approach. There is also a lack of awareness of the legal aspects and some consequent apprehension, especially among smaller NGOs. Given the very large number of small NGOs in India, they face hurdles in scaling up their operations due to the unavailability of stable, knowledgeable human resources.

The level of digitalization in the regulatory framework is also very low. In fact, this sector has not received much attention unlike many other areas like Taxation, Railways, and Land Records etc. In keeping with the emphasis laid on the Digital India initiative, it is important to simplify processes for the NGO sector too through the effective usage of IT tools. Lack of digitalization is an impediment when it comes to the smooth implementation of projects. Digitalization should ensure simplification of processes while minimizing duplication.

There is an urgent need to have a single Apex Nodal Agency at the Centre to keep track of all NGOs in all their forms – Trusts, Societies, Social Enterprises or Companies- with unique IDs and also to ensure sharing of necessary information across all states. This will synergize the efforts in Social Development and catalyse collaboration across NGOs, Regulatory authorities, Donors and Impact Groups.

It is therefore of utmost importance that we reflect on the status of the agencies, stakeholders, and eco-systems involved for social development. NGOs and the vast eco-system connected with it must be encouraged to reform and enhance the efficiency of their operations through improved governance.

• The PIC approach

The PIC Working Group on NGO Governance started addressing the issues related to the social development sector by holding discussions with separate groups comprising of NGOs, Corporate Donors, Regulatory and Legal authorities, and the Impact Groups involved in Social Development, since a multi-disciplinary approach is crucial for studying NGOs. As a result of these deliberations, it was observed that several steps have been taken by the government in the recent past in two areas:

1. Emphasis on Compliance through elaborate regulation
2. Enhancing sources of Funds through Legislation

Section II of this report describes the difficulties and problems faced by each of the stakeholders in detail.

After several rounds of brainstorming and a study of the extensive work done by several institutions and individuals, the Group concluded on some major steps which will go a long way in improving the Governance and Effectiveness of NGOs in India. 

Section III details the various recommendations.

 

Section2

Issues and Problems within the Social Development sector

This section focuses on issues faced by NGOs with other stake holders (like donors, corporates, governments and statutory agencies, beneficiaries and societies) and issues that the stakeholders face with NGOs.

Professionally organized NGOs tend to have clearly defined structures, roles and responsibilities and they manage projects by closely monitoring and evaluating the outcomes and their impacts through a formal reporting and control mechanism. Senior management and employees are trained on the required competencies and regular communication and transparency is maintained with the stakeholders involved in the projects. However, small organizations invariably find it difficult to carry out all these procedures for a host of reasons.

Based on the stakeholder meetings conducted by PIC, several issues concerning NGOs and other entities within the social development space emerged as crucial. They are as follows

• Senior leadership / Management

The Chairperson/President may be a one-person army, taking all the decisions for the NGO. Many small and medium sized NGOs do not have a formal structure and decisions are often influenced by the likes, views and beliefs of the senior most people in the management, even though they may not have the expertise for making those decisions and may even lack a professional approach. Financial decisions or operational decisions taken through such an approach may result in improper utilization of resources (including human resources) and biased decisions. Often, funding is received by NGOs due to the influence and contacts of the senior leadership, rather than the NGO’s quality of work, capacity and maturity.

• HR, Training and Capacity-building

Many NGOs face several difficulties in attracting and retaining talented, skilled people as the compensation structure is low, service conditions are poor, there are occupational hazards involved and there is no scope for vertical and lateral growth.

Most of such NGOs do not have a transparent recruitment process, which results in a non- uniform compensation policy. NGOs also face a high attrition rate due to these reasons, which Governance and Effectiveness of NGOs-The Way Ahead  are compounded with a lack of training and awareness, informal organizational structure, etc. Eventually, a person who joins the NGO continues working there only if he/she is passionate about serving the society.

Today a good number of Donors are reluctant to monitor the usage of funds provided for administrative and capacity building of the NGO staff; instead the focus is primarily on program implementation, which directly benefits the community.

In case of projects handled by the NGOs, the projects are identified and defined by the donors, CSR departments or the Government, based on convenience of implementation, visibility or personal interest rather than on the real needs of the people.

One of the important reasons for inadequate of performance of many NGOs is the low level of their capacities. NGOs often find passionate people who are enthusiastic to work for development of disadvantaged sections of society. However, many NGOs do not have the competencies and capacities to plan and execute programs effectively. Most NGOs face questions about sustainability and viability because they lack such competencies.

• Operational and Governance Issues

Some other issues faced by NGOs during project implementation and management are as follows:

1. NGOs do not use Planning tools based on data or formal Project Management Systems (PMS).
2. Since PMS is not implemented, many projects suffer due to the implementation of inappropriate techniques, lack of regular and periodic review, absence of focus on quality, lack of mechanisms for recording, field constraints,
3. Due to lack of periodic documentation of innovative practices and milestone achievements, knowledge sharing is not
4. Timelines are extended due to several reasons such as local conditions, funds, and changes in priority, which are sometimes beyond the control of NGO

Section3

Proposals and Recommendations

3.1     Classification of NGOs by Size and Level of Excellence

Based on the numerous issues discussed in the previous section, we would like to make recommendations relevant to the area in which the issues are being faced. But before that, it is important to emphasize that the objective of improving NGO governance is to enhance and maximize the social impact of NGO Projects. Impact Groups and society in general must be able to gain as much sustainable benefit as possible from the work done by NGOs.

It is proposed to introduce two basic yardsticks when assessing NGOs – Size and Level of Excellence, in addition to their domain expertise and geographical relevance.

3.1.1      SIzE

It is important to recognize that NGOs differ widely in size and capacities. Additionally, factors such as public perception, media coverage, professional skills, knowledge and experience of staff are important in assessing the strength of NGOs. We would therefore distinguish/classify NGOs into three categories for size – large, medium and small. This classification would be based on:

1. The number of full-time employees
2. The number of volunteers
3. Asset base
4. The annual budget and
5. Net

Below is a table that specifies the details under each classification criteria, to evaluate the size of an NGO. The median can be considered as the size of the NGO. To qualify for any of these sizes, the NGO should be evaluated in all criteria.

criteria	Large	Medium	Small
A	> 50	50-10	< 10
B	> 100	25-100	<25
C	> Rs. 100 m (Rs. 10 cr)	Rs. 20-100 m (Rs. 2-10 cr)	< Rs. 20 m (Rs.2cr)
D	> Rs. 100 m (Rs. 10 cr)	Rs. 50-100 m (Rs. 5-10 cr)	< Rs. 50 m (Rs. 5cr)
E	> Rs. 100 m (Rs. 10 cr)	Rs. 50-100 m (Rs. 5-10 cr)	< Rs. 50 m (Rs. 5cr)

(m=million, cr = crore) 

It is proposed that a systematic process be introduced for classifying NGOs by their size.

3.1.2    LEVEL OF EXCELLENCE

A major recommendation of this report is the use of a Model Assessment Tool (described in detail subsequently) to objectively evaluate NGOs’ Level of Excellence. Five Levels of Excellence have been recommended with Stage 5 being the highest. The assessment of Level of Excellence has deliberately been unconnected from the size, since it is possible for a small NGO to reach high levels of excellence.

Often it is seen that large NGOs get preferred because of their size, domain expertise, and geographical relevance, made possible by their large operating budgets. While this breeds a certain level of complacency in such large NGOs, it also provides little incentive for smaller NGOs to invest in measures enhancing efficiency.

3.2     Management & Governance

3.2.1    APEX NODAL AGENCY

There is an urgent need to create a single Apex Nodal Agency at the Centre to carry out the following functions:

1. To create a directory and act as a single online repository for information on all NGOs in the country, including their official registration IDs, their focus areas and competency

2. To interact with its international counterparts (such as the Australian authorities as recommended in point 11) to further develop and refine the proposed Model Assessment Tool.
3. To select qualified agencies and authorize them to accredit NGOs on its
4. To facilitate the cross-fertilization of ideas at a national as well as global
5. To bring about the harmonization/moderation of regulatory policies of various
6. To facilitate periodic meetings of Charity Commissioners across
7. To facilitate alignment of NGO efforts with national and international objectives such as the Sustainable Development Goals by identifying priority
8. To create a platform for exploring and sharing data available with reputed organisations and academic institutions involved in social development (both domestic and international). It should also enable periodic updating of data used for policymaking at the Central and State

Since the operations of NGOs cut across central as well as state regulations, it is recommended that a centrally appointed ‘indian council for Social Development’ – icSD be created as an Apex Nodal Agency, headed by a retired Supreme Court Judge. Members should include representatives from the government regulatory agencies, Charity Commissioners of various states, corporate donors (by rotation) and eminent social reformers and institutions. The ICSD should be connected to global councils such as International Council for Social Welfare which includes national networks of other countries.

The objective for formation of the ICSD is not to constitute another bureaucratic entity which would further regulate or scrutinize NGOs’ functioning, but to create a common and open platform to facilitate better knowledge sharing across the country. This will synergize and continually enhance the Social Development movement and catalyse collaboration across NGOs, Regulatory authorities and Beneficiaries.

3.2.2    SENIOR LEADERSHIP

Trustees play a crucial role in maintaining the overall decorum and health of their NGO. Often, coming from distinguished backgrounds, Trustees can help in raising funds for the NGOs and in developing the organization through collaboration.

Trustees can help in keeping an oversight on the operations of an NGO through close contact with its Director or CEO. Trustees must act as a sounding board for the CEO or Director, help draw up mission and vision statements of the NGO and ensure that the NGO doesn’t operationally deviate from these. They must particularly focus on keeping the NGO legally compliant and check whether the impact of the projects implemented is in alignment with the vision and mission of the NGO.

Trustees should also follow defined processes for governance which are fair and transparent and be open to continual improvement based on changes or feedback information from different stakeholders, maintaining a proper balance always. Such an approach would support knowledge/ experience accumulation and growth. Gaining and retaining the trust and confidence of donors as well as beneficiaries should be the ultimate goal.

Formal Guidelines for Trustees Trustees are the guides and monitors of the NGO. Their roles and responsibilities regarding the NGO must include but are not limited to the following16–

1. Play advisory roles, depending upon their area of
2. Regularly attend Trustee meetings and committee meetings (if any) and to meet otherwise as frequently as necessary to properly discharge their
3. Be responsible for improving credibility and governance standards of the
4. Ensure the formulation of a robust risk management
5. Oversee the financial reporting process and disclosure of the NGO’s financial information, related party transactions and qualification in the draft audit
6. Ensure the NGO’s compliance with all legal requirements and the social and developmental priorities indicated by the central government and the concerned state governments from time to
7. Act as custodians of the proposed strategies of the NGO, bearing in mind the economics of any potential transaction. However, they should refrain from assuming executive responsibilities for the deliverables of the
8. Oversee the appointment, assessment and remuneration of key

To provide the Trustees with better clarity for their role and responsibilities in leading the NGOs, development of a formal orientation program in the form of MOOCs (Massive Open Online Courses) by ICSD is recommended.

3.2.3    HR, TRAINING AND CAPACITY-BUILDING

Capacity building is a crucial aspect for the performance of any NGO and it is necessary for their sustainability and success. Capacity building also helps in maintaining good quality and standards of services and in promoting a professional approach within the NGO. Considering rapid changes in the development sector and the changing needs of society, there is an urgent need for capacity building of NGOs.

Project management skills – the ability to plan projects, maintain deadlines, conduct effective monitoring and evaluation by analysing the cost-benefit ratio, design and maintain budgets, are critical for program implementation in any NGO. Personnel should be trained in behavioural skills, communication, IT-enabled project management, and in some cases, logical framework analysis (LFA) which can be a useful tool, both in the planning, monitoring and evaluation management of development projects.

Employee retention is crucial and should be achieved by collaborating with local social service institutions in a structured manner with previously defined human resource requirements. This will also help tackle the problem of lack of qualified staff members. Improving staff quality will aid in setting parameters of governance, such as accountability and transparency.

NGOs should focus on HR training which will ensure empowered and responsible staff and managers who are focused on improving the overall performance of the NGO. This will help the NGO in meeting its target through a professional approach towards key stakeholders.

3.2.4    LEGAL COMPLIANCES

Besides the online directory of NGOs that is proposed to be set up through ICSD, there must be one comprehensive website set up by the Government which carries all information regarding legal compliances for NGOs. This should also include the schemes of the Government in the development sector. This can be a part of the same portal hosted by ICSD as well. A single window must be established for ease of implementation of processes. Furthermore, initiatives such as the camps conducted by the Maharashtra Charity Commissioner Office (CCO) in 7000 villages to raise awareness towards compliances, will help bridge the gap in awareness and in reducing discrepancies in reporting.

NGOs on their part must make sure that their legal compliances are in place. A quarterly legal compliance report must be generated by each NGO and shared on their website as well. Also, considering the distinctions between the legal status of Trust, Society and Section 8 companies (Section I, point 4), there is merit in merging Trust and Society structures in the long term, to simplify legal procedures.

It is suggested that NGOs carrying out activities through a combination of domestic and FCRA funds should be treated a little differently. Purely technical or administrative errors or oversights should not be treated as contraventions leading to serious actions like suspension or cancellation of registration, confiscation, penalties or prosecution. The action that may be taken by the regulatory authorities should be commensurate with the type of non-compliance. The regulators should take up stringent measures only where they suspect serious violations or non-compliances, which could be detrimental to national interest. In other words, procedures and rules should be followed not merely by the letter.

3.2.5. DIGITALIZATION

It is encouraging to note the several initiatives being implemented in Maharashtra and Gujarat in this respect. A drive called “DÃTÔ initiated by Maharashtra Government has identified four key principles – Transparency, Access to Information, E-Governance and Ease of Operation. Once this drive is successful, it will certainly be useful for other states to emulate this initiative.

The Charity Commissioner in Maharashtra has already taken up a mission to reform the NGO sector. According to the circular issued in April 2017 for Maharashtra Charity Organizations, the rules for digitalization have already led to amendments especially with respect to Schedule I(registration of NGOs, their records and documents) and filing of change reports. These measures will surely ease processes for NGOs.

In Gujarat, the Integrated Workflow and Document Management System (IWDMS) tool was implemented to improve accountability, transparency and effectiveness through automating government functions and processes at different levels of hierarchy.

3.2.6      FOCUS ON NEED-BASED PROJECTS AND INTER-NGO COLLABORATION

Two significant suggestions came through in all our stakeholder group meetings:

1. CSR departments and NGOs should take up work that is need-based and not demand-based or convenience-based. The convenience of the project location should not solely dictate the choices and decisions taken for projects undertaken by CSR
2. NGOs should join hands and take up joint projects so that the effectiveness of the project is enhanced and trust between donors/corporates and civil society is Joint projects can provide momentum by optimizing use of human and financial capital and reduce the overall time for completion of the projects.

3.2.7    IMPROVING REGULAtORY FRONt

On the regulatory front, Maharashtra is a good example to borrow from.

Implementation of several important amendments in the Maharashtra Trusts Act is under way. The Maharashtra Charity Commissioner has taken several steps to bring in accountability and root out non-genuine Trusts. As of December 2016, Maharashtra alone had nearly 800,000 Trusts and 660,000 Societies registered. Of these nearly 390,000 Trusts were found to be “non- functional”17. The Charity Commissioner has de-registered thousands of such cases already. Other effective initiatives were also undertaken by the Charity Commissioner’s Office (CCO) in Maharashtra. While these steps were necessary, it is important to avoid creating a scare among genuine NGOs which play an important role in the nation’s social development.

A model example from the international arena would be that of Australia. A study by Bloodgood et al (2014)18 analysed the NGO regulation structures of Organisation for Economic Cooperation and Development (OECD) countries in three areas, namely, (a) barriers to entry, (b) constraints on NGOs’ political activities, and (c) constraints on NGOs’ economic resources. Measuring with the help of an index based on these parameters, the study found that Australia has the most permissive, pluralist and liberal style of NGO regulation. It has lowered barriers for NGOs to enter the sector (by imposing no restrictions on NGO formation), have expanded the scope and flexibility of their activities, and reduced the limits on their ability to raise funds from non- traditional sources.

Within the Australian regulatory framework, specific regulations concern different aspects of NGOs, such as fund-raising, internal governance, and politicking. With the exception of tax regulations, most restrictions on NGOs are weakly enforced. Penalties are economic in nature, and not leading to loss of status. The Australian regulatory framework separates charities from general non-profits by applying slightly more restrictive rules to the former. However, charities are also allowed an increase in economic resources.

Australian NGOs are given the space to be policy critics, albeit within a framework. According to a statement by the House of Representatives Standing Committee on Community Affairs in 1991, “an integral part of the consultative and lobbying role of these organizations is to disagree with government policy where this is necessary in order to represent the interests of their constituents”. NGOs and charities can engage in economic activities such as fund-raising, sales of by-products, fees for different charitable services, use of commercial suppliers, and passive investments, “as long as economic activities do not constitute their main purpose” and profits are not harvested and redistributed among members. Over time, new laws have evolved, but they do not impose restrictions on NGOs, but further clarify the conditions under which NGOs can undertake activities.

3.2.7.1NOt-FOR-PROFIt, POLICY RESEARCH/ADVOCACY NGOS

This category of organisations has not been adequately addressed. Several such organisations are not even registered as NGOs. For example, “think tanks” lie at the intersection of public policy, academia and mass media. They are a growing force in India’s research and development sector, especially in the areas of public policy and developmental studies. While some are for- profit, many are not-for-profit. Those in the latter category need to be treated as a part of the civil society sector.

It is recommended that a uniform policy be followed requiring all such organisations to be registered as NGOs.

3.2.8    DEFINING OVERHEADS

Section 135 of the Companies Act 2013, which stipulates the CSR rules, requires that corporations above a defined level of financials spend 2% of their profits on CSR programs, but it puts a cap on permissible administrative expenses at 5% of the annual CSR spend19. This threshold is very low when compared to the resources that a non-profit organisation requires.

Service providers face the challenge of rising administrative costs which can hamper project growth. To tackle this, salaries for roles under accounts, administration, general management etc., should be considered as fixed overheads, while all expenses that are incurred while working on projects should fall under project expenses. Policy research and/or advocacy NGOs will incur direct expenses, which are not overheads, due to the nature of their work.

Outcome of any expenditure can be used as a criterion to assess the proportion of funds going into overheads. An objective analysis of the social and economic impact of overhead investments will ensure there is no wastage of resources.

Defining overheads uniformly for different categories of NGOs will enable some cap to be maintained, which will further ensure that sustainable and long-lasting organisations are facilitated.

3.2.9    tAX RELAtED IMPROVEMENtS

• INCOME tAX

Regarding deductibility of CSR expenditure, there are different provisions under the Income Tax Act 1961 depending on whether the amounts fall under section 80G, section 35 etc. Such differentiation should be removed by bringing in the appropriate amendment in Section 37 of the Income Tax Act. The ambiguities in certain legal provisions should be removed.

Certain changes in tax provisions would be required to promote socio- economic development and to reduce litigation for NGOs and Companies. This would help, as Companies which are covered under Section 135 of the Companies Act, 2013 for undertaking mandatory CSR expenditure to the extent of 2% of the net profits, would be encouraged to contribute more to deserving NGOs carrying out social activities. If NGOs receive greater contribution through CSR, they would be in a better position to implement more projects for the benefit of the poor and needy.

2.9.2 GOODS AND SERVICES tAX

While the GST is applicable to charitable organisations, many aspects of it need to be clarified to ensure effective and fair implementation.

The definition of ‘charitable’ activity is very narrow and restrictive in the framework of GST. Also, exemption from GST is essentially based on registration under section 12AA of the Income Tax, Act 1961. However, the definition of the term ‘Charitable’ and the conditions to be fulfilled for claiming exemption are substantially different in GST laws and Income Tax laws. Further, the timing aspect differs as well – the exemption under the Income Tax law essentially relates to an assessment year, while under the GST laws, the exemption relates to the date of the transaction. This has created ambiguity for NGOs, leading to worries about technical compliances, and qualification criterion for exemption from GST (please see Annex 1).

3.2.10 SOCIAL IMPACT AUDITS

Comprehensive social impact audits must be carried out by a designated person from an NGO along with a third party or stakeholder who can assess and clarify the impact.

A social impact audit is a way of measuring, understanding, reporting and ultimately improving the output of the NGOs social development effort. It helps in reducing the gaps between the NGO’s vision/goal and reality as also between efficiency and effectiveness.

Social impact auditing influences governance. It values the opinions of stakeholders, including those of marginalized groups whose voices are rarely heard. Social impact auditing is taken up for enhancing local governance, particularly for strengthening accountability and transparency in local bodies.

Objectives of Social impact audit:

1. Assessing the physical and financial gaps between needs and resources available for local
2. Creating awareness among beneficiaries and providers of local social
3. Increasing efficacy and effectiveness of local development
4. Scrutiny of various policy decisions, keeping in view stakeholder interests and priorities, particularly of rural
5. Estimation of the opportunity cost for stakeholders of not getting timely access to public
6. Innovation, sustainability, cultural improvement, improved quality of life, etc are some other areas to be covered in social
7. Aligning plans undertaken by different agencies with national social development goals

advantages of Social impact audit:

1. Trains the community in participatory local
2. Encourages local self-governance.
3. Encourages community
4. Focuses on disadvantaged
5. Promotes collective decision-making.
6. Develops human resources and social capital.
7. Provides valuable feedback for periodic review of various social development initiatives to align them with national

To be effective, the social impact auditor must have the right to:

1. Seek clarifications from the implementing agency about any decision, activity, scheme, income and expenditure incurred by the agency;
2. Consider and scrutinize existing schemes and local activities of the agency, especially from the point of view of the impact group; and
3. Access registers and documents relating to all development activities undertaken by the implementing agency or by any other government Although social impact audits are essential, none of the existing agencies are currently equipped to conduct them.

3.2.11  MODEL ASSESSMENt tOOL FOR LEVEL OF EXCELLENCE

To enable creation of a credible ecosystem for NGOs, it is essential to motivate and involve them in a systematic and objective way for assessing their current level of governance and accountability and help them progressively improve upon it. Regulation alone will not achieve this objective.

Considering the different inputs obtained by the PIC Working Group, a proposed Model Assessment Tool is presented (please see Annex 2). We recommend that NGOs first conduct a self-assessment using the tool. This will facilitate and prepare them for a formal external assessment. The salient guiding principles which have led to the creation of this tool are:

1. Help the NGOs, whether classified as Small, Medium or Large in size, to objectively assess various aspects of their Governance Level using a simple Q&A
2. Enable a duly qualified and approved assessment agency to engage with the managerial and operational staff of the NGO being assessed with a focus on “continual improvement” rather than on “fault finding”.
3. Support in benchmarking current practices with “best in class” practices using global
4. Help the NGO in clearly identifying strengths and weaknesses and provide a “compass” to guide
5. Consider the expectations of all the Stakeholders – Regulatory Authorities, Donors (including Government, Corporates, Domestic/Foreign Institutions or Individuals), and NGOs as well as

1. Provide an inspirational perspective to motivate NGOs to improve their level of Governance in a measurable
2. Enable Donors to clearly identify and distinguish the right level of Governance among the NGO community, to increase their confidence in selecting the right
3. Enhance the level of transparency and

 

3.2.11.1HOW TO USE THE TOOL

The Model Assessment Tool helps an NGO to improve its governance and aids its growth and stability. Five levels indicate a path which an NGO can progressively follow towards higher levels of excellence. The tool is targeted towards medium and large NGOs, but it is open to all, including small NGOs. Levels 1 and 2 are best suited to evaluate small NGOs, while large and medium NGOs are encouraged to aspire to move up to level 5.

The tool contains a set of questions with scores and associated guidance for assessment. An NGO can conduct a self-assessment first and ascertain its current level. The questions follow a yes/no format. For each ‘YES’, the NGO scores 5 points, and for each ‘NO’ the NGO receives 0 points. A score of 50% in a given level would indicate a satisfactory position at that particular Level.

However, an NGO, to claim a particular level, needs to score at least 90% in lower levels in addition to 50% in the attempted level. For example, an NGO, to claim Level 3, must obtain at least 90% in Levels 1 and 2 and 50% in Level 3.

Each round of assessment might reveal gaps or areas of improvements, both of which can be classified as findings or observations. The NGO management should find ways and means to implement a corrective action based on its own experience or with an expert’s support. This would require training of staff, sharing of knowledge/information and focusing on expected outcomes.

3.2.11.2WHO IS BEST SUITED TO CONDUCT AN ASSESSMENT?

In order to ensure objectivity and uniformity, only an agency authorized by the Indian Council for Social Development (ICSD) should conduct external assessment. Such an agency would have been trained to conduct a professional assessment of management systems and would be familiar with NGO issues. The agency should also be able to analyse the practices adopted by the NGO and evaluate them objectively against international best practices. The agency should be able to contribute towards the development of the assessed NGO.

Prior to an external assessment, it is recommended that an internal self-assessment be conducted by the NGO with its own staff.

3.2.11.3WHERE tO GEt KNOWLEDGE OF BEttER PRACtICES?

Global benchmarking of best practices would be possible through sharing of experience with other comparable NGOs or from publications on Quality.

A useful role can be played by the external assessment agency by suggesting the use of “best practices” being adopted by other NGOs, both domestic and foreign, even though it might not always be possible to disclose the name of the concerned NGO. A useful input in this regard would be a monthly publication by ICSD. This could include case studies of successful NGOs.

Such an exercise of benchmarking would provide the necessary motivation to NGOs for continually improving their governance.

3.2.12  ACCREDITATION

The process of accreditation has been implemented on a limited scale within the social development sector in India but has been largely an informal one. While some good accreditation models created by organisations such as Credibility Alliance, CRISIL, GiveIndia, Charities Aid Foundation do exist20, they are currently operating in a fragmented manner, with different yardsticks and parameters. It is important to have a common framework, and the aim should be to create a nation-wide platform providing uniformity to the accreditation process.

It is also important to conduct a formal overview of the global scene as far as regulation of NGOs is concerned. A paper titled ‘National Styles of NGO Regulation’ in the Non-Profit and Voluntary Sector Quarterly classifies countries based on an index with three criteria – severity of requirements for registration, extent of Government discretion in approval, and complexity of regulations. As per the analysis in this paper, Australia is the most liberal followed by Switzerland, UK, USA and France. Countries like Norway, Italy, Poland and Belgium have been rated as the most restrictive.

Australia follows a well-formulated model of NGO accreditation. It has been developed and implemented jointly by their Department of Foreign Affairs and Trade (DFAT), Committee for Development Cooperation (CDC) and Australian Council for International Development (ACFID). The CDC is a joint DFAT–NGO advisory body which considers each accreditation review report prior to making its recommendation to the DFAT delegate for a final decision21.The accreditation process is characterized by peer reviews. Each accreditation assessment allows for an exchange between the Review Team and the NGO. The Review Team’s final report is presented to the CDC.

Some of the relevant prerequisites for NGOs in the Australian model are:

1. NGOs must be an Australian organization with an Australian Business Number (ABN) issued by the Australian Taxation Office;
2. NGOs must demonstrate a minimum 2-year track record of managing developmental
3. NGOs must have a recognized development expenditure (RDE) of A$50,000 minimum, averaged over three years, if applying for Base accreditation; or an RDE of A$100,000 minimum, averaged over three years, if applying for Full

Similar prerequisites could also be applied in the Indian context. The pattern of having a ‘base’ and ‘full’ accreditation with different criteria for both categories is very useful as it would help in reaching out to smaller NGOs which do not have enough capacity, extensive track record or robust systems. The Review Teams play an important role in this accreditation process and they usually comprise development and NGO experts, and finance specialists.

It is recommended that the ICSD should have a formal interaction with the CDC and other Australian authorities to incorporate applicable features of the Australian model in the Model Assessment Tool.

3.2.13  StIMULUS FOR BEttER GOVERNANCE

NGOs, especially the small and medium ones, should be given suitable incentives to go through a formal assessment process by authorised agencies, using approved tools. The incentives for accreditation can be in the form of financial assistance for training and accreditation. Accreditation should be included in the pre-qualification criteria for Government projects. Apart from being formally recognised through suitable awards, accredited NGOs should get preference for funding in Government projects. Corporate and international donors would also find this approach useful.

Section4

Conclusion

NGOs form the foundation on which India can hope to build a unique framework for sustained social development. No other country is so richly endowed with the dedicated human resources necessary for massive social upliftment.

Although the rapidly changing aspirations of our youth will throw up new challenges, it is this demographic advantage that we need to leverage by making a drastic change in our processes. If the recommendations made in this report are followed through with the necessary consultation and action, Social Development in India can move at a much higher rate and help the country attain the ambitious goals it has set for itself.

Section 5

Annexure 1

Points of differences and similarities regarding exemption for ‘Charitable’ activities under IT law and GST law

Sr. No.	Particulars	income Tax	GST Law
1.	Exemptions for charitable Organisations	Available	Available
2.	Sections/ Provisions covering exemption	Section 11 to 13 of Income Tax Act	12/2017 – Central Tax (rate) dated 28/6/2017 and 9/2017 – Integrated Tax (rate) dated 28/6/2017
3.	Exemption to the Charitable Organisations	Complete exemption, subject to fulfilment of certain conditions	Specific exemption for health services, educational activities and religious activities; General exemption in respect of services by an entity registered under section 12AA of Income Tax Act by way of Charitable activities
4.	Charitable Organisations whether defined	‘Charitable purposes’ is defined in Sec 2 (15) of Income Tax Act	No, but refers to an entity registered under Sec. 12AA of Income Tax Act; the term ‘Charitable Activities’ is defined
5.	Which registration is necessary for exemption	Registration under Section 12AA and fulfilment of certain conditions	Registration under Section 12AA of IT Act and Registration under GST; Fulfilment of certain conditions not necessary
6.	Effective date of Exemption	Basis of taxation is on yearly income; Taxability gets determined based on provisions applicable for respective assessment year. Income Tax exemption is generally given from the date of application.	GST applies to a particular transaction and hence with reference to the date of transaction.   GST exemption may not be available for earlier periods in such cases.   GST exemption may not get withdrawn by cancellation of IT exemption for earlier periods.

Governance and Effectiveness of NGOs-The Way Ahead 

7.	Definition of ‘Charitable’ and Coverage	Section 2 (15) provides that ‘Charitable purpose’ includes following 6 activities •   Relief of the poor •   Education •   Yoga •   Medical relief •   Preservation of environment (including) watersheds, fruits & wildlife) & preservation of monuments or places or objects of artistic or historic interest and •   the advancement of any other object of general public utility	GST exemption notification defined ‘Charitable activities’ refer to –   •   Public health by way of:   (A) Care or counselling of   I.   terminally ill persons or persons with severe physical or mental disability.   II.   Persons afflicted with HIV or AIDS.   III.    Persons addicted to a dependence forming substance, such as narcotics, drugs or alcohol.   •   Advancement of religion, spirituality or yoga •   Advancement of educational programs or skill development relating to   (l) Abandoned, orphaned or homeless children (ll) Physically or mentally abused and traumatised persons (lll) Prisoners; or   (lV) Persons over the age of 65 years residing in rural area (V)Preservation of environment, including watershed, forests and wild life
8.	Object of general public utility	Covered as ‘Charitable’ generically	Not Covered as ‘Charitable’ generically
9.	Relief of poor	Covered as ‘Charitable’ generically	Not Covered as ‘Charitable’ generically
10.	Education and medical relief	Covered as ‘Charitable’ generically	Not Covered as ‘Charitable’ generically
11.	Preservation of monuments or places or objects of artistic or historic interest	Covered as ‘Charitable’ generically	Not Covered as ‘Charitable’ generically

 Annexure 2

Model Assessment Tool

LEVEL 1

ELEMENT 1- LEaDERShiP aND GOvERNaNcE (45)
Sb. Element-1	Leadership	Total points	Yes/ No	Score	Guidance
1.1.1.1	Is a formal memorandum of association containing area of expertise/operation developed and recorded (considering whether mandate given by its trustees or board as per its bye-laws is for being an Advocacy or Operational NGO? Are annual financial budgets for income and expenditure and requires personnel defined?	5			NGOs can be broadly classified as 1) Advocacy NGO – The main purpose of an Advocacy NGO is to promote a specific cause. It makes efforts to raise awareness and knowledge by doing various activities like lobbying, press work and activist events 2) Operational NGO – The main purpose of operational NGO is to design and implement the development-related projects. The scope of the Operational NGOs can be national, international or even community-based. 3) Hybrid – those who get engaged in both the above.
1.1.1.2	Are complaints/grievances from donors, beneficiaries, govt. or other stakeholders being recorded, reviewed and corrective actions taken for continual improvement?	5			A written procedure stating channels how complaints/grievances can be received in the organisation and roles & responsibilities. Effectiveness of implementation from receipt till formal closure to be expected.

 

 

Sb. Element-2	Program Management, Planning & Purchasing
1.1.2.1	Are operational plans formally defined? Does the NGO use an established program management across all projects? [ For Advocacy NGO’s, a project can be a series of pre-identified activities, in order to promote a specific cause within pre -defined timelines]	5			Project is a temporary endeavour undertaken to create a unique product, service or an outcome. A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources. {Source : Project Management Institute]. Program is a group of related projects managed in a coordinated manner to obtain benefits not available from managing them individually. Program management is the application of knowledge, skills, tools and techniques to meet program requirements [Source: Project Management Institute] – For example, if NGO has more than one project being undertaken at same time, resources may be optimised between projects by NGO management through what is termed as Program Management function. For Small NGO’s [defined in Read Me, no formal documented program management is essential]
1.1.2.2	Does each project have a separate plan, showing at least key milestones and dates?	5			Consideration to be given to commitments under MOU or agreement with Donor (s) or own defined plans.
1.1.2.3	Has the NGO established a consistent practice for purchasing materials from vendors and sub-contracting part of its projects to sub-contractors or other experienced NGOs?	5			A written procedure for screening and enlisting suppliers/vendors expected. Identifying other NGOs to work as sub-contractors {partners} should be based on defined process which considers own policies. {For Small NGO’s, formal procedures are not essential]
Sb. Element-3	Management commitment, active involvement and Beneficiary Focus
1.1.3.1	Does the NGO have a formal documented contract or Memorandum of Understanding [MOU] with Donor or other relevant stakeholders with clearly stated roles & responsibilities of both parties and any other obligations	5			A formal MOU or contract should be a legally binding record. NGO should strive to protect its interests and limit its financial liabilities or claims due to its actions through a fixed cap or upper limit, normally not greater than the remuneration or compensation it receives for its services. Clauses for pre- mature termination and compensation for part work carried out and third-party arbitration in case of disputes are recommended.

 

1.1.3.2	Does senior management ensure that beneficiary needs and satisfaction are determined and incorporated into plans? Cost, timelines, quality, expected results?	5			Assessing Beneficiary needs accurately and working towards their satisfaction and incorporating required changes in its operations improves the trust with civil society and relevance of the NGO. Simple surveys conducted by trained personnel and analysing results would be the adequate to begin with
Sb. Element- 5	Management Review
1.1.5.1	Does the senior management carry out a review regularly? Are results of all types of audits, feedback, stakeholder satisfaction, analysis of complaints/ commendations, govt. notices/advices are reviewed?	5			At least once in year. Larger NGO’s may do this over more than one review at different levels in the organisation. Active participation of non- executive trustees or members of highest governing body shall be evident. Frequency of review shall be at least once in six months.
	Element 2- Financial control, Legal compliance & assessment & Review (20)
Sb. Element- 1	Policy and Planning	Total points	Yes/ No	Score
1.2.1.1	Does the Organisation have a clearly defined process for: a) The management of financial resources including accounting systems? b) The reporting of results to stakeholders, donors and beneficiaries?	5			Current Indian Accounting Standards shall be followed
Sb. Element-2	Financial Resources and Performance indicators
1.2.2.1	Have sources of funding required for own requirements and current projects clearly been identified? Has the NGO identified ways of acquiring these resources?	5			Money laundering or money generated through fraud / corruption or illegal activities to be avoided. Impact of funding on its ability to take independent decision shall be given due consideration while accepting funds.

 

Sb Element -3	Legal compliance & monitoring
1.2.3.1	Has the NGO developed a register of required permissions, licences, registrations, applications to be made and reports to be filed and have a system to monitor compliance on an ongoing basis?	5			NGO may need to obtain specific permissions, licences, and registrations or submit applications or reports for legitimacy of its operations. If operation extends to more than one state or local administrations, applicable requirements shall be followed. A register shall always be maintained and kept updated. Small NGO’s may be exempted from some of legal requirements.
Sb. Element-4	assessment, review
1.2.4.1	Are activities within the Financial Control and Project Results Area included in a structured system of audits for handling compliance to regulatory and agreed requirements with donors and/or beneficiaries?	5			Financials as per Indian Accounting Standards. System audit shall also be conducted by own personnel, independent of his/ own work. For Small NGO’s frequency shall be once in two years, others every year or as per legal requirements
	Element 3- human Resources (15)
Sb. Element- 1	Policy and Planning	Total points	Yes/ No	Score
1.3.1.1	Has the organisation defined processes for Human Resources activities as relevant to the NGO – Staffing, training and competence building/ performance assessments?	5			Simple documented process suggested.
Sb. Element- 2	Staff competencies, Training and capacity building
1.3.2.1	Has the NGO defined a Code of Behaviour for it employees and give induction training for all its employees?	5			Code of Behaviour shall as a minimum address Integrity, Ethics, Human Rights, and Fairness.

 

1.3.2.2	Does the NGO have an employee grievance process which covers receipt of a grievance till resolution, following legal requirements where applicable?	5			A fair and impartial process shall be established. For grievances related to Sexual harassment, legally established requirements shall be implemented.
	Element 4 -Project Management (20)
Sb. Element- 1	Process Management and control	Total Points	Yes/ No	Score
1.4.1.1	Are processes established being monitored for effectiveness through regular reports to management	5			A standardised report format shall be developed.
Sb. Element- 2	Project Organisation and Planning
1.4.2.2	Is a project plan containing key activities, milestones allocation of resources and time-cost schedules prepared for each project	5			If specific obligations exist in the contract or MOU with Donor or beneficiary , same shall be given consideration
Sb. Element- 3	Project Execution & control
1.4.3.1	Are key activities, milestones, allocation of resources and time- cost schedules being adhered to and corrections implemented as required?	5			If specific obligations exist in the contract or MOU with Donor or beneficiary, same shall be given consideration
Sb, Element-4	Project Performance
1.4.4.1	Has the NGO delivered successfully at least one successful complete project in last calendar years demonstrating capacity and ability?	5			Work completion certificate signed by donor or beneficiary or an independent professional would be a good evidence
	Total	100

LEVEL 2

ELEMENT 1- LEaDERShiP aND GOvERNaNcE (45)
Sb. Element-1	Leadership	Total points	Yes/No	Score	Guidance
2.1.1.1	Is the overall strategy – based on areas of interest/expertise defined? Geographical areas, manning, value/number of projects to be executed etc.	5
2.1.1.2	Has the NGO Organization developed a documented management system? [ Appropriate to its current nature, complexity and scale of operations]	5			ISO 9001for quality or SA 8000 or ISO 26000 for social accountability are models for management systems. Other management systems exist under IS/ ISO or internationally accepted standards for specific aspects such as environment management, Safety & Occupational health, Food Safety, Information security, Data privacy, Carbon/water foot printing. For Small NGOS’ a simple guidance document/manual would suffice.
Sb. Element-2	Program Management, Planning & Purchasing
21.2.1	Has a single point of contact (s) (SPOC) for donors established and communicated? Has a program manager to monitor resources, progress of all projects been appointed? Does NGO have a practice of appointing a Project Manager for each Project whose role & responsibilities are formally documented?	5			For Small NGO’s, each of its staff may have multiple responsibilities.

 

2.1.2.2	Do each project taken up for execution have a clear plan showing sequence of key activities, milestones with dates planned for completion, resources – own and bought out required to execute the project, quality requirements at each stage till project closure and hand over?	5			Documented plan is essential. For Small NGOs’ a simple plan is recommended.
2.1.2.3	Has NGO established documented procedures for procurement – purchasing& sub-contracting – roles & responsibilities, processes to be followed, chart of authority for approvals, criteria for selection of vendors etc.	5			Criteria for selection of vendors shall include capability /expertise, capacity, management skills and any other obligations committed through own policies or MOU/ Contract with Donors
Sb. Element-3	Management commitment, active involvement and Beneficiary Focus
2.1.3.1	Does the management regular interact with the NGO staff and partner team members and sections of beneficiaries through formal meetings and maintain records?	5			Records to be maintained, For Small NGO’s with less complex projects may have less number of formal meetings
2.1.3.2	Does management conduct formal need assessment of beneficiaries either by itself or through third parties before scoping the projects?	5			Applicable if need assessment is part of scope of NGO. If need assessment is done by Donor or others, full score to be given. NGO to seek information from Donors
Sb. Element- 4	Quality Policy
2.1.4.2	Are relevant feedback systems such as satisfaction measurements or complaints/ grievances or audit findings discussed in Management Review? Is continued relevance of policy being reviewed?	5			Learning from feedback is important for continual improvement

 

Sb. Element-5	Management Review
2.1.5.1	Does the output from the management review include: a) Improvement of the effectiveness of the quality policy and its processes? b) Relationships with Donors and Beneficiaries c) Outcomes of projects c) Any unfavourable events or conditions which might adversely affect the overall performance of the NGO and solutions.	5			Records of review to be maintained
	Element 2- Financial control, Legal compliance, assessment & review (20)
Sb. Element-1	Policy and Planning	Total points	Yes/No	Score
2.2.1.1	Are long term funds required for projects (2-3 years) being planned & sources identified and procurement processes initiated?	5
Sb. Element-2	Financial Resources and Performance indicators
2.2.2.4	Have performance indicators for the overall project been identified?	5
Sb Element- 3	Legal compliance
2.2.3.1	Are legal requirements for projects executed for which NGO is responsible being identified and compliance being monitored, and documents being maintained. (responsibilities of donor, beneficiary or NGO need to be clearly understood at time of contract or MOU)	5			Responsibility of obtaining legal clearances for projects to be agreed upon at time of MOU/contract. NGO may still verify such clearances to ensure business continuity and avoidance of dissatisfaction or disputes

 

Sb Element 4	assessment, Review
2.2.4.1	Is there a periodical management review conducted with an expert to assess the effectiveness and efficiency of the present systems, processes and results of the Financial Control, assessment, review, complaints & Grievance handling	5			External Expert not required if internally available. External expert normally might bring better practices. Capturing all types of complaints & grievances and analysing them is important in a healthy management system
	Element 3- human Resources (15)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score	Guidance
2.3.1.1	Does the NGO have formal, documented management policy or directives related to those Human Resources identified as relevant to the business of the NGO and is it known to all staff? Shall include capacity, competence, remuneration & other benefits	5			Policy shall include NGO’s approach towards pay, perquisites, working conditions, allowances, diversity requirements such as employment of women, under privileged sections, social security benefits. Competence enhancement, training & re training etc.
Sb. Element- 2	Staff competencies, Training and capacity building
2.3.2.1	Does the NGO have recruitment practices with education, qualifications, and experience with specialisation as appropriate to the cause NGO stands for or stated in mandate or memorandum of association?	5			Example – NGO working in child welfare or physically/ mentally challenged should have training and mindset to work with target groups. For Small NGO’s a fewer personnel may discharge multiple roles
2.3.2.2	Does the NGO have a process of identifying skill development needs of existing staff and executing it as per a plan and budget allocated?	5			Shall include all management staff as well as others according to their roles

 

	Element 4- Project Management (20)
Sb. Element- 1	Process Management and control	Total Points	Yes/No	Score
2.4.1.1	Do each project taken up for execution have a clear plan showing sequence of key activities, milestones with dates planned for completion, resources – own and bought out required to execute the project, quality requirements at each stage till project closure.	5
Sb. Element- 2	Project Organization and Planning
2.4.2.1	Is a Program management function established which tracks all resources [manpower, money, materials, time] across all projects	5			Program management office tracks resource deployment across all projects For Small NGO’s, program management is informal, responsibility may be assigned to any of the personnel
Sb. Element- 3	Project Execution & control
2.4.3.1	Are processes on Project Management well defined (incl. inputs, outputs, key steps, monitoring parameters, inherent risks and controls)?	5			Within each project by the Project management team would yield better results. For Small NGO’s, individuals may discharge this role
2.4.3.2	Is systematic analysis of root cause of critical deviations from planned being carried out and lesson learnt being incorporated on a continuous basis?	5			Analysis of deviations and finding root cause and incorporating corrections would enhance continual improvement
	Total	100

LEVEL 3

ELEMENT 1- LEaDERShiP aND GOvERNaNcE (45)
Sb. Element-1	Leadership	Total points	Yes/No	Score	Guidance
3.1.1.1	Does the NGO have formally appointed Board of Trustees (or Governors) or highest governance body formally constituted through its own by laws? Are all stakeholder sections and experts represented in the Board?	5			A well documented requirements and processes for appointment will provide consistency. Representation from all key stakeholders enables to win trust and confidence of the group.
3.1.1.2	Has the NGO established a procedure defining methodologies, roles & responsibilities to determine and monitor donor and beneficiary satisfaction?	5
Sb. Element-2	Program Management, Planning & Purchasing
3.1.2.1	Are operational plans formally defined? Does the plan identify short term (2-4 years) goals? How many projects it needs to undertake, in which areas, key beneficiaries, their needs, what is the manpower required to execute, any other support through vendors, sub-contractors, experts, partners, the competence required, possible source of funds, any licenses, permits etc and any other resources required for successful implementation	5
3.1.2.2	Has the NGO established a formal and regular reporting of performance of each project – objective, beneficiary/donor expectations, key milestones & achievements, planned/actual -expenditure, manpower utilization, any concerns, solutions, and any unplanned events which might affect execution as planned?	5			At least Internal reporting to NGO management

 

3.1.2.3	Are performance of vendors/sub-contractors/ partners or external experts being reevaluated for quality, cost and efficiency, expertise and actions taken?	5			vendors/partners or experts are critical for NGO’s performance
Sb. Element-3	Management commitment, active involvement and Beneficiary Focus
3.1.3.1	Does the NGO communicate progress of relevant projects through a standardized report to Donors and other stakeholders?	5			A regular communication improves trust and confidence
3.1.3.2	Does the management regularly interact with the NGO staff and partner team members and sections of beneficiaries through formal meetings and maintain records?	5			Involving own staff in meetings/reviews improves team work and motivates employees to perform better
Sb. Element- 4	Quality Policy
3.1.4.1	Are steps taken to communicate Quality Policy to all vendors, partners, sub-contractors, experts?	5			Communication method can be decided by NGO based on its size and complexity
Sb. Element- 5	Management Review
3.1.5.1	Are all sections of stakeholder sections participating in management review – NGO management & key Staff, donors, beneficiaries, vendors/partners/sub- contractors/experts, and Govt. authorities? Are all decisions in Management Review (s) being tracked for timely implementation?	5

 

	Element 2- Financial control, Legal compliance, assessment & review (20)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
3.2.1.1	Does the NGO develop approaches to raise long term (3+ years) funds to meet its sustainable growth requirements?	5
Sb. Element-2	Financial Resources and Performance indicators
3.2.1.2	Does the organization have documented processes for managing financial resources and reporting of results of financial performance to donors, and other relevant stakeholders?	5
Sb Element -3	Legal compliance
3.2.3.1	Are responsibilities for meeting key legal, regulatory compliance requirements for projects agreed with beneficiary and vendor/sub-contractor concerned in writing?	5			It is important to define roles & responsibilities of NGO, Donor/beneficiary, suppliers and partners.
Sb Element 4	assessment, Review,
3.2.4.1	Does the NGO conduct a root cause analysis on major legal non compliances, Complaints & Grievances, audit findings of serious nature and incorporate corrective actions in their processes.	5

 

	Element 3- human Resources (15)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
3.3.1.1	Does the NGO practice a formally documented process of measuring individual performances of all employees and take actions to motivate them to improve continually?	5			Measuring individual performance and rewarding will motivate good performance and help retain talented staff
Sb. Element- 2	Staff competencies, Training and capacity building
3.3.2.1	Does the NGO have a capacity building plan where future requirements are identified, and plans made?	5			Meeting growth aspirations of staff is important to attract and retain talent
3.3.2.2	Does the NGO assess the competencies of partner or sub-contractor NGO’s and plan and execute training plans similar to those for own staff?	5
	Element 4- Project Management (20)
Sb. Element- 1	Process Management and control	Total Points	Yes/No	Score
3.4.1.1	Are metrics and definite methods or reporting structure for monitoring projects in place to measure and assure that performance and achievements are being demonstrated based on clear requirements (incl. frequency, method, input data, analysis depth/width, risk level, communication follow-up)?	5			Clear measurements across enterprise level projects and within the project, shall be established appropriate to maturity of the NGO’s organization. – cycle times, cost deviations against planned, man hours or labour hours spent on defined services,

 

Sb. Element- 2	Project Organization and Planning
3.4.2.1	Are formal organization defined for each of the projects – to support Project Manager in execution. Site in charge, procurement & stores, quality, reporting & billing. Logistics etc.	5
3.4.2.2	Are legal or other regulatory compliances applicable for vendors and sub-contractors being monitored?	5			NGO should monitor legal compliance by seeking regular reports to ensure no delays happen to projects
Sb. Element- 3	Project Execution & control
3.4.3.1	Are risk-based approaches being implemented for verification, quality control or expediting services with each project based on assessed risks?	5
	Total	100

LEVEL 4

ELEMENT 1- LEaDERShiP aND GOvERNaNcE (45)
Sb. Element-1	Leadership	Total points	Yes/No	Score	Guidance
4.1.1.1	Has the NGO considered a multi-stakeholder approach and taken Sustainability & Sustainable development [SDG into their strategy through a formal policy? Are priorities defined by highest planning body, NITI Aayog and Central, State Govts, Local self-governments brought into own strategy?	5			SDG’s are proclaimed by UN and endorsed by member countries. NITI Aayog has identified key priorities for India. States evolve specific agenda and plan schemes considering various needs. Many donors expect their partner NGO’s to follow their priorities in projects financed by them
4.1.1.2	Does the NGO see itself in partnership mode with Donor, sharing plans of each other, aimed at creating impacts on beneficiaries by participating in formulating strategy for Donors?	5			Partnership enables better delivery and helps Donor-Beneficiary relationships
Sb. Element-2	Program Management, Planning & Purchasing
4.1.2.1	Does the management of NGO conduct a formal risk management at project level to identify key concerns and evaluate risks of non-achievement of project goals or violation of its committed principles on Sustainability?	5			Conducting risk assessment and identifying and implementing controls is a proactive measure, helps avoid bottlenecks and supports timely completion at planned costs
4.1.2.3	Does NGO seek active participation of Donors in detailed planning for its projects by inviting them to partake in highest governance body proceedings?	5			Participation of Donors and their inputs would help improve Donor NGO relationships. This shall be handled without compromising the independence of NGO
3.1.2.4	Has the NGO implemented Supply Chain development using its own Code of Conduct for Supply Chain incorporating Sustainability principles?	5			Code of Conduct for Supply Chain enables an NGO to extend its priorities in Sustainability subjects into its Supply Chain

 

Sb. Element-3	Management commitment, active involvement and Beneficiary Focus
4.1.3.1	Has the NGO management put in place a formal stakeholder engagement process with communities it serves in order to assess the needs?	5			Formal Stakeholder engagement process helps to identify material issues and needs of each Stakeholder group
4.1.3.2	Does the NGO collaborate with other NGO’s in executing joint projects by sharing of responsibilities through formal agreements?	5			Collaboration on specific projects or complementing causes can produce better results
Sb. Element- 4	Quality Policy
4.1.4.1	Does the scope of the quality policy extend to meeting to cover all stakeholder expectations such as safety, environment including precautionary principle, social apart from economic?	5			Definition of quality includes all aspects such as environmental and social in an evolved concept. If Donors have any relationship with Financiers who are committed to Socially Responsible Investments or Equator Principle, environmental/social aspects are equally important as economic
Sb. Element- 5	Management Review
4.1.5.1	Do management reviews consider external data such as Human Development Index or other poverty alleviation, public health or literacy or education or any other topics of interest to the geo areas where it executes projects?	5			Indices can be obtained from Govt. sources which are considered authentic
	Element 2- Financial control, Legal compliance, assessment, & review (20)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
4.2.1.1	Does the NGO able to create surplus reserves to make its operations sustainable with active contribution by Donors?	5			NGO shall seek Donors support or other means allowed by law to build surplus cash as reserves to fund its expansion plans

 

Sb. Element-2	Financial Resources and Performance indicators
4.2.2.2	Does the organization have documented processes for managing financial resources and reporting of results of financial performance to donors, and other relevant stakeholders?	5			NGO shall document principles and processes which might help managing its financial resources.
Sb Element -3	Legal compliance
4.2.3.1	Are responsibilities for meeting key legal, regulatory compliance requirements for projects agreed with beneficiary and vendors/sub-contractors concerned in writing?	5
Sb Element 4	assessment, Review
4.2.4.1	Does the NGO conduct a root cause analysis on major legal non compliances, Complaints & Grievances, audit findings of serious nature and incorporate corrective actions in their processes.	5			NGO shall have a system to detect and report any possible legal compliance issues and analyze it for learnings or root causes and incorporate it in its management systems
	Element 3- human Resources (15)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
4.3.1.2	Does the NGO have principle of Human Rights incorporated into its policy and implemented in its Operations for its staff and its partners/vendors?	5			NGO should establish definite policy around Human Rights principles based on UNDCHR and demonstrate application in its operations.
Sb. Element- 2	Staff competencies, Training and capacity building
4.3.2.1	Does the NGO measure Employee Satisfaction through defined processes and analyze results to review its policies and practices?	5			Employee Satisfaction Surveys shall be conducted at least once in 2 years either by itself or through external agencies

 

4.3.2.2	Does the NGO Scout and empanel list of technical or management experts/agencies with high skills/ knowledge to participate in its activities or guide/ mentor its staff on its current or future projects	5			Use of new technology start-ups to achieve scale and efficiencies for its projects shall be part of the process
	Element 4- Project Management (20)
Sb. Element- 1	Process Management and control	Total Points	Yes/No	Score
4.4.1.1	Is Project control executed according to Project- plan? Are key activities, milestones, allocation of resources and time-cost schedules being adhered to and corrections implemented as required	5
4.4.1.2	Is Method for risk assessment for each project established (before, during, after)?	5			Formal, planned risk assessment processes help achieve milestones as planned
Sb. Element- 2	Project Organization and Planning
4.4.2.2	Does NGO implement any techniques or tools for Project Management like PERT-CPM or other using IT tools in order to identify critical activities and demonstrate extra controls or monitoring to achieve better results?	5
Sb. Element- 3	Project Execution & control
4.4.3.1	Are processes on Project Management well defined (incl. inputs, outputs, key steps, monitoring parameters, inherent risks and controls)?	5
	Total	100

LEVEL 5

ELEMENT 1- LEaDERShiP aND GOvERNaNcE (45)
Sb. Element-1	Leadership	Total points	Yes/No	Score	Guidance
5.1.1.1	Has the NGO established a Code Of Conduct for Corporate Governance encompassing contemporary practices for transparency, fairness, independent functioning.	5			In order to attract Donors, it is essential to have Code of Conduct for Governance which commit to transparency, fairness and independence in functioning
5.1.1.2	Does the NGO management share best practices both locally and globally in good governance and other management topics of relevance through planned actions?	5
Sb. Element-2	Program Management, Planning & Purchasing
5.1.2.1	Does NGO have an identified committee for evaluating issues which might invite Conflict of Interest either for members of Key Governance body or NGO’s policies? Is there a documented procedure for handling such Conflict of Interest issues such as who can report, how to report, how COI is evaluated and how decisions are taken and communicated, and implementation monitored?	5			A procedure explaining guiding principles of perceived Conflict of Interest of Key Governance members with their other activities or interests in decisions of NGO and process of handling this shall be in place.
5.1.2.2	Does the NGO review risk appetite [risk matrix] used for project risk assessment periodically when changes happen in context?	5
5.1.2.3	Does the NGO have a program to proactively develop suppliers, partners, and vendors using its experience to create better supply chain in the areas it operates?	5

 

Sb. Element-3	Management commitment, active involvement and Beneficiary Focus
5.1.3.1	Does the NGO publish a balanced Sustainability Report, at least annually, bringing out its goals, achievements and non achievements and broad ambitions of future?	5			Commitment towards transparency and public stakeholders
5.1.3.2	Does NGO practice techniques to assess Cumulative Impact Assessment of communities in order to assure all stakeholders on all round development?	5
Sb. Element- 4	Quality Policy
5.1.4.1	Does the policy of the NGO include Country’s commitment to UN Sustainable Development Goals taking into account local contest? In topics like Human Rights, Diversity & Inclusion does it commit to exceed legal minimum?	5
Sb. Element- 5	Management Review
5.1.5.2	Do Management reviews address Sustainability performance of projects and its supply chain and focus on continual improvements.	5
	Element 2- Financial control,Legal compliance, assessment & review (20)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
5.2.1.1	Does the NGO have a policy to raise resources globally to be able to finance projects initiated on its own by creating collaboration with different Donor communities?	5

 

Sb. Element-2	Financial Resources and Performance indicators
5.2.2.2	Does the NGO formulate projects on shared value basis so that the projects remain economically sustainable for longer periods?	5
Sb Element -3	Legal compliance
5.2.3.1	Does the NGO play an advisory role for Governments for formulating guidelines, rules or laws for betterment of NGO’s role in Sustainable Development of communities?	5
Sb Element 4	assessment ,  Review,
5.2.4.1	Does the NGO practice an assessment of its operations by a competent external agency covering Corporate Governance practices and its policies?	5
	Element 3- human Resources (15)
Sb. Element- 1	Policy and Planning	Total points	Yes/No	Score
5.3.1.2	Does the NGO offer internship or study opportunities for professionals, students to work along in their operations with a view to develop human resources required by society, taking into account different locally relevant diversity elements?	5
Sb. Element- 2	Staff competencies, Training and capacity building
5.3.2.1	Does the NGO have exchange program or research activities on issues related to society which may result in publications?	5

 

5.3.2.2	Does the NGO depute its competent employees for conferences, seminars or workshops to play a role in mentoring staff of other NGO’s	5
	Element 4- Project Management (20)
Sb. Element- 1	Process Management and control	Total Points	Yes/No	Score
5.4.1.2	Do projects have Safety, Environment and Social priorities embedded into project plans and are they monitored in regular basis?	5
Sb. Element- 2	Project Organization and Planning
5.4.2.1	Has the NGO built Business Continuity processes into its project planning in order to increase its probability to adhere to planned schedules?	5			ISO 22301 is a good reliable model for BCM.
Sb. Element- 3	Project Execution & control
5.4.3.1	Does the NGO carry out drills around Business Continuity plans periodically?	5
5.4.3.2	Do trends of achievements of milestones in execution show over 80% achievement of planned schedules?	5
	Total	100

 

Governance and Effectiveness of NGOs-The Way Ahead 

References

¹ Human Development Report, United Nations Development Program 2016. http://hdr.undp. org/sites/default/files/2016_human_development_report.pdf

² Concepts and Functions of NGOs, Rai Technology University. http://164.100.133.129:81/ eCONTENT/Uploads/CONCEPTS_AND_FUNCTIONS_OF_NGO.pdf

³ The Top 100 NGOs 2013, The Global Journal, 2013, http://www.theglobaljournal.net/ group/15-top-100-ngos-2013/article/585/

⁴ Salamon LM et al, Global Civil society: an overview, Johns Hopkins Centre for Civic Social Studies, 2003, http://ccss.jhu.edu

⁵ Wilco de Jonge, Brianne McGonigle Leyh, Anja Mihr, Lars van Troost (eds.) 50 Years of AMNESTY INTERNATIONAL – Reflections and Perspectives, Amnesty International and SIM, 2011, https://www.uu.nl/sites/default/files/sim-special-36_50_years_of_amnesty_international. pdf

⁶ Invisible, Yet Widespread: The Non-Profit Sector In India, PRIA, 2002, https://pria.org/ uploaded_files/article_category/Invisible_Yet_Widespread_-_The_Non_Profit_Sector_in_India. pdf

⁷ Poverty in India, Economy Watch, 2010, http://www.economywatch.com/indianeconomy/ poverty-in-india.html

⁸ Global Hunger Index, International Food Policy Research Institute 2017, http://www. globalhungerindex.org/pdf/en/2017.pdf

⁹ Overview of Civil Society Organisations, India, Asian Development Bank, 2009, https://www. adb.org/sites/default/files/publication/28966/csb-ind.pdf

¹⁰ Includes both private and public Trusts.

¹¹ CSR Spend Analysis of FY 2016-17 BSE Big Companies, India CSR Outlook Report, 2017,

http://ngobox.org/media/India%20CSR%20Outlook%20Report%202017_V1.pdf

¹² The Future Role of Civil Society, World Economic Forum, 2013 http://www3.weforum.org/ docs/WEF_FutureRoleCivilSociety_Report_2013.pdf

¹³ Sundar Pushpa, Social projects bypassed as firms spend CSR funds to curry favour with govt, Business Standard, 2018 https://www.business-standard.com/article/economy-policy/social- projects-bypassed-as-firms-spend-csr-funds-to-curry-favour-with-govt-118122300158_1.html

¹⁴ Rajagopal Krishnadas, Only 10% NGOs have filed financial details with govt: CBI to SC, the Hindu, 2015, http://www.thehindu.com/news/national/only-10-ngos-have-filed-financial- details-with-govtcbi-to-sc/article7665565.ece  

¹⁵ Intelligence Bureau report reveals how NGOs work against development of India, The Economic Times, 2014, https://economictimes.indiatimes.com/news/politics-and-nation/ intelligence-bureau-report-reveals-how-ngos-work-against-development-of-india/ articleshow/36890817.cms

¹⁶ Norms on appointing Independent directors, IAS Parliament, 2017, http://www. iasparliament.com/current-affairs/daily-news/norms-on-appointing-independent-directors, India Fraud Indicator 2012- Increasing magnitude of fraud, Ernst and Young’s Fraud Investigation & Dispute Services, 2012,https://www.ey.com/Publication/vwLUAssets/Fraud_ and_corporate_governance_changing_paradigm_in_India/$FILE/Fraud_and_corporate_ governance_changing_paradigm_in_India.pdf ,

Who are Independent Directors and what role they play, Economic Times, 2013, https:// economictimes.indiatimes.com/slideshows/corporate-industry/who-are-independent-directors- and-what-role-they-play/slideshow/17853907.cms,

Rodyk Dentons, Duties and responsibilities of independent directors – An overview, Lexology, 2016 https://www.lexology.com/library/detail.aspx?g=767da924-f95a-439f-9eb1- 9e4d3fc393db,

Suraj Anil, CORPORAtE GOVERNANCE & INDEPENDENt DIRECtORS IN INDIA, tejas IIM-

Bangalore, http://tejas.iimb.ac.in/articles/104.php.

¹⁷ Digital Administration for Transparency and Accountability (DATA), The Charity Commissioner’s office, Maharashtra, https://charity.maharashtra.gov.in/en-us/

¹⁸ Bloodgood et al, ‘National Styles of NGO Regulation’ Non-profit and Voluntary Sector

Quarterly 43(4), 2014, http://faculty.washington.edu/aseem/nvsq.pdf. Working draft – http://citeseerx.ist.psu.edu/viewdoc/ download?doi=10.1.1.702.1082&rep=rep1&type=pdf

¹⁹ Section 135, Companies Act 2013

²⁰ Shah Shaili, How is the government cracking down on fake NGOs, WTD News, 2018, http:// wtdnews.com/how-is-the-government-cracking-down-on-fake-ngos/

²¹ Australian NGO Accreditation Guidance Manual, Department of Foreign Affairs and Trade, 2016, https://dfat.gov.au/about-us/publications/Documents/ngo-accreditation-manual.pdf

 

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