By Binaifer Jehani and Abbas Master
Non-governmental organisations (NGOs) and voluntary organisations (VOs) in India need to work on instilling confidence among the public, the government and funding organisations to be able to function effectively.
India has a large number of NGOs, VOs and societies operating in sectors such as education, healthcare, environment and conservation, women and child welfare, disaster relief, human rights, poverty and art.
While a majority of these are concentrated in urban centres, the remaining operate in rural and semi-urban areas, focusing on grassroots development, agriculture, rural healthcare and education.
Some of these entities do follow good practices, such as having a strong management team with experienced professionals on the board, well-articulated vision and mission statements with defined processes, policies and documentation, effective fund utilisation and appropriate impact assessment carried out, and adequate feedback mechanism for beneficiaries as well as donors.
Despite this, and their vital role in addressing social, environmental and humanitarian challenges in the economy, these entities have been in the news lately for various reasons, including compliance and governance issues.
With some of the big names also caught in the legal crosshairs, the sector is battling credibility issues.
These include high dependency on the chief functionary, lack of dedicated human resource, administrative and internal audit departments, limited geographical outreach, undiversified resource mix with high single-donor dependency, limited corporate funding and corporate tie-ups, lack of good governance, low financial proficiency and high susceptibility to sustainability risks.
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Accountability and transparency
NGOs manage funds from various sources, including governments, corporates and the public.
It is important that these organisations use the funds responsibly and ensure the impact reaches the vulnerable sections of society.
Transparency and accountability assume significance in this context. Both income and expenditure details should be available in the public domain.
NGOs must publish regular financial reports, and fund utilisation reports, and demonstrate a clear understanding of their goals and objectives.
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Compliance with norms
It becomes important to formulate and adhere to relevant compliances, policies and processes in terms of coverage and staff awareness, besides feedback/grievance redressal mechanisms and disclosures on financial reporting and operating performance.
A key regulation governing NGOs is the Foreign Contribution Regulation Act (FCRA), which lays down the ground rules for NGOs to get foreign donations and makes sure the funds they get are used properly and for specified activities only. Thus, adherence to this regulation is critical.
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Evaluating impact, ensuring good governance
NGOs must regularly evaluate the impact of their operations on the society by periodically tracking key metrics such as the number of beneficiaries reached, measurable changes in the community, the sustainability of their initiatives and the outcomes achieved.
The entities must also follow the best practices in governance. Having a well-defined structure, with a top management, key functionaries and legal team, is crucial here.
Only strong and experienced leadership can ensure the organisation is complying with all existing policies and codes, which, in turn, will attract funds, talent and committed volunteers.
Such leadership will also be able to forge strong partnerships with the government and corporates, prioritise strategic planning and adapt to evolving regulatory and economic scenarios to achieve long-term sustainability.
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Financial proficiency, operational efficiency
For a VO, it is critical to have an adequate and diversified funding profile, with a mix of donors and fundraising track record, as well as a sound liquidity profile.
Large donors typically prefer NGOs that have sound financial proficiency and maintain all records and documentation.
Therefore, NGOs need to work effectively and efficiently with the resources they have.
NGOs also need to work on well-defined key performance indicators and targets. This will help them ensure proper utilisation of funds, thereby giving comfort to large donors and drawing corporate funding.
It is critical to examine programme implementation, regional engagement and recognition, along with stakeholder involvement.
Capacity building and impact measurement are the other areas that need attention.
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Collaborate and grow
The government has undertaken various initiatives and is offering support to help these entities address the challenges.
For sustained growth and impact, however, the players should establish collaborative partnerships with government agencies and private corporations.
Financial discipline, good governance, compliance with relevant norms, adherence to best practices and ensuring transparent functioning are all imperatives in the context. Discipline above all.
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About the Authors
Binaifer Jehani – Business Head, Risk Solutions – Assessments & Social Sector Consulting, CRISIL Market Intelligence and Analytics.
Abbas Master – Associate Director, Risk Solutions – Assessments & Social Sector Consulting, CRISIL Market Intelligence and Analytics.
Disclaimer: Views are personal.
