Thursday, 20 July 2017

EDITORIAL - CAP's Quarterly Newsmag Philanthropy (Q1 April June 2017)

This issue of CAP's Quarterly Newsmag Philanthropy (Q1 April June 2017) had a Guest Editor. In the coming weeks we will post articles from the newsmagazine on this blog. We begin with the editorial. Stay connected for the articles to follow.  



Editor - Noshir Dadrawala
Financial reporting is fundamental to effectiveness and ensuring transparency and accountability. For an NGO it can be a critical communication tool with donors, beneficiaries and other stakeholders. More importantly it is important that the organization tells its financial story clearly, concisely and authentically. While financial statements do need to comply with the relevant Accounting Standards and other regulations, one also need to ensure that financial statements are an effective part of the NGO’s wider communication with all stakeholders! It should clearly and effectively provide a snapshot of the financial health of the organization.

The critical areas of concern are always judicious use of the funds. How much is spent on the actual program, how much on overheads and admin, how much on travel and the all important ‘cost per beneficiary’? But, does all this emerge clearly in the financial reports? More often than not, the answer is no! We tend to tuck certain incomes and expenses under ‘miscellaneous’ income or expenditure without justification or explanation. Sometimes we take refundable deposits which we rightly (under accounting standards) reflect as liability and not income. We do the same with certain grants. While all this is within the framework of law and financial accounting, who does the onus of providing clarity for all this fall upon? should grant makers insist on "receipt & payment" statements also along with "income &expenditure" statements. Maybe they should, unless NGOs pull up their socks and take these and other issues seriously.
In our view sound financial reporting is not just a statutory requirement but essential to financial fitness and long term sustainability.

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Editor - Meher Gandevia
Financial reporting could only be the topic of the newsmagazine because I was not editing it. Finance and me have an aversion as many do. However, as I get older and senior in this sector I realise not its importance but also its relevance. Last year when we had a changeover of staff and in the interim, I had to report for certain grants, I had no choice but to start understanding it & today I would urge every non-finance person to try to understand it with an open mind.
Our Highlight of last quarter was our successful second CAP Compliance-Complete Conference in the last quarter in March. What made me happy was to see 70 participants engaged through the day, but what made me happier was to see so many of them from the previous year back again this year. The only finance we had in that conference was adapting the number game of Housie to 50 favourite words of NGOs, a game well played & enjoyed.
The conference also felicitated our CAP compliance Complete Certificate achievers. After an entire year of working hard at their compliance documents and polices, it was a sigh of relief and sense of pride for all of them. As starts the new year, we start with our next 5 NGOs in the Compliance programme. We wish them perseverance to not give up, determination to do their best and of course all good wishes. 
The Compliance Certificate achievers with the CAP Team
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 Our guest editor Pradeep Mahtani is a Chartered Accountant. He was CEO at HelpYourNGO.com (Feb 2013-Apr 2017), a portal that shows standardised and comparable financials of 650 NGOs. Prior to that, he was a well recognised equity analyst with Citi, J.P. Morgan, Jardine Fleming and ASK-Raymond James.


Guest Editor - Pradeep Mahtani
“When Meher asked me to be Guest Editor and focus on the theme of Finance for this quarter’s issue, I wasn’t sure what it entailed. Frankly I wasn’t sure if I could pull it off.
Finance is certainly important for NGOs, but except for the large and well established ones, most struggle with it.
I analysed more than 600 Audit Reports at HelpYourNGO and in a vast majority of cases the Audit Reports gave rows of data that had to be sifted through, and categorised, to make them coherent. At the other end of the spectrum were NGOs that did not provide any financial data, not in the Annual Report, nor on their websites. Queries we sought, especially from the smaller NGOs, had to be clarified with their Auditors.

To achieve the aim of this issue to cover many aspects of our theme 'finance', we reached out to grantmakers, NGOs, and Intermediaries to get various perspectives. We are grateful to those who responded, and their insightful views. Some interesting aspects come to the fore – NGOs and Corporates need to speak the same language; Corporates should treat the relationship as an equal partnership, support NGOs in being more financially transparent, and connect with each other more to share their learnings.

I am grateful to Noshir and Meher for their constant support, and guidance in helping me plan, reach out, and edit this theme. It turned out to be a little more work than I thought, but it was fun. The enjoyable part was reading and editing the insights of the experts who sent in their contributions. We hope you enjoy reading the issue.“


Above is the editorial of the latest newsmgazine, If you have requested a print copy it has been posted to you. Alternately all copies are available on The CAP Website . 





Monday, 17 July 2017

Proposed new law to regulate NGOs

A recent report in the Times of India states:Decision in 4 weeks on new law to regulate NGOs, their funding. Here is a link to the report:  http://toi.in/LkzhhZ/a19ai

According to the report, the NDA government appears to have told the Supreme Court that a decision would be taken within four weeks “on the need for a standalone law to regulate activities, funding and expenditure of non-governmental organizations (NGOs), lakhs of which have mushroomed across the country.” What the NDA government has failed to add is the fact that many among these mushrooming NGOs are floated by politicians or their own relatives. 



Politicians and their political parties cannot receive funds from foreign sources under FCRA 2010. However, NGOs set up by their relatives, friends or supporters can! Politicians and their political parties cannot receive CSR funds from companies under section 135 of the Indian Companies Act 2013. However, NGOs set up by their relatives, friends or supporters can and reportedly do! Rightly has petitioner-cum-advocate M. L. Sharma been quoted in the aforesaid report to have said that till date, not a single NGO has been prosecuted, "because ninety per cent of NGOs are owned either by politicians or linked to bureaucrats".

The bench of Chief Justice of India J. S. Khehar and Justice D. Y. Chandrachud has said, "The issue is very serious. We do not want to push the government... Whether you want to enact a separate legislation or not, you have to take a decision … Previously, we found that not many have filed audited accounts. The government has already initiated civil and criminal proceedings against defaulting NGOs. So, it is not as if there is no legal framework available to take action." This view was based on the CBI having informed the Supreme Court that it had detected 32.97 lakh registered NGOs and voluntary organizations, but, less than ten per cent of them, 3.07 lakh, filed their audited accounts with the Registrar of Societies.

Once again, here the CBI has failed to inform the Supreme Court that many offices of the Registrar of Societies across India simply register societies and have no mechanism in place to regulate such societies. It is a known fact that even when NGOs in some states try to submit their accounts at the Registrar’s office, they are told that there is no need for them to do so.

Does the National Capital, New Delhi or for that matter Bangalore have a charity commissioner to regulate charitable trusts? The answer is in the negative. The failure is not on the part of the NGOs. The failure is on the part of the state governments for not having regulatory agencies in place.

On January 10, the Supreme Court had ordered government to scrutinize accounts of lakhs of NGOs and voluntary organizations, which together received thousands of crores of rupees of public funds, and take civil and criminal action if they were found to have misused the grants.
Later, on April 5, 2017, the Centre had filed in the Supreme Court draft guidelines to regulate NGOs and said all such organizations, which intended to receive funds from governments, must register afresh online with Niti Aayog's 'NGO-Darpan' portal giving details of their past work, fund utilization, yearly audit reports and key persons responsible for managing the NGO.

Additionally, a provision in the draft guidelines intends to deter non-serious NGOs from seeking government funds. It mandates NGOs and its office-bearers to execute a bond, equivalent to the fund amount received, promising to refund to the government with 10% interest the entire amount if the funds were found misused, misappropriated or not used for the purpose for which they were sanctioned.

Let’s wait and see what the government comes up with within four weeks. Till then let’s console ourselves saying: These are challenging times and these challenges should make us better and not bitter!

Noshir H. Dadrawala

Thursday, 13 July 2017

“Light Regulation” for NGOs. Let’s keep our fingers crossed!

Readers may recollect that in January 2017, the Supreme Court Bench of Chief Justice of India J.S. Khehar and Justices N.V. Ramana and D.Y. Chandrachud has directed the government to audit nearly 30 lakh NGOs which received public funds, but, consistently failed to explain how they spent the money. 

The Supreme Court bench had given this decision in response to a writ petition filed by Advocate Manohar Lal Sharma. The court had also ordered that any NGO found to have cooked its books or indulged in misappropriation should be subject to immediate criminal prosecution. Besides, the government should initiate civil recovery proceedings against such rogue organisations. The Supreme Court has also demanded that the government file a compliance report by March 31, 2017.



Now, a high-power committee appointed by the Central government on the orders of the Supreme Court has recommended several steps to ensure the “light regulation” of non-governmental organisations (NGOs) so as to reduce their harassment. A shortened version of the recommendations is now before the Supreme Court, though the government is yet to accept the full set.

The committee, headed by S. Vijay Kumar, a former Secretary in the Ministry of Rural Development, was formed as part of the Centre’s response to the ongoing writ petition filed by Manohar Lal Sharma. On the Supreme Court’s suggestion, the committee has also drawn up a framework of guidelines for the accreditation of NGOs (through Niti Ayog), audit of their accounts, and procedures to initiate action for recovering grants in case of misappropriation.

The committee has recommended that:
  • The registration procedures be modernized so as to facilitate the seamless operation of the applicable provisions of Income Tax Act and the Foreign Contribution Regulation Act with respect to NGOs, without the need for cumbersome and intrusive processes.
  • Steps must be taken to reduce the need for physical interface between NGOs and public officials acting under the Income Tax Act and FCRA, along with reduction in mutual distrust and scope for misuse.
  • A separate law for voluntary agencies engaged in activities of a charitable or “public good” nature to enable more effective and efficient regulation of the sector.
  • Regulation should be ‘light’ and consistent with the fundamental rights, so as to give effect to the objects for which voluntarism is being promoted.
  • Replace various State-level and existing Central laws with an overarching legislation with best practices.
  • Details of NGOs should be available as searchable database information.
  • The new framework should enable ‘national uniformity’ of approach following the principle of ‘cooperative federalism’.
  • ‘Light regulation’ of NGOs

All this sounds like a dream come true. But, there is a wide gap and many a slip between good ‘intent’ and ‘implementation’. Hence, for the exciting and interesting times that we presently live in, our fingers remain tightly crossed.

Write in for more details to connect@capindia.in 
 



Tuesday, 11 July 2017

5,922 NGOs likely to lose their FCRA registration by end of July 2017

The latest Notice from the Ministry of Home Affairs (MHA) may sound the final death knell for 5,922 NGOs across India that have failed to file their missing FCRA annual returns online in Form FC4 for the Financial Years 2010-11 to 2014-15 despite several reminders and opportunities given to them from time to time on the MHA’s website. 


 
MHA has now issued a notice asking these 5,922 NGOs to show cause as to why their FCRA Registration should not be cancelled. Copy of this Notice can be read at: https://fcraonline.nic.in/home/PDF_Doc/Show_Cause_08072017.pdf

 
One may go through the list of the unfortunate 5,922 NGOs at: https://fcraonline.nic.in/home/PDF_Doc/Show_Cause_List_08072017.pdf
 
We request all those who follow our Blog to go through this list and check if any NGO known to them is in this list. If so, please request them to immediately file the missing annual returns along with an email to MHA explaining why the return was missing (E.g.: the NGO may have posted a hard copy instead of filing the same online). The email should be sent at the following address: fcrarenewal-mha@gov.in
If these 5,922 NGOs fail to update the missing returns by 22nd July 2017, MHA will cancel their registration under FCRA 2010.

Stay connected to this blog for further updates


Saturday, 8 July 2017

NGO version of Frank Sinatra’s “I did it my way …”

…. And, so, here is an NGO version of Frank Sinatra’s “I did it my way …” 



And now, the grant is over
And so I face my annual challenge
My friend, I'll say it clear
I'll state my case, of which I'm certain

I've lived a life that's not viewed as “impactful”
I've travelled each and every district
But more, much more than this
I couldn’t do it my donor’s way

Regrets, I've had many
But then again, joys a few to mention
I did what I had to do
And saw it through without tax exemption

I carefully planned each course
Each careful step along the foundation’s way
But more, much more than this
I couldn’t do it my donor’s way 

Yes, there were times, I'm sure you knew
When I bit off more on admin than on program
But through it all, when there was doubt
My Board ate me up and my funder spit me out

I faced it all and I stood small
And did it my funder’s way
I've tried strategy, scale and impact
Yet had my fill, my share of losing

And now, as tears subside
I find it hardly amusing
To think I did all that
And may I say - not in my way

Oh no, oh no, not me
I could never do it my way
For what is a man, what has he got
If not himself, then he has naught

To say the things he truly feels to the donor
And not the words of one who kneels
The record shows I took the blows
But, still could not do it my donor’s way

Yes, it was seldom my way .....

Noshir H. Dadrawala
(With apologies to my all time favourite vocalist Frank Sinatra .... I am sure he too would empathise)