Monday, October 4, 2010

People for Profit

This is a great article about NGO's published in Times Crest. Sharing it here, thanks to Times Crest and the writer.


People for Profit

Arati R Jerath | September 18, 2010

Thirty years ago, Rohit was a small-time health worker in a village on the outskirts of Allahabad in Uttar Pradesh. At the time, malaria eradication was a major concern in a poor nation plagued by epidemics of the Third World variety. Being a resourceful young man, he managed to corner a tiny fraction of the funds that the Uttar Pradesh government had earmarked to stamp out this mosquito-borne infection. He was soon running a small non-governmental organisation for anti-malaria programmes in the village.
Ten years later, the malaria menace had petered out and so had the money. A globalising India of the '90s was shifting gears and priorities. International pandemics were 'in' and the new buzzword in the health sector was HIV/AIDS. "Humne dekha ki AIDS mein bahut paisa hai (I saw there was lots of money to be made from anti-AIDS campaigns), " Rohit was to say later. He did a rapid makeover, moved to the city, and plunged into HIV/AIDS awareness campaigns.

The next decade swept Rohit (whose name we have changed on request) to dizzy heights. He shifted base again, this time to an office in upmarket south Delhi. And he went in for another makeover, dumping prosaic health campaigns for high-flying conferences on the latest international flavour - climate change. He now jets all over the world and his NGO is flourishing. "Ab to hum metro mein pahunch gaye hain. Climate change mein khas kaam nahin karna padChta hai aur paisa bahut hain (I've reached the metro now. There isn't much work do on climate change, but there's plenty of money), " he boasts. He looks like a man well satisfied with himself.

In many ways, Rohit's metamorphosis from a modest, village-level, kurta-pyjama clad activist into a well-heeled, suited-booted, city slicker whose voice is heard in high places, mirrors the changing face of India's burgeoning voluntary sector. Once the preserve of the humble jholawallah, the 'third sector' of the Indian economy is now teeming with smart men and women, armed with management degrees, laptops and huge funds generated by a liberalised and booming economy. As the state retreats in an era of privatisation, new-generation NGOs have moved in to fill the vacuum, often doing what the government used to do in rural areas and urban slums or conducting advocacy programmes for policy interventions, even holding skill-building workshops to update small voluntary groups. Their activities are vast and varied and bear little resemblance to the sweetly charitable work of the silent, selfless grassroots workers of the '70s and the '80s.

The growth of the sector has been explosive in the past two decades, both in numbers and financial resources. First, the numbers. If the findings of a survey conducted by the Central Statistical Organisation of the ministry of statistics in 2008 are to be believed, there are as many as 3. 3 million NGOs registered in India. In other words, there is one NGO for every 400 Indians. No other country in the world boasts of such huge numbers in the third sector. However, this mind-boggling figure should be taken with a pinch of salt, as even the CSO report has acknowledged that many are probably defunct. But, as Sanjay Agarwal, a chartered accountant who works with several NGOs, said, "At least the CSO has tried to shine a light where there was darkness all these years. No one has ever tried to collate any kind of data on the voluntary sector. "

The CSO report then is a starting point and its data is revealing. It found that the big growth spurt has happened since 1991. As many as 30 per cent of the 3. 3 million NGOs were registered in the decade of the '90s and 45 per cent more came up after the year 2000. While religious organisations and charities were the most commonly registered societies in the period before 1970, there was a phenomenal expansion in social service organisations after 1991 - as much as a 40 per cent increase, according to the CSO report.
It is significant that the phenomenal expansion of the voluntary sector coincides with the opening up of the economy and its rapid growth. India was changing as it privatised and globalised, and the changes saw NGOs blooming in thousands as civil society matured and began asserting itself. Nothing underscores their growing influence more than enforcement of the Right to Information Act and the National Rural Employment Generation Act, both of which were products of pressure from civil society organisations.

Yet, despite such unprecedented growth, there has been little or no effort to map the voluntary sector or streamline it for transparency. It remains opaque, with questionable accountability levels, leaving it vulnerable to scams and scandals and the inevitable public suspicion about sources and utilisation of funds. Because of the lack of comprehensive data, even estimates about the financial size of the sector vary. One figure is as high as Rs 75, 000 crore annually, but Rajesh Tandon, president of PRIA (Society for Participatory Research in Asia), a leading mega NGO that works with a host of smaller ones, puts the amount of money available to this sector at around Rs 40, 000 crore per year.

Most of the funding comes from domestic sources, of which the government is the largest donor. However, foreign donations make up a significant portion of the financial resources available to NGOs. Unfortunately, here too, despite a Foreign Contributions Regulation Act, no authentic figures are available, underlining the laxity that prevails in this sector. Home minister P Chidambaram told Parliament recently that the government recorded a figure of around Rs 10, 000 crore from foreign donations last year. He went on to add that this figure was grossly undervalued because nearly half the NGOs registered to receive foreign aid had not reported contributions they have received over the years. In other words, he said, foreign funding of the NGO sector could be as high as Rs 20, 000 crores.

The prevailing confusion and the lack of systems to track movement of funds have only served to tarnish the image of the voluntary sector, despite the good work that many of them do. As with every sector, there are good NGOs and bad NGOs. Unfortunately, the latter hog the headlines. Scams are aplenty, particularly when it comes to the disbursement of government money. The rural development ministry's main funding agency, which also happens to be the biggest government donor, CAPART (Council for Advancement of People's Action and Rural Technology ), fell into disrepute because of the high level of corruption in the department.
Said Mihir Shah, member, Planning Commission, "We did a cleanup of CAPART 10 years ago and knocked off hundreds of NGOs for misappropriation of funds. We even found that some people were giving out registered NGOs as part of dowry because of the funds they had at their disposal. Of course, this can't happen without the collusion of officials in the department. Some officials are facing CBI investigations now. " But Shah added that the rot in CAPART has continued despite the surgery a decade ago and he has now been entrusted with the task of overhauling it completely.

The more honourable among the NGO leaders are disturbed by the corruption shadow that dogs the sector and gives it a "bad" name. "The trouble is that a host of NGOs have come up, headed by retired bureaucrats or politicians, " lamented Tandon. "They know where the money is and how to get it. And they are all siphoning off government funds with the help of corrupt officials. This is particularly prevalent at the state and district levels where there is little monitoring. We at PRIA don't touch government money because we know that we'll have to pay a kickback of 20-25 per cent. "

People like Mathew Cherian, CEO of Help Age India, and Venkat Krishnan, director of Give India, are among those who have taken the initiative to bring some transparency into the sector by floating a set of norms for better governance practices. Cherian heads a consortium called Credibility Alliance, which has started a registration process for NGOs after vetting their credentials. In the six yeas since it was formed, Credibility Alliance has only managed to accredit some 600 NGOs so far. Clearly, there's little enthusiasm in the sector for self-regulation or accountability.

There is widespread agreement that the absence of an accountability mechanism is a huge handicap for the sector, especially when it comes to raising funds. A survey on "Giving in India", circulated by Cherian, came up with revealing figures on the trust deficit from which the sector suffers. It found that 45 per cent of respondents were not confident about the manner in which NGOs use donations;as many as 74 per cent felt that more stringent regulation of the sector is needed, and 56 per cent felt that the money doesn't reach those it is supposed to benefit. Almost half the NGO executives interviewed in the survey admitted that there are serious ethical violations in the NGO community.

Obviously, a lot is at stake here for the "good" NGOs and after they mounted pressure on the government, the Planning Commission in 2007 finally announced a national policy for the voluntary sector. One of the key recommendations was the formation of a National Accreditation Council to register NGOs that follow good governance practices. It was felt that this would help active and credible organisations raise donations. Unfortunately, there has been no movement to implement the policy on the ground. It remains on paper even today.

Funding is one of the biggest issues for the voluntary sector today, with many NGO leaders concerned that the pursuit of money is introducing distortions that could end up defeating the very purpose of civil society organisations. For instance, often, it's the money that drives the agenda of an NGO, like it did for Rohit, not the other way around. "Some years ago, we used to joke that more people are living off AIDS than dying from it, " laughed Krishnan. "That was when international funding for AIDS campaigns and research suddenly went up and we saw NGOs coming up in hundreds in this field. "

Sunita Narain, director of Centre for Science and Environment, said this trend was a source of concern because "flavour-of-the-month" NGOs tend to dance to the tune of their international donors, instead of focusing on what is good for the constituency with which they work. "After the NDA government kicked out bilateral donor agencies, we've been left with the worst kind of donors, " she said. "They are totally driven by their own agendas and interests, which may or may not converge with ours. "

In a study published last year in the influential medical journal, The Lancet, an analysis of over $9 billion donated by the Bill & Melinda Gates Foundation between 1998 and 2007 showed how big money can distort spending priorities. The study said that the Foundation had "a focus on malaria in areas where other diseases cause more human harm, "creating "perverse incentives for politicians, policymakers, and health workers". The Gates Foundation, with a $38 billion corpus, is the world's biggest donor agency and its annual budget surpasses that of the World Health Organisation. The Lancet study said that 65 per cent of the funding by the Foundation went to just 20 organisations. The study also criticised the governance mechanism of the Foundation, saying that "it seems to be largely managed through an informal system of personal networks and relationships rather than by a more transparent process based on independent and technical peer review".
Krishnan, a product of IIM(A), also expressed concern about the proliferation of professional NGOs. While the steady influx of educated management executives and other trained personnel has helped the voluntary sector to upscale itself and find a voice that is heard and taken seriously today, it also threatens to fundamentally alter the character of the sector. "More and more people see NGOs as a way to make money. If people look to get a salary from voluntary organisations or if their livelihood depends on them, it just won't work, " he warned.

The government, he stressed, must create an enabling environment for NGOs to raise funds, whether from private donations or government funds so that they nurture their independent character. "A vibrant, thriving voluntary sector is the bedrock of a democracy. Citizens should be able to intervene where government can't and they should be empowered to influence policy for the greater good of the society. "
Concurring with this view, Narain said, "The question we must ask ourselves is whether we want dissenting voices in our democracy. The role of an NGO is that of a watchdog. In Europe, governments actually fund dissent so that the watchdog function of the voluntary sector is protected. My concern is that this role is being diluted in India because NGOs, particularly the larger ones, have to look for money to sustain themselves. "
She felt that NGOs are increasingly moving towards the corporate sector or have settled for becoming extension agents for government by performing services that the state no longer wants to do. These could be as basic as running anganwadis in rural areas or building toilets or digging wells. Tandon noted that the proliferation of NGOs that provide such extension services has forced them to adopt corporate practices, which is changing the nature of the voluntary sector. "They now have to bid through tenders for these services and have to compete for funds, " he said.

Many NGO leaders are worried about the impact that the provisions of the new Direct Tax Code and the recently amended Foreign Contributions Regulation Act will have on voluntary organisations. Cherian feared they will severely hamper the voluntary sector's ability to raise money. So did Krishnan. "The government is just making life more difficult for the genuine ones, " he said.

While the voluntary sector has certainly come of age in India and is increasingly working with government and corporates to bridge the gap with the people, there is also an existential question that haunts many. Said Ajay Mehta, executive director, National Foundation for India, "As I see it, NGOs must play a transformational role in society. It's not just about making governments or corporates accountable but also about making society accountable. Unfortunately, the transformational part has gone out of the discourse of both NGOs and donors. What we have left is 'rights', like the right to food or the right to education. Is this enough to build a better society?"


Credibility Alliance is a consortium of NGOs that has been trying since its formation in 2004 to enhance accountability and transparency in the voluntary sector. It has laid down a set of minimum good governance norms that were endorsed by the Planning Commission as a "starting point" for the proposed National Accreditation Council, envisaged as the nodal agency for NGOs. The norms highlight the gaps and loopholes that have allowed bad eggs in the sector to flourish the unchecked.


The organisation should have existed for a minimum of one year from the date of registration and the physical address should be verifiable. Its registration documents should be available.


It should have a stable, verifiable vision beyond registration documents. It should define its own verifiable indicators relating to attainment of vision and performance.


It should have a governing board in which at least 2/3 of the members are not related to each other. Details about the board members, including their remuneration and position, should be available. Not more than half the members should have an executive function. The board must meet at least twice a year and minutes of the meetings must be documented. All programmes, the annual budget and audited financial statements, should be approved by the board. A board rotation policy should be followed.


Activities of the last three years should be in line with the vision statement. Appropriate systems should be in place for periodic planning and review of programmes, internal control and consultative decisionmaking. There should be clear roles and responsibilities for personnel and an appropriate personnel policy should be in place.


Audited statements should be available;an external review every three years is needed and the reports should be available on demand. Salient information should be effectively communicated to all stakeholders. The organisation's annual report should be disseminated. Salary and benefits of its highest paid and lowest paid staff should be disclosed as well as total cost of international travel by all personnel.


A hallmark of a developed democracy is the vibrancy of its voluntary sector and the role it plays as a watchdog and a vehicle for social transformation. With the expansion and maturing of the sector in India, NGO leaders feel that it's high time the government put in place mechanisms to protect the independent character of civil society organisations and give them space to perform the function they are supposed to perform. Some suggestions:

1. Clean up and modernise the legislative framework to give NGOs a distinct identity. After all, a religious organisation cannot be equated with a civil society organisation. Yet today, both are registered under the same laws. There are at least five different central laws and a multitude of state and even district-level laws that govern charities, trusts and societies. The government must bring them in line with the needs of a maturing democracy.

2. Create a funding framework that holds out incentives for "giving". The new Direct Tax Code and Foreign

3. Contributions Regulation Act take away the tax benefits that used to accrue to NGOs. Countries like Brazil and Mexico have moved in this direction. Why not India, ask voluntary organisations.
There should be independent funding mechanisms so that NGOs are not dependent on the government or corporates for resources. Small district-level NGOs need particular attention because of their vulnerability to pressures and corruption.

4. Implement the national policy for the voluntary sector, framed by the Planning Commission and approved by the government in 2007.

5. Develop a process of accountability to bolster the credibility of the sector.

Courtesy: Times Crest.