ngo management mobilizing managing financial resources

Broader Meaning of Resource Mobilization Mobilization is "the process of forming crowds, groups, associations, and organizations for the pursuit of collective goals" (Oberschall quoted in Scott p. 169). Organizations do not "spontaneously emerge" but require the mobilization of resources. Resource mobilization is a sociological theory that forms part of the study of social movements. It stresses the ability of movement's members to acquire resources and to mobilize people towards the furtherance of their goals. [Kendall 2006] In contrast to the traditional collective behavior paradigm that views social movements as deviant aberrations, resource mobilization--which emerged in the 1970s--views social movements as formed by rational social institutions and social actors taking political action. [Buechler 1999] According to resource mobilization theory, it is a core group of sophisticated strategists that works towards harnessing the disaffected energies, attracting money and supporters, capturing the media’s attention, forging alliances with those in power, and creating an organizational structure. This theory assumes that without such resources, social movements cannot be effective and further that dissent alone is not enough to engender any social change. [Kendall 2006] This theory is based on the assumptions that individuals are rational. Also, it views social movements as a goal-oriented activity. Thus, following rational choice theory, individuals are viewed as weighing the costs and benefits of movement participation and deciding to act only if benefits outweigh costs. When movement goals take the form of public goods, the free rider dilemma has to be taken into consideration. Organization is more important than acquisition of resources, or than resources themselves. Organization focuses on interactions between social movement organizations (SMOs) and other organizations (other SMOs, businesses, governments, etc.). Organization infrastructure is another aspect of study in this approach. [Kendall 2006] Resource mobilization theory may be divided into two camps:

John McCarthy and Mayer Zald are the originators and major advocates of the classic entrepreneurial (economic) version of this theory, while Charles Tilly and Doug McAdam are proponents of the political version of resource mobilization.[Kendall 2006]

The entrepreneurial model blends economics and organization theory to account for collective action. It argues that grievances are not enough to lead to the creation of a movement, and instead that access to and control over resources is the most important factor. This model states that the flow or resources from and towards the group can be best explained by the laws of supply and demand, and that individual or group involvement (or lack thereof) is accounted for by rational choice theory. Critics, however, point out that resource mobilization theory fails to explain social movement communities. [Kendall 2006] The political version of RMT focuses on the political struggle instead of economic factors. [Kendall 2006] Critics have argued that it fails to account for social change brought about by groups with limited resources and that it marginalizes the role of grievances, identity and culture as well as many macro-sociological issues. [Kendall 2006]

S.Rengasamy Madurai Institute of Social Sciences

Of all the resources required for a Voluntary organization /NGO /NPO, resources in the form of ‘money’ is the most important one. Without this resource we cannot activate the other resources in the agency / community. In the market oriented economy like ours, it is the monetary resource,

which determines the expansion or contraction of other resources. The

Mobilizing and Managing of Financial Resources

http://en.wikipedia.org/wiki/Deviant

http://en.wikipedia.org/wiki/Infrastructure

Management of NGOs –Mobilizing & Managing Financial Resources – S.Rengasamy

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Resources are the inputs that are used in the activities of a program. Broadly speaking, the term encompasses natural, physical, financial, human, and social resources, but the vast majority of the resources are financial resources. In kind resources such as the provision of office space, seconded staff, or partner participation at board meetings are a second level of resources. Resource mobilization is the process by which resources are solicited by the program and provided by donors and partners. The process of mobilizing resources begins with the formulation of a resource mobilization strategy, which may include separate strategies for mobilizing financial and in-kind resources. Carrying out a financial resource mobilization strategy includes the following steps: identifying potential sources of funds, actively soliciting pledges, following up on pledges to obtain funds, depositing these funds, and recording the transactions and any restrictions on their use. The process is generally governed by legal agreements at various stages. Financial management refers to all the processes that govern the recording and use of funds, including allocation processes, crediting and debiting of accounts, controls that restrict use, and accounting and periodic financial reporting systems.

success of any NGO / community organization agency lies in its ability to raise enough funds (monetary resources), or to convert other resources in such a way that it can be exchanged for the money, or to plan its activities into fundable projects. In the earlier days when ‘Alms Giving’ and charity was held a high and respected place, the persons who were concerned with community affairs, were able to collect the necessary funds from the wealthy people. But at present the motives behind giving charity as well as the dimensions of the community problems have drastically changed. The resultant effect is that the resources are drying. At the same time more and more money is required for welfare services of meeting the changing needs and adopting better methods of helping the people. To get over this crisis, either the state aid is to increase or the agencies have to depend largely upon the community’s support. It is not possible to step up the aid from the Government. This necessitates a change in our outlook and we should think of more suitable ways and means of raising money from the public.

Explanation: FUND-Literally means a sum of money on which some enterprise is founded or expense supported. MOBILIZE /RAISE- Means to bring about or to get. CAMPAIGN-Means an organized and intensified series of operations in the advocacy of some cause or object. FUND RAISING- Means obtaining the requisite funds for the operation of a voluntary agency. SOURCES OF FUNDS Government: The major type of support extended by the Govt. to the voluntary agencies is in the form of Grants – in – Aid. Grants – in – Aid is a sum of money assigned by a higher to a lower authority either out of the former exchequer or out of the revenue source specially designed for the purpose. (E.g. Subsidy, Concession, Material incentive, Staff deputation)


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A system of centralized, partially decentralized and decentralized pattern of Grants-in- Aid system evolved to support the voluntary agencies. -Centralized – CSWB – directly distributing the grants -Partially decentralized – CSWB giving it to SSWB and then to voluntary agencies. -Decentralized – CSWB themselves grant it. Types of Grants: *One Year Grant *Plan Period Grant *Maintenance Grant*Development Grant*Non recurring / Capital Grant *Discretionary Grant *Grants for Innovative and Experimental Projects *Administrative Grant *Grants for Meeting Deficit *Grants for Appointing Staff Conditions for getting Grants – in – Aid Ø Registration Ø Three year existence Ø Well established memorandum and bye – laws. Ø Paid / volunteer work with will established working condition. Ø Annual report submission and audited statement of accounts. Ø Submission of detailed project proposal. Ø Accepting the powers of Grant – giving agency. Private / Voluntary Sources: Private / Voluntary Sources consists of Ø Subscriptions Ø Donations Ø Sponsorship Ø Creating endowments /fixed deposits and getting interest from it Ø Service fees Ø Sponsorship Ø Paid ‘Solicitors’ campaign Ø Collection by organizing premier shows Ø Collection of left over food from hotels / second hand clothes / newspaper Ø Contributions / Collections (Hundial) Voluntary agencies are experiencing the following problem in raising adequate funds.

a. Donors dictate the terms Problems related b. Donors specification to sources c.Donors using it for their political advantage d. Weakening of the religious sources Problems in raising e. New sources are not tapped Funds Problems related a. V.a.’s want only cash

Voluntary Agencies b. V.a’s poor and limited contact with the prospectivedonors prospective donars

a. Absence of proper public relations b. Poor staff morale and out moded working Problems related to pattern

the functioning of c. Misuse and misappropriation of funds Voluntary agencies d. Lack of credibility among public


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Other Problems identified are: Ø With the high cost of living, people have little money to donate Ø There is no co-ordination between the agencies located in an area. Several agencies approaching one and the same person for collecting money for the same purpose.

Ø Industrialists and businessmen find it more profitable to invest money in political fields to get more advantages rather than donating money to charitable institutions.

Ø The various agencies engaged in providing grants – in – aid programs appears to be gaining more and more hold on the institutions through its rules and regulations for utilization grants.

Ø Donors often do not have any idea about the standing of an agency. No systematic attempts made by the agencies so that prospective donors’ maybe prompted to contribute resources through them.

Keeping in view the virtues of voluntary agencies (human touch, dedication, flexibility, nearness to the community) and the problems faced by them in raising enough funds to carry out their programs, it was decided to support the voluntary organizations with necessary funds in the form of grants –in – aid. Grants – in – Aid was also not a new concept in the past. It was discretionary and sporadic in nature. Govt. decided to make it as a permanent feature, that too not through a govt. department but through an autonomous body.

Fundraising Campaign –I To collect funds from regular sources such as getting grants from the government, subscriptions, creating endowments, fees, and interest from endowments one need not resort to campaign tactics, If the agency wants to tap from sources other than regular, say it form public, it has to organize a fund raising campaign. A fund raising campaign is a highly organized undertaking. Fund raising campaign is based on five general principles. 1. Skilled planning and direction 2. Compilation, efficient distribution and constant control of a sufficient number of prospect cards (i.e. appeals) 3. Organized use of large number of volunteer solicitors (canvassers) 4. The largest amount of publicity 5. A short and specific period to complete the work.

Planning the Campaign Preparing the Budget Preparing a list of

Patrons Forming a fund raising

committee[FRC] Selecting volunteers

Amount required Enlist their support Prepare a prospect Orientation training Cost of fund raising campaign [FRC]

Ask them to appeal Determine the strategy i.e. Methods & Duration

Assignment of quotas and prospect cards

Campaign supplies Solicitation of Prospects /Collecting fund

Review meeting /Dealing with Campaign Crises Big Gifts Receiving / Recording / Auditing Sundry Collection

Campaign mop up / Dinner / Award / Appreciation Evaluation of the Campaign


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Methods of Collection 1. Mere collection methods Paid solicitors, campaign sponsorship program. Collection

at religious / ceremonial gathering Hundi / Musti Dan / Birthday / Auspices day.

2. Partly Beneficial Methods Organizing premier shows. Publishing calendars / diaries etc. Organizing lectures and demonstrations / exhibition

3. Wealth from waste Organizing matches 4. Lottery Method Collection and sale of old news paper arrangements for

utilization of left over foods in canteens / restaurants / marriage parties.

COMMUNITY CHEST / UNITED FUND / JOINT BUDGETING / FEDERATED FINANCIAL

CAMPAIGN Fund raising is not an easy task. It requires the services of trained and experienced personals. The agency has to spend a lot of time in collecting funds relegating its regular services. Even if the agency can spare time and personals, there is no guarantee that the public will make positive response. The prospective donor may also irritated if too many organizations appeal to them for funds. At times, the cost of the campaign may exceed the collections made during the campaign. So, to solve the problems connected with the individual agency’s attempt to raise funds, innovative methods are being adopted. These methods are variously called as community chest / joint budgeting, united fund / federated financial campaign etc. The main feature of these methods is to raise funds collectively and appropriates it on the basis of already agreed upon terms and priorities. Community Chest: The idea of community chest was first conceived in 1913 in Cleveland USA. A community chest is a co-operative organization of citizens interested in fund raising for welfare work and voluntary agencies needing the communities’ financial support. Its main functions is to raise money through the community and distribute it according to a systematic budget procedure and to ensure more co-operative planning, co-ordination and administration of the community’s social welfare services. Community chest is not an adhoc organization, but a permanent agency to raise funds for continuing services. Fund raising through international agencies.


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FUNDRAISING - II Many community organisations need to raise funds to be able to continue their work in the community or to carry out special projects. Seeking funding is one of the most important tasks facing these organisations. For a number of them it’s also a difficult task. This material will give some tips on how to go about successfully raising funds, from how to create a fundraising plan through to completing grant applications. A lot of what is covered can be summarised into the following six-step approach to raising funds.

Step 1: Gather information about the organisation

Step 2: Gather information about the project or activity

Step 3: Find out about funding sources and possible activities

Step 4: Create a fundraising plan

Step 5: Implement the fundraising plan – send out applications and complete fundraising activities

Step 6: Account for funding received and evaluate how your plan worked

Fundraising plan The most important step in successful fundraising is to have a plan. You need to take time to think through strategies for achieving that plan. Also set a timeline and break down tasks into manageable pieces. Producing a fundraising plan involves the following 3 steps: 1. FIRST STEPS • Identify the purpose of obtaining funds.

• Check whether fundraising is really necessary – consider what’s available now and whether there are other ways of achieving what you want e.g. does another group have the equipment that you could use? Rather than money, could you get a donation of a service or item instead?

• Think about whom will gain from the fundraising e.g. will your target group benefit?

ONCE DECIDED TO RAISE FUNDS • Establish a fundraising committee • Describe the exact purpose for raising funds • Set a budget • Set goals • Build a fundraising pyramid (see picture) Fundraising pyramid


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• List the other (non-monetary) resources needed • Build a fundraising team • Consult • Evaluate (and choose) your funding options (see “Funding Options” below). • Know how to account for any funding you might receive • Develop your strategies (including a timeline) to put your final plan into action. Funding options LOCAL FUNDRAISING ACTIVITIES • Food and entertainment • Sales • Money for labour • Sponsored activities • Exhibitions or demonstrations • Community services • Competitions RAISING MONEY THROUGH MEMBERSHIP • Membership fees • Having patrons • "Friends of the organisation" membership • Business membership • Local authority or government agency membership • Major sponsors DONATIONS Donor-donee relationship BUSINESS SPONSORSHIPS Sponsorship strategy A sponsorship strategy involves: • identifying activities suitable for sponsorship • writing a clear summary of and budget for the proposed activity • identifying potential benefits for the sponsors • establishing the value to the sponsor • identifying potential sponsors and selecting who you will approach • writing the sponsorship proposal • approaching the sponsor • follow up with the sponsor. Ways of recognising sponsors You could put the sponsor’s name on: • Clothing • All stationery, which can be done cheaply with a self-inking stamp • All promotional material such as entry or registration forms, posters, tickets • Notice boards at clubrooms • Cups, medals and ribbons • A display by the sponsor in the clubrooms • The club banner. You could also: • advertise the sponsor's wares or activity in programmes and club newsletters


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• promote and foster the sponsor's name and products at, or during, an event, in your annual report, or at the AGM

• have the organisation or its members become involved in promotional activities for the sponsor

• give the sponsor the opportunity to market products at the venue or to the participants

• distribute the sponsor's advertising material at clubrooms or to all participants • have the sponsor's advertising on your venue • have the sponsor use photos of events for their own promotions. PROFESSIONAL FUNDRAISING CONSULTANT Applying for funds Whether you’re applying for public funding, a trust grant or making a sponsorship proposal, a well-presented application stands the best chance of success.

Applying for Funds - Application Contents - Checklist • A funding application typically requires the following information, which can be altered to

suit your group and the funding body: • Introduction – to your organisation, its staff and volunteers, services provided,

community served, numbers. • Legal form – are you an incorporated society or charitable trust? Do you have an umbrella

organisation willing to receive money on your behalf? Are you registered for GST? • The problem – outline the problem your project seeks to address. Enclose any needs

analysis, evidence or statistics. • Objectives – these should be specific, achievable and able to be evaluated. • Procedure – who will implement the project, how and with what? • Evaluation – explain how you intend to measure whether the project was worthwhile. • Budget – list all items of anticipated income and expenditure, including staff salaries and

administration costs. Note any other sources of funding that you have approached for this project, and when you expect a response. State how much the organisation is providing. Attach professional quotes.

• Request – ask for a specific amount of money that is realistic in terms of the project budget and of the size of the grant usually made by the funding body. In many cases it will be less than the total expenses identified in the budget.

• Contacts – list address and phone numbers of two people who can provide the funder with any further information or clarification.

• Referees – list two or more referees from outside your own organisation who understand the project and support it.

• Other information – attach any letters of support and other materials that support your case such as media releases, annual reports, brochures, annual accounts etc.


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Budgeting Estimation of Financial Requirement of a Project

Budgeting: Budgeting is the first step in the financial administration. It is a fundamental part of the planning process. Budget is a statement showing the various sources from which money is to be raised during a particular period and the programs and activities on which this will be utilized. Ø Indicates the financial conditions of the agency during the coming year. Ø Indicates the distribution of funds for certain definite welfare services. Ø Indicates the proposed expenditure for a specific period, and the purpose and the proposed means of securing the income required.

Ø Is a basic means of controlling the programs as well as funds Ø It is the program of work of the agency expressed in rupees and paise. Definition Budget means formal quantitative statement of resources allotted for planned activities over stipulated periods of time. Future plans if its expressed in quantitative numerical terms are called as budget. Purpose of the budget. The purpose of budget is 1. Assessment :To asses the financial requirement of an agency Ø To start fund raising campaign Ø To request various grant giving bodies for financial assistance. 2. Indication: To indicate the lines on which money raised / received (forecasting) will be spent. 3. Guidance: To guide the staff of the agency about the manner of spending money on various schemes and heads of account. 4. Helping: To help the managing committee to exercise financial control over the agency’s work. 5. Informing: To inform the community about sources of income and the plan for incurring expenditure. Methods of preparing a budget: (Steps) 1. Preparing a schedule of payments and expenditure in respect of each activity or heads of expenditure. E.g. Salaries, Travel, Communication, Equipment, Medicine Contingencies.

2. Collecting the income / expenditure statement for the last three years, on each head of account.

3. Actual income / expenditure during the previous year. 4. Budgeted income / expenditure during the previous year. 5. Proposed income / expenditure for the coming year.


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Estimation of Financial Requirement

Proforma of budget estimate / accounts in respect an orphanage for the year ………….

Note: -

Receipts Payments

Budget Account Head

Ave

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of th

e la

st 3

yea

rs

Budget

ed

Act

ual

Pro

pose

d for

the

year

Budget Account Head

Ave

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of th

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yea

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Budget

ed

Act

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Pro

pose

d for

the

year

s

Grants Recurring Donations Salaries of staff Subscriptions Food & clothing Sale proceeds Raw material for crafts Interest Medicines Rent of building Rent Fees Light water etc Value of services Contingencies Value of donations in kind Non recurring Balance from the previous year

Van Equipment

To be collected Building / maintenance Other items Other items Total Total

BUDGET

MEANING

STATEMENT SHOWING THE INCOME & EXPENDITUREFOR A SPECIFIC PERIOD IN NUMERICAL TERMS

PURPOSE

ASSESSMENTFORECASTINGGUIDANCEHELPINGINFORMING

STEPS

PREPARING SCHEDULE OF PAYMENTS & EXPENDITUREBUDGETTING STATEMENTS FOR THE LAST 3 YEARS

ACTUAL INCOME AND EXPENDITURE FOR THE PREVIOUS YEARBUDGETTED INCOME/ EXPENDITURE FOR THE PREVIOUS YEARPROPOSED INCOME AND EXPENDITURE FOR THE NEXT YEAR

SOURCE / MATERIAL FORBUDGET PREPARATION

ACCOUNTS FOR THE LAST 3 YEARS

LETTERS OF SANCTION FROM DONARS

REQUESTFROMVARIOUSHEADS

BUDGETTINGBUDGETTING


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1. The list of heads of accounts is not exhaustive. An agency could adopt the above from as far as possible leaving out items not applicable or adding a few items of Receipts and payments, if necessary. 2. The value donations in kind to be shown / separately against the relevant items with extra entry on the sides. The above proforma explains not only the process of budget preparation but also indicates how to estimate financial requirements of a project. Financial estimates are usually done under two major headings i.e. recurring and non- recurring. Recurring expenses are those expenses which happens regularly, includes salaries to the staff (Project Director, Professional, Administrative, field staff) expenses related to project activities (depends upon the nature of the project) and contingencies expenses. Non–recurring (capital expenses that happens once in a while) includes building construction machinery and other project related expenses. Expenditure pattern not only differs from project to project but it also differs from phase to phase. The first phase (planning) consumes less resources and the second phase (implementation) phase consumes more resources. So, estimation of financial resources demand knowledge about the expenses that are to be incurred under various headings and also the volume of resources required phase of a project.

Foreign Contribution Regulation Act 1976

Foreign Contribution (Regulation) Act, 1976 (FCRA) was enacted in the year 1976 with the prime objective of regulating the acceptance and utilization of foreign contribution and foreign hospitality by persons and associations working in the important areas of national life. The focus of this Act is to ensure that the foreign contribution and foreign hospitality is not utilized to affect or influence electoral politics, public servants, judges and other people working in the important areas of national life like journalists, printers and publishers of newspapers, etc. The Act also seeks to regulate the flow of foreign funds to voluntary organizations with objective of preventing any possible diversion of such funds towards activities detrimental to the national interest and to ensure that such individuals and organizations may function in a manner consistent with the values of sovereign democratic republic.

The organizations seeking foreign contributions for definite cultural, social, economic, educational or religious programs may either obtain registration or prior permission to receive foreign contribution from Ministry of Home Affairs by making application in the prescribed format and furnishing details of the activities and audited accounts. The registration is granted only to such association which has proven track record of functioning in the chosen field of work during last three years and after registration, such organization is free to receive foreign contribution from any foreign source for stated objectives. Registration is granted only after thorough security of the activities and antecedents of the organization and office bearers thereof. However, such organizations which are newly established and do not have proven track record of functioning may also receive foreign contribution for specific activities, for a specific purpose and from a specific source after seeking project based prior permission (PP) from the Ministry of Home Affairs.


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In order to bring in transparency in the administration of the Foreign Contribution (Regulation) Act, 1976 and the Rules framed there under, improve the functioning, disseminate the information and enhance user friendliness of the various procedures the web-site is uploaded with all the FCRA forms, Citizens’ Charter, list of registered associations, State-wise status of application for registration/prior permission, etc. In our efforts to bring in further improvements in the system, the following additional charters/materials are uploaded for information and guidance of all concerned:

CHARTER FOR NGOs / ASSOCIATIONs APPLYING FOR GRANT OF PRIOR ERMISSION / REGISTRATION UNDER THE FOREIGN CONTRIBUTION (REGULATION) ACT, 1976.

• Any NGO wishing to receive Foreign Contribution (FC) must have a definite cultural, economic, educational, religious or social program.

• It shall neither receive nor utilize any FC without obtaining either prior permission or registration from the Central Govt.

• Details of FC received prior to obtaining either prior permission or registration should be mentioned clearly at the time of applying for prior permission or registration, as the case may be.

• An application for seeking prior permission to accept foreign contribution is to be made in Form FC – 1A, and for grant of registration in Form FC – 8, respectively. The forms can be downloaded from Ministry of Home Affairs Web Site at http://mha.nic.in/fcra.htm

• The application should be complete in all respects and no column should be left blank.

• Each Prior permission application should be sent for receiving a specific amount, for a specific purpose and from a specific donor. The donor’s commitment letter specifying the amount of FC and copy of project for which FC is solicited should invariably be sent along with the FC-1A form.

• Copies of following documents are required to be sent along with FC-1A and FC-8 form

1. Copy of certificate of registration issued under the Societies Registration Act, 1860 or Trust deed , as the case may be;

2. Details of activities during the last three years; 3. Copies of audited statement of accounts for the past three years (Asset and Liabilities,

Receipt and Payment, Income and Expenditure); If any printed work is brought out by the association, a certificate from the Press Registrar that the publication is not a newspaper in terms of section 1(1) of the Press Registration of Books Act, 1867

Sarkar-approved contributions only In the name of internal security, the Foreign Contributions (Regulation) Bill would add to the government's already long list of rules applicable to voluntary organizations, even as it ignores the fact that they receive less than one per cent of the foreign funds flowing into the country.


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Indian non-governmental organizations (NGOs) have not only been getting money from big donors like the US, Germany, the UK, Switzerland and Italy, but are also receiving contributions from Pakistan. In fact, Islamabad has consistently been donating money to various associations in the last three years. Although the amount contributed by Pakistan is quite small when compared to that given by the bigwigs, it has put Islamabad in the august list of donors. The contributions by Pakistan and the other big donor countries have gone to NGOs engaged in carrying out cultural, economic, educational, religious or social programs in different parts of India. Statistics released by the home ministry regarding 'foreign funds to NGOs' show that India, which has a total of 33,937 registered associations, received Rs 12,289.63 crore in foreign contributions during 2006-07 as against Rs 7,877.57 crore in 2005-06, a substantial increase of nearly Rs 4,400 crore (56%) in just one year. The US, Germany, the UK, Switzerland and Italy were the top five foreign contributors during 2006-07. These five countries have consistently been the big donors since 2004-05. Spain, the Netherlands, Belgium, Canada and France are the other countries which figure prominently in the list of foreign donors. The US has been the biggest donor to Indian NGOs in the last several years. It contributed over Rs 2,971 crore in 2006-07 alone. As far as Pakistan is concerned, the country contributed Rs 43.28 lakh in 2004-05, Rs 71.70 lakh in 2005-06 and Rs 21.99 lakh in 2006-07. In response to a query on whether NGOs getting money from outside had been known to divert the funds for illegal work or to spread terror activities, the home ministry, in a written reply in the Lok Sabha on Tuesday, said, "There are no specific inputs to indicate misuse of foreign contribution by the registered associations (under the Foreign Contribution Regulation Act) for terrorist activities." The ministry pointed out that no association having a definite cultural, economic, educational, religious or social program could accept foreign contributions without registration or prior permission under the Foreign Contribution Regulation Act (FCRA), 1976. "However, as and when complaints relating to the violation of the provisions of the FCRA against associations come to the notice of the government, appropriate action is taken," it said. Such activities may include prohibiting the NGOs from receiving foreign contributions, freezing their bank accounts and prosecuting them in a court of law. On the basis of various complaints, as many as 44 NGOs have been prohibited from receiving foreign contributions whereas the bank accounts of 11 others have been frozen. Besides, the cases of 17 organizations have been referred to the CBI for detailed investigation. Among the states, Tamil Nadu has the distinction of having the highest number of registered associations (3,009) and getting the highest amount of foreign contributions in India. Maharashtra, Tamil Nadu, Delhi, Andhra Pradesh, Karnataka, Kerala, Jharkhand, West Bengal, Gujarat and Rajasthan are the top ten states which received major foreign contributions in 2006-07

Salient features of Foreign Contribution Regulation Act, 1976 • An act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons or associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organizations as well as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic

republic, and for matters connected therewith or incidental thereto. Need for Foreign Contribution Regulation Act, 1976 • Regulating foreign contribution meant for influencing elections or individuals or associations working in important areas of national life.

• Not meant to prohibit receipt of foreign contribution for genuine purposes. • Security considerations.


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Registering an NGO is the first step to get foreign funding Societies Registration Act 1860 Ø Each state has its own rules and regulations Ø Century outmoded sections continues Ø Office Bearers are not eligible for remuneration as per certain state rules Ø Re-registration is must in certain states Ø Takeover provisions Indian Trust Act, 1882 Ø Applicable only for private trust but, can be registered as per public charitable trust Ø No external control Ø It is considered non-democratic but depends on trust deed Cooperative Societies Act Ø Have became political weapon of ruling parties in certain states Ø Elections are not conducted and bureaucrats are ruling in those states Section 25 Companies Ø Administration has to control more time in filling forms Ø Rules & Regulations applicable as per Companies Act Ø Medium & small NGOs needs proper personnel to handle the regulatory requirements

Foreign Contribution • Foreign contribution means the donation, delivery or transfer made by any

foreign source of any a) article, not given to a person as a gift, for personal use, if the market value in India of such article exceeds one thousand rupees; b) currency, whether Indian or foreign; c) foreign security as defined in clause 2(i) of the Foreign Exchange Regulation Act, 1973. NOTE: Contributions made by a citizen of India living in another country, from his personal savings, through the normal banking channels, is not treated as foreign contribution. It is advisable to obtain the passport details of the concerned citizen of India before accepting such contributions. Foreign Source • Government of foreign country or any agency of such government. • International agencies, not being of a) United Nations or its specialized agencies b) World Bank c) International Monetary Fund d) Such other agencies as so notified by the Central Government. • Foreign Company or Corporation incorporated in foreign country • Trade Union in a foreign country • Foreign Trust or Foundation or Society or Club formed or registered outside India • Company where more than half of shareholding held by foreign Govt., foreign citizens, foreign corporations

• Citizens of foreign countries


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Who cannot accept Foreign Contribution? • Candidate for elections. • Correspondents, columnists, cartoonists, editor, owner, printer. • Judge, Government servant or employee of any corporation • Member of any Legislature • Political party or office-bearer thereof. Types of permission An association having a definite cultural, economic, educational, religious or social program can receive foreign contribution after it obtains the prior permission of the Central Government, or gets itself registered with the Central Government. Registration • Means permanent permission to accept foreign contribution from any foreign source.

• Granted to associations with proven track record having definite cultural, economic, educational, religious, social program.

Reasons for rejection of Registration Applications • Association being in formative stage • Association formed for personal gain • Association involved in prosetylisation • Members of Executive Committee involved in illegal/criminal activities • Sister association prohibited under the act • Applicant association prohibited • Association involved in anti-national activities • Stated objects of the association not being pursued. • Applicant having close links with another association with doubtful credentials • Incomplete application. Must dos for the registered associations • Designated exclusive Bank account for receipt and utilization of foreign contribution.

• Submission of annual FC-3 returns. • Change in members, home, address, objectives of the association to be reported to Central Government within 30 days.

• Change in the O.B’s by 50% or more with prior permission only • Exclusive accounts for utilization of foreign contribution and audit by the Chartered Accountant.

• Exclusive accounts for receipt and utilization of foreign contribution . • Substantial proportion of foreign contribution to be spent on welfare activities Reduction in Administrative expenses


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Indian Diaspora’s opinion on FCRA The Indian Diaspora, particularly from the affluent Silicon Valley, had pleaded for the scrapping of the Foreign Contribution Regulation Act (FCRA). Instead of scrapping, its obnoxious features got worse. Fears that money could incentivize conversions stymied any action. Fortunately, one obnoxious regulation making it compulsory for any contribution aimed for educational institutions, overlooking that such contributions to the alma mater was a way of repaying back, was scrapped by the new government. The FCRA was introduced in 1976 as an Act to ‘‘regulate the acceptance and utilization of foreign contributions/ donations or foreign hospitality of certain persons or associations with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organizations as well as individuals working in important areas of national life function in a manner consistent with the values of sovereign democratic republic.’’ Notwithstanding the unexceptionable (although somewhat pompous) objective, in practice its application has been detrimental in multiple ways. The Act is administered by the Ministry of Home Affairs. The Foreigners Division of MHA is a bureaucratic web scrutinizing thousands of applications; a vestige of the ‘‘permission culture’’. Some 23,000 associations stand registered under the FCRA and roughly 700 associations get permissions each year and over 14,598 such associations filed returns in 2001-02 alone. The Act regulates a spectrum of activities: 1 International conference 2 Individual foreign scholars 3 Foreign contributions need prior approval. 4 Foreign hospitality, 5 Scholarships 6 Media 7 The Indian Diaspora finds the Act even more onerous because currently contributions from NRIs to corporate sector come under the Foreign Exchange Maintenance Act, while non-corporate organizations are under the ambit of the FCRA. FERA was repealed some time ago and FEMA which was its replacement looks into foreign exchange utilization for business purposes. However, even philanthropic activities are clubbed under FCRA and contributions do not get any tax exemption for the donations given by them. Action on Singhvi Committee’s recommendations has been tardy. The FCRA is an archaic legislation. Even as India has become increasingly globalised, this Act reflects undue diffidence. It is a part of a misplaced paranoia that foreigners are busy conspiring to destabilize us and even self-respecting Indians and recognized academic institutions can be so easily subverted. Every country must protect attempts to subvert institutions and, given enhanced security concerns, keep a firm check on suspect money. There are, however, other means to achieve this unexceptionable goal. Several existing laws like the Money Laundering Act, Foreign Exchange Management Act and other legislations under the control of Ministry of Home Affairs can be strengthened to meet this objective. The FCRA deserves to be scrapped. Democratic institutions and our pride in preserving an ‘‘open society’’ need repeated vindication. Can we arrange a decent but quick burial for this outmoded law?

Prior Permission when required • Where the association does not have a FCRA registration • Where the association is placed under prior permission category • Where registration is frozen • Associations of political nature, not being political party Essentials of prior permission • Donor specific • Donee specific • Amount specific – within overall limits • Purpose specific


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FCRA Problems Ø Genuine groups with documental

evidence of support letters from donors, summarily rejected

Ø If there is a change of 50 % or more of the office bearers, fresh application – undemocratic

Ø Grey Areas: n When FC losses its characteristics. n Not able to support Gross Root

level Orgs.,/CBOs Ø FC 8 Application recommendation

letter from Collector or Govt., officials

Penalties • Prohibition • Placing the association in prior permission category

• Fine • Seizure/confiscation of the foreign contribution

• Imprisonment upto 5 years Role of Banks • Prime source for receipt and utilization • Can keep a watch over activities of doubtful associations

• Information about foreign contribution • Not to allow receipt and utilization of foreign contribution without Registration or prior permission.

Bilateral Development Assistance Preferred Bilateral partner countries • Japan • United Kingdom • United States of America • Germany • European union Countries • Russian Federation Preferred Areas for Bilateral Development Assistance Ø Projects of economic and social importance Ø Technical assistance programs that aim at enhancement of knowledge/skills of Indian Nationals

Ø Each project to be cleared by the DEA. No blanket permission to any NGO based on reputation/past performance

Ø FCRA clearance compulsory Procedure for clearing the proposals • Bilateral partners to identify the recipient organizations and projects. • Submission of brief particulars of program/project to the DEA. • Response of DEA to bilateral partners. • Approval of list of recipients/programs/projects. • Transfer of funds by bilateral partner to the recipient organizations. • Monitoring the physical and financial progress of the projects.


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RECEIPT OF FOREIGN CONTRIBUTION Year Amount Rs/crores % increase over previous Year

2000-01 2001-02 2002-03

4535.2 4871.9 5046.5

3.58 7.42 15.56

Amount wise break-up of foreign contribution received by reporting associations Year Below

Rs.1 cr Between Rs.1-5 cr

Between Rs.5-10 cr

Above Rs.10 cr

2000-01 13815 669 62 52 2001-02 14761 721 77 52 2002-03 15650 798 76 66

TOP DONOR COUNTRIES

Foreign Contribution Rs/crores 2000-01 2001-02 2002-03 USA 1492.63 1658.29 1679.84 Germany 664.51 702.33 715.04 UK 677.59 679.29 685.38 Italy 269.78 304.55 315.82 Netherlands 227.04 237.37 261.88

TOP DONORS) Foreign Contribution (Rs. in crores

2000-01 2001-02 2002-03 Ford Foundation, USA 41.32 56.05 121.94 World Vision International, 80.43 78.33 90.24 Vicent E Ferrer Spain 63.26 63.06 79.16 Christian Children Fund.USA 43.07 44.27 75.15 Foster Parents Plan International, USA 76.37 72.37 53.73

TOP RECIPIENT STATES/UNION TERROTORY Foreign Contribution (Rs. in crores) 2000-01 2001-02 2002-03 Delhi 763.05 794.42 880.77 Tamil Nadu 649.45 695.49 774.99 Andhra Pradesh 589.52 559.56 629.76 Karnataka 489.96 504.98 629.76 Maharashtra 466.91 464.35 505.13

TOP RECIPIENT DISTRICTS

2000-01 2001-02 2002-03 Bangalore 365.13 362.19 357.66 Chennai 310.77 311.55 363.45 Mumbai 240.25 298.28 283.53 Kolkotta 167.38 168.38 181.44 Anantapur 165.43 115.42 168.95

TOP PURPOSES


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Rural Development 547.74 464.61 486.50 Establishment Expenses

170.05 859.00 673.77

Construction & Maintenance of School

192.46 242.24 275.74

Relief/Rehabilitation of Victims of Natural Calamities

339.77 438.65 265.85

Construction of hospital/ dispensary/clinic

145.77 186.65

Trends Year Registered Associations Amount of foreign contribution

received (in Crores)

1993-94 15,039 1865 1994-95 15,723 1892

1995-96 16,740 2168 1996-97 17,723 2571 1997-98 18,489 2864 1998-99 19,834 3402 1999-00 21,244 3924 2000-01 22,924 4535 2001-02 24,563 4872 2002-03 26,404 5047 ISSUES IN THE FUNCTIONING OF NGO’S • Non-existent regulatory mechanism • Accountability • No perspective planning for NGO sector • Proliferation of paper organizations • No National NGO policy • Comprehensive National Legislation Required

Accountability


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Accountability People often talk about accountability of NGOs. Sometimes this makes scandalous headlines. Other times, it may lead to a heated argument in a drawing room. ■What is financial accountability? ■How is it enforced in the context of NGOs? ■How do NGOs look at it? ■What are public expectations in this connection? ■How does the corporate sector deal with this issue? Perceptions Different people have widely differing views of financial accountability of NGOs. Some believe them to be extremely honest; others argue equally vehemently that they are all corrupt. As always, the truth lies somewhere between these two extreme views. In our experience, there are some NGOs who may not be doing any real work, but maintain their accounts very nicely. These NGOs may be primarily vehicles for self-enrichment or for tax evasion. Then again there are many NGOs whose work is exemplary but the quality of accounting is quite poor. Sometimes this is due to lack of accounting personnel or skills. Other times, this may be due to faulty budgeting policies or organizational pressures. There are also some NGOs whose work and accounts both shine equally well. These can be held up as models to be emulated by all.

Accountability – Authority – Responsibility: Efficient Use of Resources

Administrative Accountability • A few writers in the field of management indicate that accountability means the managers’ liability for the proper discharge of the duties use the term accountability by his industries.

• Some others conceive that accountability as the requirement of those organization members to whom responsibility and authority are delegated be held answerable for results.

• Responsibility, authority. accountability are related terms. The purpose of all this is to make efficient use of resources. Efficient use of resources is again depending on administrative ability.

• Administrative accountability involves the ability to mobilize allocate and combine the actions that are technically needed to achieve development objectives. -Katz

• Administrative accountability involves efficiency related to the conversion of inputs and outputs, with special attention as to how the inputs are used.

• Administrative accountability is the capacity of the administration to achieve the desired objective of socio –economic progress and nation building.

• Accountability means taking responsibility for the omissions & commissions of the subordinates

• related to efficiency • Ability to mobilize, allocate & combine actions that are needed to achieve development.


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Why accountability? D.A is the arm of the state; they can enact & enforce law. D.A at times regulates the activities of other administration. Because of these public expect that D.A should rise above the normal patterns of management in commerce & industry Accountability is like electricity, is difficult to define, but possess qualities that make its presence in a system immediately detectable. Accountability means liability to give a satisfactory account of the exercise of the power, falling which some kind of evil or punishment may follow. Administrators are guilty of 1. Non–feasance; [ laziness, ignorance, want of care, corruption.] Officials have not done what the custom or law requires them to do owing to laziness, ignorance or want of care for their charges of corrupt influences. 2. Mal–feasance; [waste & damage, ignorance, technical incompetence] Means that a public duty is performed with waste and damage because of ignorance, negligence and technical incompetence. 3. Over–feasance; [dictatorial power, vanity ambition genuine, sincere, public spirited enthusiasm] Means when an official duty is undertaken beyond what law & custom oblige or empower. If may occur act of dictatorial temper, vanity and ambition of an official or his genuine, sincere, public spirited enthusiasm.

To control them accountability is stressed; it is achieved through [control mechanisms] Internal system controls; (department) • Hierarchy; a body successively classified in subordinate grades. • Span of Control: Define the number of subordinates an administrator can efficiently control or direct.

• Unity of Command: States that subordinates should have no more than one superior to whom they are directly responsible.

• Inspection Supervison.

Defining Financial Accountability The word accountability has many different interpretations in the NGO sector, and is a complex, multi faceted concept. In the present context, the discussion is limited to financial accountability. Fortunately, this is simpler to deal with. Simply put, financial accountability is the ability to account for money properly. This would mean that a person is able to show how they have used the money. They should also be able to show that the money was used properly and accounted fairly. Finally, their financial reports should be financially true and not misleading. Simply put, financial accountability is the ability to account for money properly.

Hierarchy Span of control Unity of command Well known accountability facilitating

devices. Inspection Supervision


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The key principles of NGO accountability, and how can it be applied? The four principles of accountability call for responsibility and authority to be clearly specified, guidance and support to be provided at all stages to everyone involved, exercise of responsibility and authority to be monitored and assessed, and appropriate action to be taken. One of the first principle is that responsibility and authority has to be clearly specified. The responsible person must be informed of the expected program results and resources (financial and human) allocated for the purpose. Monitoring and evaluation systems should be clarified, along with organizational values, policies, rules and regulations, and the behavioral standards. The second principle calls for providing guidance and support to the responsible person in the form of regular and timely management information, training and development, access to senior managers, and advice from financial and human resource management experts. The third principle calls for the monitoring and assessment of the needs of responsibility and authority. This is done by an objective comparison of results against targets and standards, covering such issues as delivery of programs, cost and quality; management of human and financial resources; decision-making - authority fully exercised but not exceeded; and compliance with policies, values, rules and regulations, and behavioral standards. The final principle is on taking appropriate action. This deals with issues such as excellence, satisfactory performance, unsatisfactory execution of responsibility and authority as a result of carelessness or ignorance, unacceptable execution of responsibility and authority due to deliberate flouting of policies, rules and regulations, or exceeding the limits of decision-making authority.

External system controls: (people) Legislative, electorate or the people, professional bodies counts Political Legislative Financial, Judicial / normative accountability Through prescribing conduct & rules. Internal individual controls –administrators values towards law, his moral development, promise keeping mutual aid, respect for persons / property. Ombudsman type institutions– Lokpal & Lokayukta

Accountability is determined by • nature of political structure. • nature of social organization • nature of political culture • level of popular expectations • value system of the public • levels of administrative morality • power relations.


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Regulatory Authorities Different Government departments approach this issue from different perspectives. For example, Ministry of Home Affairs is concerned with whether some NPOs, which receive foreign funds, could use these to influence electoral politics. It is also concerned with whether the funds could be used to influence media or effect religious conversions. The new FCRA Bill 2006 takes it further to whether foreign funds could be used for anti-national activities. The Income Tax Department is focused on whether the tax exemptions granted to NPOs could be misused as a tax shelter and thus cause the Government to lose revenue. This normally happens when people set up paper-based NPOs and use these to mask their business activities. Or they could use these to provide fake tax deductions to taxpayers. Contrary to general perceptions, the society registrars are normally not concerned with ensuring accountability of NPOs. They essentially function as a public record office. This role varies from one state to another However, in some states, such as Maharashtra and Gujarat, the Charity Commissioner is also concerned with preventing theft of funds or properties entrusted to trusts and societies. Similarly, the Companies Registration office also tries to ensure that section 25 companies are not used for personal enrichment. Thus, it can be seen that Government authorities are primarily not concerned with financial accountability of NPOs. They do not see themselves as arbiters of good financial management.

Methods to improve the Administrative Accountability 1. There should be decentralization of authority because concentration of power and authority corrupts bureaucrats

2. The duly elected representatives of the people in the legislatures should tighten their group and no exclusively depend on the bureaucrats for running day-to-day administration of their department.

3. Institutions like those of the Lokpal and judiciary tribunals should be encouraged and empowered to look into the grievances of the public against the bureaucrats.

4. They should be constantly reminded that they are the servants of the people with whom they must establish healthy contacts.

5. Socially, they should never be allowed to develop a sense of class and self-consciousness.

6. Top bureaucrats must be taught at responsive to public opinion, which they should be told by direct & indirect means and methods.

7. Nepotism in making appointments should be ruthlessly crushed. 8. The bureaucracy should be deprived of judicial powers so that people can hope to get justice against their high handedness. Effective political control, good management, efficient personal administration, internal review professional moral and non official participation in administration can go a long way to improve the administrative accountability and there by removing many of the evils of bureaucracy.

Methods to improve accountability. • Decentralization Political control • total dependency on the bureaucrats should be avoided • Institutions like Lokpal should be encouraged • Bureaucrats should be remained that they are servants • Not allowing them to develop a class consciousness • Depriving them judicial powers.


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Financial Accountability 1. An NGO should operate in accordance with an annual budget that has been approved by the board prior to the beginning of each fiscal year. 2. An NGO should create and maintain financial reports on a timely (at least quarterly) basis, accurately reflecting the financial activity of the organization, including the comparison of actual to budgeted revenue and expense. 3. Quarterly financial statements should be provided to the board of directors. The statements should identify and explain any significant variation between actual and budgeted revenues and expenses. 4. An organization should subject its financial reports to an annual audit by a Chartered Accountant. 5. An NGO should provide employees and volunteers with a confidential means to report suspected financial impropriety or misuse of organization resources. 6. An NGO should have written financial policies governing the following matters, where appropriate: (a) investment of the assets of the organization; (b) internal control procedures; (c) purchasing practices; (d) reserve funds; (e) compensation, including salary and benefits; (f) expense account reporting; and (g) earned income. 7. The organization should have clear and written policies on loans and staff advances. 8. Wherever possible, the organization should ensure that its funding base is diversified.

• Effective political control, efficient personal administration internal review, professional moral non-official participation.

Administrative Accountability • Dovetailing of professional judgment into citizens’ preferences. • Accountability, like electricity, is difficult to define, but possess qualities that make its presence in a system immediately detected.

Concept of Administrative Accountability is culture oriented Administrative Accountability It power is not to be abused, it must be accompanied by responsibility / accountability. Accountability means liability to give a satisfactory account of the exercise of the power, failing which some kind of evil or punishment may follow. Accountability is built up in constitutional provisions, statues, rules, judicial decisions & precedents and customs & usages Accountability is achieved thro ‘ • the legislature • the electorate or the people • the administrative superiors • professional bodies • courts

So accountability in administration is political, administrative, professional and judicial. Responsibility to the Legislature: • to hold office, they have to win the confidence • If the party is powerful/majority – then what? • Questions, resolutions and debates are the methods


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Conduct & Discipline: Accountability is established thro’ conduct rules 1) Maintenance of correct behavior towards official superiors and of loyalty to the state.

2) Restrictions to engage in private trade, business, contracting debt, acquisition & disposal of property etc.

3) Observance of a certain code of ethics in the official, private & public life. 4) Regulation of political activities of the public servants public servant has to forego certain citizen rights.

5) All India service rules. Discipline: In attention to duty, inefficiency, insubordination, immorality, lack of integrity, violation of the recognized code of ethics.

ngo management mobilizing managing financial resources

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