Credibility & Governance of NGOs

Mhatma Gandhi Mahatma Gandhi, Father of the Nation proposed the trusteeship approach for managing the public charitable trusts. A trustee is one who holds property in trust for another or others. For Gandhi, trusteeship is the application of the law of God to human society and human institutions. The concept of trusteeship implies stewardship without ownership. Such stewardship is not for private profit, but for the greatest good of all. The existing laws in India on Public Trusts and Societies established for betterment of life and public good have adopted the concept of Trusteeship. Each Trustee of such an organization, in whatsoever designation, either as .Trustee or as Member of the Board, Executive Committee, Managing Committee or General Body is responsible for the proper management of the properties and programmes of the Trust. No Trustee, under any circumstances, is either owner or beneficiary of the Trust. The moment one accepts responsibility as a Trustee, one by implication accepts the responsibility of properly managing the activities of the concerned body without any scope of causing “Loss to the Trust”. The Trustees are merely the custodians and caretakers of the Trust. The envisaged Direct Tax Code even restricts the Trustees from taking any financial or pecuniary benefits from the Trust. In fact, all benefits taken by a Trustee in cash, kind, or facilities shall be liable for taxable to the Trust. It is primary duty of every Trustee, working in whatsoever capacity, to ensure sound, proper and effective functioning of the Trust. One is bound to follow all the statutory provisions applicable to such Trusts under different laws, guidelines, notifications and Executive Orders issued by the appropriate Government authorities. One is expected to make good the losses incurred by the Trust due to wilful neglect, any deliberate omission or any apparent commission of the act which results into such loss to the Trust. It is important to mention that such losses can be recovered from the personal properties of the Trustees. Thus every Trustee or the Manager by implication is duty bound to ensure proper functioning of the Trust within the legal framework applicable to such Trusts. Trustees are expected to ensure adequate, appropriate and prudent use of all financial, material, intangible and human resources and apply them solely for achieving the objectives of the Trust. The Trustees are thus duty bound to ensure effective and efficient functioning of the organization. To achieve these obligations, it is important to maintain and enhance organizational credibility by evolving and observing various accounting procedures, disclosure standards and monitoring mechanisms. And this in turn, can be achieved by adopting and promoting good governance of the organization. These two criteria, of maintaining credibility and ensuring good governance would require introduction of procedures in respect of extent of accountability, transparency, responsiveness, inclusiveness, effectiveness and participation of the stakeholders. Credibility means the quality of being believed or trusted. It refers to the objective and subjective components of the believability of a source or message. Traditionally, credibility has two key components: trustworthiness and expertise. Trustworthiness is based more on subjective factors, but can include objective measurements such as established reliability. Similarly, expertise can be subjectively perceived, but also includes relatively objective characteristics of the source or message (e.g., credentials, certification or information quality). Secondary components of credibility include source dynamism (charisma) and physical attractiveness. In simple terms, credibility implies confidence amongst the public and community we serve that an organization is working towards its objectives of serving “public good”.

In respect of enhancing credibility of the NGOs, the Credibility Alliance suggests following values to be inculcated in their management:
  • Self Governing – NGOs are independent of Government

  • Integrity – in all that we do and say

  • Non-profit – working selflessly and not to generate profit for ourselves – though profits can be made in some of our activities to support the overall services we provide.

  • Volunteers – using and respecting volunteers

It is these values, more than anything else, which must be preserved by complying with the norms laid down as minimum norms, desirable norms and good practices.
The Credibility Alliance has developed the following sets of norms which NGOs should follow:
  1. Identity is based on the principle that the NGO should exist and be registered under the appropriate laws applicable to it - as it being a charitable organization - specific laws become applicable to the specific nature of its activities and coverage.

  2. Vision, Aims, Objectives and Achievements are based on the principle that the NGO is able to state what it is aiming to do and can also state achievements related to its aims. The NGO must have a clear vision, mission, mandate, and purpose; set very clear objectives; and develop indicators for measuring impact, listing achievements and evaluating its performance.

  3. Governance relates to the commitment of the NGO to good governance in order to enhance effectiveness, especially so because it draws upon public funds and donations.

  4. Operations refer to the capacity to conduct programmes and operations efficiently and effectively in public interest. The NGO needs to develop norms in respect of nature of programme it should undertake, nature and style of its management; and roles and responsibilities of its human resources including personnel, staff and volunteers.

  5. Accountability to the community served, Government, public, donor community, staff, volunteers, service providers and other stakeholders. It would include making all financial statements like Income & Expenditure Statement, Balance Sheet and Receipt and Payment available to all stakeholders, including statutory authorities.

  6. Transparency of activities, programs, appointments, payments, compensations, reimbursements, salaries, financial transactions, purchases, sales, receipts and payments, etc. It would also include including relevant information in the Annual Report and other publications and display material of the NGO.

  7. Disclosure in the Annual Report: Based upon these norms developed by the Credibility Alliance, Give India, the most leading NGO which facilitates online fundraising, desires disclosure of following information in the Annual Report.

  • Summary of financial statements

  • Names of major donors

  • Identity and legal status

  • Name and address of banks

  • Names and address of the architects

  • Name and address of the auditors

  • Reimbursement given to Board Members

  • Remuneration of the highest paid staff

  • Remuneration to lowest paid staff

  • Meetings of the Managing Committee or the Board

  • Gender wise distribution of staff

  • Salary wise distribution of staff

  • Total cost of international travel

  • Total cost of domestic travel

  • Members of the Governing Board

I feel that all organizations must disclose these details in the Annual Report as this will enhance their credibility. The NGOs may study, adopt and implement various norms developed by Credibility Alliance in this regard. The NGOs must follow minimum norms, attempt to follow “desirable norms” within a certain span of time and aspire to follow “best practices’ which are the highest level of credibility norms. Organizations which aim to follow this process may plan to go for accreditation from the Credibility Alliance.

Governance: In the case of a non-profit organization, governance relates to consistent management, cohesive policies, guidance, processes and right decision for a given area of responsibility. For example, managing at a corporate level might involve evolving policies on privacy, on internal investment, and on the use of data.

Non-profit governance focuses primarily on the fiduciary responsibility that a board of trustees (sometimes called directors - the terms are interchangeable) has with respect to the exercise of authority over the explicit public trust that is understood to exist between the mission of an organization and those whom the organization serves.

Governance refers to how an organization controls its actions. Governance describes the mechanisms an organization uses to ensure that its constituents follow its established processes and policies. It is the primary means of maintaining oversight and accountability of the organization. A proper governance strategy implements systems to monitor and record what is going on, takes steps to ensure compliance with agreed policies, and provides for corrective action in cases where the rules have been ignored or misconstrued.

The concept of "governance" is not new. It is as old as human civilization. In simple words, "governance" means: the process of decision-making and the process by which decisions are implemented (or not implemented). Governance can be used in several contexts such as corporate governance, international governance, national governance and local governance.

Since governance is the process of decision-making and the process by which decisions are implemented, an analysis of governance focuses on the formal and informal actors involved in decision-making and implementing the decisions made and the formal and informal structures that have been set in place to arrive at and implement the decision.

 GOOD GOVERNANCE has eight major characteristics. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable, inclusive and follows the rule of law. It assures that corruption is minimized, the views of stake-holders are taken into account and that the voices of most of the target group are heard in decision-making. It is also responsive to the present and future needs of organization.

Good governance

Figure: Characteristics of good governance
Participation by members of the General Body and Managing Committee is a key corner stone of good governance. It could be either direct or through representatives and needs to be informed and organized. This means active involvement and participation of all the members in the management of the organization. We need to do away with the concept of “show-pieces”, “glory seekers” and those who only turn up to sign the attendance register during formal meetings.
Rule of law: Good governance requires fair legal frameworks that are enforced impartially. The members must be aware about their legal responsibilities, liabilities and obligations of becoming members of the Trust. They should be aware about the key provision of the Trust Act and the Societies Act which govern roles, responsibilities and liabilities of the members of different classes.
Transparency means that decisions are taken and enforced in a manner that follows rules and regulations. It also means that information is freely available and directly accessible to those who will be affected by such decisions and their enforcement. It also means that enough information is provided and that it is provided in easily understandable forms and media. If the NGOs achieves a significant level of transparency, it would be able to win confidence of the donor community, funding organizations and the concerned departments of the Government. Establishing and maintaining sufficient or total transparency is the biggest challenge the NGOs are facing at the moment.
Responsiveness: Good governance requires that organizations serve all stakeholders within a reasonable timeframe. This component could well be supported by ensuring accountability of all activities and accounting entries of the NGOs. The standard accounting procedures and guidelines of grant-in-aid also require adopting and maintaining adequate standards of accountability. This component would require projecting all the activities and dealings in the manner that accountability of operations is properly reflected.
Consensus oriented: There are several actors and many view points each in and every organization. Good governance requires mediation of the different interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved. It also requires a broad and long-term perspective on what is needed for sustainable management of activities and programs and how to achieve the goals of such development. This can only result from an understanding of the historical, cultural and social contexts of a particular type of organization.
Equity and inclusiveness: A society’s well being depends on ensuring that all its members feel that they have a stake in it and do not feel excluded from the mainstream of society. This requires all groups, particularly the most vulnerable, to have opportunities to improve or maintain their well being. In context of NGOs, it would mean the active involvement and participation of all the stakeholders and specially the members of General Body and the Managing Committee in all decision making, policy matters and the planning process. To achieve inclusiveness, the organizations need to develop a system of reporting back to members through appropriate formal or informal means.
Effectiveness and efficiency: Good governance means that processes and institutions show results that meet the objectives of organizations while making the best use of resources at their disposal. The concept of efficiency in the context of good governance also covers the sustainable use of community resources and available financial, material and human resources. The concepts of retaining staff, keeping Trustees motivated and involved and seeking support and participation of volunteers are very important in this context.
Accountability is a key requirement of good governance. Not only governmental institutions but also the NGOs must be accountable to the public and to their institutional stakeholders. Who is accountable to whom varies, depending on whether decisions or actions taken in an organization or institution are internal or external. An organization or an institution is generally accountable to those who will be affected by its decisions or actions. Accountability cannot be enforced without transparency and the rule of law. One important component here is “reflecting end use of all donations, grants, contributions and receipts – in cash, kind and services”. Most organizations consider “issuing of a receipt’ as the final gesture in this regard. The NGOs must develop a system of reporting back to donors, supporters and contributors in respect of end use of all such contributions. The system of “reflecting end use” would ensure complete transparency and accountability of all activities.
Case Study: While all these propositions in respect of maintaining accountability and ensuring good governance seems a Herculean, gigantic and almost impossible task, the National Association for the Blind (NAB) Gujarat State Branch and Blind People’s Association (BPA) have taken the following initiatives which have yielded excellent results. One would agree that if it possible for NAB Gujarat to achieve this highest possible level of accountability, transparency, good governance and complete reflection of end use of all transactions, it should be possible for each and every organization to achieve this, subject to their willingness and determination to do so. The initiations taken by NAB, Gujarat State Branch and BPA are:

  1. Following the disclosure policy as per norms of Give India.

  2. Uploading all contributions, donations and grants on the website on day to day basis by giving name of the contributor, amount contributed and the purpose for which the contribution has been made.

  3. Making all major purchases public by displaying name of the supplier, bill number, rate and total amount for all the major purchases on website.

  4. Displaying 5 major donors of the month during the whole month that follows it and displaying names of 5 major donors of the year for the following whole year on a public display board installed outside the main gate for public view.

  5. Issuing receipts on the spot for all donations, contributions and grants made to the organization in cash as well as kind.

  6. Displaying names of volunteers on the website with their area of voluntary work.

  7. Depositing all the cash, cheques, drafts and other instruments in the bank in the respective account.

  8. As far as possible, making all the payments through “account payee” cheques to all the suppliers, etc.

  9. Releasing all the salaries, remunerations, reimbursements by cheques through the “account payee” cheques.

  10. Making public announcement on access to all the accounting entries, vouchers, bills and any other payments – complete transparency of all the accounting activities.

  11. Making all bulk purchases for all the major items directly from the manufacturers or authorized dealers and making payment through cheques only.

  12. Unrestricted distribution of all the financial statements to anyone who wants to have a copy.

  13. Regular and timely filing of returns to various statutory departments and authorities including income tax, Charity Commissioner, Foreign Contribution Regulations Act, provident fund, new pension scheme, etc.

  14. Coverage of all the regular non-grant-in-aid staff under Contributory Provident Fund; payment of gratuity and leave encashment.

  15. Payment of all salaries to regular staff in scale as per 6th Pay Commission.

  16. Issuing of 16 A Certificates as per provision of the Income Tax Act to all the staff falling in the income tax range.

  17. Investment of all funds and endowments as per the provisions of the Bombay Public Trust Act.

  18. Following Government rules in respect of casual leave, earned leave and sick leave.

  19. At least 3 Office Bearers of the Managing Committee visit the organization every day from Monday to Friday; The President of the Trust visits the organization once a week. The visiting officials meet the Directors and key officials during such visits and monitor overall performance of the organization.

  20. Convening of quarterly meetings of all the Managing Committees during the months of March, June, September and December on a pre-decided date. The organization has never jumped the stipulated dates for meeting.

  21. Convening Annual General Meeting every year before 30th September of the following year. Only once in 40 years, the organization delayed the meeting by 7 days and met on 7th October of the following year.

  22. Providing access to all the donors, visitors to all the departments and programmes – no office or activity is out of public reach.

  23. Following provisions of Indian labour laws and Industrial Dispute Act in case of any dismissal, discharge or termination and appointments.

  24. Accounting of all the donations received even in kind even for the purpose of direct distribution.

Outcomes: These efforts of enhancing credibility and ensuring good governance have yielded very encouraging results as reflected below:
· The NAB Gujarat, BPA and 3 other Trusts, clubbed together, have emerged the biggest NGO in the country in the field of disability development.
· It receives regular and uninterrupted grants from various departments of the Government.
· It has developed very functional and result-oriented partnership with various Ministries of the Central Government; various Departments of the State Government and leading international NGOs.v · Almost 80 percent donations are made by walk in donors, who visit the organization on their own and provide the support.
· When it went on-line resource mobilization through Global Giving – it emerged second all over the world in an open challenge of mobilizing highest resources within a period of 30 days.
· It receives regular contribution from 3 on-line websites.
· It received a donation of land of 5 acres for eye hospital; 22 acres for inclusive education; 1 acre for disaster management and I acre for inclusive schools. With a land bank of 45 acres, all pieces of land have been received either as donation or as allotment of revenue free land by the Government. It has received land for 3 campuses as revenue free land from the Government.
· More than 50 persons provide their voluntary services on day- to - day basis – there are number of persons who are in the queue and willing to provide voluntary services.
· Extent of contributions from the corporate sector under the Corporate Social Responsibility is on the increase on year to year basis.
· The funding from international statutory sources is on the increase on year to year basis.
· The assets of the organization have maintained an annual rate of growth of 20 percent over the last two decades.
· The investment of organization has been growing at the rate of at least 10 percent every year for the last two decades.
While there is meteoric growth of disability development organizations and there is tough competition among such organizations for seeking financial support from the same sources, the organization has succeeded in maintaining its pace of growth in each and every respect. The whole credit for this goes to “good governance”, complete accountability, transparency and reflection of end use of donations and contributions. Due to these efforts, the organization is heading towards attaining self sufficiency, sustainability and unparalleled growth.
Challenge: If this target of seeking “growth through highest level of credibility and good governance” is doable and achievable at Ahmedabad; there is no reason why can not it be achieved elsewhere and every where. While now you a shining example of achievement through accountability before you, choice is yours whether you want to remain where you are or make the sky as your limit in your pursuit for achieving unparalleled growth for your organization.

[1]  Paper presented in the Regional Conference organized by the National Association for the Blind, Unit Maharashtra on theme “Reach the Unreached” at Nasik        during 7-8 January, 2012 by: Bhushan Punani, Treasurer, National Association for the Blind, Gujarat Branch, Vastrapur, Ahmedabad

[2]  From Wikipedia, the free encyclopedia

[3]  Credibility Alliance is a consortium of voluntary organizations and networks which has come together to enhance good governance in the voluntary sector and        to further the sector’s credibility in the eyes of the public. Visit website for more details

[4]  From Wikipedia, the free encyclopedia

[5]  Website: Loosely coupled articles on Governance

[6]  Poverty and Development Division of UN ESCAP, 2011

[7]  As above Un ESCAP