NGOs: To whom are they accountable?

The Hindu Business Line, Thursday, Apr 21, 2005

R. Vaidyanathan The activities of non-governmental organisations have grown manifold and, hence, the issue of their accountability becomes important. This in no way minimises their importance or questions their functioning. NGOs can create a self-regulatory body, to which they can be accountable and they can co-opt eminent citizens in this body, says R. Vaidyanathan. ONE of the largest members of India Uninc is the NGO (non-governmental organisation) sector or what is known as the third sector (after government and private) in academic circles. An NGO is any voluntary, non-profit, citizens' group which is organised on a local, national or international level. They could be registered as a society, trust or Section 25-companies though some co-operatives also claim this label. Two important criteria are that they are supposed to be independent from government and they are organisations not meant for making profit. They are also expected to be "value-based" .

The type of activities they are involved in is mind-boggling (Table 1). It indicates that the range of concerns of the third sector, which is as large as that of the sovereign state. The list is indicative and not exhaustive and it reveals the range of activities in which the third sector is involved.

The NGOs are involved in different type of activities and, correspondingly, the type of organisation could differ as indicated in Table 2. The funding for these NGOs could be domestic or international. The international flow of funds is regulated by the Foreign Contributions Regulation Act (FCRA Act) of the Centre.

Table 3 provides the trends in the number of registered associations and amount of money received under the Act. It is taken from the records of the Ministry of Home Affairs as presented by them. As is the case with many government Statistics, the latest year for which data is available is 2002-2003.

The report of the Home Ministry also provides other information on the States receiving largest amount and purpose pertaining to 2002-2003. It suggests that important States/Union Territories are Delhi (Rs 881 crore), followed by Tamil Nadu (Rs 775 crore) and Andhra Pradesh (Rs 630 crore). The US leads in the list of donor countries (Rs 1,680 crore) followed by Germany (Rs 715 crore) and the UK (Rs 685 crore). The leading donor agencies are Ford Foundation US (Rs 121 crore), World Vision International (Rs 90 crore) and Foundation Vincent E Ferrer Spain (Rs 79 crore). The largest recipients are World Vision of India, Tamil Nadu (Rs 98 crore) followed by the Rural Development Trust, Andhra Pradesh (Rs 85 crore). The interesting information is on the purpose of the donations. Establishment expenses (Rs 674 crore) tops the list followed by rural development (Rs 487 crore) and construction and maintenance of schools and colleges (Rs 275 crore). Maharashtra, Tamil Nadu, West Bengal, Gujarat and Andhra Pradesh are some of the States with large number of NGOs. It is curious to note that the poorest States such as Bihar, Uttar Pradesh, and so on, do not have as many numbers. The number of persons employed in NGOs is not separately available. One estimate by PRIA (Society for Participatory Research in Asia) Research, published by Indianngos.com, indicates the figure at 19.4 million with West Bengal (1.52) Tamil Nadu (1.49) and Delhi (1.03) leading the pack. These imply that the total number of government employees at nearly 20 million (Central, State and local bodies) and the number employed by NGOs are comparable. By definition, NGO activity is voluntary and, hence, one expects that the overheads of the organisations are lean. In financial parlance, the fixed cost is expected to be relatively very small. Contrary to this belief, we find that the Establishment Expenses are the major reasons for receiving donations from abroad. In other words, the NGOs are perhaps becoming like top-heavy Government Departments wherein substantial portion of developmental expenses are spent on salary wages and other expenses such as telephone, travel both domestic and international. Another important aspect is the funding and functioning of NGOs who get funds from domestic sources. Unfortunately, we do not have a full picture of the financing (sources and uses of funds) of the entire spectrum of the NGOs. The NGOs are active in pointing out the deficiencies in the functioning of the Government, be they on human rights or wild life preservation or child labour. It is also important that the activities of the NGOs are transparent, particularly from the point of view of their sources and uses of funds. Since the Companies Act does not cover them, it is not required of them to file annual report with the Registrar of Companies. They are not part of the Government and, hence, the Comptroller and Auditor General of India do not audit their accounts. For instance, this writer has tried unsuccessfully for nearly three years to get the annual report, including annual accounts of three leading NGOs of this country, which are often featured in newspapers and TV channels. Their activities have grown manifold and, hence, the issue of accountability becomes important. This in no way minimises their importance nor questions their functioning. One can argue that they are accountable to their donors but it is not like a corporate situation where the company is accountable to its shareholders. They have larger impact on our civil society and hence their role is more than that of giving details to their donors. Particularly in our civil society, which places importance on voluntary efforts and appreciates it, the responsibility is much more. To start with, they can publish their annual reports, including accounts, in their Web sites on a regular basis. It would also facilitate domestic individual donors to decide regarding providing funds to them based on their effectiveness measured by overheads.

We are not suggesting that a Central regulatory organisation be created with a large number of retired bureaucrats occupying posts and demanding quarterly statements from the NGOs. We would rather have NGOs create a self-regulatory body, which is a creature of their own and to which they are accountable. They can co-opt eminent citizens in this body. This becomes important since it is perceived that some of the NGOs are engaging in religious conversions in a rather aggressive fashion and some others are using the NGO banner for blackmailing wellfunctioning corporate and government entities. Of course, the nature and dimension of such activities may be relatively small as of today but it would be prudent to be proactive and generate credible self-regulating systems to enhance the effectiveness of the third sector. It would not be appropriate to suggest that everything is fine with every NGO in the country. Numbers are growing, causes are getting enlarged and funding particularly from abroad is increasing. Hence, perhaps, the time has come for them to be more transparent and enhance disclosure practices to be like Caesar's wife. And transparency and regulation and full disclosure are the things, which they demand from corporates, and the Government. Hence, is it too much to expect the same from them? (The author is Professor of Finance and Control, Indian Institute of Management, Bangalore, and can be contacted at vaidya@iimb.ernet.in. The views are personal and do not reflect that of his organisation.)