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Pakistan Centre for Philanthropy (PCP), established in 2001 under section 42 of The Companies
Ordinance, 1984, is an independent, nonprofit, support organisation created to facilitate collaboration
among the philanthropists, nonprofit organisations (NPOs) and the government for social
development in Pakistan. It is led by an independent Board of Directors, comprising eminent citizens
and leaders from the corporate sector and civil society. Its mission is to promote the volume and
effectiveness of philanthropy for social development in Pakistan. The Centre runs a number of
programmes to achieve its objectives. The NPO Certification Programme is its flagship programme.
The certification regime developed by PCP in 2002-03 endeavours to set sector wide standards of
good internal governance, transparent financial management and effective programme delivery. The
purpose is to strengthen the civil society by bridging the information and credibility gap that exists
between the donors and recipient organisations. The Government of Pakistan in the Revenue Division
authorised PCP as the first NPO Certification Agency vide notification no 1116(1)/2003 dated
December 18, 2003.
An organisation may wish to obtain certification for enhancing its credibility in the wider public
(including donors) view or for obtaining tax benefits from the Central Board of Revenue (CBR 1) or for
both. The Certification Model (which contains the standards and process of evaluation) applies in
either case.
PCPs certification focuses on the examination of structures, systems, procedures and processes put
in place by an organisation to deliver the services it promises and to ensure sustainability of its
programmes. It falls beyond the mandate of certification process to evaluate the degree of success of
programmes except to the extent it is reflected in the standards of programme implementation.
Some important points about the certification regime are given below:
1) The pre-requisites for consideration of an application for PCP certification are contained in
Section I. An application by an NPO will only be processed if it meets these requirements.
2) An NPO applying for certification for the purpose of availing tax benefits (under Section 2(36)
and/or under Clause 58 of the 2 nd Schedule of Income Tax Ordinance, 2001) must also comply
with the requirements of the Income Tax Ordinance, 2001 and the Income Tax Rules 2, 2002.
Although it is the prerogative of the relevant authorities in the CBR to finally check an
organisations compliance with these requirements, PCP will also examine the applicant
organisations status viz a viz these provisions and submit its observations and recommendations
to the NPO concerned.
3) PCPs Certification Model consists of standards organised in three categories (Section II) against
which an NPO is assessed. The three categories relate to NPOs internal governance, financial
management and programme delivery.
4) Fulfilment of these standards fetches scores for the NPO. A maximum score is assigned to each
standard. In most cases, score assigned to a standard is further divided into smaller components
depending upon the ingredients of the standard and various aspects like degree of compliance
etc. Wherever expressly provided an NPO is assigned score on a standard on a defined range.
The maximum attainable score for all standards is 1000. Details of these standards and the
scoring system are given in Section II. An NPO must attain a total score of at least 600 (and a
minimum 50% score in each individual category) to be certified by PCP.
5) Applicability of standards varies according to the size of the NPO. This is highlighted in the
second last column of each table of Section II. For this purpose, the NPOs are divided into small,
medium or large organisations as under3:
1
The term CBR, wherever used in this Model, also includes its field offices, unless the context provides to the contrary.
Relevant provisions from the Income Tax Ordinance, 2001 and the Income Tax Rules, 2002 are available on PCP web site
(www.pcp.org.pk).
3
This categorisation of NPOs derives from the general consensus of various stakeholders expressed in the consultative
process that led to the development of this Model.
a) If the average of total annual receipts of an NPO during the last three years is less than Rs.
1.0 million, it is a small NPO;
b) If the average of total annual receipts of an NPO during the last three years is more than Rs.
1.0 million but less than Rs. 5.0 million, it is a medium NPO; and
c) If the average of total annual receipts of an NPO during the last three years is more than Rs.
5.0 million, it is a large NPO.
6) In case a standard (or its component) does not apply to an NPO being evaluated, marks will be
assigned on a pro-rata basis for such not-applicable standard (or component thereof).
7) Appendix I and II display the workflow of certification process. These charts indicate that:
a) When an NPO applies to PCP for certification, a team of evaluators (comprising a Programme
Officer (PO) and an evaluator) is assigned to the case. For the purposes of evaluation two
basic instruments are applied the Desk Review and the Field Evaluation.
Desk Review involves examination of application and supporting documents furnished by the
NPO. The Field Evaluation (comprising a visit to the organisation (including any branches or
facilities/ outlets) on a mutually convenient date) involves examining the field records;
reviewing programme delivery; and meetings with governing body members, the executive
head(s), and managerial and programme staff of the organisation. A brief beneficiary
feedback survey is also conducted.
b) The Desk Review of the applicant NPO is conducted first. If the organisation meets the prerequisites as contained in Section I, its application is processed further. If not, the application
is returned to the organisation and the reason(s) for doing so are specified.
c) If the organisation has applied for certification for seeking tax exemptions, its compliance with
the tax related provisions given in Section I is also checked. If the organisation complies, PCP
proceeds further with the evaluation of the organisation. If not, the application is returned to
the organisation and the reason(s) for doing so are specified.
d) The NPOs case is then assessed and scored against standards contained in Section II. Once
the Desk Review is completed, Field Evaluation of the organisation is conducted and the NPO
is awarded score on relevant standards.
e) Both Desk Review and Field Evaluation, evaluate the NPOs performance in achieving its
aims and objectives during the last three years.
f)
On the basis of such evaluation, the PO prepares a detailed report. The detailed report
contains an assessment of the NPOs performance in the areas of internal governance,
financial management and programme delivery, the scores obtained by the organisation on all
the standards and its financial highlights over the last three years.
and
its
h) The assessment report along with the feedback received by the organisation is then placed
before the Certification Panel, which is the final authority to grant or refuse the certification
application of an NPO. The Panel is a five-member independent body, three of which are
nominees of the PCP Board of Directors and two represent the Government of Pakistan 4. The
Certification Panel deliberates upon the report and recommendation of PCP 5 and examines
the comments received from the organisation. The Panel may or may not concur with PCPs
recommendation in any given case or it may send the case back to PCP for re-evaluation.
i)
If the Certification Panel decides to grant the NPOs application for certification, PCP issues a
certificate to the NPO in the prescribed format. If, however, the Certification Panel decides to
refuse the application for certification, it will advise PCP to regret issuance of the certificate to
the NPO. The Panel may also decide to defer the NPOs application for certification for a
The Board nominees for the Certification Panel are not members of the Board. Instead, the Board has identified persons of
acknowledged professional eminence and integrity to sit on the Panel. The two representatives from Government of Pakistan
are ex-officio members. Chairman, National Council of Social Welfare and the Chief Direct Tax Operations, CBR represent the
Ministry of Social Welfare and the CBR respectively.
5
In light of the score obtained by the organisation, PCP proposes that the organisation be certified or deferred or rejected. PCP
may also draw Panels attention to anything that is considered important for Panel to decide a case.
certain period of time ranging to a maximum of 1 year. This provides the NPO concerned an
opportunity to make up some of the deficiencies and qualify for certification. In case of either
deferral or rejection, the Panels reason(s) for doing so are also duly recorded.
j)
The Panel may, on PCPs recommendation or the NPOs request or on the basis of its own
judgement, defer its decision regarding an organisation. However this deferral is for a period
not exceeding one year.
k) Once an organisation has been certified, PCP designs its web profile and places it on the
Centres website. The profiles are derived from the evaluation conducted and prepared in
consultation with the certified NPO. PCP periodically publishes these profiles in the form of a
Directory of Certified NPOs.
l)
In the event of applying for tax exemptions the NPO is required to furnish the certificate and
the detailed evaluation report to CBR authorities (i.e. Chief Direct Tax Operations, CBR or the
Zonal Commissioners of Income Tax) along with other required documents.
8) Every effort is made to complete the process of certification within 10-12 weeks of the NPO
furnishing its duly filled in application. This, however, might take longer in case of NPOs that do
not furnish some of the documents required with the application or if they do not submit their
response to PCPs evaluation report within the prescribed time.
9) Certification is valid for three years following the date on which certificate is issued. All
subsequent renewals of certification are also valid for the same period of time. The renewal is
based on a fresh evaluation.
10) A certified organisation should apply to PCP for renewal of certification within three months of the
expiry of validity of certification earlier granted.
11) PCP informs the CBR and any other Certification Agencies of the names of certified, deferred and
rejected organisations, immediately after the Panel decision.
12) All information provided by an organisation applying for certification is deemed public information
unless specified otherwise.
13) The Certification Panel may withdraw certification in case of NPOs dissolution, bankruptcy, failure
to comply with mandatory reporting requirements, utilising the funds or property of the NPO for
the benefit of people other than the stated beneficiaries, any of the information provided by the
NPO having been proved to be false, or any of the material information proved to have been
deliberately concealed by the organisation. Certification, however, shall not be withdrawn without
giving the NPO concerned an opportunity of explaining its position in this regard.
14) Certification is a highly subsidised process and the applicant NPO pays a small proportion of the
total cost of evaluation and certification (depending upon its size), the rest being borne by PCP.
The subsidy is provided on a graduated scale so that the largest subsidy goes to the smallest
NPO6.
15) In addition to certification, PCP also plays a role in the development and promotion of NPOs.
a) Capacity building is an important part of the certification regime. The capacity of an
organisation is built during the certification process itself. In case of those organisations that
do not meet the required standards for certification, PCP facilitates linkages with specialised
capacity building organisations.
b) If the certified NPO intends to apply for tax exemptions under relevant laws, PCP also
provides assistance in preparing required documents for submission to the CBR.
16) The Model is a living document, which is reviewed periodically in consultation with all
stakeholders. The first such review was conducted in 2005-06.
17) Certain concepts and definitions used in this Model are explained below:
a) Benchmark is a measurement or standard that serves as a point of reference by which
process performance is measured.
b) Beneficiaries are the men and women, communities, or organisations expected to benefit
from the projects or programmes.
6
Certification fee schedule is available in certification application form as well as on PCPs website (www.pcp.org.pk).
c) Best Practices are the processes, practices, or systems identified in organisations that
performed exceptionally well and are widely recognised as improving an organisations
performance and efficiency in specific areas. Successfully identifying and applying best
practices can reduce expenses and improve organisational efficiency.
d) Budget means an estimate of future incoming funds, expenditure and other applications of
funds for a particular accounting period.
e) By laws are the rules governing the operation of a nonprofit organisation. By laws often
provide the methods for the selection of directors, the creation of committees, the conduct of
meetings and other matters of similar nature.
f)
Capacity means all the resources available to an organisation, including people, money,
equipment, expertise, linkages and information.
Charter means a description in writing of the purposes, aims, objects and the mode of
functioning of an organisation. These may include the constitution, memorandum or articles of
association, or the trust deed, depending upon the law whereby the NPO is registered.
j)
Chief Executive Officer means the executive head of the organisation working under the
supervision and control of the governing body.
Disclosure for the purposes of this Model, means disclosure to the general public,
notwithstanding any legal or statutory requirement to do so. There could be different means
and modes of disclosure. For evaluation purposes, information or data shall be deemed to
have been publicly disclosed once it is:
I. Published in a document which is meant for wide distribution; or
II. Placed on a website; or
III. Submitted to a government department as public information.
m) A donor is the one who gives something without receiving consideration for the transfer.
n) Endowment is the principal amount of gifts and bequests that are accepted subject to a
requirement that the principal be maintained intact and invested to create a source of income
for an organisation.
o) Evaluation means an assessment of an organisation, its programme(s) or project(s)
(irrespective of whether the same have concluded or not). Evaluation also involves
articulation of opinion and comments on the organisational structures and on the state of
programme delivery of an NPO. It is a management tool that is built around a formal process
for evaluating performance and impact that help measure progress towards achieving
intermediate targets or ultimate goals.
p) External evaluation means any evaluation conducted by an individual or organisation that is
external to the NPO being evaluated. The Terms of Reference (ToRs) are defined by an
external commissioning authority, and the evaluation report is primarily for an audience
external to the organisation. Internal evaluation, on the other hand, means any evaluation
conducted by an individual or organisation, either internal or external to the NPO, for primarily
the internal audience of an NPO. Typically, the ToRs for an internal evaluation are also
defined by the Board or the management of the organisation.
q) Financial System is an information system, comprised of one or more applications, that is
used for any of the following: collecting, processing, maintaining, transmitting and reporting
data about financial events; supporting financial planning or budgeting activities; accumulating
and reporting cost information; or supporting the preparation of financial statements.
r)
s) Governing body (GB) means the body, board, council or committee of directors, trustees or
executives, as the case may be, in which control of the NPO is vested. Its name, for any given
NPO, may depend upon the law whereby the NPO is registered or owes its juristic personality
(e.g. for an NPO registered under section 42 of The Companies Ordinance, the Board of
Directors is the governing body). For the purposes of this Model, any subcommittee of
governing body formed with a specific mandate is deemed to be the governing body for that
purpose.
t)
Grievance Settlement Procedure is a procedure for staff to object to and seek redressal
against an order from a colleague or a senior officer that they believe to be illegal, unethical or
counterproductive.
IV. Wide knowledge among the staff that the policy exists
dd) Pursuance of personal gain would include using official position in the organisation for
obtaining any kind of material benefit either directly or indirectly, other than the payment for
services provided.
ee) Staff unless specified otherwise includes all paid workers, consultants and advisors of the
NPO.
ff) Transparency involves sharing information and acting in an open manner. Transparency
allows stakeholders to gather information that may be critical to uncovering abuses and
defending their interests. Transparent systems have clear procedures for decision-making
and open channels of communication between stakeholders and organisations, and make a
wide range of information accessible.
gg) Unrelated persons are those who are not related to each other by relation of blood or
marriage. For the purposes of this Model, relations by blood include parents, siblings,
children, grandparents and real uncles/ aunts: Relations by marriage include spouse,
brothers/ sisters-in-law and parents-in-law.
Section I
The Pre-requisites
These standards are non-scored, as they constitute the pre-requisites for certification. An applicant NPO must fulfil these requirements before its application is
processed for evaluation. Wherever this section requires a specific statement to be contained in the charter, the NPOs compliance to such provision in the
charter will also be examined.
No.
The Standard
Means of verification
1.
2.
Desk review of the charter of the NPO may reveal this to sufficient
extent.
3.
The organisation does not propagate the views of any political party or
religious sect.
4.
E.g. The Trust Act, 1882; The Societies Registration Act, 1860; The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961; The Local Government Ordinance, 2001; The
Religious Endowments Act, 1863; or The Companies Ordinance, 1984.
8
PCPs evaluation system is thorough and requires enough information and history of the organisation to evaluate it on certification standards. For this reason, PCP evaluates only those
organisations that have a formal work experience of three years on the least. Organisations younger than this should approach the CBR directly, should they be interested in obtaining tax
exemptions under Section 2(36) of the Income Tax Ordinance, 2001.
6.
7.
8.
9.
An external auditor has audited the accounts of the organisation for the
last three years.
Desk review of the NPOs audit reports of the last three years will verify
this fact. For this standard, audit refers to an organisational audit
(covering all projects and programmes and the total expense of the
organisation). Project audits are not admissible.
10.
No adverse decree has been passed* during the last ten years against
the NPO in any of the civil courts in Pakistan on grounds of fraud or
breach of trust.
Note:
* An adverse decree subsequently reviewed by the court itself or set aside by a higher court will not attract the application of this clause.
E.g. The Trust Act, 1882; The Societies Registration Act, 1860; The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961; The Local Government Ordinance, 2001; The
Religious Endowments Act, 1863; or The Companies Ordinance, 1984.
10
Any deviation(s) where the interests of the NPO have been taken care of, will be considered by PCP
The charter of the NPO requires audit of the annual accounts of the organisation by a duly qualified auditor as prescribed by the IT Rules 12.
2.
The charter of the NPO provides for maintenance of accounts of the organisation being kept in a scheduled bank or in a post office or national
savings organisation, National Bank of Pakistan or nationalised commercial banks.
3.
The charter of the NPO prohibits any changes therein without prior approval of the Commissioner of Income Tax or CBR, as the case may be.
4.
The charter clearly states that the NPO does not propagate the views of any religious sect or political party.
5.
The quorum of meetings of the governing body of the NPO, as provided by its charter is not less than four* members or 1/3 rd of total
membership of such body, whichever is greater**.
6.
The charter of the NPO prescribes that in case of NPOs dissolution for any reason whatsoever, its assets, after meeting all liabilities, if any,
would be transferred to another NPO within three months of the dissolution under intimation to the Commissioner of Income Tax or CBR, as the
case may be.
7.
The charter of the NPO prescribes for restricting the surpluses or moneys validly set apart, excluding restricted funds, up-to twenty-five per cent
of the total income of the year.
Provided that such surpluses or monies validly set apart are invested in Government securities, NIT units, a collective investment scheme
authorized or registered under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, mutual fund, a real estate
investment trust approved and authorized under the Real Estate Investment Trust Rules, 2006, or scheduled banks.
For the purpose of this rule, restricted funds means any fund received by the organization but could not be spent and treated as revenue
during year due to any obligation placed by the donor.
8.
11
The charter of the NPO provides for the regular maintenance of books of accounts in accordance with the generally accepted accounting
principles and for their inspection by the interested members of the public, without any hindrance, at all reasonable times***.
Under Section 2(36) and/or Clause 58 of the II Schedule of the Income Tax Ordinance, 2001.
12
For a small NPO, audit is to be conducted by a retired Audit, Accounts, Taxation or Treasury officer of the government not below grade-17 or a Bank Manager, provided its receipts and
expenditure pass through a bank; for medium NPOs the audit is to be conducted by a Cost and Management Accountant; for large NPOs the audit is to be conducted by a Chartered Accountant. An
NPO may, however, have its accounts audited by a higher category auditor.
9.
Note:
10
11
Section II
This set consists of those standards whereby the NPOs governance structures, financial management, and programmes performance and effectiveness is
assessed objectively. Salient features of the scoring regime are as under:
a) An NPO can attain a maximum score of 1000.
b) The break-up of these scores is presented in the following table:
Categories of Standards
Total
The Minima
Internal Governance
300
150
Financial Management
300
150
Programme delivery
400
200
Overall
1000
600
12
Mode of Verification
1.1
Applicable
on
Weightage
All NPOs
20
All NPOs
All NPOs
10
1.3
1.4
13
All NPOs
10
All NPOs
10
All NPOs
10
All NPOs
15
1.6
1.7
GB has met at least twice a year in any two of the last three years
5
GB has met at least twice a year in all the last three years 10
Documentary or other evidence of issuance or receipt of minutes is
available 5
1.8
14
All NPOs
15
All NPOs
10
All NPOs
Field evaluator may also ask questions in this behalf to some of the
members of the governing body and employees during field
evaluation.
Quorum is 1/3rd 5
Quorum is not specified or is less than 1/3rd zero
Quorum requirements followed in all meetings 10
Quorum requirements followed in at least 80% of meetings 5
1.9
1.10
1.11
1.12
15
All NPOs
15
All NPOs
10
All NPOs
10
All NPOs
15
1.13
Desk review of the charter will answer this question. During field
evaluation, specific cases of amendments in the charter and the
process adopted be also examined.
Governing body or general body are exclusively responsible for
amending the charter 5
Amendments can only be effected with at least 2/3rd majority of the
total members 5
1.14
1.15
16
All NPOs
20
M/L NPOs
15
1.17
17
M/L NPOs
20
All NPOs
10
1.19
18
M/L NPOs
05
All NPOs
10
1.21
19
M/L NPOs
20
M/L NPOs
10
1.23
20
Large
NPOs
M/L NPOs
10
M/L NPOs
10
1.25
1.26
21
M/L NPOs
22
Mode of Verification
2.1
Applicable
on
Weightage
All NPOs
15
All NPOs
10
2.3
All NPOs
10
2.4
All NPOs
15
2.5
2.6
2.7
23
Large NPOs
15
All NPOs
15
All NPOs
15
All NPOs
10
NPO maintains
Cash Books 5
Salary records 5
Petty-cash records 5
2.8
2.9
24
All NPOs
20
All NPOs
15
M/L NPOs
10
All NPOs
10
NPO has disclosed its expenditure in the following heads (during all
of the last three years) in its annual reports, website, documents
meant for public circulation, or documents provided to the
government:
Administrative expense 4
Capital expenditure 4
Foreign and local travel 4
Maintenance of transport 4
Remuneration and reimbursement to staff and consultants 4
The NPO has disclosed such information during any two of the last
three years (2+2+2+2+2 =) 10
2.10
2.11
2.12
This will be verified from the finance department of the NPO. List of
accounts will be examined. Review of accounting sheets and
auditors report will also be conducted.
2.13
25
All NPOs
05
All NPOs
10
2.15
Large NPOs
05
2.16
All NPOs
10
All NPOs
15
2.18
26
All NPOs
20
M/L NPOs
15
Large NPOs
10
2.20
2.21
27
M/L NPOs
10
All NPOs
10
All NPOs
05
All NPOs
15
2.23
2.24
2.25
28
M/L NPOs
10
Accounting records for the last eight years are kept in safe custody
10
Accounting records for the last three years are kept in safe custody
5
29
No.
The Standard
Mode of Verification
3.1
3.2
Applicable
on
Weightage
All NPOs
10
All NPOs
20
All NPOs
10
3.4
3.5
30
Field evaluators may engage the staff of the NPO, especially the
programme staff, in discussion and ascertain whether
programme/project planning is participatory or not.
Large
NPOs
10
All NPOs
15
All NPOs
10
All NPOs
10
3.7
3.8
31
All NPOs
30
All NPOs
15
M/L NPOs
10
Field evaluators may ask staff of the NPO specific questions in this
regard.
Staff meetings are held at least bi-monthly 5
Junior programme staff also participates in the meetings 5
Participants perceive these meetings to be participatory and useful
5
3.10
3.11
32
M/L NPOs
10
All NPOs
10
All NPOs
25
Large
NPOs
10
3.13
3.14
3.15
33
M/L NPOs
20
All NPOs
10
All NPOs
25
3.17
3.18
34
All NPOs
15
M/L NPOs
20
Large
NPOs
15
All NPOs
25
The NPO has increased its outreach during last three years 15
The NPO outreach has remained static during the last three years
5
3.19
3.20
3.21
3.22
35
M/L NPOs
10
M/L NPOs
10
Large
NPOs
10
All NPOs
10
3.24
3.25
The periodic reports for the last three years may be examined. Only
those reports will be considered that are meant for public circulation.
3.26
36
All NPOs
10
M/L NPOs
3.28
M/L NPOs
3.29
All NPOs
15
37
Appendix I
Certification Process
NPO
Mandatory
Requirements Not Met
PCP
Initial scrutiny
Mandatory Requirements Met
Evaluation
Desk Review
Field
Evaluation
Standards
Not Met
Standards Met
Rejected
Deferred
Capacity
Building
Certification Panel
(Non-GoP & GoP)
Capacity
Building
Approved
PCP Directory
Taxation Authorities
Enhanced
Credibility
Tax
Benefits
Increased
Donor
Assistance
Appendix II
CERTIFICATION PROCESS
Organisation expresses interest in certification
PCP sends the Application Form (or the NPO downloads this from PCP
website) to be filled-in by the applicant NPO. The Form contains the
checklist of documents to be attached.
The applicant NPO submits the duly filled Application Form along with
the required documents and a demand draft (evaluation fee) in favour of
PCP.
PCP starts the evaluation process by screening the application etc. to see
if the NPO fulfils the pre-requisites.
PCP schedules the field evaluation and coordinates with the NPO to
prepare schedule of visit by PCP team. PCP sends the applicant NPO a
tentative schedule for the field visit.
40
PCP makes all necessary arrangements for the field visit and draws
final and detailed schedule of activities
The evaluation team visits the NPOs Office (including selected field
outlets), meets a few governing body members, staff and beneficiaries.
Organisational and programme matters are discussed in detail in an
informal setting. Selected records are also examined.
Evaluation team sits together to discuss its assessment of the NPO against
certification standards and prepares outline of the evaluation report
For Field
Evaluation
The evaluation report and organisations comments are
submitted to the Certification Panel (CP) for the final
decision.
41
42
NPO
PCP
Evaluation
Desk Review of application
Field Evaluation
Assessment Report
Financial Management
Verification of
Accounts
Discussion
with Staff
Internal Governance
Evaluation of
Documents
Discussion with
Board Members
Programme Delivery
Discussion
with Staff
Beneficiary
Feedback
Visit of
Outlets
Assessment Report
NPO
Field