Starved of funds, now NGOs find themselves unequal to the task

New rules mean that the NGOs have to spend a lot of money on meaningless paperwork

About a year ago, I attended a district-level, Covid-related meeting of NGOs organised by the Haryana government, where the government spokesman claimed that a certain number of food packets had been distributed among the migrant labour. As the meeting progressed, I realised that the number mentioned was the aggregate of the food packets the NGOs distributed in the district.

Around the same time, I also attended similar meetings organised by the NITI Aayog and the National Disaster Management Authority. I was happy to note that the NGOs were able to do significantly well to fight Covid-19. Today, when coronavirus has become deadlier, with bodies floating in sacred rivers, the NGOs find themselves unable to chip in.

The Union government has only itself to blame for the emaciation of the NGOs during the interregnum. Two laws it brought forward are primarily responsible for their diminishing role. These are - the amendments in the Foreign Contributions Regulation Act (FCRA) and the Corporate Social Responsibility (CSR) law.

The NGOs eligible to receive foreign money were asked to open a new FCRA account in the New Delhi Parliament Street Branch of the State Bank of India. Once the application for opening the new FCRA account, including the personal details of all the board members, was submitted, the NGOs would not be able to receive money in their old accounts. A few days ago, this provision was withdrawn but the damage had already been done! The SBI does not even say whether the money has been credited to the account or not.

Earlier, NGOs could use foreign remittances to run projects in many states and cities through other NGOs. Now, they will have to employ their own staff wherever they want to run a project. Thousands of small NGOs with a budget of, say, Rs 10 lakh a year, which depended on large NGOs having FCRA accounts, have been left in the lurch. Every time an amount reaches the FCRA account, electronically or otherwise, the SBI expects the signatories of the NGO to submit a letter from the donor for what purpose the money was sent and an undertaking that the money would be spent only for the specified purpose.

There was always the threat that the government could check the records and take the NGO concerned to task if there was any discrepancy, deliberate or accidental.

Given the risks and bother involved, few would like to be associated with an NGO as either an office bearer or a governing board member. This will push NGOs into the hands of fly-by-night operators.

Earlier, up to 50 per cent of the foreign money could be used for administrative expense. Now it is 20 per cent. Similarly, the NGOs eligible to issue certificates under Section 80G of the Income Tax Act, under which the recipient will get income tax exemption up to 50 per cent, will have to apply periodically for this facility. It is a different matter that they have to comply with all income-tax rules on a yearly basis.

There is no clear understanding of what constitutes administrative expense. Is the salary paid to a teacher in an education programme an administrative expenditure? It is not but if a particular official takes such a stand, the NGO concerned will have to spend a lot of time and energy to prove him wrong.

When it was made mandatory for large corporates to earmark a portion of their profits for corporate social responsibility (CSR) programmes, the NGO sector was happy that it would get money to implement its own programmes which were in conjunction with those of the corporates.

The CSR rules have been made strict and stringent for corporates. The NGOs have to register themselves with the government to be eligible to receive CSR funds. Corporates have to submit to the government a report from an independent agency that its CSR strategy achieved the purposes for which the CSR money was spent.

If an NGO, which received the fund, did not use it properly for whatever reason, the chief financial officer of the corporate will be held personally responsible. Of course, the corporates can deposit the money in a government-sponsored initiative like the PM Cares Fund, in which case no questions will be asked.

Today, even state governments compete with the NGOs to get a slice of the CSR funds. Thus, CSR funds have become a mirage for the NGOs. The new rules mean that the NGOs have to spend a lot of money on meaningless paperwork.

Small wonder that the NGOs do not have any money to be used to prepare food packets and distribute the same among the needy people or help in the burial or cremation of the dead.

How one wishes the government had been a little more sensitive and trusted the NGOs for their ability to reach where the government can’t and do what the government can’t. Trust begets trust!

Today, even state governments compete with the NGOs to get a slice of the CSR funds. Thus, CSR funds have become a mirage for the NGOs

The writer was, until recently, Secretary and Chief Executive, Deepalaya, one of the largest NGOs in India. He can be reached at ajphilip@gmail.com