Social Sector in India: For Social Good or Financial Gains?

Did you know that India could potentially have the highest number of non-government, not-for-profit organisations in the world? Of course you didn’t, because despite a high number of NGOs, they haven’t achieved very much. As a country, we have 3.3 million NGOs, and this is a figure from 2008, more than 10 years ago! We have a disproportionate number of NGOs in comparison to the work conducted on ground. It is obvious that the social sector requires reform, but what is wrong with it? With such a high number of active not-for-profit organisations, why does the social sector have so little to show for to show in terms of impact?

Mismanagement of Funds

These 3.3 million organisations raise approximately $10-$16 billion cumulatively every year. That’s a buttload of money thrown at a sector that has very little accountability in the grand scheme of things. For instance, almost half of these funds are recklessly used on administrative and organisational costs. While we know that running any kind of organisation costs money, it is difficult to digest that around half the funds NGO’s receive to help people are used to simply keep it afloat. There has to be a large percentage of mismanagement within the sector for this to be true, and yet it is.

Hurling money in the wrong direction (Source)

This kind of mismanagement is majorly due to incompetence and inexperience. Many a times, an NGO’s funds and the founder’s funds are not kept mutually exclusive. If you pierce the veil of the NGO structure, it may become apparent, that the NGOs’ account is used by a few for personal use. This leads to mismanagement and even embezzlement. Furthermore, petty cash amounts are quoted to be much higher than they need to be, adding to distrust towards the non-profit sector. If you also account for the lax accountability of foreign funds, the lack of impact on the ground, isn’t surprising.

The Modi government has been doubling down on non profits who receive foreign funds. In 2014, the Intellegence Bureau stated that NGOs accepting foreign funding are staggering the GDP by 2-3%. These organisations were accused of promoting western government’s propaganda rather than pushing for development within the country. By 2018, more than 20,000 NGOs lost their FCRA (Foreign Contribution Regulation Act) licenses for a variety of reasons, such as inability to produce balance sheets and the right documentation. These claims and allegations may be purely political in nature, but there is no question that the social sector needs more scrutiny. When non-profits decide to throw transparency out the window, it was only a matter of time before one government or administrative officials came knocking with a few questions.

Accountabilty

NGOs, by their very nature, enjoy a laxer standard of accountability than other organisations across the country. Their disclosure standards are abysmal; annual reports are barely credible and cash flow is hardly ever disclosed. These not-for-profits often scoff at accountability and label it as unnecessary bureaucratic red tape that stops them from doing ‘real work’. This however, leads to ethically questionable practices within the sector.

No accountability without transparency (Source)

Let us paint you a picture. The year is 2004; NGOs are still not under too much scrutiny from the government. Jerry Almeida, the former fundraising director of ActionAid India, walks into the basement of their Bangalore office. Here, he finds his staff writing letters in childlike handwriting, in an attempt to gain more foreign funding. This is one instance of the lack of accountability, especially for NGO’s that are reliant of foreign funds. Organisations that rely on national funds are more accountable to the public, because a donor could walk in any time asking for how their donation has been used. Foreign donors are unlikely to take the same action, thus leading to less accountability.

Lack of Qualifications

The lack of skills is not an issue exclusive to the social sector; the World Economic Forum states that India is in dire need of equipping its young population with better skill sets. This is also true for the social sector in India. As an organisation, Twisted Tiara has been working with various not-for-profits over the period of six months. We started out as starry eyed romantics, hellbent on making a difference. Six months down the line, we have a more realistic view of what it truly means to operate within the social sector.

More often than not, people working in not-for-profits lack the education or experience to be at the position they are in. These mediocre attendees often slow down meaningful work. With no personal motivation, no expertise to speak of, and a head full of their inflated ego, these people tend to chase the glory of being in the social sector, without putting in the guts. For example, an ‘environmental NGO’ that has been operational for 15 years conducts annual sapling drives for children. No one has thought of teaching the audience about the importance of plantation, how to keep a sapling alive, or the concept of environmental security. They do not seem concerned with teaching the children about environmental rights, duties and security for a sustainable future. Instead their focus seems to be on doing these sapling drives and donations for media publications and “show” impact to their funders.

Additionally, large businesses often incorporate NGOs just to claim tax benefits for their mandatory CSR compliance. These NGOs are closer to shell corporations created for financial gain; they aren’t trying to better the world.

Sustainability

NGO’s need to be scaleable and sustainable, which they are currently not. A study shows that less than half of Indian NGOs believe they can replace upper management. The truth is, most Indian NGOs are personality driven. They rely on leadership for networking, fundraising and strategy. For example, when Rippan Kapur passed away in 1994, Child’s Rights and You (CRY) struggled to fill that position for almost four years. This particular situation is easily avoidable with better governance systems and planning.

CEO’s and Founders of NGOs never really retire, which shows their commitment but also limits the scalability of the organisation. It is fairly simple to move away from a founder-centric system, by fixing tenures for CEO’s. This allows others in the organisation to grow, and does not hamper the growth of the NGO in case of an unforeseen event.

Bureaucracy Wins

More often than not, all the above factors contribute to an unwarranted amount of bureaucracy; the kind that you cannot work around. A founder-centric system relies on the founder’s approval for everything. Unqualified employees end up micromanaging the qualified ones because of their sense of insecurity. A waiver on accountability slows productivity because there is no objective or deadline you are actually working towards. This, in turn, leads to mismanagement of funds. More money goes in simply keeping the NGO afloat rather than actually providing aid to people in need.

These are some of the obvious reasons NGOs are struggling to stay afloat in India today. NGO employees and owners need to realise that they aren’t above the law just because they are “fixing society”. Just because they are working for a cause doesn’t mean they can skip out on accounting for their time and other people’s money. Now more than ever, with big brother always watching, non-profits need to raise their standards of operations, employees and transparency, otherwise their existence could be on the line.

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