Fund Utilizations by NGOs in India

Fund Utilizations by NGOs in India

Situation of NGOs in India

There are nearly 33 lakhs NGOs across the country as per the Central Bureau of Investigation report. [1] That is more than double the number of schools in the country, 250 times the number of government hospitals, and one NGO for 400 people. [2] Astonishingly, only 10 per cent of them have filed their annual income and expenditure statements. And none of the 76,566 NGOs in Delhi has filed the statement. [2]

Funding of NGOs

The World Bank lists a total of 47 NGO variations. [3] They can accept donations from private individuals, for-profit companies, charitable foundations, and governments, whether local, state, federal, or even foreign. As non-profit entities, they can also charge membership dues and sell goods and services. [3]

Chief Justice of India T.S. Thakur exclaimed that Indian NGOs are getting money from all over the World and it is quite mind-boggling. [4] Billions of dollars each year are spent on foreign aid projects, much of which end up in the hands of NGOs worldwide. NGOs are involved in many phases of development and have done significant work for the upliftment of the underprivileged. But unfortunately, there have been very few studies which consider the actual effectiveness of this process. The demand for a comprehensive and clear legal and institutional framework for NGOs in India dates back to 1985. [5]

Between 2003 and 2010, the Union and state governments released Rs 6,654 crore to various NGOs, averaging almost Rs 950 crore per year. [6] And for the financial year 2010-13, available data show that about 22,000 NGOs received over $3.2 billion from abroad, of which $650 million came from the US.

The 22,400 Indian NGOs registered under the Foreign Contribution (Regulation) Act received funding of over Rs 50,975 crore from abroad from 2016-2020. [7] These statistics show that there is a huge inflow of funds for NGOs from the nation and abroad. But the major problems are poor working efficiency and transparency in fund utilization.

Unclear Statistics on Fund Utilization

 

There are unclear statistics related to fund utilisation due to various reasons. Some of them can be:

1. Several states fail to gather and provide information about the grants given to NGOs

2. Mismanagement of funds by NGOs

3. Irresponsible behaviour and corruption tendencies

4. Lack of research on NGOs

5. Poor transparency and accountability in NGOs

6. Lack of policies and established institutions by the government

Fraud in NGOs

According to a bench headed by Justice Pradeep Nandrajog, “Most private run so-called philanthropic organizations do not understand their social responsibilities. 99% of the existing NGOs are fraud and simply money making devices. Only one out of every hundred NGOs serve the purpose they are set up for”. He added  that, “There is a need for toughening of licensing norms and the legislature has to keep this in mind”. [8]

There are numerous cases of NGOs being taken into custody for malpractices.

Earlier, in 2016, the Income Tax Department had issued notices to 3000 NGOs, under the provisions of Section 133(6) of the IT Act, in just Tamil Nadu and Puducherry on serious allegations of money laundering, immediately after demonetisation. [9]

In 2022, massive raids were held in 40 locations in Delhi, Chennai, Hyderabad, Coimbatore, Mysore and Rajasthan linked to NGOs and Rs 2 crore in hawala transactions were found. The CBI arrested at least six government officials for allegedly taking bribes for facilitating clearances of foreign donations to NGOs through middlemen. [10]

Black listing of NGOs

The CAPART under the Ministry of Rural Development sanctioned 24,760

projects during 1 September 1986 to 28 February 2007 involving a total

sanctioned grant of Rs 252 million. Out of these, 511 NGOs were placed

under the blacklist category due to irregularities committed. [11]

 

The Council funds nearly 7,500 NGOs in India; its overall budgetary portfolio was a whopping Rs 208 crores last year. CAPART has managed to audit the books and working of just over 2,000 NGOs: the malpractices it discovered were worth Rs 15 crores. It estimates that the overall financial skulduggery could be worth Rs 45-50 crores. [12]  

 

As many as 16,754 NGOs have been barred from accessing foreign funding since 2014, according to home ministry data: 80% of the licenses revoked since 2011. The funds raised by Indian NGOs via the FCRA fell 87%, from Rs 16,490 crore in 2018-19 to Rs 2,190 crore in 2019-20. [13]

Importance of Financial Management of NGOs

NGO’s primary work is not just to do social service but also to do financial management. Unless finances and funds are organised well, objectives cannot be achieved.

1.     Accountability to the donors: Donors deserve transparency in their donations. This builds trust and chances of getting continuous support from them.

2.     Making healthy decisions: The right decision-making skills are required to invest the funds in the right place to efficiently utilise them.

3.     Securing the future: Funds need to be spent keeping in mind the future.

4.     Achieving goals: Fund organisation is crucial to achieving any objective or goal of an NGO.

5.     Increasing credibility: Having a proper well-defined financial plan and policy helps NGOs earn a good reputation and hence enhances their credibility.

6.     Getting rid of fraud and theft: Unfortunately, malpractices, fraud, theft, and corruption are becoming common among NGOs. There need to be good checks to minimise them to ensure finances are utilised well.

Krsh and Financial Management

Krsh Welfare Foundation has proved its efficiency in financial management by keeping its donations transparent and having a proper financial plan. We have zero-tolerance for malpractices related to donations. We have kept our working efficiency to the maximum, enabling us to be one of the most efficient NGOs in the country. We focus on being 100 percent accountable to the donors about their donations and provide relevant proof related to the utilization of the funds.

Concluding Remarks

Corruption and malpractices have long entered the world of NGOs which has reduced their working efficiency and donations transparency. NGOs require reliable financial management plans to gain trust and work sincerely for the cause. Krsh Welfare Foundation is also continuously working on this and has achieved significant results and credibility in the domain of social work.

Reference

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