New Delhi: One common criticism of the not-for-profit sector is that it lacks transparency and accountability, making many donors including corporates wary of extending financial support. While a section of not-for-profits contests this claim, most are eager to adopt more efficient systems of disclosure—of internal proceedings, fund usage, progress of projects, etc.

One such group met in New Delhi on 19 July, under the aegis of GuideStar India, an agency that provides accreditation and rankings to not-for-profit organizations (NPOs).

Accreditation agencies like GuideStar and Credibility Alliance and even donation portals like Give India rank NPOs on the basis of governance data, financial health and other information that NPOs need to provide. Some even conduct a physical verification of the organizations.

Of the 3 million-plus NPOs in the country—all trusts, societies and foundations fall under this category—there are just a handful that can boast of a third-party stamp of approval. For instance, Guidestar India has 6,841 organisations registered on its portal, but only 409 are accredited. Similarly Credibility Alliance has certified around 550 organizations while Give India has accredited 150.

With NPOs coming under increasing scrutiny of the government—last month, a notice said senior executives of such organizations fall under the ambit of the Lokpal and Lokayuktas Act 2013, and are required to disclose their income and assets—the need to self-regulate has increased.

Besides, as Mala Bhandari, founder director of Social And Development Research and Action group (SADRAG), a Delhi-based not-for-profit, says: “The sector today is infested with all kinds of people and the practices adopted by them lead to a lack of trust against the sector as a whole."

Bhandari believes that Guidestar and intermediaries like it can act as a bridge between NPOs and those who provide financial, technical and other kinds of resources to the sector.

According to Harish Vashistha, executive director of Credibility Alliance, “Transparency needs to be understood in the context of larger organizational governance and disclosure practices. Transparency is a value that can be reflected in organizational culture and practices."

He adds that NPOs are diverse in nature, form and function and can only be considered credible if they uphold the “three pillars of an effective organization—governance, accountability and transparency".

He suggests developing systems using information technology, improving communication with stakeholders and developing communication products suited to the needs of different stakeholders, strengthening documentation and dissemination processes and redesigning/re-engineering the organization to remain relevant to the changing context.

Pushpa Aman Singh, CEO of Guidestar, also emphasizes the need for self-disclosure. She says NPOs can use their web presence, financial statements and annual reports as tools to demonstrate transparency.

“We have seen instances where a compelling case for support is declined in the end due to qualifications in the audit report or non-compliance with statutory requirements," she says, explaining why an NPO that may be doing good work on the ground does not receive funding.

Sanghamitra Bose, founder trustee and CEO of Sshrishti India Trust, a not-for-profit focused on working with underprivileged children, believes accreditation by organizations like GuideStar India and Credibility Alliance helps attract donors. “We do mention the accreditations when we send out proposals to prospective funders and it has some positive effect, though it is difficult to measure. However, some individual donors have come our way because of the listing on a particular portal," says Bose.

She adds that the processes to acquire the accreditations also help “strengthen our internal processes".

Independent bodies are essential, believes Bhandari, because they “scan, monitor and test an NGO (non-governmental organization) on the basis of standard guidelines that reflect the actual handling of funds, legal aspects and follow-up on mandatory administrative and management guidelines. As a result, the NGOs definitely earn an improved image and they become credible organizations within the legal and statutory framework".

Bhandari adds a caveat: “Multiplicity of intermediaries and multiple due diligence processes that an NGO has to undergo can be time consuming. We would like this system to align with the government’s system of accrediting NGOs for the sake of uniformity and permanence."

Rohit Shipstone, from India@75, a CII initiative that seeks to bring together stakeholders from industry, government and not-for-profits, believes that with speculation rife that government accreditation of NPOs is on the cards, efforts at self-regulation and accreditation should dovetail with the government’s efforts.

Shipstone adds that fragmented efforts cannot reach scale. “Through the huge efforts of organizations like Guidestar and other agencies we have a certain degree of transparency for organizations registered with them. But going forward these efforts should dovetail into a recognized accreditation which everyone can follow." 

According to him, when donors or corporate organizations give money, they prefer to conduct their own due diligence. “No amount of accreditation from independent agencies can override that till a common government-recognized standard can emerge... Till the government comes up with a standardized system, of which these initiatives can be a part, it will be tough to get NGOs accredited at scale."