Minting Money in an NGO Way

by Anant Kumar

Global Minds

August 9, 2012

We want to open an NGO

In reality, these people’s hearts were crying to bring changes in their own lives. They wanted to properly utilize their connections. The real motive and drive behind opening NGOs were interesting and it may be summarised, ‘if you do not own an NGO, please register one; if you are unemployed or an entrepreneur, register an NGO or many NGOs because it’s easier to set up and requires no investment in comparison to an industry’. Despite my advice and suggestions (do not open an NGO), most of these people opened an NGO which forced me to rethink ‘what was that strong drive which was stronger than my advice’. I thought to explore and examine the real motive behind it which is discussed below.

Motive behind opening an NGO

People are opening an NGO because it is a business with sure profit. Most of them were having contacts and were eager to use it. In their opinion, “if one has contacts at a right place, opening an NGO is one of the easiest ways of minting money”. One can mint money in an NGO way if either of the following is true. If you know a powerful person (a politician or a bureaucrat) so well that he will do business with you, if you know some non-resident Indian (NRI) whose heart is bleeding with love and care for India, if you have impressed the international funding agencies, or if you are a powerful person like a politician or a bureaucrat. “Many politicians cutting across party lines and bureaucrats are managing the affairs of NGOs. They run NGO by proxy (in the name of their wife, relative, or friends) while in service and take charge of the organisations after retirement”.   By opening an NGO, one can run a parallel government with the patronage of politicians and senior bureaucrats which can be inferred from the observation by the Panchayati Raj Minister of Odisha that:

“at one point of time, it was desired by the Planning Commission to encourage NGO participation in the socio-economic development process with the hope that there will be healthy competition between the government agencies and voluntary organisations. But finally, it has been observed that the NGOs are running a parallel government with the patronage of senior bureaucrats. A new regulatory mechanism has to be thought of to make the NGOs accountable”.

Many NGOs are against this government move to enact the legislation to ensure their accountability and transparency and introduce a measure to involve the elected representatives in their working.    Many heads or owners of NGOs are making profits with a catchy tagline – not-for-profit organisation. The NGO head’s lavish lifestyle, houses, property, foreign trips, and expenses on children educations makes thing complicated and contradicts their claims of social service. Financial management systems in most of these NGOs are weak which permits to mint money by improper ways such as less payment to staff whereas on paper they show full salary (cash back system with every salary cheque under the umbrella “contribution to the organisation” for welfare of employees). Sometimes, one staff is assigned to manage two or more programmes with two appointment letters but they get only one salary as other program’s salary has to be refunded in cash to the organisation. Alternatively, in many NGOs, staff work in projects and salary goes to the head of the NGO whose designation and roles were elaborated in project budget. For most of the government project, there is fixed share and commission by NGOs which goes to politicians, bureaucrats, and other officials. To influence the monitors or evaluators, even money and women are used by few organisations. In few organisations, two parallel financial management systems are in practice, one for themselves (in the name of General Fund) and other for the donors and auditors. Hence, it is difficult to find faults in their financial management system.

Many organisations are easily luring or impressing the donors by showcasing their work without doing anything. There are good numbers of consultants available to develop proposals, write reports, case studies and documentaries which can be sold to donors. Besides, nowadays many awards are also available which one can buy or manage for their organisation. One does not need to worry about transparency and accountability, particularly in respect of the funds received from various sources. One can spend a sizable portion of funds in personal asset building, air travel, and purchase of vehicles. Even most of the training opportunities, fellowships, conference participation and foreign trips are attended by the head of the family and their members. There are instances where donors have sponsored international fellowships and foreign trips to family members or for the senior bureaucrats. Although these trips are shown as training programmes, the real intent is to oblige the bureaucrats so they can grant a project or make a policy in donors or an organisation’s favour.

Under Societies Registration Act (1860), there is a mandate to have seven members in the governing body of the organisation having no blood relation to promote representation of diverse sections of the society. However, to defy this clause, many organisations heads have made their daughters-in-law or other family members the board members who are part of the family but not having direct blood relation. Mostly treasurer posts are confined within the family members and majority of the board members are kept out of fence and everything revolves around one or two members. Rest of the members remain silent signatory to validate the board decisions which they hardly aware of.

If one owns an NGO, they do not need to worry about their children’s career. Just transfer the special skills and prepare them to inherit the NGO. For instance, an NGO in Jharkhand, established in the beginning of 1970s, now is in the process of transferring the leadership to their sons. Interestingly, despite the fact that many staff have devoted decades in the same organisation but they will not get the leadership, title and ownership. In another organisation in Bihar, after the death of its secretary, his wife became the secretary, as his son was minor. After attaining 18 years of age, her son took over the secretary position. It shows that most of organisation’s leadership rotates in the family and board are customary and ornamental without having the real power. Similarly, one need not worry about dowry. According to a study “Expanding Dimensions of Dowry” carried out by the All India Democratic Women’s Association (AIDWA), “Several middle and upper income group families interviewed said that they were trying to organise an NGO for the prospective bridegroom because that is what he had demanded!” The AIDWA study has revealed that this trend is not limited to economically marginalized classes. The study says: they specifically demand NGOs that have been registered for three years – the eligibility criteria for overseas funding.

This situation is not only prevalent in Bihar, Jharkhand, or Odisha, the state of Uttar Pradesh also has the culture of giving dowry in the form of NGO. There are NGO owners who want to employ professionals to run their NGOs and earn money for them. These new professionals think that they are helping underdeveloped community but soon they realize that they have become the part of the “system”. Biswanath Dalei, a lecturer in a private college in Balasore, Odisha, is a harried man – running around to get an NGO registered within a month’s time. “Definitely, he is not in a tearing hurry to be of service to society. The fact is that his future son-in-law is demanding an NGO as dowry in lieu of Dalei’s inability to give Rs 100,000 in cash”. Nowadays, NGO buying and selling is increasingly emerging as a good business and one can buy an NGO in 10-20 thousand depending on how old it is or having FCRA or not.

Conclusion

The paper does not mean that all NGOs are money making entity. Many NGOs have set up examples of transparency. But there is still a long way to go. The only way to stop these people to become the part of minting money in an NGO way is to make strong legislation and monitoring body. Misuse of hundred and fifty years old Society Registration Act is common where anyone and everyone can register an NGO. Society Registration Act needs a thorough review and amendment. The existing legislation and monitoring bodies for NGOs are weak and powerless. There is a need of strong accreditation body to monitor and regulate NGOs to improve transparency, governance, and accountability. The government and planning commission needs to relook their policy on NGO partnership. The Government should also take the responsibility of the development of its people and should stop transferring their responsibility to NGOs in the name of public-private-partnership.

Acknowledgement:

Author is thankful to all those who shared their experience, provided relevant information, and helped in developing this paper. Their names are not mentioned as it might hamper their career.

Disclosure: The commentary is based on author’s discussion with various NGO staffs and development professionals. The views expressed in this paper are not against any individual or organisation. Therefore, name of NGOs are not mentioned in the paper.

(Photo © DR)

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