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Half of the 3.2 million NGOs active


KPC RAO | New Delhi, May 25, 2012 14:43
Tags : ngos in india | corruption in ngos | kudankulam nuclear plant stir |

The Indian voluntary sector (or the NGO sector) is emerging to be a credible force in catalysing  social and economic growth, particularly for masses at the ‘bottom of the economic pyramid’. The potential for this is apparent from the experience of other developed economies. If India is to achieve, as is predicted, the living standards of the developed world by 2050, then the NGO sector would need to play a critical role and must grow at a pace much higher than that required of the overall Indian economy. Within India there are about 3.2 million registered NGOs, of which an estimated 1.5 million are active.

Existing Legal Framework
The right of all citizens to form associations or unions is guaranteed under Article 19(1) (c) of the Constitution of India. Charitable organisations usually take a  legal status in the form of a Trust, Society, or non-profit company (also called not-for-profit organisations or NGOs), and are regulated by a variety of state and central government agencies, laws and authorities. The federal and state laws (Many states also have their own Public Trusts Acts) which are applicable to charitable organisations.

NGO Sector - Shortcomings in the Present Set-up
By its nature the voluntary sector has an extremely philanthropic side to it, thus making it difficult for corporate-like professionalism or profit-driven accountability-standards to take precedence over its core functions. However, like other key sectors of India, the voluntary sector is also faced with imposing evolutionary and ‘market’ challenges. Hence, issues of internal control mechanisms, professionalism, accountability, transparency and financial management must be given impetus.

Evidently, there is both a need for a pertinent shift in the manner of how the voluntary sector views governance and regulatory frameworks. Equally important is to create competencies for better risk management through operational means and management procedures for risk monitoring and risk mitigation. In case of the NGOs, more so than for the corporates, the risks often take the shape of vulnerability to influences and risk dynamics ranging across:
a. Lack of or limited access to professional management expertise
b. Financial inefficiencies and malpractices
c. Vested organised crime and political interests
d. Extremism and terrorism

Need for Good Governance Practices
Therefore, the policy makers should give top priority to regulate this NGO sector by introducing a regulatory framework to bring in the transparency and accountability in this voluntary sector. Some of the areas where the government needs to intervene are furnished below:
a.  Financial prudence
b.  Internal control mechanisms
c.  Management efficiencies
d.  Prone to money laundering transactions
e.  Internal control checks in the operations of NGOs
f.  Misuse of the image of NGOs leads to mistrust
g.  Bridging the gap between the top-level management and grassroot level volunteers
h.  Strategic leadership to provide holistic guidance

Concerns have been raised that trusts do not spend adequate amounts on their core objects. There isn’t enough transparency in the administration of the trusts, resulting in disproportionately high administrative expenses. Unregulated non-profit organsations (NPO) activities in the past have known to be the conduits for money laundering for organised crime. Global pressure is also growing on India to act urgently. The Financial Action Task Force (FATF) has in its report identified fund transfers from foreign NPOs as one of the major sources for terrorist financing in the country on par with counterfeiting of currency, drug trafficking and extortion. 
(Rao is an expert on NGO law.)

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Issue Dated: Feb 5, 2017