It's time the government shut the foreign-funds tap for NGOs

Prof R Vaidyanathan
Friday, March 20, 2009 23:59 IST

Mumbai: A non-governmental organisation (NGO) is any voluntary, non-profit, citizens' group which is organised on a local, national or international level. It could be registered as a society, trust or under section 25 -- companies, even though some cooperatives also claim this label.

There are two important criteria: the organisation should not be for making profit and should be independent of the government. However, many NGOs get money from the government.

NGOs are also expected to be value-based organisations. The range of activities they are involved in is mind-boggling and can extend from issues of ageing to waste management.

The funding for these NGOs is substantially international. The international flow of funds is regulated by the Foreign Contributions Regulation Act (FCRA). Table-1 provides the trends in the number of reporting registered associations and the amount of money received under the Act.

We find that the number of reporting associations has declined (percent wise) over the period and the numbers of those not complying with the laws have increased. For instance, the ministry has placed 8,673 associations under "prior permission" category in 2005 for failure to furnish annual returns for the three previous consecutive years. There exists substantial under-reporting.

We also find that in the last three years, the amount received has shown a phenomenal increase and it was 56% more in 2006-2007 than in the previous year. The report of the home ministry also provides other information regarding the states receiving the largest amount and purpose, etc pertaining to the year 2006-2007.

It suggests that important states or union territories are Tamil Nadu (Rs 2,244 crore), followed by Delhi (Rs 2,187 crore), Andhra Pradesh (Rs 1,211 crore) and Maharashtra (Rs 1,195 crore). Among donor countries, USA leads in the list of donor countries (Rs 2,972 crore), followed by Germany (Rs 1,649 crore), UK (Rs 1,425 crore) and Switzerland (Rs 605 crore).

The leading donor agencies are Misereor Pastfach, Germany (Rs 1,244 crore), World Vision International USA (Rs 469 crore), Foundation Vicente Ferrer Spain (Rs 399 crore) and ASA Switzerland (Rs 302 crore).

The largest recipients are Ranchi Jesuits of Jharkhand (Rs 622 crore), followed by the Santhome Trust of Kalyan, Maharashtra (Rs 333 crore), Sovereign Order of Malta, Delhi (Rs 301 crore), World Vision of India, Tamil Nadu (Rs 256 crore), Jesuit Educational and Charitable Society, Karnataka (Rs 230 crore).

Tamil Nadu, Maharashtra and Andhra Pradesh are some of the states with a large number of NGOs. It is curious to note that the poorest states like Bihar and Uttar Pradesh, etc do not have as many numbers. Among the top 15 recipients, each with more than Rs 90 crore receipts from abroad, at least 14 are easily identifiable as Christian charity organisations from their names.

The interesting information is regarding the purpose of the donations (see Table-2). Establishment expenses top the list, followed by relief and rehabilitation, rural development, child welfare and construction and maintenance of schools and colleges. Substantial sums are spent on construction of places of worship and maintenance of priests.

Establishment expenses consist of buying land, buildings, jeeps, setting up fancy offices, mobiles, laptops, expensive cameras, salaries, consultancy fees, honorarium, and importantly, foreign travel etc, which make up 35-70% of the expenses. This goes against the grain of service motto where the ultimate recipient is supposed to get the maximum.

By definition, NGO activity is voluntary and hence one expects that the overheads of the organisations are lean. In financial parlance, the fixed cost is expected to be relatively small.

Contrary to this belief, we find that the establishment expenses are the major reasons for receiving donations from abroad. In other words, NGOs are perhaps becoming like top-heavy government departments wherein a substantial portion of developmental expenses is spent on salary wages and other expenses such as telephone, travel (both domestic and international), etc. Nowadays, they even recruit "executives" from management institutions.

NGOs are active in pointing out the deficiencies in the functioning of the government, be they on human rights or the Right to Information or Tribes Act or dam oustees.

Hence, it is all the more important that their activities are transparent, particularly from the point of view of their sources and uses of funds.

I have tried unsuccessfully to get the annual reports including annual accounts from the website of the top 25 recipients, many of whom are often mentioned or quoted in newspapers and TV channels and stress the importance of "transparency" in the functioning of the government. Many do not have any information in their websites. Some of their websites contain all razzmatazz but nothing on finances.

Physician heal thyself is very much applicable to this body of self-proclaimed saviours of Indian masses and who also claim themselves to be the "civil society." Given the declaration by various Evangelical groups in the USA and Europe that Asia is the next major place to "harvest the Souls "and "plant the churches" India should exercise caution in allowing foreign funding of these groups. They affect social harmony and foment communal disturbances by their conversion activities in small towns and tribal India.

Indian NGOs can and should access funds from domestic sources and there are millions of charity minded Indians. It is not required for Europeans or Americans to send money for our NGOs who spend it on establishment expenses and conversion propaganda to fill up the statistical "soul harvesting" exercise of foreign evangelical groups.

For instance, Russia recently approved a bill that introduces stringent control over the activities of foreign-funded non-government and non-commercial organisations in a move designed to pre-empt any "coloured revolution" in the country.

It says, "The Kremlin has learnt its lessons from a string of "coloured revolutions" in the former Soviet Republics-- the "rose revolution" in Georgia, the "orange revolution" in Ukraine and the 'tulip revolution" in Kyrgyzstan -- all inspired and orchestered by western funded NGOs. The bill allows NGOs to be shut down if they threaten the country's "sovereignty, independence, territorial integrity, national unity and originality, cultural heritage and national interests." There are 4,50,000 NGOs in Russia representing religious organisations, charities, think tanks, and professional groups. The US Congress has allocated $85 million for the support of democracy in Russia in 2006."

Incidentally, there is an act in the USA called Foreign Agents Registration Act (FARA), which provides for penalties up to 10 years in jail for any one acting as a foreign agent or getting foreign funds without notification to the Attorney General. FARA was originally passed in 1938 to prevent the spread of Nazi ideas and propaganda.

It would be appropriate that all NGOs insist they be covered under the Right to Information Act, even though as of now it is not applicable to those who do not receive funds from the government. This insistence will go a long way in establishing their credentials as real believers in transparency and right to information.

To enhance their credibility, they need to publish their sources and uses of funds voluntarily on their websites, including the break-up between administrative and other expenses. Last, but not the least, it is important that the government bans foreign funding of our NGOs. We are no more the "white man's burden."

The writer is professor of finance and control, Indian Institute of Management. Views are personal.