NGO is different from a NFP
Quite often people make the mistake of equating a NGO (Non governmental organisation) with a NFP (not-for-profit organisation). While the management and accounting requirements may be quite similar in both , what differs is the way the operations are executed.
Typically, NFP administration can spend as much as they like as long as there is a revenue to offset that. But a NGO, which is dependent on funds from donors, have to ensure that the maximum part of the money reach the beneficiaries and hence there is a limit to what can be spend as administrative expenditure.
For a NFP, the revenue can be changed by altering the price line (fees for a private MBA school, for example) but for a NGO, one is dependent on how much funds is being churned out by the donor.
This differentiation is nothing subtle but quite often not understood.
Examples of NFPs in India are many: Private Educational Institutes, Clubs, Societies etc. Of course, as you can see, they are not NGOs as they do not supplement or substitute any government program in the social sector. Can you, for example, call CII (the industry body) or Delhi Gymkhana a NGO? You can't and they aren't too.
So what is the constraint for a NFP ? Only one major constraint and that is they have to reinvest the surplus generated within a maximum of 5 years . So that means they cannot keep surplus in perpetuity.
Chracteristics of a NGO and its effect on the society:
Having worked in a "corporate" NGO & NFPs over 3-4 years , I have come across quite a number of NGOs and CSRs in the state and my observations (at the cost of not-so-gross generalisations) are as follows:
1. A NGO is typically a GO. Works like a government, acts like a government with no serious accountability.
2. Among the NGOs, there are two major types .
The middle class, corporate NGOs (having multi-city amd multi-state opreations) get a lot of funds from trusts and foundations , (who are more busy parking their funds "somewhere good") and the NGO management lead a reasonably good life, fly once a month to the continent, draws super salaries and talk of "activists donning executive attire" to make it look professionally managed. The ground level community workers of such NGOs get a pittance of a salary, are untrained and are as impoverished as the beneficiaries they are supposed to serve. The board/trust in such NGOs is a farce, as they consist of the top brass who are either trying to improve their image, goodwill or trying to get political contacts or even in some case use it as a channel to make illegal money from the donor's funds. With such a board, the NGO management gets away scot free as there is hardly any review that is done. The NGO management also is accountable to the Funders, who are happy with the quarterly reports , monitoring the NGO from their corporate offices thru video conferencing. Do the funders visit the project area? Once in a while, they do but they obviously cannot visit 1000 villages in a project area. So the NGO chooses a model village , with the some half naked smiling people garlanding the funders and the quarterly review is over. The second type of NGOs are the localised, small ones working in only one project area . These NGOs are passionate, have commited people working in rural health, education and perpetually starved of funds. The CSR groups and funders scarcely target them as as these NGOs do not fit in their model of "scale".
3. The NGOs have become an industry by themselves and like the Indian society, the middle class NGOs are thriving while the localised NGOs are deprived.
4. The NGOs came into operation because the GO at some level did not perform. Now the GOs do not want to perform because the state has co-opted the NGOs in their area and leave the performance issue to the NGOs.
5. Finally the CSR group. in majority of the cases , has come up as a compliance requirement or as a means to generate goodwill. The profile of people heading the CSRs is pathetic. They are generally rejects from the mainstream corporate line function and have been asked to cool their heels in the new group. Their chief occupation is to "spend money" (and not to generate ) and they just go berserk in parking the funds to a already well-funded NGO. Their ability to review is seriously limited because 90% of their time they do not visit the project area or have a team which can . The quarterly reports and video conferencing and one occasional visit justify their existence.
6. Majority of the NGOs finally are not into any radical change either in education or health . They spend money in patchwork kind of assignments . For example, education NGOs will re-train a teacher (who anyway teaches five subjects, keeps accounts , opens and closes the school) or add a classroom etc. forgetting the fact the teacher is a lousy one in the first place. What one requires is a well paid , qualified faculty (like the one we got in our schools in the cities) etc.etc. So the money gets spend in making minor changes , which anyway disappear after the end of the project period and the new cycle of funding and perpetuity of NGO existence restarts. Almost like the AJC Bose Road in Kolkata getting a flimsy tar coating every year.
The NGOs have been in existence for more than a half a century and so why blame the government only for the inequity? The NGOs and the CSRs will continue to grow , unaccounted money will continue to be spent and the inequity will remain, whether we like it or not. The NGO industry will thrive in the name of beneficiaries but nothing will change radically.
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