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Evaluate. Then Donate - Outside View

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Evaluate. Then Donate
Mar 14, 2014

Rahul is a hard-working trader. Last year, a bumper deal yielded him with a phenomenal profit and to celebrate, he took his children on a shopping spree. Exhausted, the family finally settled down with their many bags, to enjoy a burger at the Food Court. Rahul suddenly noticed a 5-year old unkempt boy standing outside the mall, eyeing the food and his children's toys. That night the image of the deprived child's expression kept Rahul awake for a long time. He knew he had to do something, but the question was HOW?

As social awareness is growing in India, there are many Rahuls in the country who would like to donate but are unsure of the process. The reasons for charity are manifold - social responsibility, a feeling of fulfilment, belief in karma. But the challenge to identify the right non-profit is the same. Today, potential donors have begun thoroughly researching the organisation they plan to support. There are several lakh NGOs in India engaged in causes ranging from education, health, development to animal welfare and arts. To identify a deserving charity based on parameters like transparency, impact, optimal utilisation of funds is an onerous task.

As a first step, the donor should apply two filters before narrowing down the choice - the cause and the method of support.

To make an informed donation decision a potential donor should consider:

  • Registration: Ensure that the NGO is registered either as a Trust under Public Trust Act, as a Society under Societies Registration Act, 1860, or as a Section 25 Company under Companies Act, 1956.

  • Income Tax Approvals: A Section 12A certificate from the Income Tax Authorities exempts the NGO's income from tax. Sections 80G and 35AC certificates offer tax savings opportunities to donors.

  • FCRA: Foreign donors (all non-Indian citizens) must ensure that the NGO is registered under FCRA (Foreign Contribution Regulation Act, 2010) and eligible to receive foreign funds.

  • Funds Utilisation: A critical factor for most donors. An optimal manner to verify past fund utilisation is to peruse the NGO's annual reports and website. The donor can learn about the NGO's mission, ongoing projects, future plans and impact on Society. As a thumb rule an NGO, irrespective of size, utilising 70 to 85% of its funds on programme activities would be considered efficient.

  • Peer Analysis: Compare NGOs within a sector on factors like financials, impact on beneficiaries, good practices

  • Things to look out for:

    • Accreditation with NGO listing sites like Credibility Alliance
    • Trustees and Management Team
    • Reporting standards followed
    • Funding from reputed institutions like international foundations, large corporates
    • Good practices like setting aside reserves for earmarked projects or unforeseen contingencies
    • An NGO should not be judged on the surplus or deficit it earns

  • Finally, not all NGOs are genuine, funds getting utilised for non-charitable purposes is a common phenomenon. Ensuring accountability and transparency from NGOs is therefore of utmost importance. An NGO open to share its financials and management details builds confidence among donors.
It is cumbersome and time consuming to monitor a slate of NGOs on these parameters. Organizations acting as intermediaries between donors and NGOs lend a helping hand. One such organization, www.HelpYourNGO.com has pioneered the concept of analysing financials of NGOs to enable a donor to evaluate and donate.

To learn more about the NGO sector please visit HelpYourNGO Knowledge Centre.

HelpYourNGO.com seeks to increase transparency in the social sector and promote philanthropy. Donors can use HelpYourNGO to make an informed decision by accessing NGO financials and comparing data across multiple parameters.

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