Compliance or ownership – Contemporary trends in NGO governance in India

Early days

When I decided to set up an initiative with a few other colleagues, so that I can continue to do what I was passionate about, I was advised to set up a ‘Society’. Thus was born PRIA in 1982. The seven ‘Executive Committee’ members of PRIA were co-promoters. They were very active in deliberations about the purposes, activities and impacts in the couple of years before and after legal incorporation.

Most continued to contribute professionally to its programming for decades afterwards, as a couple of new Board members were added. A stable composition of Board members of PRIA was in place within three years of its incorporation and continued to guide its directions for the next two decades.

Given my professional training, I was trying to ensure effective management of the programs and resources. In a chance meeting with a senior voluntary sector leader in 1984, I heard him say, “We are non-profits, so no laws apply to us.”

I got thoroughly confused because just a week before we had received a notice from the Income Tax authorities. This was for supposedly engaging in ‘for-profit’ activity, since a couple of PRIA publications were ‘priced’ Rs 50 each. Not that we made much income at all, ’selling’ publications or anything else, for that matter!

In 1985, PRIA organized perhaps the first ever consultation in India on ‘Management of voluntary organizations’. Its goal was to deliberate on this issue with founders of 20+ voluntary organizations (or development NGOs). I gained several insights form those five days.

Management was a dirty word for such NGO leaders. Statutory obligations were assumed to be mostly meant for for-profit organizations, including Income Tax, Sales Tax, Shops and Establishment Act, etc. Executive Committees (or Governing Boards, or called by whatever other names) were ‘friends of the founders’. They merely fulfilled the basic requirements of signing the minutes of meetings occasionally held.

Within PRIA’s mandate of building human and institutional capacities of development NGOs, we convened several workshops during 1988-1995. Their objective was to deliberate on effective governance of such organizations. The first set of such workshops focused on clarifying “Vision, Mission, Strategy” of such organizations. The goal was to ‘refresh’ them after 6-7 years of functioning on the ground.

Teams of senior leadership attended these. However, these workshops did not include any Board members. Only founders and a couple of senior managers attended such workshops. We decided to then suggest that some key Board office-bearers, like Chairpersons, Treasurers, etc., should be included in future workshops.

When some key office-bearers joined the next set of workshops, we discovered that founders alone performed most governance functions. Other office-bearers did not demonstrate much of a sense of ownership of, or responsibility toward, the organization. Their affiliation was mostly with the founder. This was because they were essentially friends or family members of the founder.

Some of my professional colleagues and a few donor friends got very upset to learn about this reality. They insisted that friends and family members should not continue as Board members to avoid conflict-of-interest. Little did they appreciate that founders are risk-taking entrepreneurs. They need immediate, local support of several kinds to hedge against the risks they have taken to set up an NGO. Initial needs for various types of material support, like office space, furniture, vehicles, and money are mostly met by family and friends. Likewise, many activities of NGOs require human resources. Family and friends provide free skills and pro-bono work in all such initiatives in the early years.

All new ventures face difficulties, and NGOs more so. Friends and family provide emotional support to founders by holding their hands in the face of difficulties. Friends and family were thus ‘early investors’ for most NGOs in the 1980s and the 1990s, through their ‘sweat equity’. As an NGO matures and its programs stabilize, more professional composition in the governance becomes desirable.

Next phase

While the previous phase described the identity of such work as ‘voluntary development organizations,’ new narratives began to emerge in the 21st century around conceptualizations of such entities as ‘nonprofit,’ and ‘civil society,’ etc. These global narratives brought new ways of managing and governing such organizations as well. New approaches to ensure NGOs’ good governance have several features. These include fixed terms for Board members, regular rotation of Board composition, and diversity of competencies on the Board (bringing other professionals in). Representation of ‘beneficiaries’ is also a key aspect.

As most NGOs began to implement these new features of governance, several challenges began to emerge in the Indian context. Periodic (every three or five years) rotation of Board members did not generate enough understanding or ownership of the work of the NGOs. Professional experts with domain knowledge joining the Boards brought in new competencies. However, they had limited exposure to (or even interest in) local ground realities. Inviting government officials generally meant finding retired ones, since approvals to serve on NGOs’ Boards became increasingly restrictive.

Bringing in members of the Board living in places farther away from the location of the NGOs entailed additional expenses. Donor funds for such ‘overheads’ became less available. In the pursuit of diversity in the composition of the Boards, gender and social inclusion mostly became tokenism. Adequate considerations for such matters in the very design of the programs was not necessarily attempted. Formally structured meetings of NGO Boards were alien to the lived realities of local community ‘beneficiaries’ (both culturally and linguistically). This made their participation also a mere tokenism.

Recent phase

As India campaigned against corruption (IAC), and Lok Pal Bills began to be discussed, deep investigation of NGO Board members began to be publicly debated by 2012. Further restrictions and scrutiny of FCRA registered NGOs imposed recently have created fears of harassment of Board members by the government machinery.

By the time the COVID-19 pandemic hit, another ‘virus’ had thus inflicted NGO governance. Professionals from the world of business, academia, and public service were unwilling to get themselves ‘exposed and scrutinized’ by becoming members of NGO Boards.

One of the practical solutions now being implemented is to invite such diverse professional experts into a non-statutory Advisory Board/ Committee, where legal requirements for serving on NGO Boards are not imposed, and yet, access to diverse expert advice is possible.

Finally, with rise of CSR and corporate foundations in India after 2013, a new phase of NGO governance has emerged. This is the ‘star-ranking’ system. Several private consulting firms, having developed their tools in the USA/ the UK, are now ‘rating’ NGO governance for a fee. This is sometimes greater than other expenses on governance.

Should the above historical sketch suggest that governance of NGOs is a problem best to be avoided, let me clarify the obverse. Effective governance of all organizations is essential for their continued effective performance, whatever their mandates. In today’s context, effective governance of NGOs is even more critical since NGOs are change-makers in society.

The following are some key NGO governance functions that need to be effectively performed. Sustaining, refreshing and ensuring the implementation of the NGO’s vision and mission is critical. An NGO must continuously reflect on the changes it intends to bring in society and the reasons thereof.

Fiduciary roles with respect to taking care of assets, resources and endowments of the NGO need to be thought through. This is important to ensure that systems and protocols are appropriate and implemented.

Overseeing statutory compliances related to incorporation, fund management, personnel and office/ establishment, etc., are also crucial. External stakeholder engagements (e.g., with governments, resource providers, the media, etc.) also need to be supported.

Periodically reviewing and approving the upgradation of systems and processes of internal management with respect to planning, banking, implementation, monitoring, procurement, inventory, maintenance of assets, human resource management and development, etc., is also important. Systems and processes of performance review and compensation of all functionaries, including the CEO, need to be managed effectively.

The above list may appear complex. However, it is not so once the systems and mechanisms are in place. Our experience suggests that NGO leaders need some guidance in creating a system and culture of governance that is appropriate for them.

At this juncture, only chartered accountants and/or lawyers are advising on issues related to NGOs’ governance. This provides for processes more oriented toward mere compliance. It does not necessarily foster a holistic and systemic approach to nurture ownership. Even in well-governed NGOs, certain ticklish issues are difficult to deal with.

What does governance imply in between Board meetings? What processes and systems need to be in place for continued support and oversight in governance, since at most quarterly Board meetings are formally conducted? What mechanisms are in place to periodically review the composition and the functioning of the Governing Board and its office-bearers? Very few Boards review themselves, and their office-bearers, such as the Chairperson, the Treasurer, etc. How can this be integrated into the Board responsibility chart?

What governance practices are followed to ensure the accountability of founder(s)/ CEOs? As charismatic leaders with vision, they took risks to set up the initiative. Board members join because of personal knowledge of NGO programs through the founder. When personal and professional relationships overlap, ensuring regular performance reviews of the founder/ CEO is not easy.

In conclusion

The environment in which NGOs are operating has been undergoing major changes lately. Stronger and more complicated statutory compliance procedures and laws are now in place. The changing nature of funding, and greater attention to social impact and sustainability from funders is making certain additional requirements for governance more relevant.

Social composition is changing toward more youthful, educated and digitally active populations, even amongst low-income households. Ensuring continued relevance and effectiveness of an NGO in such a context is an ongoing task for effective governance.

However, the current tendency is to prescribe standard procedures and templates for NGO governance. ‘One size should not fit all.’ Instead, ‘fit for purpose’ should be the motto. Early-stage and smaller NGOs, more locally operating, need a more flexible governance model. Large NGOs with larger budgets would need more structured and corporate-style governance procedures and systems.

Legal compliance and donor reporting are crucial pre-requisites for NGO governance. However, a sense of ownership is built through regular deliberations about its mission, strategy and programs, and their impacts. This is where the role of the chief functionary and/or the founder becomes crucial. Facilitating such periodic reflections with senior program staff gives a sense of appreciation of the challenges in the field and the ways in which governance processes can support them.

NGOs are public institutions, anchored in society. Their work is increasingly subject to public scrutiny. Effective leadership and accountable governance of NGOs can go a long way in promoting goodwill toward their contributions.