Highlights of the First Year (F.Y. 2014-15) of Mandatory CSR Spending

An analysis of CSR reports of Bombay Stock Exchange (BSE) listed companies numbering one hundred presents that 27% companies have spent more than prescribed CSR spend and 64% companies have spent less than the prescribed CSR. 

 

These 100 companies represent large and medium companies and account for 33 sectors as per the BSE sector classifications. Public Sector Units and Public Sector Banks have been kept out of the purview of this analysis as the required information was not available.

·       Only 1 Banking & Finance sector company could spend the prescribed CSR amount.

·       VIP Industries emerges the top performer by spending almost double of the prescribed CSR spend.

·       2% of the companies spent zero amount from their prescribed CSR spend and 9% the companies spent exactly same as the prescribed CSR amount.

·       39% of the companies spent more than 50% of the prescribed CSR spent but missed the target of the prescribed CSR spend.

 More details will be available by the end of this year. However, one should not forget that these are just figures. There is need for deeper analysis on not what was spent on CSR related activities, but, what really was the input, output and outcome.

- Noshir Dadrawala 

CAP Workshop - Good Governance & Management for NPOS

Often, ‘Good Governance’ is a term that most pay lip service to. Many feel that it ‘looks good’ to mention it in Annual Reports -- “we believe in good governance best practices”, little knowing what these “best practices” could be.

Often NPO Boards have ‘conflict of interest’, but, refuse to disclose it let alone resolve conflict. Also, most often NPOs think ‘Risk Management’ is what business enterprises should be concerned about, little knowing that NPOs encounter far greater risks be it in terms of human and financial resources or programs and sustainability.

Keeping all these and other factors in mind CAP organised a workshop on 20^th August 2015 with an internationally accomplished expert in the field, Mr. Pesh Framjee. Pesh is the Partner leading the International Not For Profit Group at Crowe Horwath International a role he previously carried out at Deloitte and Arthur Andersen. 

Pesh set the tone of the session by stating that being a non-profit is never an excuse for tardy management. 

  Whether the organisation is for-profit or non-profit it must focus on raising adequate resources and managing them effectively. Just as business houses are ‘profit driven’, NPOs are ‘value driven’. However, both need to be financially healthy. He emphasised that continuous learning and improvement is something that all Boards and Management need to consider. The organisations that are succeeding have recognized this and know that they need to be nimble and able to change and adapt. 

 

Boards and management of NGOs and other not for profit organisations need to be able to constantly respond to a number of questions:

What is good governance and what are the necessary attributes for boards of the future?

Structures, behaviors and competencies need to be fit for practice and understanding of what successful organisations are doing.

In effect ‘good governance’ is looking even beyond legal and fiscal compliance to ensure effectiveness. It’s about integrated transparent and accountable systems and processes that permeate across organizational silos.

We often think in terms of financial or legal audits and at times on program performance audits. However, Pesh brought up the interesting issue of ‘Skills Audit’ to which a participant pointed out that if they tried recruiting after a skills audit it would take more than a year as the people with the necessary skills often don’t have the time, passion or shared vision. Another participant said, “While we formally may not have that process here in India we do it subconsciously”.

Why we are here and where are we going to?

This requires clear understanding of the mandate, mission, vision and values of the organization. It was emphasized that everyone must have a ‘buy in’ to all these and in the absence of ownership it would fail. Unless there is a ‘buy in’ by the CEO and staff a ‘Board driven’ agenda could fail and conversely, without Board ‘buy in’ and support a CEO driven agenda may not be effective.

  

There were several other thought provoking issues:

How do we get there? This requires a coherent strategy and operational plan to deliver against objectives.

What might prevent us from getting there? This is the risk management piece. Risk management is not about being risk averse but about understanding the uncertainties that can prevent the organization from achieving its goals.

How do we know we are getting there? This is the performance measurement piece, tying into effective processes and delivering impact.

How do we remain nimble? This requires recognition that change is constant and managing change needs to be understood at all levels. 

 

Participants discussed how to implement risk management that focuses on both value protection and value creation, linking strategy to risk. They also discussed aspects of measuring performance and impact and the importance of useful research on change management and strategy facing NGOs.

Participants also discussed what leads to successful change, lessons learned, how to go about it and how to recognize when change is needed. Most concluded that change efforts do not deliver up to expectations.  Pesh pointed out the difference between successful transformational change and simple tweaking initiatives.  He felt that Boards and senior management need to ensure that they can lead and shape change efforts big and small.

The workshop culminated with a group exercise where real experiences where shared with examples on collaborative efforts and how risks were assessed and mitigated or circumstances under where risks far outweighed the potential benefits. 

ABOUT THE SPEAKER - 
  Pesh Framjee is the Partner leading the International Not For Profit Group at Crowe Horwath International. A role he previously carried out at Deloitte and Arthur Andersen. Pesh is a Chartered Accountant working in the UK with Crowe Clark Whitehill which is has been recognized by independent surveys as the leading provider of audit and related services to charities. Crowe Horwath International is ranked number 9 among global accounting firms and associations, with over 720 offices throughout the world, has specialist teams working with Not for Profit Organisations and those that fund them.
  

Pesh has been working in UK for over 35 years and writes and lectures internationally on matters facing NGOs and Civil Society. Pesh works with NGOs around the world and therefore understands the different contexts - he is an Indian citizen who is regularly in India and he has an understanding of the opportunities and challenges facing Indian NGOs.

He is an acknowledged expert in the field and a thought leader in areas of financial management, financial reporting, effective governance, strategy and risk management and performance measurement.

 Pesh is past board member of the Institute of Risk Management, Special Advisor to the Charity Finance Group (A UK umbrella body with more than 1,350 charities in membership, managing over £21.1 billion). He has been a member for 22 year of the SORP Committee that produces the accounting and narrative reporting guidelines for UK charities  and is also a member  of the working group considering the development of an International Financial Reporting Standard for Not for Profit Entities.

FCRA Renewal - To file or not to file now???

There is hardly a day at our office when we do not receive queries by e mail, phone or a personal visit, regarding FCRA renewal. Earlier this year we thought this was the flavour of a season. It would seem now that it may go down as the all dominating flavour of the year 2015!

At CAP, we, tongue firmly in cheek, consider ‘FCRA Renewal’ the Mother of all FAQs. Hence the necessity to provide this detailed analytical update. 

Is Renewal Mandatory?

Under FCRA 1976, registration once granted did not require any renewal unless specifically cancelled by the Ministry of Home Affairs.

However, under the new FCRA 2010 'Registration' is granted for a period of five years. Thus, all registrations granted under FCRA, 1976 shall remain valid for a period of 5 years from the date FCRA 2010 came into force i.e., 1st May, 2011.

Thus, validity of FCRA registration for associations granted registration prior to 1^st May 2011 is 30th April, 2016.

In other words, associations registered under FCRA before 1^st May 2011 must apply for renewal before 30^th September 2015.

However, an Association granted registration under FCRA, 2010, i.e., after 1st May, 2011, may apply for renewal of registration six months before the date of expiry of the validity of its certificate of registration.

Have Associations implementing ongoing Multi-year projects missed the deadline?

The FC Rules state that associations implementing an ongoing Multi-year project should apply for renewal twelve months before the date of expiry of the certificate of registration.

In other words such associations should have applied for renewal by March 2015!

However, "Ongoing multi-year project" is nowhere stated in the FCRA 2010 let alone defined. It would simply mean projects that are funded in installments over a period of 3 to 5 years.

To reiterate, the requirement for "ongoing multi-year project" to apply for renewal 12 months before expiry has been referred to in the Rules. However, as per the Act all organisations (including those running "ongoing multi-year project") may also apply anytime six months before expiry of the registration. When there is a conflict between the Rules and the Act, the Act prevails.

Thus even associations implementing ongoing Multi-year projects may apply anytime before 30^th September. They have NOT MISSED the deadline!

Have you registered for availing FCRA online services?

Ministry of Home Affairs in its latest circular dated 28^th July 2015 has announced that it will be making all FCRA services online “in order to improve the existing services of FCRA, faster processing and disposal of cases and also to bring transparency”.

The circular adds that in order to avail the online services of FCRA with ease, all associations registered under FCRA are advised to update their latest information (particularly contact details, registration number and FCRA bank account) in the next 15 days at the link http://fcraonline.nic.in

The procedure is quite simple and the details asked for are quite basic. The process can be completed quite easily within a few minutes.

Renewal of FCRA Form FC 5 or the new (proposed) Form FC3?

Confusion, more confusion and confusion confounded!!!

We know of several large and small NGOs who wanting to play safe have already applied for renewal by downloading Form FC 5 and sending it several months ago by post along with the pay order / DD of Rs. 500/-. These envelops are lying unopened at the MHA’s office in New Delhi and the DDs remain enchased – some have even expired after three months. Many knew this was an exercise in futility, but, they did this “to play on the safer side”! It gave them some sense of comfort in complying with the law.

As most of us are aware Form FC 5 is not available for online submission as yet and in the meantime MHA has proposed replacing the current Foreign Contribution (Regulation) Rules (FCRR) 2011 with the new Foreign Contribution (Regulation) Amendment Rules 2015.

Currently the form for seeking Registration under FCRA is Form FC 3, for seeking Prior Permission to receive foreign contribution is FC 4 and for seeking renewal of registration is FC 5.

Under the proposed new Rules MHA has sought to integrate application for ‘Registration’, ‘Prior Permission’ & ‘Renewal’ all in one new integrated Form FC3.

Barely 6 weeks remain for that magical deadline of 30^th September 2015 and neither Form FC 5 nor the new form FC 3 is available for online renewal.

Does it make sense bringing in this new form at a time when about 25,000 NGOs are expected to apply for renewal of FCRA registration? We think not!

Also, the proposed new rules require all applications be it registration, prior permission or renewal, to be digitally signed.

Supporting documents that need to go with the application can be sent as scanned copies. Processing Fees would also have to be paid online.

Tech evangelism is here whether we like it or not and whether we are ready for it or not!

NGOs which are registered as Section 8 (old Section 25) Companies are familiar with some of these process and procedure. But, this could prove challenging for grassroots NGOs which are not quite tech-savvy or struggling with internet connectivity in remote districts and villages.

Are NGOs ready for these changes?

Will MHA extend the deadline considering the inordinate delay on their part?

Hopefully, we will have the answers by the end of this month.

In the meantime:

1) Associations which have already applied by post should stay vigilant. In all likelihood they will be required to apply afresh using the online process.

2) Keep all data and information as required under Form FC 5 and the proposed new Form FC 3 ready.

3) Obtain Digital Signatures

4) Get tech-savvy or seek professional help from your statutory auditors.

5) Follow this Blog for further updates.

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