Soon after India’s new government assumed power in May 2014 under the leadership of Prime Minister Narendra Modi, the Central Bureau of Investigation (CBI) sought permission for arrest and custodial interrogation of journalist and human rights activist Teesta Setalvad for alleged mismanagement of $576,000 by her organization. In October 2014, the Ministry of Home Affairs (MHA) issued show-cause notices to 10,343 non-profits for not furnishing annual returns, and subsequently cancelled FCRA registrations for around 9,000 of these non-profits citing “non-response within the stipulated time period.” India’s Foreign Contribution Regulation Act (FCRA) regulates the inflow of foreign contributions to charitable organizations and is expanding its tentacles and grip under each successive government (see here and here). In April 2015, Ford Foundation, the philanthropic organization whose work in India dates back to 1952, was Ford is being targeted primarily for channeling funds to Ms. Setalvad’s NGO that was apparently ineligible to receive funds under FCRA.
As many in the Indian media have pointed out, the government’s aggressive actions against non-profits seems selective—more like a political vendetta than a principled stand against misappropriation of funds. It’s hard to ignore the fact that Ms. Setalvad had sought the conviction of Narendra Modi for alleged human rights abuses during his tenure as the Chief Minister of Gujarat, or that the case against Ford is linked to its funding for her non-profit. Moreover, in the same month that MHA canceled the FCRA licenses of 9,000 non-profits, an access-to-information query revealed that 401 of the 545 Members of the Parliament’s Upper House had not declared their assets and liabilities – including the Minister of Home Affairs himself. And the government’s tenacious pursuit of non-profits contrasts awkwardly with the practical impunity of those accused of perpetrating India’s three biggest scams (the $27.8 billion coal scam of 2012, the $26.3 billion 2G spectrum scam of 2013, and multi-million Vyapam scam of 2015).
So, when nonprofits, activists, and their supporters accuse the government of applying a double standard, they have a point. Yet, even as we rightly protest the government’s politically motivated vendetta against civil society, it is equally important for India’s non-profits to take a good hard look in the mirror. India has witnessed an unprecedented civil society mobilization against corruption in 2011 and non-profits have spearheaded numerous successful anticorruption initiatives, such as social audits, citizen report cards, and crowdsourcing platforms like I-Paid-a-Bribe.com. Yet the members of India’s vibrant non-profit sector must be sure that they are applying to themselves the same high standards of transparency and accountability that they advocate in the public sphere. Too often, they fall short. Indeed, the accountability practices within India’s non-profits are alarmingly sketchy.
India has around 3.3 million registered NGOs which cumulatively receive around $8-$16 billion in funding annually. According to non-profit watchdogs, almost half of that money is misused. Disclosure standards are poor, annual reports sketchy, and balance sheets non-existent in most cases. Many non-profits scoff at these details as bureaucratic hurdles that distract them from ”real” work, or even view accountability requirements as government interference that hampers their efficiency in holding the governments and corporations to account.
Sadly, the allegations against Ms. Setalvad illustrate some of the transparency, accountability, and financial management problems at otherwise laudable Indian non-profits. First, according to reports, Ms. Setalvad did not keep her NGO’s funds strictly separate from her personal funds, and often used her personal credit card for making payments on behalf of her NGO, later seeking reimbursement. This has given rise to allegations by the government that she used NGO funds for her personal shopping expenses. Her failure to keep good records means that there is little financial proof to counter the allegations. Second, the NGO’s records include $269,000 in expenses categorized as “petty cash” whose supporting records are untraceable, obscuring the true purpose of underlying transactions (see here). Third, there seem to be no exclusive book of accounts for foreign contributions received and utilized by Ms. Setalvad’s non-profit under the contracts entered between it and the Ford Foundation.
Ms. Setalvad has rebutted these and other allegations against her, condemning the deliberate political vendetta behind the cases (see here and here). Indeed, based on what I know, I do not believe that Ms. Setalvad broke any law. Nor does these allegations detract from her redoubtable work, particularly on behalf of human rights victims in Gujarat. Yet the reports are troubling, suggesting at best sloppy record-keeping, and at worst some serious ethical lapses. Activists like her, who fight pitched battles against powerful governments, cannot afford to forget that they need to remain above suspicion in their activities.
Moreover, while Ms. Setalvad’s work is nationally recognized and unquestionably legitimate, there are millions of less well-known non-profits that use lax accountability standards as a cover for shady or non-existent operations. The lack of transparency and accountability in non-profits has been raised consistently by a newly emerging group of non-profit watchdogs, including Credibility Alliance, iCongo, and GiveIndia. They seek to increase NGO accountability through annual reviews, accreditation, and call for a non-profit code of conduct. However, the fact that Credibility Alliance has so far enlisted only 600 non-profits speaks volumes about the lack of interest in calls for accountability. (And this is not a uniquely Indian problem: international NGO watchdogs like the Humanitarian Accountability Partnership have barely registered around 70 international non-profits in their lists.)
Further, Indian non-profits were the primary drivers behind the legislation and implementation of the Right to Information (RTI) Act 2005 that offers the citizens timely access to information from public authorities and mandate public authorities to proactively disclose all information of public interest. While non-profits receiving substantial government funding are automatically covered by the RTI, most others have shied away from voluntary adherence to RTI, calling into question their legitimacy to constantly call the government to account.
There are those who argue that stringent accountability requirements for NGOs are a ruse, intended to impose bureaucratic requirements on NGOs that constrain their agility and efficiency in addressing social issues. And, even putting that concern aside, it is true that many non-profits operate on shoestring budgets and would therefore find it difficult to employ trained accountants and lawyers to keep track of their finances—in contrast to the richer corporations and governments they fight against.
These points are well-taken. And, as noted above, there are reasonable grounds for suspecting that the current Indian government is using anticorruption as a convenient tool to suppress civil society dissent. However, the civil society community should resist the temptation to use those suspicions as an excuse to ignore their own failings, or to use their sense of rightness (or, less charitably, self- righteousness) to ignore their own accountability lapses. Such a course of action is not only inconsistent with these organizations’ core values, but it is tactically unwise, as it makes the NGO community more vulnerable not only to government harassment, but also to a potential loss of citizen trust. To avoid ending up perpetually playing defense on these issues, it is time that civil society organizations take voluntary measures to clean up their house.
Some possible measures of sector-wide internal accountability could include:
- A code of ethics: Adoption of code of ethics could help strengthen the non-profit governance structures, increase transparency and in turn build stakeholder trust in non-profit operations. A ready-made code of ethics is available with the world Association of International NGOs that has developed a set of fundamental principles and practices for the non-profits in 2002 based on inputs from non-profit leaders of 42 countries. Adoption of self-regulation through a voluntary code of ethics is especially suitable in a country like India where the non-profits share a distrustful relation with the State and would be loathe to be placed under its regulation.
- Smart and effective records management: Non-profits face a vicious cycle of limited funds preventing major investments in infrastructure and human resources including computers and qualified employees to handle specialized tasks like record keeping and this in turn limiting their accountability to strict but generous donors and making them vulnerable to government hawks. However, organization’s dealing with public money (domestic or international) cannot wish away their accountability trappings. Some possible options include soliciting the support of non-profit certification agencies such as the Humanitarian Accountability or their domestic counterparts in helping streamline internal processes. At the very minimum, separation of personal and professional credit cards if the first step that can be taken to preempt avoidable but serious financial allegations.
- Weeding out toxic players: Any number of steps toward accountability will be ineffectual without a concerted movement within the non-profit community to call out millions of non-existent and shady operations whose presence continues cast shadow on even credible non-profits. Determination to eliminate unscrupulous players through whistleblowing, peer pressure for accountability and legal actions will prove valuable in sending a strong message about the sector’s commitment to accountability.
Steps by the non-profits to usher in for internal accountability should be matched by an effort by the Government to be fair and equal in its treatment of corruption in the Government, Corporate or non-profit on an equal footing. Even within non-profits, call for accountability should not stop at the non-profits fighting the government in the political, human rights, welfare space but also include religious organizations, trade and professional associations, political parties, standard-setting bodies and educational organizations. Another good starting point is the review and implementation of the National Policy on Voluntary Sector 2007 from India’s erstwhile Planning Commission that suggested simplifying FCRA regulations, time-bound procedures for registration, income tax clearances and financial assistance for non-profits and adopting a trusting and respectful relationship between the Government and the non-profits. The current toxic environment may be the farthest possible from the above-stated vision, but it’s never too late to start.