Effective April 1, 2014, there is a provision in the legislation that mandates a CSR spend. This has created a sudden hype and all my friends who have small NGOs and are presently doing a good job over the last few years are in a fix. These existing NGOs did not expect the CSR initiative to be thrust into corporates and in turn has created a new demand for existing NGOs who are not in a position to cope up to the increase in their new found business. Every NGO worth its name is now looking to get a social audit done and is re-looking at getting its registrations in order under the Income Tax Act, Foreign Contribution Regulation Act, companies act if it is a company registered under the act. The entire clean up or swatch NGO is taking place to ensure that these NGO are not on the wrong side of any law to are getting ready for what I call – “the NGO boom”.
Creating value to society
Mohan, the founder had humble beginnings started a NGO a few years back that identified street children who were lost in this big bad world and the NGO found them and tried to restore these children to parents or provide shelter. This NGO was a very contended service oriented organisation where the mission was to ensure that the last person in the service seekers list is happy. The scope of this NGO was limited to a few initiatives and all the employees of the NGO and the beneficiaries could get personal attention from the founder of the NGO who was passionate about everything that was being done. The founder ensured that the value creation to the society was given full attention and every stakeholder was contended.
Making more money from free money – founder’s dilemma
With the companies act 2013 bringing in the concept of a mandatory CSR spend, the entire focus of the founder of these NGOs started shifting to the large CSR pie of about Rs. 10000 crore that is required to be spent every year by corporates. So the focus of the founder’s of NGO started drifting to ensure that each one of them gets a bite into this pie. Thus emerging a need for an accountant to draw up a 5 year business plan, a project report of sorts, from a humble no profit no loss scenario these founders started corporatizing the NGO with “number game”. All this only to ensure that the NGO does not lose out in the rat race to make more money out of this age old concept of free money (this concept of free money was in vogue in the form of public issue for corporates). There is a rush to change offices of NGO’s from a decent small place, which served tea in glass cups and just an old fan to provide air circulation to better offices, which has porcelain cups to serve tea and an air conditioner to provide air circulation. There is a separate cabin for the founder in the new office, things are changing fast, from the founder’s style of working with his team to working for a separate identity. The founder’s time has suddenly become important and he has a secretary to attend to his calls and to fix his appointments moving away from the practice of providing accessibility to any service seeker who could meet him without prior appointment. All this preparations only to ensure that the NGO has a big bite in the CSR pie.
From ordinary to extra-ordinary
The founder has become aware that such change in his lifestyle and his business model will require funding. The dilemma is whether to go to a corporate for funding or to a social venture capital. The founder was a contended happy social activist till last year but the lure of free money has set even the social mindset of a socialist to that of a capitalist. The founder is now putting all his energy and efforts into thinking how to raise money for the NGO from a small 10 million corpus trust, how to grow it to a billion and how to reach out to more people. The founder engages the services of professionals and decides to raise this big amount. He decides not to go in a cost efficient two-wheeler and to own up one of those big cars for the fund raising program. The effect of change in the CSR values to pursuit of valuations
Valuations of NGO
With a project report, 5 year plan, a plush office, a personal secretary and a big car this founder sets sail to tap the market of FREE MONEY. He is required to get a valuation report of his NGO and that sets the founder thinking, all these days he was only working about the cause but has never bothered to assess the cost of this cause. He assigns the task of doing his valuation report from a big firm of repute. The founder has already taken enough loans for preparing to take this journey he has even mortgaged his house to raise money to do a good valuation report. Finally in the last one year he realizes that in pursuit of unhappiness, which is raising more and more money and creating a valuation for the NGO, he has left behind the pursuit of happiness, which was the very purpose and values of this NGO – to serve the society.
By: Sundharesan Jayamoorthi,
Life coach for directors & compliance guru
Tags Corporate Law