Don't trust blindly when you donate

anthony (Finance) (7918 Points)

15 July 2011  

Due diligence on religious and charitable trusts is as important as the act of givingCharity is not an expense, but an investment for the welfare of the society. Just like other investments, it also requires due diligence.In India, private donations stand at 0.6 per cent of the gross domestic product (GDP), higher than China (0.1 per cent) and Brazil (0.3 per cent). However, they lag behind those in the US (2.2 per cent) and the UK (1.3 per cent).


  • How transparent is the trust/ organisation with funds?
  • Do they provide progress updates? How open are they to being visited at their site?
  • What is their administration cost vis-à-vis the money spent on projects?
  • Are the accounts maintained (in case of small trusts)? Are they audited (in case of larger ones)?
  • Has the money donated generated returns, or, benefited the society?


Even as many Indians are willing donors, they hold themselves back, thanks to a lack of transparency. The Bain Indian Philanthropy Report, 2011 says some key reasons why people refrain from being more philanthropic are lack of transparency and accountability. While 70 per cent feel these to be prime concerns, 60 per cent see tax laws for donations as unfriendly. Companies like ICONGO and Karmayog, which run their own portals, and, respectively, have tried bridging the gap between the donors and non-governmental organisations (NGOs).Meenu Chopra, executive founding director, ICONGO, says “There were many incidents that prompted the start of such a venture. Of the 1.7 million NGOs in the country, only 2-3 per cent are doing good work. This led to citizens losing faith in them, as people felt that lack of transparency and high administration costs led to very little work, if at all, being done by many organisations.”


ICONGO provides a list of trusted NGOs. This list is based on the Omega rating system, which looks into the governance, working, transparency, progress, administration costs and accountability of such organisations. This is an accreditation of sorts to make the vastly unorganised NGO sector easier to understand, and bridges the gap between these institutions and genuine citizens/corporations willing to donate.Similarly, Karmayog provides a list of NGOs in Mumbai and rates them. It also provides information on NGOs across the country.When putting money in any trust or charitable institution, one should know how it is likely to be used — quite difficult, given the huge number of trusts.In Maharashtra itself, there are 5-6 million registered trusts. Of this, 50,000-60,000 promote social causes, the rest being for religious purposes. “Majority of the complaints are about improper functioning of trusts, especially in terms of spending the collected funds,” said a senior official at the state’s charity commissioner’s office.


“Following up on donations is very essential. A proper progress reporting format is what we are trying to get all NGOs to follow, so that the donor can see what his money is achieving. This is similar to how one would track the net worth of his/her mutual fund investments,” says Chopra.In theory, there are rules for every trust under which these NGOs operate. They are supposed to spend the accumulated funds in accordance with the guidelines and objectives for which the trust was formed.According to the Bain Indian Philanthropy Report, Indians spent $5-6 billion on donations in 2010, the most popular causes being education, food and clothing, housing/shelter, healthcare, sports, arts and culture.It further adds, “Fourty per cent of the wealthy individuals surveyed said they would increase donations over the next five years. The number could jump to more than 70 per cent if these issues were resolved.”Indeed, more donations are required. However, one also needs to be vigilant about them.

*Source: BusinessStandard