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A piggy-bank no NGO should break!

Human beings are biased towards action. When we are approached by a hungry child or a request to leave our change in a charity box, we (naturally) assume that our contribution will make a difference to the beneficiary’s situation in life. When faced with uncertainty, we prefer to act with the belief that we made an impact.

This bias towards action happens with decisions related to financial investments, impulse purchases, food and even giving to charity! Most of us give one-off donations to NGOs and don’t reflect about it later. Yet most would be surprised to know how minimal the impact our money has had. More importantly, we do not release that if given strategically, the same sum could create a larger impact.

Donating to an organisation’s corpus fund is a great way to help an NGO sustain itself in the future. A corpus fund is like a permanent fund that an organisation cannot dip into except in emergencies. The corpus fund and the interest on it act as an internal source of funds, as opposed to grants or donations that are one-offs received by an organisation. Additionally, a corpus fund can be created out of internal accruals and surpluses as well.

A healthy corpus fund can be a good indicator of an organisation’s sustainability. In 2013, The Akshaya Patra FoundationThe Leprosy Mission Trust IndiaHelpAge IndiaSri Chaitanya Seva TrustISKCON Food Relief Foundation had the largest corpuses of all 550 NGOs on our site. These organisations are well known, have been running impactful programmes for at least five years, and have among the highest spend on programme expenses in the latest available year.

Large Corpus = Long Term Sustainability
NGO Age Corpus Int to Corpus to Investment Int to
(All data pertains to FY13)   Rs mn Tot Inc (%) Tot Liab (%) to Tot Assets (%) Cash + Inv (%)
Akshaya Patra Foundation, The 15 756 1 55 10 4.9
Leprosy Mission Trust, The 146 346 1 62 5 4.3
HelpAge India 37 339 2 55 68 2.8
Sri Chaitanya Mission Trust 17 339 25 98 28 10.3
ISKCON Food Relief Foundation 11 303 1 79 14 5.5

You would be surprised to know that a number of ‘known’ NGOs are living a hand-to-mouth existence, overly reliant on the goodness of strangers to continue the work they are doing. Dependency on external donors makes it difficult for them to plan their activities in advance. A day-to-day existence also makes it hard for an NGO to innovate or scale programmes to benefit more people. Would Akshaya Patra be able to feed 1.3 million children if they were trying to cut corners at every step? HelpAge India provided 1.23 million free treatments through their mobile vans in 2013, the kind of scale that requires large investments.

NGOs tend to run their programmes as per the funding they receive. However, programme funding only covers the expenses of running that particular time-bound programme. An organisation with a healthy corpus fund is able to prioritise spending. As an example, interest income earned from the corpus could be a guaranteed source to finance the annual rent paid by an education NGO for the space they use to educate their beneficiaries.

A corpus fund in a legitimate organisation can go a long way towards supporting beneficiaries and programmes. Therefore, if you’re considering donating to an organisation you like, we’d urge you to reserve a part of your donation for the organisation’s corpus fund. What’s more, you’ll know your money won’t be misused. Here’s why:

  • A corpus fund is strongly regulated: Under the Indian Income Tax Act, an NGO cannot transfer more than 15% of a year’s voluntary donations towards the corpus fund. At least 85% is to be used for programme expenses which ensures that an NGO doesn’t forego programme activities to build up its own corpus[1].
  • Donations to a corpus fund are regulated: A donor has to include an explicit, written statement specifying that the donation is for the purposes of the corpus fund.

Watch out for:

  • NGOs that have built up large corpus funds and high interest income without corresponding spends on programme expenses, staff costs, overhead expenses or earmarked funds over two or three years. A donor should explore why an NGO is building up a corpus when no charitable work is evident.

 


3 thoughts on “A piggy-bank no NGO should break!”

    1. Dear Sir,

      Thank you for writing in to us! Based on the financial details available to us, we feel that corpus donations would be beneficial to the following NGOs:

      Pune Neurosciences Trusts and Research Society’s Samavedana: This organisation provides those in need with financial support for surgeries, and subsidises medical treatment and tests for those who cannot afford it. You can avail 50% exemption under 80G on donating to Samavedana.

      2. Annapurna Mahila Mandal, Pune: This organisation chose to start day care centres for the children of poor working women after a child was raped in a Pune slum. They now run a chain of day-care centres that takes care of of 300 children. They also give scholarships to children of single mothers. You can avail 50% exemption under 80G on donating to Annapurna Mahila Mandal.

      3. India Foundation for the Arts (IFA): IFA works for the conservation and promotion of Indian art forms by supporting artists, encouraging research and documentation of arts practices and increasing awareness of arts forms in the country. You can avail 50% exemption under 80G with IFA.

      4. Public Concern for Governance Trust (PCGT): Established by senior IPS and IAS officers, PCGT works to increase accountability of governmental institutions and employees and tackle corruption in the public sphere. You can avail 100% exemption under 80G with PCGT.

      5. Andhjan Kalyan Trust (AKT): AKT supports people with mental and physical handicaps. They run a Computer Education Centre for the visually impaired, a residential care centre and provide several other support services. You can avail 50% exemption under 80G with AKT.

      You could also consider donating to the following NGOs with larger corpuses in case you would like to fund a different area.
      V Care Foundation, which supports cancer patients.
      Mumbai Mobile Creches: They run creches and care centres for the children of construction workers who do not have access to these services.
      Welfare of Stray Dogs: This animal rights NGO conducts mass sterilisation programmes on dogs and vaccinates stray dogs for rabies eradication.
      India Sponsorship Committee (ISC): ISC runs a children’s shelter, secondary school and industrial training institute for the benefit of families in need.

      Do let us know if this is helpful for you, and if you would like any further details from us. We’re happy to help!

      Warm regards,
      Team HelpYourNGO

  1. Prem Seva Mahila Mandal,kalyan west, work for the underprivileged women and children at the brick kiln sites,construction sites,tribals in the backyard of kalyan,shahapur,murbad talukas,building toilets,providing sanitary napkins.

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