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Grading of NGOs likely to be a game changer

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August 11, 2014
Times of India
Lubna Kably

NEW DELHI: Grading of non-government organisations (NGOs) is likely to be a game changer in the non-profit arena in India. CRISIL, India's leading rating agency has recently evolved an NGO-specific evaluation process. In many countries, such as the USA, NGOs are rated by third parties and play a crucial role in attracting large donations.

CRISIL has recently graded two NGOs, HelpAge India was assigned a VO-1A grade, denoting 'very strong delivery capability and high financial proficiency', while SOS Children's Village (SOSCV) was given a 'VO-2A grade, which denotes 'strong delivery capability and high financial proficiency'.

V Srinivasan, COO, CRISIL, told TOI: "NGO grading is a distinct process from that of credit rating of companies. We grade NGOs based on their performance and financial proficiency."

The parameters of profile, process and programmes determine a NGOs performance or capacity to deliver. Aspects such as: the people driving the NGO, the processes that are in place for attaining its objectives - such as training of field staff or a grievance mechanism for beneficiaries and lastly impact analysis of flagship programs which includes site visits are considered. CRISIL then conducts a deep-dive financial analysis to determine both the ability of the NGO to raise funds and also its utilization. CRISIL has chalked out five grades for capacity delivery - VO 1A to 5A, while for financial proficiency, the grades are High, Moderate and Low.

India has as many as 20 lakh plus NGOs. The low levels of regulatory compliance by many NGOs has adversely impacted donor confidence. The Central Bureau of Investigation (CBI), which has been entrusted with collating data on NGOs has informed the Supreme Court that the task is difficult given the mind-boggling number of NGOs as many do not file audit reports with the authorities. CSR norms have also put NGOs in the spotlight.

"There is a need for more transparency in the NGO sector as after all it is dealing with public money. Grading or accreditation by independent third parties is the first step in this direction," says Mathew Cherian, CEO, HelpAge India.

Grading provides an in-depth analysis of the strengths of an NGO and highlights areas that require improvement. This helps us identify practices that could be adopted, states SOSCV in its official communication. "Introduction of grading in the NGO sector will help increased and easier access to grand funding," adds Rakesh Jinsi, general secretary.

"In the wake of the CSR requirements for companies, grading of NGOs assumes significant importance. Companies can carry out their CSR activities via third party NGOs, provided such NGOs have a past track record of at least three years. However, for grading to be extra effective, adherence to regulatory compliance norms by an NGO must also be given their due weightage," says Milind Antani, partner, social sector practice, at law firm, Nishith Desai Associates.

As in the USA, the jury is out on the parameters that a grading process should consider. Venkat Krishnan, founder, GiveIndia says: "The aim of an NGO is to make an impact, thus the grading process should be 'progmatic' with emphasis on program delivery. Even, US based non-profit rating agency, Charity Navigator, which once concentrated on financial analysis, has since last year factored in mission-related results."

Accreditation of NGOs has existed in India since several years. Credibility Alliance, a consortium of voluntary bodies set up in 2004, has granted accreditation to more than 200 NGOs. An NGO after having committed itself to a set of norms - classified as basic, minimum or desirable can apply for accreditation and get an appropriate certificate. For example: Certification under basic norms means an NGO is legally valid and active. Many more models relating to accreditation or grading could be introduced by different agencies, given that NGOs are today in the spotlight, sum up experts.