JAN - FEB 2011 : No. 136 :
Finance Bill 2011 - Just a couple of sops for charities..... Pg. 1
Newsletter by the Centre for Advancement of Philanthropy (FOR MEMBERS ONLY)
NEWS Finance Bill 2011 - Just A Couple Of Sops For Charities
he Union Finance Minister presented the Budget in the Indian Parliament on February 28, 2011.
The amendments proposed under the Income Tax Act concerning charitable organizations are few but not negative. Finance Act 2008 had changed the definition of "charitable purpose" given under Section 2(15) such that “Advancement of any other object of general public utility” would not be considered as “charitable purpose” if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for any fee, cess or other consideration. The Finance Bill 2010 had attempted to provide some relief with retrospective effect from the 1st day of April, 2009 by exempting the aggregate value of the receipts from such activities up to ten lakh rupees. This limit has now been further increased to Rs. Twentyfive lakhs; Weighted deduction for donations made for scientific research program (approved by the prescribed authority) to a National Laboratory or a University or an Indian Institute of Technology has been enhanced from 175% to 200%.
Note To Members..... Pg. 2
NGOs With Rs 50 Crores Revenue Must Follow Accrual Accounting..... Pg. 3
Anatomy Of A Philanthropic Act..... Pg. 4
CSR Is Different From Corporate Philanthropy..... Pg. 6
Are NGOs Required In India?..... Pg. 7
Individual Board Member Responsibilities..... Pg. 8
HDFC Debt Fund For Cancer Cure..... Pg. 10
Charity Begins With Altruism Gene..... Pg. 10
Readers Forum..... Pg. 11
Service tax continues to be retained at 10 per cent to pave the way for GST.
‘PHILANTNROPY JAN-FEB 2011
As you are aware, at The Centre for Advancement of Philanthropy, we specialize in areas of not-for-profit law, taxation, financial management, resource mobilization and human resource development. For the last 24 years we have been a provider to all types of trusts, charitable societies and section 25 companies in matters pertaining to set-up, effective administration, good governance, legal compliance and capacity building. As we enter our 25th year, we hope to strengthen our areas of expertise and widen our outreach. Over the year, there will be many changes at the Centre. We have a new website. Visit us at www.capindia.in If your organization would want us to help you with specific training areas or need consultations for any problems please drop in a mail at firstname.lastname@example.org All our publications can now be couriered at no extra cost. (Members can avail of a discount). Check details on our website or send us an e-mail at email@example.com Keeping our member feedback in mind, we have made several changes to our newsletter 'Philanthropy'. There will now be an additional classifieds column where members can place their requests for their resource needs, job vacancies or any other information they would like to share. To place your classifieds insertion, please mail us at firstname.lastname@example.org We will also be happy to feature two member organizations every issue. This would help organizations to connect with each other and also offer them platform to share their valuable learning with other organizations that do similar work. It would also help organizations reach out for further resources before a wider and varied network. If you would like to be featured in our upcoming issues, kindly email us email@example.com We look forward to hearing from you and would love to have your feedback, especially how we can assist you more effectively as per your needs, be in areas of consulting, training or publications. Do email us for any queries, feedback at firstname.lastname@example.org We are also updating all our member information. We request you to kindly send your latest details. For any reason, if you are getting multiple or extra copies that you do not need; we request you to inform our office so that we can rectify it. Name of Institution: Area of work: Name of Contact Person: Telephone Number: E-mail Id: Kindly call us at 2284 65 34 or e-mail it at email@example.com Or alternately send it to our postal address: - Centre for Advancement of Philanthropy, 4th floor, Mulla House, 51, M.G. Road, Flora Fountain, Mumbai 400 001. â€˜PHILANTHROPY JAN-FEB 2011
NGOs With Rs 50 Crores Revenue Must Follow Accrual Accounting
here is serious need of financial control in several NGOs operating in the country as it is an important way to curb money laundering and suspected terrorist financing, accounting regulator ICAI has said in its report on the Accounting and Reporting Requirement of NGOs submitted to the ministry of corporate affairs in January 2011.
income and expenditure account and cash flow statement.
According to the accounting regulator, there "is need for one single regulatory authority for all NGOs" as currently they are established under different laws ranging from Societies Registration Act to Trust Act.
The regulator has also suggested that it should be made mandatory for NGOs having gross revenue above Rs 50 crore to follow all accounting standards framed by the ICAI while those having gross revenue up to Rs 50 crore may follow the standards subject to certain relaxation by the ICAI.
"This will help in curbing funds diversion," the source added.
There are two kinds of funds received by the NGOs - restricted funds and unrestricted funds. Restricted funds are purpose specific. The ICAI has suggested that these NGOs must follow "fund-based accounting", which means that there should be a separate bank account for restricted funds and the NGOs must maintain a separate balance sheet,
[Source: Indian Express 16-February 2011]
“The Research Society for the Care, Treatment & Training of Children In Need of Special Care” works in the field of Mental Handicap and associated disabilities. We have following vacancies in our organization. Secretary to Administrator:
for reader grade and 15 years at Professor grade and/or Ph. D. and equivalent published work.
Qualification: Graduate in Commerce or Arts with fluency in English & Marathi language, good typing speed, well conversant with Computer use.
Laboratory Technician: Qualification: B. Sc. D. M. L.T.
Principal of SKPMINDS’ college of Special Education ( Mental Retardation):
Social Worker: Qualification: M. S. W./ Psychiatric Social Worker/Rehabilitation Social Worker
Qualification: 10 years approved teaching experience at under graduate/post graduate level
For further information Please contact Ms. Chetna Bhatt- Project Coordinator (Mobile No.9619370007)
‘PHILANTHROPY JAN-FEB 2011
Anatomy Of A Philanthropic Act
zim Premji, the promoter of Wipro, one of India's big four IT companies, recently transferred 5 per cent of the shares of the company (from out of more than 80 per cent held by him and his family) to the Azim Premji Foundation, whose mandate is to impart and promote education. The public perception has been that he pioneered the oxymoronic spectacle of 'closely held widely held' companies by controlling upwards of 80 per cent of the voting power in Wipro. That the law of the land allowed him - as indeed others - to do so however did not cut much ice with the commentariat because, in a widely-held company, there must be substantial public participation.
is not the maiden initiative in vesting shares with trusts created for altruistic purposes. The lion's share of the stock of Tata Sons, the investment arm of the Tata group, is held by a clutch of trusts. Shares held in trusts were earlier not available to company promoters for controlling companies; the public trustee, a government nominee, alone had the right to exercise voting power.
With the government seriously mulling a proposal to mandate a minimum 25 per cent free float for continuing to enjoy listed company status, there is consternation in corporate circles, especially in companies where the promoter and his associates have the lion's share of the stock and, by extension, of the voting power. The market value of these shares now vested with the foundation is over Rs 8,000 crore or roughly $2 billion, which could perhaps make this the single biggest act of philanthropy; other recent acts of Indian philanthropy have either benefited people abroad or were smaller.
But the NDA government dismantled this regime, paving the way for company promoters to use shares held by trusts promoted by them for controlling companies. In the context of Wipro, its promoter or his nominee would be exercising voting rights attributable to the shares held by the Azim Premji Foundation. The bottom line therefore is that while income from assets vested in the trust would be used for charitable or altruistic purposes, voting rights springing from these assets obviously would be used for promoting the interests of the author of the trust. To put it bluntly, the trust or foundation would be the handmaiden of the authors of trusts holding shares.
To be sure, the size of Azim Premji's philanthropy is only notional, in that he has not donated Rs 8,000 crore in cash. But even sceptics would concede that the foundation would have at its disposal considerable dividend income from the company, with which it can do extensive and significant work in the realm of education. Of course, Azim Premji's
â€˜PHILANTHROPY JAN-FEB 2011
Azim Premji's gesture has incidentally sparked a debate on American and Indian philanthropy. Warren Buffett, the American billionaire, donated around $35 billion in instalments - albeit with some conditions attached as to achievement of milestones
- to charities, the bulk of which went to the Bill and Melinda Gates Foundation, which has been doing exemplary charitable work, especially in the realm of health. Bill Gates himself has given away considerable sums in philanthropy, and Azim Premji has been hailed as India's Bill Gates.
may be several repetitions of the Premji initiative, with company promoters having to willy-nilly shed shares sooner or later in order to make the grade for listing status. It would be prima facie wrong for a philanthropist to inform a trust that the income from assets transferred to it may belong to it, but the author of the trust would exercise tight control over the trust, including over the way it votes in company meetings.
The Buffett brand of philanthropy is outright, in the sense that he does not retain anything for himself, whereas Azim Premji, even after vesting these shares in the foundation, will presumably use these shares to further his interests in the company. It may therefore be possible for one to contend that this is a case of philanthropy with strings still in the hands of Azim Premji, though American philanthropy too is not entirely born of altruism. The state and federal inheritance taxes often aggregate to a frightening 45 per cent, compelling wealthy people to dispose of a sizeable part of their wealth to others during their own lifetimes.
Of course, there is no guarantee that public trustees would vote dispassionately, but the old regime at least had the effect of discouraging self-perpetuating philanthropy. The income-tax law does not give tax exemption to charities in which the authors continue to have a hold or which serve their interests directly or indirectly; but there being no tax on dividend, charities whose main assets are shares may not be seriously handicapped in the absence of tax exemption.
It is for policymakers to consider whether it would be appropriate to bring back the old regime that vested voting rights in respect of shares held in trusts with the public trustee. That is because there
Source: Business Standard December, 19 2010. The author is a New Delhi-based chartered accountant
Old Used Items
The Centre for Advancement of Philanthropy is seeking to fill the position of an 'Administrator'.
Over the years we have had many individuals asking for NGOs that accept the following old items as donations which would be of use to them.
The candidate must * have good communication skills with a good command over English * thoroughly proficient with computers. (Word, Xcel, Power point)
Children's & adults clothes, Children's Toys, Story books, Furniture Other usable household items (Electrical fittings, curtains, kitchen equipment) We request NGOs who would make good use of these items to contact us so that we can refer the items to you. Drop a mail at firstname.lastname@example.org or call 2284 6534
Our office is located at Flora Fountain. Interested candidates may call the office 2284 6534 for more information or send a detailed CV to Meher at email@example.com
â€˜PHILANTHROPY JAN-FEB 2011
CSR Is Different From Corporate Philanthropy
ince long CSR has kindled interest in good corporate governance practices. It has shifted corporate governance focus from shareholders to stakeholders. Corporates are also beginning to realize the importance of CSR as a tool for risk management. True CSR should start from within the company with practices for good Corporate Governance. CSR is not making companies more ethical. It is simply being used to beef up their image as a good and caring company. The approach is still quite superficial and the impetus is primarily because others are doing it. Most have still not latched on to its intrinsic value through a strategy based CSR approach.
make-up on a wolf â€?. Nonetheless, good beginnings are being made by a number of companies. Wipro, Tatas, Infosys, Reliance, NTPC and ONCG are setting good examples. There is a huge drive on CSR in PSUs and some of the oil companies like ONGC and Oil India have begun to seriously engage with local civil society groups.
CSR of course is different from corporate philanthropy and if built into the strategic intent of the company is bound to enhance shareholder value.
There is a standard called SA 8000 to measure, monitor and evaluate achievement in social responsibility and a number of companies today are endeavoring to achieve certification to that standard.
Both investors and customers of the 21st Century have become highly sensitive to societal and environment issues. They want to know more about the companies they are buying from or investing in. This is particularly true of the younger generation. Markets of today are being driven by the 2 billion teenagers for whom social, ethical and environmental issues are far more important. Even in India 54% of its population consists of people less than 25. It is they who are concerned about CSR issues.
Content Writer Seeks Assignment Am a writer and teacher by profession. I would like to read/write content for children in NGO related programs. Do feel free to contact me firstname.lastname@example.org
Though a lot of Indian private sector companies such as Tatas and Infosys have done work on corporate philanthropy, CSR in India has still not taken root. Most companies' efforts are like â€œputting
â€˜PHILANTNROPY JAN-FEB FEB - MAR 2011
Are NGOs Required In India?
Surya Prakash Loonker
ately, I wonder as to why NGOs exist? Are non-profits required? Is the government not sufficient? Do we need NGOs in traditional sense or more as catalysts / facilitators? You might wonder why I am saying this.
lakhs of rupees. Also, NGO resources are always limited but government resources are practically unlimited. Is it not better to teach people to tap these unlimited resources than go after limited donations to do welfare yourself ?
I have been in the social and development sector for last two decades. Every few years, I analyze the work I am doing and the sector itself and ask myself, if my direction and strategy will lead to a developed India by 2025. My recent analysis, led to the above questions.
It leads to the age old conundrum. If I do it myself, I get the name, credit, fame. If I show the way, I will hardly even get recognition. So is it that NGOs in India want to survive for generations and so unable to do the right thing, follow the better way? As soon as I put this question before NGOs, I know what the response will be. We are different, we are unique, we provide quality, there is corruption in government we cannot work with government, government is inefficient, government cannot do it the way we can do it, government does not provide what I provide and so on.
Today, Indian government both at central and state level has welfare schemes for everything. Children, women, health, environment, wildlife, education, livelihoods, social security, electricity, road, school, water, sanitation…… you name it and there is a Scheme run by Government of India. The Government of India has even launched a website (http://india.gov.in/govt/schemes.php) so that you can find a scheme relevant to you.
I wonder if we can put our differences and viewpoints aside and get united to help the poor instead of funding our own survival! Can we work really in the best interest of the poor and the needy? Shall we make an attempt to solve our country's problems for once and for all in a timely manner, if not all, at least most of them? Let's at least try!
Now, there are these Schemes and there are Resources behind them. Both are unlimited and mostly un-utilized. Still NGO sector in India scrambles to raise funds to do welfare of poor Indians. Why cannot NGOs act as catalyst or facilitator and bridge the gap between people and government schemes? Can't they empower people to ask for their own rights and teach them how to access their rights? Is it not far cheaper, to be a catalyst, than to try to themselves offer these services that these schemes offer? It can easily be done at 1/10th the cost of running an actual service/scheme. So why raise lakhs and crores of Rupees when you can do it for few thousands or
[The author is COO of Catalyst Social Development Consultants Pvt Ltd and lives in New Delhi. For more details, please visit www.catalystindia.net or write to him at email@example.com]
‘PHILANTHROPY JAN-FEB 2011
Individual Board Member Responsibilities
funds for the organisation's sustainability and growth. In western countries there is an unwritten code (The 3 Gs) for every Board member Give, Get or Get off!
erving on the Board of a non-profit organisation can be a very fulfilling and rewarding experience. It provides unique opportunity for people with diverse skills & experiences to work together as a team and bring value to an organisation's growth and development.
Unfortunately, there are several institutions in India where Board members are either completely or substantially disengaged with the affairs of the organisation. Often times this is by default rather than by design. Very often when Board members are appointed they haven't a clue why and with what objective they have been invited to serve on the Board. It is therefore very important for every Board member to know at the time of appointment, why he / she has been invited to serve on the Board and what are the specific expectations. This gives very Board member a clear sense of duty and direction and his / her's individual performance as a Board member can be measured or self-evaluated against this.
People often ask me what would be the ideal numeric strength for a Board. The answer to that would depend on the nature and size of the organisation. Also, the size of the Board must be in accordance with the organisation's own charter or constitution. A large educational or health care institution working in several districts or states may require a bigger Board than say a small grassroots level NGO working in a small town. However, as a general rule of thumb, I recommend organisations to keep the Board's size to anywhere between five to nine members in -other words, a single digit.
Just as every staff member is given a 'Job Description' (JD), it is desirable to provide every Board member with the equivalent of a JD. Of course, this would vary to some extent from organisation to organisation. However, the following could be the basic template to adapt from:
An ideal Board is one where one can see adequate gender parity, a mix of young and dynamic members with new ideas along with a few seniors who would bring their vast knowledge and experience to match. Diversity of skills is also very desirable. It's always best to have one or two Board members with financial or legal skills, someone with expertise in communications & marketing, one or two members with contacts with the media or the government, someone knowledgeable in human resource and of course individuals whose professional background could add value to the organisation's vision & mission.
General Expectations 1) Know the organisation's mission, plans, policies, programmes, services, strengths and needs. 2) Be an active, not passive, contributor to the board's activities. 3) Serve in board leadership positions and undertake special responsibilities when asked. 4) Follow trends in the organisation's field of
It is also every Board member's role to mobilize
â€˜PHILANTNROPY JAN-FEB 2011
Noshir H. Dadrawala
director as appropriate. 2) Avoid asking for special favours of staff members. 3) Urge those with grievances to follow established policies and work through their supervisors. Avoiding conflict 1) Serve the organisation as a whole, rather than special group or individual interests. 2) Avoid even the appearance of a conflict of interest. 3) Disclose any possible conflicts to the board chair in a timely fashion. 3) Never exchange favours or gifts with anyone who does business with the organisation.
activity. 5) Treat other board members with respect. 6) Help new board members learn their role.
4) Maintain independence and objectivity.
Financial responsibility 1) Exercise prudence in the control and management of funds. 2) Ensure that an appropriate system of internal control is in place. 3) Faithfully read and understand the organisation's financial statements. 4) Ask questions when necessary - even the obvious ones.
5) Do what a sense of fairness, ethics, and personal integrity dictate.
â€˜Credibility Alliance' has subscribed to 'Philanthropy' for it's member organizations.
Meetings 1) Prepare for and participate in board meetings and other organisational activities. 2) Suggest agenda items to ensure that significant policy-related matters are addressed. 3) Ask timely, pertinent questions. 4) Keep contributions focused on what matters.
'Credibility Alliance' is a consortium of Voluntary organizations committed towards enhancing accountability and transparency in the voluntary sector through good governance.
Relationship with staff 1) Offer support and counsel to the executive
â€˜PHILANTHROPY JAN-FEB 2011
HDFC Debt Fund For Cancer Cure
are not available.
aking ethical investing to a new level, HDFC Asset Management Co. Ltd has launched a three-year closed-end debt scheme that will invest in scripts that mature a little before the scheme and then stay invested in them throughout the scheme's tenor. Called HDFC Debt Fund for Cancer Cure (HDFCC), it is a capital-protection-oriented scheme that will be open for subscription only for a few days and will lock your money for three years. The fund has a tie-up with the Indian Cancer Society (ICS) and will enable its unit holders to donate either 50% or 100% of its proceeds towards helping the underprivileged cancer patients in their fight with the disease. The fund offers only dividend pay-out option; dividend reinvestment and growth options
However, HDFCC is not a scheme you'd want to look at if you wish to make money for yourself. It's an investment with a purpose; to donate money to cancer patients. As a result, the 50% dividend donation option doesn't make any sense if, say, your fund earns 9% per annum. On the other hand, investors who would want to donate money to the ICS may find little incentive to go via HDFC Mutual Fund since you could also donate directly to institutions such as the ICS. A high minimum investment (Rs. 1 Lakh) may also act as a deterrent.
Charity Begins With Altruism Gene
esearchers at University of Bonn have found an altruism gene that makes people more charitable. People with this gene gave twice as much money on average to a charitable cause as did other study subjects.Martin Reuter and his colleagues asked participants to memorize series of numbers and then repeat them as correctly as possible for which they would receive money which they could either take home or donate.
average as did fellow students with the COMT-Met variant,explained Reuter. The reason why the Bonn scientists focused their analysis on the COMT gene is because for several yearsit has been known that dopamine is involved in controlling social behaviour in animals and humans.
DNA swabs taken pre-test were analysed and the team focused on one gene that contains the building instructions for an enzyme,which inactivates certain messengers in the brain the most well-known of these messengers is dopamine.Students with the COMT-Val gene donated twice as much moneyon
â€˜PHILANTNROPY JAN-FEB 2011
Readers Relatives on Board
Can a relative of a trustee be appointed as an additional trustee? If the deed of trust is silent on the issue, what are the formalities to be completed for such appointment? Secretary A.K. Sinha Charitable Trust Additional trustees may be appointed as long as one does not exceed the maximum number (if specified) in your trust deed. If the procedure is not laid down in the deed, new appointment is usually by invitation (a letter inviting the person to join as trustee) and a consent letter from the new trustee (accepting the invitation). The change must be reported within 90 days. The new/additional trustee may be a relative of one or more of the sitting trustees. However, the beneficiaries of the trust should not relatives of the Board members. It is a desirable norm of good governance not to have a Board of trustees where more than fifty per cent are related to each other by blood.
Unanimity - Not Majority According to our trust deed we are required to have a minimum of three and a maximum of seven trustees. For year we had only five trustees on our Board. About a year ago, at one of our meetings where four out of the five trustees were present, it was resolved to appoint two other trustees. Thereafter, we filed the change report with the charity commissioner within the stipulated period of ninety days. However, at the time of inquiry we were told by the charity commissioner that the Resolution passed by the majority trustees was not valid. We were informed that as per law, appointment of a new trustee should be approved by all the trustees unanimously. Is this correct? Concerned Trustees Yes, this is correct. Trust property vests jointly and severally in the trustees and therefore appointment of a new or additional trustee/s has to be unanimous and not by simple majority. “The power to appoint new trustees is the joint act of all the trustees and if they do not agree, the matter becomes one where the court's intercession must be called for”. (Mohommad Jaffar Vs. Mohammad Jan Mohammad, 46 Bom. L.R. 40: AIR 1944 Bom. 222: I.C. 210: I.L.R. 1943 Bom. 420). ...ccntinued on pg. 12
‘PHILANTHROPY JAN-FEB 2011
Remuneration Vs Benefit I have been told that any charitable organization enjoying tax exemption would lose its exemption if any trustee derives personal benefit from the trust. I have observed that in a certain charitable trust known to me, a couple of trustees are drawing a monthly salary and yet their tax status has not been affected. What could be the reason for this? Do you think this has gone undetected by the tax department? P. N. Saksena Bhopal To begin with any 'reasonable remuneration' drawn by any one or more trustee whether in the form of a monthly salary or honorarium cannot be construed as a 'benefit'. 'Remuneration' is a recompense for services rendered and therefore not deemed as benefit. â€˜Benefit' on the other hand is an 'advantage' or 'profit' that one derives. An example of 'benefit' would be a trustee buying the trust's property for himself or favoring his family or relatives with grants from the trust. However, having said that, we may add that though legally permissible, it's not a desirable practice for a trustee to draw remuneration reasonable or otherwise. According to International Standards of Good Governance (for NPOs) it is not considered a good practice to remunerate Board Members. In fact many Foreign Donor Agencies disqualify NGOs for grants on this ground alone. It may be noted that as per section 13(2)(c) read with section 13(3)(cc) of the income tax act, any salary or allowance paid to "any trustee or manager (by whatever name called)" should not "be in excess of what may be reasonably paid for such services". Edited by Noshir H. Dadrawala; published by R. R. Chari for CAP; printed by him at Union Press, Mumbai - 400 001; designed and layout by Vaishali at Alpha Printers. COURIER / BOOK POST
Fr o m : C EN TR E F O R A D VA N C EM EN T O F P H I L A N TH R O P Y Mulla House, 4th Floor, 51 M.G. Road, Flora Fountain, Mumbai 400 001. Tel : 22846534
â€˜PHILANTNROPY JAN-FEB 2011