MRDE-002

Ans 1: The range of different funding sources that the governing body needs to consider.

The main sources of income are:

1. Gifts and donations

2. Grants
3. Loan financing and equity capital
4. Contracts
5. Trading

Gifts and donations

Donations generally come from individuals (e.g. from a fundraising appeal or given as a legacy), from
companies, or from charitable trusts and foundations. Unless they have been given in response to a
particular appeal you generally have considerable freedom in how to apply them. Gifts and donations
are a particularly important source of income for charities and can attract tax relief. Raising funds
however can be time-consuming and costly and you could even lose money.

Grant funding

Grants are typically made by the public sector or by charitable trusts and foundations. The money does
not have to be repaid and is usually exempt from tax. Many grant funders will only fund organisations
with charitable status. Some grant makers prefer not to fund organisations that have built up significant
reserves or generate cash surpluses. This can disadvantage those with a business-like approach to
running a sustainable social enterprise. Grants almost always come with conditions, for example:

particular outputs or outcomes

achieving agreed milestones
unspent monies are returned to the funder
reporting requirements on the progress of the project or use of the money.

Before pursuing grant funding the charity or non-profit board should consider the following.

Is this an activity consistent with our aims and strategy or is this grant encouraging us to drift
from our mission?
Can we meet the grant conditions?
Will the cost of seeking grant monies outweigh the benefits?
How will the activity be maintained or wound up after grant funding ends?

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Loan financing and equity capital

Debt and equity finance are routinely used in the for-profit sector, but are less common in the not-for-
profit sector.

Debt finance is essentially loans and overdrafts, which have to be repaid.

Equity finance does not have to be repaid. Instead, the investor takes a stake in the organisation,
entitling them to a share in the rewards (and risks) of the organisation.

Both forms of finance are described more fully below.

Loan financing

A loan is simply a sum of money which is borrowed and has to be paid back, usually with interest. Loan
finance is potentially useful for a range of non profits. They are a flexible form of funding that can be
quicker and easier to secure than grant funding. However they have to be repaid and may require assets
to be offered as security.

Equity capital

Equity capital is provided by external investors in return for a (permanent) stake in the organisation and
if the organisation is successful, the investors share in the rewards. It does not have to be repaid and
does not require security. An equity investor tends to take a long-term view of the organisation and may
also want to contribute expertise. Their money is at risk if the organisation fails. Equity finance is most
likely to be used by social enterprises.

Contracts

A contract is a form of trading where there is a formal agreement between two parties. It means that
each party has agreed to do something and that if either of them fails to do it they are covered both by
the terms of the contract and by contract law.

A contract is a commercial agreement and the income from it may be liable for tax and VAT. An
increasing number of non-profits are contracting with the public sector to deliver specific services. But
there are potential pitfalls. Delivering public services may distract the organisation from its primary aims
or undermine its independence.

Trading

Many non-profits earn income by selling goods and services to members, service users, the general
public, or other organisations. Some organisations earn all their income this way. You have flexibility
about how to spend your earned income.

Examples of trading by non-profits include:

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selling tickets to events

selling publications or products

hiring out a venue

selling in-house expertise to interested parties e.g. publishing, training, consultancy.

Charities can trade. However, if the trading activity is significant and is not related to your primary
purpose there are charity and tax law implications and you should seek specialist advice. You may need
to set up a separate trading arm.

Trading is likely to pose particular challenges for charities. Questions to be considered include:

does your governing document allow you to create and invest in a trading subsidiary?

will the proposed trading involve significant risk to a charitys assets?

would investment in a trading subsidiary be in line with the charitys current investment policy?

Ans 2: There is one NGO for every 400 people in India, that is a lot. And when there are so many of
them, there is a race, an unhealthy one, for money and your attention. These NGOs raise Rs 40,000
crore - Rs 80,000 crore in funding annually and most of it goes into maintaining the staff on payroll.
While this might be good for NGOs where the core service is the human resource (Eg. counselling
children of sex workers), in many other cases (Eg. Solid waste management, Solar energy) which require
some capital, funds often fall short. There is a problem with mind space of a potential donor.

The above is a general problem for NGOs in India. Now looking specifically at grass root level NGOs

They accept cloth as input, re-work on them and solve the problem of dignity for the poor via clothing,
children via school uniforms and emergency supplies during disasters. They have been able to scale their
operations across the country over the last 14 years and are almost always there where the need is.

Now the problem starts here. They accept clothes as donations from people. Note that even when
clothes are donated, there is significant cost involved in moving supply to where demand is, reworking
on clothes, etc. We would expect urban, educated Indians to know what to donate right? Well they
don't. People confuse donation with waste disposal. Quoting from the Goonj Facebook page,

Here is one of our biggest challenge- the mindset of people.. If a large number of thoughtful, sensitive
people send us duly washed and repaired material, a number of people and organisations send us this!!
from soiled clothes to undergarments with blood, used sanitary pads to potty seat with potty !! some
glimpses from Delhi, Mumbai, Kolkata, Faridabad and Jalandhar. It is certainly not worth sharing but do
share.. as not only it eats our meager resources but challenges the dignity of everybody from volunteers,
our team to the people for whom they 'donated' !!

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So the main challenge NGOs face is people, people who don't like change, people who have a false sense
of what giving means, people who just don't care and that is symptomatic of a lot of wrong things we
see in India today.

The problem is just not on the supply side. Consider something like Teach For India (organization) or
Pratham books (Pratham) who both work towards achieving universal quality education through
different means. There have been several instances where the recipient of the goodwill (the student) is
so against the teacher & the organization, that the entire effort put in till date goes to waste. So there
are different socio-economic challenges while integrating two different layers of society and mis-
communication & misunderstanding often end up wasting a few months of dedicated effort.

Then there is the problem of social acceptance for the person working at the NGO. Considering the
society's obsession with stable, high paying, secure jobs working at NGOs is often looked down upon
and seen as something one would do due to lack of other options. And if the work involves working with
daughters of HIV infected sex workers, it is hard not to be ostracized especially if you come from a low
or middle income background.

Money - NGOs need money for operations. There is no direct correlation with the work and income i.e
unlike a for-profit company where the work you do is directly sold for revenue, the correlation between
raising money and solving problems is very little. So NGOs have to put resources on creating successful
media campaigns, getting the right connections, filling tons of forms and paperwork for grants, aid and
taxation. Not to forget the hassles in getting the NGO recognized as an NGO and finding a secure way of
getting tax-exempt donations. What all this results in is a lack of focus. The people created the NGO to
solve a problem and now the focus is on doing things that get attention to help raise money. This leads
to disconnect between vision and work.

There are plenty more problems and I'm hardly qualified to enumerate all of them. A lot of NGOs are
doing amazing work solving hard, real world problems selflessly and silently. The least we can do is find
one and help them in whatever way we can.

Ans 3 a): Globalization refers to the free movement of goods, capital, services, people, technology and
information. It is the action or procedure of international integration of countries arising from the
conversion of world views, products, ideas, and other aspects of culture. Advances in the means of
transport (such as the steam locomotive, steamship, jet engine, and container ships) and in
telecommunications infrastructure (including the rise of the telegraph and its modern offspring, the
Internet and mobile phones) have been major factors in globalization, generating further
interdependence of economic and cultural activities. Though many scholars place the origins of
globalization in modern times, others trace its history long before the European Age of Discovery and
voyages to the New World, some even to the third millennium BC. Large-scale globalization began in the
1820s. In the late 19th century and early 20th century, the connectivity of the world's economies and
cultures grew very quickly. The term globalization is recent, only establishing its current meaning in the
1970s.

In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization:

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1. trade and transactions,

Economic globalization is the increasing economic interdependence of national economies across

the world through a rapid increase in cross-border movement of goods, services, technology, and
capital. Whereas the globalization of business is centered around the diminution of international
trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade,
economic globalization is the process of increasing economic integration between countries, leading
to the emergence of a global marketplace or a single world market.

2. capital and investment movements,

Globalization allows corporations to outsource manufacturing and service jobs from high cost
locations, creating economic opportunities with the most competitive wages and worker benefits.
Critics of globalization say that it disadvantages poorer countries. While it is true that free trade
encourages globalization among countries, some countries try to protect their domestic suppliers.
The main export of poorer countries is usually agricultural productions. Larger countries often
subsidize their farmers (e.g., the EU's Common Agricultural Policy), which lowers the market price
for foreign crops.

3. migration and movement of people, and

An essential aspect of globalization is movement of people. As transportation technology improved,

travel time and costs decreased dramatically between the 18th and early 20th century. For example,
travel across the Atlantic ocean used to take up to 5 weeks in the 18th century, but around the time
of the 20th century it took a mere 8 days. Today, modern aviation has made long-distance
transportation quick and affordable.

Immigration is the international movement of people into a destination country of which they are
not natives or where they do not possess citizenship in order to settle or reside there, especially as
permanent residents or naturalized citizens, or to take-up employment as a migrant worker or
temporarily as a foreign worker.

4. the dissemination of knowledge.

Further, environmental challenges such as global warming, cross-boundary water and air pollution, and
overfishing of the ocean are linked with globalization. Globalizing processes affect and are affected by
business and work organization, economics, socio-cultural resources, and the natural environment.
Academic literature commonly subdivides globalization into three major areas: economic globalization,
cultural globalization, and political globalization.

Ans 3 c): Traditionally, government and business had few incentives to actively collaborate. For
the most part, government regulated business, and business lobbied government on areas of
economic interest. When partnerships did occur, they were usually undertaken to invest in large
infrastructure projects through formal contractual agreements, as represented in the National
Council for Public Private Partnerships definition of PPPs:

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Public-private partnership: A contractual agreement between a public agency (federal, state, or
local) and a private sector entity. Through this agreement, the skills and assets of each sector
(public and private) are shared in delivering a service or facility for the use of the general public.

Todays challenges for the United Statesincluding an unprecedented recession and fiscal crisis,
global warming, terrorism, the Afghanistan conflict, and crises in healthcare and educationare
changing the equation. There is a sense that these problems are increasingly complex, requiring
new responses. Faced with mounting pressure to resolve these complex challenges, government
is introducing regulations to prevent future crises, and seeking innovation to execute its mission
more effectively with fewer resources. In spite of these actions, there is an increasing recognition
from government that it cannot solve these challenges alone.

Meanwhile, in the business world, there is also an increasing recognition that these challenges, as
well as the governments response, represent both a threat and opportunity. The impact of
government behavior on business was evident in a recent Deloitte LinkedIn poll of more than
500 senior executives, which found that 82 percent of respondents believe governments
influence on their business has either greatly or somewhat increased in recent years.2 This seems
to indicate that business leaders acknowledge that something fundamental is changing in their
relationship with government. The question is, what will come next? Lobbying spending rose
dramatically in response to new regulations in recent years,3 but government and business are
also starting to take more creative approaches to collaborating. Both sides seem to realize that
business problems are now government problemsand vice versaand both are proactively
intensifying new approaches to partnership at the highest levels.

The complexity of the current challenges and changes occurring at the political and macro-
economic level have fundamentally changed the federal governments traditional behaviors,
creating new incentives for partnership.

Ans 4 a): Main characteristics of Non-profit organisations:

1. Qualified Staff Members

The key to any successful organization is its people. What is the composition of the staff? Does the
leadership have an aligned staff and an aligned board of trustees; is everyone on the same page and
working toward the same goals?

2. Cash is King

A nonprofit is no different than any business, regardless of how good your mission is, if you are out of
money you are out of business.

3. A Good Board of Trustees

A good board of trustees is one that is diverse in skill set, has a desire to help the organization move
forward is willing to share their business knowledge and financial support.

4. A Clear Concise Mission Statement

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Everyone associated with the organization should be in a position to clearly communicate the mission of
the organization. Who do they serve and why? Who is the target market audience and what sets your
organization above others? What makes you unique and/or different?

Ans 4 d): CBO Approach is a step by step, whole into parts method that includes, planning a message,
composing a draft and completing a message. First you should identify the message and learn the
objectives. Then, proceed to the planning of the message. You should also visualize the audience to
know their interest and get the appropriate ideas to present. Gathering supporting information is also
needed like brainstorming and non-stop writing in which discussion and writing method is done. Next is
organizing the information using patterns like direct pattern for good news and indirect pattern for bad
news. Composing a draft wherein you need to choose appropriate words to construct sentences for
assembling paragraphs. Next is choosing paragraph locations and check proofread for revising and
editing. Then you will finalize your work.

Ans 4 e): Tarun Bharat Sangh (TBS) is a non-governmental organization in Rajasthan. It is directed by
Rajendra Singh. The organization and Singh are best known for doing ecological research and land
development to provide clean and fresh water to people.

Tarun Bharat Sangh was founded in 1975 in Jaipur by a group of students and professors from the
University of Rajasthan. In 1985 the direction of the organization changed when four young members of
the organization went to live in the rural area of Alwar to teach rural children and do rural development.
Of those four, Rajendra Singh stayed when the other three left. He asked the local people what they
needed most, and he found that they needed easier access to water. With the villagers he organized the
building of a johad, which is a traditional rainwater storage tank.

Ans 4 f): Non-governmental organizations have been active in the United Nations since its
founding. They interact with the UN Secretariat, programmes, funds and agencies and they
consult with the Member States. NGO work related to the UN comprises a number of
activities including information dissemination, awareness raising, development education,
policy advocacy, joint operational projects, and providing technical expertise and
collaborating with UN agencies, programmes and funds. This work is undertaken in formal
and informal ways at the national level and at the UN.

Given the diverse nature and large number of NGOs, relations between NGOs and the UN have at times
been stormy. NGOs face a constant battle to be heard at the UN, and often must compete with
businesses and other private sector organizations toward which the UN is increasingly friendly. While
some NGOs enjoy excellent access to meetings and good relations with UN officials and delegations,
governments sometimes react negatively to NGO advocacy and seek to restrict NGO opportunities.

Ans 5 a): The Social Work and Research Centre ("SWRC"), widely known as the Barefoot College is a
voluntary organisation working in the fields of education, skill development, health, drinking water,
women empowerment and electrification through solar power for the upliftment of rural people, which
was founded by Bunker Roy in 1972. It is registered under Friends of Tilonia Inc.

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Ans 5 b): Freedom of association encompasses both an individual's right to join or leave groups
voluntarily, and the right of the group to take collective action to pursue the interests of its members.
Freedom of Association, The Essentials of Human Rights describes the right as coming together with
other individuals to collectively express, promote, pursue and/or defend common interests. It is both an
individual right and a collective right, guaranteed by all modern and democratic legal systems, including
the United States Bill of Rights, article 11 of the European Convention on Human Rights, the Canadian
Charter of Rights and Freedoms, and international law, including articles 20 and 23 of the Universal
Declaration of Human Rights. The Declaration on Fundamental Principles and Rights at Work by the
International Labour Organization also ensures these rights.

Ans 5 d): A primary beneficiary is a beneficiary in a will, trust or insurance policy that is first in line to
receive named benefits. Primary beneficiaries are contrasted with contingent beneficiaries, who will
only receive benefits if the primary beneficiary has died. There can be more than one primary
beneficiary.

BREAKING DOWN 'Primary Beneficiary'

For example, an IRA can name a spouse as the primary beneficiary, while the same person's will may
name the children as primary beneficiaries. The spouse will receive the proceeds of the IRA and the
children will receive the assets for which they are named primary beneficiaries in the will. By definition,
a sole beneficiary is a primary beneficiary.

Ans 5 f): Provision of Urban Amenities to Rural Areas (PURA) is a strategy for rural development in India.
This concept was given by former president Dr. A.P.J. Abdul Kalam and discussed in his book Target 3
Billion which he co-authored with Srijan Pal Singh. The genesis of PURA concept can be traced to the
work done by Nimbkar Agricultural Research Institute in the early 1990s on Taluka energy self-
sufficiency. It was shown in the study that energy self-sufficient talukas can be a new development
model for rural India in terms of creation of jobs and better amenities to its population.

Ans 5 g): The Millennium Development Goals influenced Development policy formulation and planning
globally. Along with bringing critical development challenges to the forefront, they also provided
countries with a strong target-oriented agenda. While India has been moving in the right direction in
some areas, there is still work remaining in the others.

Eradicate Extreme Hunger and Poverty

Achieve Universal Primary Education
Promote Gender Equality and Empower Women
Reduce Child Mortality
Improve Maternal Health
Combat HIV/AIDS, Malaria and Other Diseases
Ensure Environmental Sustainability
Develop a Global Partnership for Development

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