By Srijan Kishore
Every time the Government strengthens regulation in the social sector, two goals come into view. One is to improve accountability. The other is to preserve the spirit of public service. The latest amendments to the Foreign Contribution Regulation Act (FCRA) Rules remind us that achieving both together is never easy.
At one level, the changes are straightforward. Companies supporting NGOs linked to foreign funding will now be expected to carry out deeper due diligence before releasing grants. They will have to verify whether an organisation is authorised to undertake a particular activity, whether it is working within its approved geographical area, whether its governance systems are in order and whether it continues to remain eligible under the law. Grant agreements are also likely to become more detailedwith closer attention to reporting and audits.
Few would object to these expectations. Public money and philanthropic funds must be handled with honesty. Every organisation receiving financial support should be able to demonstrate that it follows the law and uses resources responsibly. Good governance in the backdrop of Corporate or Organizational Governance is the basis of the trust.
The real question, however, lies elsewhere. How will these changes influence the relationship between companies and the organisations that implement social programmes on the ground?
Corporate Social Responsibility (CSR) has matured over the years. Most companies no longer view it as an annual spending exercise. They work with organisations that understand local realities, have earned the confidence of communities and possess the experience needed to deliver change. A manufacturing company will not automatically know how to improve learning outcomes in a village school or strengthen maternal health in a remote district. That expertise often comes from civil society organisations that have spent years working with people.
The new compliance framework may change how these partnerships are formed.
As legal responsibilities increase, companies are likely to become more cautious. Every additional document, verification and compliance check adds to the decision-making process. Larger organisations with dedicated legal and compliance teams may adapt without much difficulty. Smaller organisations may not find the transition as easy, even when their work is respected within the communities they serve.
This could produce an unintended outcome. Companies may gradually favour organisations with the strongest compliance infrastructure rather than those with the deepest grassroots presence. From a legal standpoint, such decisions are understandable. From a development standpoint, they deserve careful thought.
Many of India’s most effective community initiatives began on a modest scale. They grew because they understood local problems and earned people’s confidence through years of patient engagement. If compliance becomes the primary lens through which partnerships are assessed, there is a possibility that smaller but capable organisations may receive fewer opportunities. The social sector cannot afford to lose such diversity.Now, let us consider a grassroots NGO working in Nagaland. Meeting a high level of compliance comes at a cost. The organisation may be excellent at implementing programmes and deeply trusted by the community, yet lack the administrative systems needed to meet every compliance requirement. Many such organisations could lose their edge during the due diligence process.
At the same time, it would be unfair to present regulation as an obstacle. Better due diligence can improve the quality of corporate philanthropy. It encourages companies to ask better questions before committing resources. It rewards NGOs that maintain transparent records, ethical leadership and sound financial systems. These are qualities that every institution working in the public interest should aspire to uphold.
There is another lesson that deserves equal attention. Compliance should never become a substitute for judgement. A file may satisfy every legal requirement and still produce little social value. Another organisation may spend more time in villages operating with modest administrative resources as I gave an example of the NGO in Nagaland.
India’s development story has always depended on collaboration. The new rules should be viewed in that spirit. Their larger purpose should be to strengthen confidence in the institutions that serve society. If they encourage better governance while preserving space for genuine partnerships, they will leave the CSR ecosystem stronger than before.
(Kishore is a Delhi based CSR Practitioner. He holds a PhD in CSR from Santiniketan and a PGDM from XISS. Views are personal)
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