COMPLIANCE – Stay On The Right Side Of The Law

A vital component of organizational
effectiveness is ensuring compliance with the laws that govern their
functioning. This involves not only an awareness of all the regulations and
legislations that apply to one’s organization and following them stringently,
but also the ability to demonstrate compliance by keeping records of checks,
implementing policies and procedures that abide by the relevant laws, and
evidence that members of the organization are taking responsibility for
No organization wants to face
criminal charges for not adhering to the law. However, there are so many
different regulations and laws governing how a non-profit should manage its
taxes, raise funds, recruit staff and volunteers, donations received and spent,
fiscal compliance, employee salaries, safety rules, and several more issues.
Despite this regulatory thicket, and no matter the many constraints,  non-profits must always strive to stay on the
right side of the law, while doing effective work in their chosen area.
To get a sense of the awareness among
non-profit organizations about the importance of legal and fiscal
compliance  and determine what measures
they had taken to implement regulatory compliance, CAP spoke to women working
with three different NGOs. This is what they shared with us.

Is your organisation aware of all its compliance
requirements  under various laws and
what steps has it taken to fulfill these compliance needs?

Vaishali Goel is the
Assistant Honorary Treasurer of Paramparik
, which
promotes traditional Indian arts, crafts and textiles. Its members are
craftsmen from most states of India whose work, showcased at various
exhibitions in Mumbai and other metros with the help of donations from corporate
houses and individuals, has brought them great recognition and a sustainable
income too.“Since our organization gives absolute importance
to legal compliance, we have attended CAP’s seminars to increase our awareness
and we also consult Mr Dadrawala, who is prompt and helpful in reply to our
queries”, Vaishali told us. “CAP’s quarterly news
magazine Philanthropy is also very
informative, keeping us updated on the latest rules and regulations we need to
follow as an NGO. This
has helped us to become and remain legally compliant,” she added.

Gaynor Pais is CEO of International Resources for Fairer Trade(IRFT), a
charitable trust with a global presence. Established in 1995, IRFT is a self-sustainable organization
and comprises a team of 10 highly qualified professionals from various
disciplines and levels of expertise. Gaynor
too was happy to report that her organisation considers all areas of compliance
as crucial to her organisation. “I would say we are very well versed with all
compliances and applicable laws pertaining to our organization, since
we are highly rated as Social Compliance experts, Decent Work Global Master
Trainers, Social Compliance Auditors and Continuous Improvement Monitors. This
forms the profile of IFRT’s key programme area – Ethical Business Solutions
(EBS). So, our organization understands and respects compliance needs, both
statutory and voluntary,” she asserted.

Ishak Valikarimwala
is the Honorary Treasurer of Royal Society of
Bombay and Royal Higher Education Society, 
charitable  and educational trusts
respectively,  that work for the
advancement of underprivileged in Mumbai. The two trusts run the Royal College
of Arts, Science & Commerce,  Mira
Road; Royal Girls High School (English Medium); Royal Girls High School (Urdu
Medium); and the Royal College of Education & Research for Women. While she
agreed that compliance was necessary, saying, “We need to be compliant in all
aspects”, she conceded that, “we have not made any specific effort in this
direction. We are not aware of all compliances but Philanthropy magazine helps us tremendously.”

While non-profits have to comply with the same
laws as for-profit enterprises, one major difference is a resource crunch,
both of staff and capital, to address their compliance needs in the way that
corporations  are able to do. There is a
perception that non-profits are scrutinized far more than profit-making
entities and that in some respects, the former’s compliance requirements are
more arduous.

Is the compliance
burden is greater for non-profits than for businesses, which may be better
equipped to be legally compliant? Do you think NGOs are held to greater
standard of accountability?

Zainab certainly thinks so.“Since our finances come from donors and well-wishers,
we are more accountable compared to profit-based companies. Yes, NGO are held
more accountable and due to lack of expertise in these matters they face more
problems as compared to companies who have different departments and can
recruit manpower to deal with compliance,” she stated.

While Gaynor concurred with the necessity of
compliance, she also flagged a few concerns. “Compliance is absolutely
necessary for both non-profits and for-profit entities. However, both
sometimes  overlook this responsibility
in the larger interests of business and sustainability. Profit-making
enterprises have a formal structure and the staff ensure adherence to all
compliances – Legal, HR, Finance, Board Governance etc. The organization’s
structure and hierarchy lends clarity to each role and responsibility towards
compliance. Yet, very often the intent is clearly towards statutory compliance,
and legal policies are more to protect the larger interest of the business.
Elaborating on a practical problem many NGOs face, she said, “In
the case of non-profits, the responsibility to be sustainable over and above
the ability to uphold the causes that the organization represents becomes
critical. With every good intention to represent the cause, the not-for-profits
are in a dilemma on compliance. The need to be compliant is genuine, but often
challenging, and as the organization grows the need to survive and sustain
outweighs the compliance imperative.”
“NGOs are held
more accountable due to the free flow of national and international funds to
them and their failure to manage the same responsibly may lead to a sceptical
attitude about their ethical philosophy and raise doubts about whether the
funds reach the intended beneficiaries. Thus, this needs to be recorded and
reported regularly. Failure to be transparent and accountable leads to
blacklisting and termination of funding sources which is detrimental to the
survival of the organization,” she concluded.
Vaishali  had no view on this. “Since we are not attached to
any for-profit companies we cannot comment on this.” She did add, however, “On
our part, as an NGO we try our best to stay compliant and we have had no
difficulty in doing so. Since NGOs have to deal with government rules and
regulations on the one hand and the safe keeping of accounts held on the other,
it is imperative that we are compliant.”

More and more non-profits are seeing increased
value in investing in strong compliance initiatives because these measures not
only prevent violation, but may also serve to mitigate fines if an offence has
been committed. A compliance review assists in identifying areas of importance
and avoiding pitfalls, without imposing additional burdens.
Of course, embedding these compliance policies
into a non-profit’s culture requires further, practical measures. Having
compliance policies but not enforcing them may be almost as harmful as not
having them at all. The most effective way of ensuring compliance is to train
employees in the basics and stressing how they apply to the organization’s
well-being. Regular health checks and clear procedures for reporting concerns
are also critical to promoting effective compliance.
Compliance can no longer be viewed in isolation
from the rest of the organization or as a function to keep it out of trouble;
it must become part of the overall business strategy of any operations or
organization, big or small. Compliance and related practices should be a
non-negotiable practice implemented throughout the organization AND PERFORMED
BY ALL. Ultimately, this integrated approach will lead to better and less
burdensome compliance.

What internal controls does your
organisation have to ensure compliance? Which areas do you give importance to –
Legal, Finance, HR, Board Governance, Strategy, Communication, Fundraising, or
Volunteer Management?
shared these details with us. “Our compliance team (EBS) continuously monitors
and mentors the Administration and Finance departments to adhere to ethical
social and legal compliances stipulated under the Bombay Trust Act, 1950. Also,
we ensure a voluntary transparency mindset and seek opportunities to submit
documents to reputed Government Bodies (CII, MHA, CBI) and Private Validation
Agencies to build a good credibility profile for IFRT. Other measures we have
undertaken are  requests for validation
statements/letters of  recommendation
from our Project Partners, Project Funders and Global Training Organizations
that we represent and the constant updating of our website to provide and
promote IRFT as a credible, responsible and transparent organization of repute.
Our Board of Trustees is also well-informed about
all developments and compliances, with the intent to seek their guidance
regularly and voluntarily, over and above the statutory quarterly board meetings
and reviews. Good governance, upholding the ‘Vision and Mission’ and verbally
reinforcing the values of the organization to new recruits  are part of our ongoing HR Team Building
At the other
end of the spectrum, Zainab
admitted, “So far, a monthly check is done on the Income/Expenses of the trust
but other means of compliance we have yet to formulate.” The areas of
compliance her organization considered important were Finance, Strategy,
Communication and Fundraising, she said. 
an illustration of  having made a sound
beginning, Vaishali claimed, “Our administrative system is set up to be
absolutely transparent and democratic to ensure compliance. And the three areas
we give maximum importance to  are Legal,
Finance and Fundraising.”
 As CAP turns 30 this year, CAP’s new CAPacity Building Programme will help
non-profits to address and comply with the law in the following core areas –
Legal, Board Governance, Finance, Human Resources, Strategy, Communication and
Reporting, Fundraising and Volunteer Management. To know more about how you can
obtain your compliance certificate, write to


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