CORPORATE SOCIAL RESPONSIBILITY (CSR) FUNDING 

• In any such social effort, programme expenses attract big cheques, especially from corporate social responsibility (CSR) initiatives in India.
• For example, an NGO working on education outcomes might receive funding for books, other online resources, teacher training, curriculum design, etc.
• But NGOs have other expenses too. To achieve long-term and sustained impact, they need to pay for administrative and support expenses not specifically tied to programmes, for instance, rent, electricity, technology and human resource costs.
• This organisational development and indirect costs, combined with programme expenses, make up an NGO's true costs and reduce the efficacy and impact of the programmes that funders support.

The funder archetypes 

1. programme proponents,
2. adaptive funders and
3. organisation builders.

• These three archetypes represent different beliefs in terms of how philanthropy becomes impact.
• Those beliefs manifest in different practices around funding indirect costs and organisational development.
• Programme proponents value programme outcomes above all.
• Adaptive funders are not rigid and support indirect costs and organisational development if the NGO makes a case.
• Organisation builders see value in investing in stronger organisations in addition to programmes.

NGOs' indirect costs

• CSR funders now represent a fifth of all private giving in India, and principally fall under programme proponents.
• They mostly contribute little or no money to organisational development and limit what they pay for indirect costs to a fixed rate often below 5 per cent.
• NGOs' indirect costs range from 5 per cent to 55 per cent, depending on their mission and operating model, much as a corporate's sales and administration costs vary significantly by industry and product.
• These practices are partly a consequence of the CSR funder's focus on regulatory compliance amendments to the CSR law in 2021 including substantial financial penalties for non-compliance.

CSR committee

• Roughly 90 per cent of the CSR funders are relatively small, unlisted companies and companies that spend less than 50 lakhs annually on CSR are not required by law to have a CSR committee.
• They generally leave decision-making and action plans to company boards, who may have little to no experience working with NGOs or on social impact.
• Their priorities tend to sway towards risk avoidance, compliance and cost minimisation.
• Several larger companies have added CSR to the responsibilities of their HR or administration or communications heads, rather than hiring professional leads, experienced in the social sector.

Learn from peer organisations

• In addition, CSR funders would learn from peers who view organisational development and indirect costs differently.
• For example, ASK Foundation, the CSR arm of ASK Group is working to enable better livelihoods for rural communities.
• Until four years ago, the ASK gave annual programme grants to NGOs, limited indirect cost coverage to between 5 to 10 per cent and did not provide organisational development expenses.
• It shifted to a multi-year grant-making approach and started providing up to 20 per cent support for indirect costs.
• The shift in practice came after the CSR team presented benchmarks of the higher rates paid by peer CSR organisations and the beneficial effects of a stronger NGO partner on its programme outcomes.
• These peer examples and impact stories were instrumental in ASK getting board approval for changing its NGO funding policy.