The chief executive of the Centre for Advancement of Philanthropy, who was addressing a Moneylife Foundation workshop, explained what is required from NGOs under the law and that is was critical to have a vision, a working plan and a reliable system to be effective

"A lot of people ask what are they required to do as NGOs or its trustees. Take a look at your charter first, and then, look at the government guidelines," said Noshir Dadrawala, chief executive of Centre for Advancement of Philanthropy. He was speaking at a seminar on 'Good Governance and Legal Compliance Issues for NGOs', hosted by Moneylife Foundation.

Mr Dadrawala discussed in detail the laws, regulations and definitions laid down for NGOs, saying was essential to know this to understand the legal obligations. "Whether you like it or not, there are several rules you have to abide by and it is a must that you follow them in order to avoid trouble."

While charitable institutions help people in many ways, they are often accused of bad management and dismal accounting. Mr Dadrawala explained how NGOs can manage their affairs better and what rules they must adhere to, so they are not de-legitimised and can function efficiently.

He gave a brief overview of the required form of a charitable organisation, the implications of the pending Direct Tax Code, the ambiguities present in relevant laws and the problems the voluntary sector faces. Mr Dadrawala emphasised how audits are to be filed, what records have to be kept and what notifications must be made to ensure legal and financial compliance.

Governance deficit is about authorities not fulfilling what is expected of them. Non-government organisations are increasingly filling in this gap in various areas of our lives. But, to be more effective, NGOs must have a vision, a working plan and a reliable system to implement the plan, he explained. Otherwise, they could be hampered in achieving their goals.

Mr Dadrawala discussed guidelines for voluntary organisations in the light of his experience as chief executive of The Centre for Advancement of Philanthropy, an NGO that specialises in charity laws and good governance. "Non-profit does not mean you must not make profit, but it means that the profits should not be distributed among the members of the charitable institution or the trustees," he said.

Mr Dadrawala talked about the rules that pertain to the income and expenditure of NGOs, and financial transactions between NGOs. His tip to NGOs is, "Have a detailed vouching system and a cash and receipt system in place, maintain records and go for audits regularly." He also elaborated on the restrictions placed on receiving foreign donations and ways to avoid them.

He also dwelt on the tax exemption rules pertaining to NGOs and donors. "One cannot be exempt from taxes simply by being a charitable institution. Unless NGOs fulfil certain criteria that the Income-Tax Act specifies, they are not exempt from taxes," he explained.