Grading of Voluntary Organizations

Background

Voluntary organizations (VOs) play a pivotal role in furthering human development, thereby supplementing the efforts of the government in the overall development process. The 2002 UNDP Human Development Report applauds the contribution of the NGOs: “In addition to advocating for and engaging in development projects, NGOs are taking more direct roles in local decision-making and monitoring and are developing new, collaborative forms of governance.” This increased role along with the spurt in the number of VOs calls for a heightened need for focus on this sector. This can be clearly seen as the receipt of foreign contribution to Indian VOs has increased 56 per cent over 2005-06[1]. While VOs  have emerged as a connecting bridge between the 

 government’s policies and the people at the grass-roots level, there is a general perception that there is scope for these organizations to improve their governance standards and operational efficiency. Moreover, over the years, the expectations from the stakeholders, including the donors, have increased on account of the following reasons:

·        Increased channelling of funds through the VOs for developmental and welfare programmes

·        Instances of poor management by VOs

o       Huge number of fake NGOs in the state of Uttaranchal[2]

o       Blacklisting of 3 Mumbai-based NGOs by NACO[3]

·        Donors inclination to be associated only with reliable and efficient VOs

Globally, the accountability of VOs has been the subject of substantial debate and analysis. This may be due to various factors like rapid growth of the sector and the subsequent increase of funding to the sector. Transparency, or rather the lack of it, seems to be a perennial problem which has plagued the voluntary sector across the world. This is crucial given the expanded role the voluntary sector may play in fulfilling public policy. In addition, with many VOs competing for funds, the stakeholders would benefit from having access to an independent and objective third-party opinion about the specific VOs before making their choice.

 

Need for a grading product different from an accreditation

The accreditation process would typically assess an entity’s adherence to a set of minimum quality/ standards. The norms and standards would ensure a clear demarcation amongst organizations which meet these standards as against those who fail to achieve these standards. VOs which are less effective in fulfilling their objectives will be accredited as would those which demonstrate superior performance in their field of work, as long as they meet the minimum standards.

With more donors willing to contribute funds to the voluntary sector, over a span of time, it is important to develop a product which brings out the differentiation amongst the VOs in terms of their ability to deliver quality service while adopting good governance practices. In other words, those VOs which are more capable of excelling in their field of work need to be differentiated. This may also foster a healthy sense of competition amongst VOs and aid in dissemination of best practices in the sector, leading to better utilization of resources across all the VOs. This also ensures that the perspective of the VOs shifts from being a purely compliance-oriented approach (accreditation) to one aimed at continuous improvement (grading). A summary of the difference between accreditation and grading is given in the table below:

Sr. No.	Accreditation	Grading
1	Is an indication that an entity meets the minimum standards set by the accrediting association that accredits it	Is a measure of the “relative quality” of an entity in relation to the best in class
2	Typically acts as a “qualifying” requirement	Is used for meaningful classification of a pre-qualified group
3	Ensures adherence to minimum standards	Incentivises excellence in the given field of work

 

Grading of VOs: Objectives and process

An assessment framework that will be used to grade VOs will need to address how effective in is the VO in delivering on its stated objectives? This can be evaluated by assessing its

o       Quantum of delivery

o       Efficiency of delivery

o       Governance architecture

 

The process of grading would involve assessment of a VO by an independent agency in relation to a pre-identified set of standards. These standards, while yet to be evolved in the Indian context, should not only take into account the prevailing trends amongst the VOs, but also inculcate the global best practices. The grading exercise would not result in a binary outcome of selection or elimination, but would rather address the need for classification of the accredited population into various categories. This would not only provide the stakeholders with an impartial and accurate feedback on resource utilization, but it would also help government and regulatory agencies to focus their efforts and energies on those VOs which have the potential to improve their standards, but lack appropriate guidance and awareness.

 

The assessment framework has to strike a balance between the needs of all stakeholders. The rigour and granularity of the framework should factor in the current state of affairs and the limitations which may be encountered in a sector which was hitherto not subjected to an independent assessment. Some of the aspects which merit attention are given below:

·    The end-user of the grading: i.e. donors, government bodies, etc

·    Necessity of participation in the grading process: i.e. voluntary or mandatory

·    Incentives for VOs to get graded

·    Scalability and sustainability of the grading process

·    Attracting competent and credible organisations to carry out the grading exercise

·    Evaluating whether all the VOs must be graded on the same scale or whether there should be different scales to cater to say different sectors they serve.

 

Also, the standards devised should have applicability across the sectors. The standards should be appropriately tailored to ensure that all organisations have equitable access to the grading process, both in terms of operations as well as expenses incurred for this exercise. To ensure that smaller organisations also find the cost of getting themselves graded affordable, there could be some subsidy in the grading fees borne by an institution such as the central accreditation organisation. This will ensure that the grading agencies would find grading smaller VOs an economically viable proposition. For instance, in the SME rating business of CRISIL, National Small Industries Corporation Limited (NSIC) subsidises some portion of the rating fee ; the subsidy amount is higher for a smaller SME and is lower for a larger SME. At the end of the grading exercise, the assessment agency should give a report highlighting the factors considered while arriving at the final grading. An effective grading model needs to complement the existing donor standards or at the very least not conflict with these donor standards.

 

Implementation of the Grading process

The implementation of the grading framework needs to take into account a variety of factors.

·    Identify the target audience that would use the grading.

·    The cost involved in administering such assessments would determine the ability to reach out to the grass-root level organisations. Costs would dictate the design of the program as well as the inherent level of detailing required in the assessment. However, technology can be utilized to reduce costs as well as achieve a better and wider reach by developing a web-based portal wherein the initial documentation and information can be directly keyed in by the VOs.

·    The track record of the independent agency in carrying out assessments in a credible and sustainable manner is also important in the entire process. An agency having significant track record in implementing similar assignments and having impeccable credibility is required to ensure the confidence of the donors in this process. This is important considering the requirement to scale-up the operations necessitated by increased demand.

·    The grading process should involve an agreement between the grading agency and the VO. This agreement should provide for interaction between the grading agency and the VO’s management. This will ensure that the VO is given an opportunity to participate in the grading process and share its future plans. This will enable the grading to reflect a forward-looking assessment.