Philanthropy
What do you mean by enhancing the Volume and effectiveness of philanthropy?
Enhancing the volume of philanthropy means motivating people to give more. This is done by highlighting best practices and examples in philanthropy through a variety of means – posting them on our website, sharing them at our seminars and workshops and publishing them in our publications.
While speaking about the effectiveness of philanthropy, we have the fundamental reality in mind that although Pakistanis make huge philanthropic contributions every year, yet most of these contributions are by way of charity and do not have significant impact on overall social development. We perceive that although charity does help alleviate poverty, yet it fails to provide sustaining and long-term effects in alleviating their problems. Therefore, we seek to divert this immense potential of indigenous philanthropy towards social investment in Pakistan, which will not only make philanthropic contributions more effective, but will also contribute to national development through poverty alleviation.
What has civil society and its development to do with philanthropy?
Civil society is one of the most important stakeholders in national development. There are thousands of CSOs working with communities throughout the country and contributing towards poverty alleviation. Therefore, it is a need of the hour that these organisations are developed, strengthened and made viable.
The fundamental premise established, but what can the civil society do in the philanthropic arena? The answer is simple. The CSOs, through their community presence, can effectively motivate people to give more, can help channellize these contributions to projects of collective benefit, and ensure sustainability of those projects by embedding into them the valued ingredient of community ownership.
How can Laws and regulatory environment affect philanthropy?
Enabling laws and the regulatory environment facilitate the individuals and organisations engaged in philanthropy by ensuring better governance and transparency structures and systems, promoting better credibility amongst donors and stakeholders, helping them create linkages, and incentivising through tax exemption.
Philanthropy is such a personal affair. How can it be organised?
It is widely known that philanthropy arises out of a personal impulse, yet the same resources can be used more effectively by motivating people to give more to organisations and causes rather than to individuals. Channellised charity can yield more.
PCP General
Is PCP a nonprofit organisation?
Yes. The Pakistan Centre for Philanthropy (PCP) is an independent, nonprofit support organisation with a mandate to promote the volume and effectiveness of philanthropy for social development in Pakistan. It was incorporated in 2001 as a nonprofit company licensed under Section 42 of the Companies Ordinance, 1984.
PCP is governed by a Board of Directors, which consists of a group of eminent citizens, civil society representative and corporate leaders. The Board is actively involved in policy matters and performs its governance function by providing oversight, guidance and supervision to the managerial staff of the organisation. In accordance with the guidance provided by the Board the organisational business of the Centre is carried out by the Executive Director, with the help of the support provided by the managerial and programme staff.
PCP’s is a unique initiative (the first of its kind) in Pakistan for harnessing the potential of philanthropy for social development. The Centre does not engage in direct philanthropy; instead it strives to facilitate philanthropic efforts of others through support services. These services include working with and for the various stakeholders (Government, NPOs, national and international donors, diaspora communities) on its following major programmes;
i)
Public Private Partnerships
ii) Certification of NPOs
iii) Research on Indigenous and Diaspora Philanthropy
Today PCP, within its diverse range of activities and track record of professionalism and performance, is recognised as one of the major players in the civil society sector in Pakistan.
Who are PCP’s Board of Directors?
In the composition of the Board, PCP brings together many years of experience and commitment by a group of eminent citizens, representatives of civil society organisations and business leaders, acknowledged for their exemplary contribution to social development. Please click here to go to the Board of Directors' page.
What does PCP aim to do?
PCP’s objectives are as follows:
* Creating a policy, legal and fiscal environment that enables giving for development and promotes the growth and development of citizen organisations
* Facilitating linkages between corporate philanthropists, citizen organisations and government for increased social investment.
* Enhancing citizen organisations’ capabilities as effective vehicles of philanthropy through a certification system and capacity building measures
* Assisting philanthropists (corporations, foundations, Diaspora communities) in increasing the volume and impact of their giving
What is PCP? What is its legal and organisational structure?
The Pakistan Centre for Philanthropy (PCP) is an independent, nonprofit support organisation with a mandate to promote the volume and effectiveness of philanthropy for social development in Pakistan. It was incorporated in 2001as a nonprofit company limited by guarantee under Section 42 of the Companies Ordinance, 1984.
PCP is governed by a Board of Directors, which consists of eminent and experienced people from the civil society and the corporate sector. The Board elects one of its members as Chairperson for a term of three years. Mr. Shams Kassim-Lakha, H.I, S.I. is the current Chairperson of the Board. The Board is actively involved in policy matters and performs its governance function by providing oversight, guidance and supervision to the managerial staff of the organisation.
The Executive Director (who is also a non-voting ex-officio member of the Board) is the Chief Executive Officer of the organisation. He/ she, with support from other managerial and programme staff, is responsible for carrying out the organisational business in accordance with guidance provided by the Board.
What is PCPs Mandate?
PCP’s goal is to enhance the volume and effectiveness of philanthropy for social development in Pakistan. The Centre seeks to attain this goal by:
* Creating a policy, legal and fiscal environment that enables giving for development and promotes the growth and development of nonprofit organisations (NPOs)
* Facilitating linkages between corporate philanthropists, nonprofit organisations and government for increased social investment
* Enhancing the capacities of nonprofit organisations as effective vehicles of philanthropy through a certification system and capacity building measures
* Assisting philanthropists (corporations, foundations, diaspora communities) in increasing the volume and impact of their giving
* Conducting research, policy reviews, analyses and compiling case studies
* Organising wide dissemination through internet, conferences, seminars and publicity campaigns
* Networking with international philanthropic organisations
The Centre does not engage in direct philanthropy; instead it seeks to facilitate altruistic efforts of others through support services. These services include working with and for the following constituencies:
Government
· Advocating an enabling policy, regulatory and fiscal framework for philanthropy.
· Facilitating public private partnerships between government, philanthropists and citizens
organisations in delivery of basic social services
Philanthropists
· Evaluating and certifying grant-seeking organisations, thereby providing the corporate sector a list of credible partners for their social development initiatives.
· Facilitating linkages with nonprofit organisations through publishing of directories of certified organisations.
· Documenting corporate giving and highlighting best practices.
· Providing legal and tax advice on philanthropy, assistance in setting up of foundations and corporate giving programmes.
Nonprofit organisations
· Introducing a voluntary certification regime
· Building capacity for certification
· Compiling databases/ developing Directory of certified organisations
· Building linkages between grant makers and recipient organisations
What is the rationale of PCP’s NPO certification programme? How is this linked with its mission to promote philanthropy?
The idea of establishing a certification programme for nonprofit organisations (NPO) in Pakistan emerged during the course of stakeholder consultations for its Enabling Environment Initiative (EEI). Various stakeholders including large corporate donors and diaspora philanthropists indicated that a mechanism was needed to identify credible partners in development. International donor agencies, government and individual philanthropists also expressed the view that philanthropic activity would increase in volume as well as effectiveness if the existing information and credibility gap between donors (individuals, corporate sector, government and international agencies) and recipient NPOs is bridged. Consensus emerged that the existence of a reliable system of updated information about various nonprofit organisations would facilitate giving.
It was in this context that PCP set to develop a system whereby reliable information about various organisational and programme aspects of NPOs is collected on a voluntary basis. The result was PCP’s NPO certification regime, which seeks to evaluate NPO on standardised parameters and widely disseminates information about organisations that qualify on these parameters. The parameters are benchmarks in critical areas of internal governance, programme delivery and financial management.
Certification, thus, offers a useful service to key stakeholders in philanthropic giving. On one hand, it promotes credible organisations through its databases and strives to link certified NPOs with various donors (individual as well as organisational). On the other hand, it provides the philanthropists with credibility assurance about their potential partner NPOs.
The Government of Pakistan, realising the value added by this service, statutorily linked grant of tax exemptions with evaluation and certification by PCP (or another Certification Agency). The Central Board of Revenue grants tax exemptions to nonprofit organisations after an assessment of their performance as public benefit nonprofit organisations. PCP’s certification of an NPO is considered by the CBR as a valid proof of good performance of an organisation, and thus forms the basis on which tax exemptions are granted. Income Tax Rules, 2002 were amended accordingly and PCP was authorised as the first NPO Certification Agency in Pakistan vide notification no. 1116(1)/2003 dated December 18, 2003.
What constitutes PCP’s mandate to function as a Certification Agency?
PCP is a professional, progressive and well-managed nonprofit organisation. Though young in terms of age, it occupies an important position in the development sector of Pakistan.
A thorough appraisal of PCP’s capability, competence and potential to act as a certification agency was conducted by the CBR. On the basis of this appraisal PCP was authorised by the Government of Pakistan to operate as the first NPO Certification Agency in Pakistan. Such authorisation was duly notified in the Gazette of Pakistan.
The Centre brings together in its Board of Directors many years of experience and commitment by a group of eminent citizens, representatives of civil society organisations and prominent business leaders, acknowledged for their exemplary contribution to social development.
The confidence reposed in PCP by various donors like CIDA, USAID, AKF (P), AusAID and UNDP speaks volumes about PCP’s credibility and track record.
Credibility and capacity of the Centre also speaks in the increasing awareness and understanding of the NPO sector about the rationale of certification as a mechanism for improving their accounting and governance structures and as a means of enhancing their credibility. This fact is evident from the number of organisations that have applied for certification and/ or are preparing to apply.
What relationship does PCP have with government?
PCP regards government as a primary stakeholder in national development and feels that the goal of finding long-term solutions to the nation’s most-pressing issues lies in partnership between all the three segments of the society – government, nonprofits and the corporate sector. PCP is working with the government to create an enabling legal and fiscal framework for nonprofit organisations in Pakistan. The government was widely consulted at all stages of our Enabling Environment Initiative and we received valuable input and feedback from all levels.
Government officials engaged actively in the EEI for creating an enabling legal and fiscal framework for citizen organisations. The government accepted EEI recommendations for providing increased concessions to the nonprofits. The government has also shown inclination towards partnering with the civil society organisations to ensure more sustainable and community-owned development projects.
What relationship does PCP have with Aga Khan Development Network?
PCP has very close ties with the Aga Khan Foundation (Pakistan) which is not only a major donor to PCP, but also provides valuable technical assistance on various programmatic dimensions. Aga Khan Foundation (Geneva) has also been involved with our Enabling Environment Initiative and has provided valuable support through Mr. David Bonbright, Director, NGO Enhancement
Does PCP fund organisations? How can our organisation apply?
PCP does not provide funding to organisations. However, we have launched a certification system for nonprofit organisations which will enhance their credibility and hence, the chances of obtaining funding from philanthropists (corporate, diaspora and individuals), government and international donors.
I need to get funding from either foreign donors or the corporate sector? How can PCP help?
The PCP has launched a certification programme for nonprofit organisations. The programme has been launched as a response to an explicit demand by the corporate sector. The certified NPOs will have enhanced credibility with the corporate sector and foreign donors and their chances of securing funding will increase considerably.
I and a few friends of mine want to get an NGO registered? Can PCP help us with this effort?
The PCP provides advice on the legal issues, requirements and different laws under which the NPOs can get themselves registered. Please click here to go to the Laws’ page.
A friend has told me that NPOs get benefits under the Income Tax Ordinance? Is this true? What are these benefits and how can our organisation get these benefits?
Yes. The NPOs get considerable benefits under the Income Tax Ordinance 2002. Please click here to go to the relevant page.
We have heard that PCP is preparing a directory of NPOs that will be sent to donors and the corporate sector? How can our organisation be included in this directory?
Yes. PCP will prepare a directory of certified nonprofits to be used by the donors and the corporate sector. Every certified nonprofit organisation will automatically be included into the directory
What PCP Can Do for Corporate Philanthropists
Does PCP have a corporate sector philanthropy support programme? How can the philanthropy programme of my organisation be helped?
Yes. PCP has launched a comprehensive corporate philanthropy program for facilitating linkages between corporates, NPOs and government. The objectives of the programme are to bridge the credibility gap between these sectors through awareness-raising and advocacy leading to creation of mutually beneficial linkages; understanding and disseminating the nature and scope of corporate philanthropy in Pakistan; and publishing a directory of certified nonprofits. This directory can be of immense use to the corporate donors who want to channel their organisations’ philanthropic contributions towards social investment.
Miscellaneous
We hear a lot that Rs 70.5 billion are given in Pakistan? How did PCP arrive at this figure? Does this figure of Rs 70.5b involve cash or kind or both?
The above-mentioned figures are from the first Annual Survey of Individual Giving, conducted by the Aga Khan Foundation (Pakistan) in 1998. The findings of the Survey have been published in Philanthropy in Pakistan: A Report of the Initiative on Indigenous Philanthropy, Aga Khan Development Network, 2000. As per the survey findings, Rs. 70 billion was approximated as an aggregate amount of philanthropic contributions by Pakistanis in 1998. Out of this amount, Rs. 30 billion accounted for donations in cash.
How can I access PCP publications?
The PDF versions of the PDF publications can be downloaded free-of-cost from our website. The order forms for published versions are available on the relevant pages of the website.
PCP Certification Programme
Why is there a need for a certification system?
In the last decade the nonprofit voluntary sector has emerged as a significant force in promoting social and human development in Pakistan. The contributions made by this sector towards development are considerable and are being acknowledged by all the stakeholders (government, national and international donors, people at large).
Extensive consultations conducted by PCP with these stakeholders highlighted the problems being faced by various donors (individual philanthropists, corporate donors, diaspora communities, international aid agencies, government) in the identification of nonprofit organisations that can become credible partners in social development.
For the donors both local as well as international this lack of knowledge results in a limited menu of available choices in terms of efficient, effective and credible donees. Representatives of corporate philanthropists and diaspora communities have indicated this lack of information as being the major impediment in their philanthropic activities.
The Government which aims to support public benefit nonprofit organisations through tax incentives faces similar problems. For this purpose the Central Board of Revenue (CBR) also requires a system that will yield reliable information about the NPOs.
At the other end of the spectrum, a large number of not so well known small and medium size NPOs face a severe resource constraint. They find their access to donor financing, so important for them in expanding their operations, limited by this information and credibility gap.
A careful review of these problems indicates the necessity that a system of objective, transparent and professional evaluation and certification of nonprofit organisations be institutionalised as a mechanism of ‘credibility assurance’ to the donors.
With this in view, PCP developed its NPO certification regime, which seeks to evaluate an applicant NPO against well-defined and objective criteria. These criteria cover different aspects of NPOs working such as internal governance, financial management and programme delivery. The certification system adopts a professional, objective and standardised approach in assessing organisational performance in these critical areas thereby portraying an exact picture of the standards of their operations and the true nature of their capabilities.
PCP’s Certification regime adds credibility to an organisation, having been evaluated and certified by an independent, professional and transparent agency. It creates opportunities for increased donor assistance through inclusion in PCP’s Directory of certified organisations. Certification also forms the basis for the organisation to claim tax benefits from the CBR.
Is the certification system working in other countries of the world as well?
Similar initiatives exist in many parts of the world, but the Philippines were the first country to develop a full-fledged NPO certification programme in 1990s based on standardised parameters. Pakistan has the distinction of being the second country to move in this direction. A similar example is Paraguay that has recently developed a certification regime for the nonprofit sector.
There are a number of countries, both developed and developing, that are struggling to cope with the issues of standards setting in the nonprofit sector. Increasingly, certification, based on an objective and professional assessment on standardised parameters is being seen as the way forward.
What is the rationale of PCP’s NPO certification programme? How is this linked with its mission to promote philanthropy?
The idea of establishing a certification programme for nonprofit organisations (NPO) in Pakistan emerged during the course of stakeholder consultations for its Enabling Environment Initiative (EEI). Various stakeholders including large corporate donors and diaspora philanthropists indicated that a mechanism was needed to identify credible partners in development. International donor agencies, government and individual philanthropists also expressed the view that philanthropic activity would increase in volume as well as effectiveness if the existing information and credibility gap between donors (individuals, corporate sector, government and international agencies) and recipient NPOs is bridged. Consensus emerged that the existence of a reliable system of updated information about various nonprofit organisations would facilitate giving.
It was in this context that PCP set to develop a system whereby reliable information about various organisational and programme aspects of NPOs is collected on a voluntary basis. The result was PCP’s NPO certification regime, which seeks to evaluate NPO on standardised parameters and widely disseminates information about organisations that qualify on these parameters. The parameters are benchmarks in critical areas of internal governance, programme delivery and financial management.
Certification, thus, offers a useful service to key stakeholders in philanthropic giving. On one hand, it promotes credible organisations through its databases and strives to link certified NPOs with various donors (individual as well as organisational). On the other hand, it provides the philanthropists with credibility assurance about their potential partner NPOs.
The Government of Pakistan, realising the value added by this service, statutorily linked grant of tax exemptions with evaluation and certification by PCP (or another Certification Agency). The Central Board of Revenue grants tax exemptions to nonprofit organisations after an assessment of their performance as public benefit nonprofit organisations. PCP’s certification of an NPO is considered by the CBR as a valid proof of good performance of an organisation, and thus forms the basis on which tax exemptions are granted. Income Tax Rules, 2002 were amended accordingly and PCP was authorised as the first NPO Certification Agency in Pakistan vide notification no. 1116(1)/2003 dated December 18, 2003.
How does PCP qualify to function as a Certification Agency?
PCP is a professional, progressive and well-managed nonprofit organisation. Though young in terms of age, it occupies an important position in the development sector of Pakistan.
The Centre brings together in its Board of Directors many years of experience and commitment by a group of eminent citizens, representatives of civil society organisations and prominent business leaders, acknowledged for their exemplary contribution to social development.
The confidence reposed in PCP by various donors like CIDA, USAID, AKF (P), AusAID and UNDP speaks volumes about PCP’s credibility and track record.
Credibility and capacity of the Centre also speaks in the increasing awareness and understanding of the NPO sector about the rationale of certification as a mechanism for improving their accounting and governance structures and as a means of enhancing their credibility. This fact is evident from the number of organisations that have applied for certification and/ or are preparing to apply.
A thorough appraisal of PCP’s capability, competence and potential to act as a Certification Agency was conducted by the CBR. On the basis of this appraisal PCP was authorised by the Government of Pakistan to operate as the first NPO Certification Agency in Pakistan. Such authorisation was duly notified in the Gazette of Pakistan in December 2003.
Is PCP the only Certification Agency in Pakistan? If so, doesn’t this create monopoly?
At present PCP is the only authorised NPO Certification Agency in Pakistan. A few organisations applied to the Central Board of Revenue for their appointment as Certification Agencies, but could not qualify on the very rigorous criteria and capacity assessment that CBR subjected them to for authorisation as a Certification Agency. A few applications are also pending with the CBR. Currently an appraisal of the capacity of these organisations is being conducted by the CBR so as to evaluate the competence level of such organisation to function as a Certification Agency. There is likelihood that in the near future there will be more than one certification agency in Pakistan. Income Tax Rules, 2002 provide for appointment of more than one NPO Certification Agencies in Pakistan.
In the mean time, the CBR will function as an alternate window. Until such time that at least two Certification Agencies are authorised by notification in the Gazette of Pakistan, the NPO shall have an option to approach the CBR directly for grant of tax exemptions. The CBR, in such case, shall conduct a performance assessment of the applicant organisation through its usual channels. Rule 211 (2 (g)) of the Income Tax Rules, 2002 provides to this effect. It has been further decreed by the CBR that the CBR officers would also apply the same standardised parameters for performance assessment of applicant NPOs as approved by the CBR for Certification Agencies (and contained in the certification model (may be downloaded from www.pcp.org.pk ).
PCP is thus so far the only NPO Certification Agency in Pakistan, yet it does not have a monopoly on evaluation and certification.
Will there be multiple certification agencies in future?
The Central Board of Revenue has received applications from a few organisations that have shown interest in the process of awarding certification to NPOs and have applied for their appointment as Certification Agencies. Some of these applications were rejected, as the applicant organisations did not meet CBR standards to functions as independent and professional Certification Agencies. Some other applications are under process. These organisations are currently being assessed by CBR in terms of their level of experience, understanding and professionalism for evaluating and certifying NPOs. There is a likelihood that in the very near future there will be more than one certification agency in Pakistan.
It is to be noted here that the evaluation of any and all NPOs carried out either by CBR or by any other certification agency so authorised by the CBR will be conducted solely on the parameters approved by the CBR. These parameters, contained in the Certification Model (available at www.pcp.org.pk), are an embodiment of the international best practice in critical areas contextualised in the Pakistani context. These provide for an objective and professional assessment of an applicant NPO. These parameters were developed through an extensive consultative process involving key stakeholders including NPOs, donors (especially corporate sector and international aid agencies) and the government. The participatory nature of development of these parameters has earned broad acceptability of these standards among the stakeholders.
Which Government Division/ Department is authorised to approve an organisation as a Certification Agency?
For grant of tax exemptions, the Central Board of Revenue (CBR) possess the authority to approve an organisation as a Certification Agency under clause (g) of sub rule (2) of rule 211 and sub clause (vi) of clause (b) of sub rule (1) of rule 220A of Income Tax Rules, 2002.
Such authorisation is given by the CBR after an appraisal of the technical, institutional and professional capacity of the organisation to function as an independent Certification Agency. Any independent organisation can apply to the CBR for such authorisation. The CBR shall appraise the capacity of such organisation as per the Rules framed by the CBR in this regard, and announce a decision.
All Certification Agencies (including PCP) are mandated to apply the same parameters in evaluation of nonprofit organisations as approved (and amended from time to time) by the CBR.
If tax benefits are not a consideration, any organisation may develop its own evaluation parameters and evaluate the performance of other NPOs as a professional service provided on request. Such a system of evaluation would not require any mandate or authorisation from any government department. In fact, most donors (national and international) have already developed their specific criteria for performance assessment of NPOs that apply for grant funding. What was missing was a standardisation of the criteria and mechanisms to deliver it on a cost-effective basis. Certification by PCP provides precisely the same and fills the gap.
What are the benefits of certification?
Certification offers a variety of benefits to various stakeholders.
Nonprofit Organisations:
* Certification adds credibility to the NPOs as having been evaluated and certified by an independent agency. The NPO’ performance, transparency and sense of mission gets acknowledged once it is certified.
* The certified NPOs are promoted through PCP’s databases, which assists these NPOs in diversifying their resource base, and accessing enhanced donor assistance.
* It forms the basis for an NPO to claim tax benefits from the Central Board of Revenue (CBR). Through an amendment in the Income Tax Rules 2002, the CBR has statutorily linked grant of tax exemptions under section 61 and clause 58 of II schedule with evaluation and certification by a duly notified certification agency. Certification basically offers a hassle-free and convenient mode of accessing these exemptions. It frees the certified NPOs from the arbitrary and bureaucratic procedures of the CBR.
* An important dimension is capacity building of NPOs. By identifying weak areas and providing professional advice, PCP builds the capacity of NPOs in the course of certification. Additionally, the centre also establishes linkages between specialised capacity building organisations and NPOs to prepare the latter according to certification benchmarks.
Donors:
* It provides donors (individual, corporate, diaspora and international) assistance in identifying credible partners for social development. It provides them with a menu of choices; a list of credible organisations, their areas of intervention and above all comfort and confidence about the antecedents of partner organisations.
* Certification acts as a filtering mechanism saving considerable time and resources spent on sifting through funding applications.
Government:
* Through an amendment in the Income Tax Rules, 2002, the CBR has statutorily linked grant of tax exemptions under section 61 and clause 58 of II schedule of the Income Tax Ordinance, 2001 with evaluation and certification by a duly notified Certification Agency. Though CBR has a mechanism of scrutiny and evaluation before tax incentives are allowed, it also needs a reliable system that will yield dependable information based on independent, objective and professional process of evaluation. Thus it facilitates the government in granting tax exemptions (essentially a form of public grants) to only those organisations that have a proven track record of efficient service delivery for the benefit of public at large.
* Government Departments and Divisions also require a list of credible organisations they can partner for social sector programmes. Certification provides such a list. It saves considerable time and resources that would be otherwise spent by various government agencies in selecting such partners.
Is certification exclusionary in nature?
Certification is a standard setting regime that promotes good governance, financial transparency and programme effectiveness in the nonprofit sector. Based on a system of thorough, professional and objective evaluation, it seeks to provide credibility assurance to various donors about the antecedents and capacity of nonprofit organisations. It also strives to promote certified organisations as credible partners for social development. The underlying objective is to facilitate credible organisations in diversifying their resource base and expanding their programmes.
This is not to say that organisations that are not certified are not credible partners for development. Many of them might not have simply opted for evaluation and certification. But this definitely means to say that organisations that meet the certification standards are credible partners for social development initiatives.
To a certain extent, certification is exclusionary. By promoting certified organisations as credible partners, by linking them with international aid agencies, Pakistani diaspora communities and corporate philanthropists, certification acts as an instrument of channelisation of resources to certified organisations. But this exclusion is based on merit, transparency, performance and effectiveness. It is hard to dispute the need to promote credible organisations as effective vehicles of social philanthropy.
Is the certification system biased in favour of large organisations?
Certification is not aimed at promoting certain types of organisations; instead it seeks to promote certain types of practices in organisations irrespective of their area of operation and scale. There is absolutely nothing in certification parameters that confers any competitive advantage to an organisation working, say, at national level or involved in more areas than one. A small community based organisation is as eligible to be certified as a large national NPO, provided it meets certification standards. It is essentially the robustness of governance structures; democracy and participation in decision-making; involvement of stakeholders; existence of effective monitoring mechanisms; grievance settlement processes; level of information disclosure; and extent of stakeholder engagement that really matter in the certification process. If an organisation is transparent in its financial management, participatory in governance and effective in programme delivery, it has all the chances of faring well on certification parameters, any other thing notwithstanding.
What are the mechanisms that PCP has put in place to ensure transparency and objectively in the certification process?
PCP has put in place the following operational and institutional mechanisms to ensure neutrality, objectivity and transparency in the certification system:
* The certification model has been developed with the objective to achieve a thorough, professional and objective evaluation of NPOs. For this purpose an effort has been made to develop parameters that are precise as well as objectively verifiable. These parameters have further been divided into sub parameters for the purpose of clarity. Clear specifications and guidelines have been given for the procedures to be employed for the evaluation of these parameters thereby ensuring that the evaluation done is free from the influence of the subjective judgement of the evaluator and is in accordance with a standardised format.
* The evaluation of an NPO is not done by an individual but by a team comprising of 3 people. In this team 2 people are involved in the desk review and the field evaluation of the organisation under the direct supervision of the Training Monitoring Evaluation (TME) Specialist. The report prepared by these people on the basis of desk review and field evaluation is subjected to intense scrutiny by the TME specialist.
* The evaluation report prepared by the TME specialist is first submitted to the Programme Manager Certification. The report is carefully examined by the Programme Manager in terms of accuracy of data, reliability of assessment and quality of presentation.
* As a final check the evaluation report is presented to the Certification Panel to oversee and approve the findings of the certification unit. The Certification Panel acts as the final authority to grant or refuse the certification application for an NPO. It is a five-member panel comprising of three nominees of PCP’s Board of Directors (not from within the Board) and two representatives from the government (one each from CBR and Ministry of Social Welfare). Board’s nominees are accomplished individuals of high eminence and include persons like Mr. Humayun Khan (formerly Foreign Secretary of Pakistan), Mr. Shamim Ahmad Khan (formerly Chairman Corporate Law Authority) and Ms. Bushra Gohar (Director HRMDC). The panel is a completely independent body and works in an autonomous manner free from any control of the government or PCP.
Who will regulate the PCP and what are the risks that it will be politicised in the process?
In its Board of Directors PCP brings together many years of experience and commitment by a group of eminent citizens, representatives of civil society organisations and prominent business leaders, acknowledged for their exemplary contribution to social development. The Board decides programme priorities and oversees their implementation. The presence of such a strong and involved Board safeguards against the risk of politicisation.
Credibility and track record of PCP are excellent. PCP is a professional, progressive and well-managed nonprofit organisation. Though young in terms of age, it occupies an important position in the development sector of Pakistan. The confidence reposed in PCP by various donors like CIDA, ADB, USAID, AKF (P), AusAID and UNDP speaks volumes about PCP’s credibility and track record.
Maintaining quality and ensuring credibility of certification process is the biggest challenge for PCP. This is addressed in the following ways:
* An effort has been made to make the certification parameters as objectively verifiable and specific as possible. Most of the parameters contain sub-parameters and the mode of verification is specified in each case. This leaves little to the discretion of desk reviewers and field evaluators at PCP.
* PCP has developed a monitoring system to ensure transparency and objectivity in the process. Emphasis has been on developing systems rather than depending upon personalities.
* Certification Panel is the ultimately authority to grant or refuse an NPO’s request for certification. The Panel is independent of PCP. None of the members is in any way associated with PCP, other than their membership of the Panel itself. Members are persons of established integrity, repute and professional standing. It is a good mix of government, citizen sector and corporate sector. Since each and every case is presented before the Panel for discussion, examination and decision, discretion/ subjectivity in the process is further reduced. The Panel provides the mechanism for external accountability of PCP Certification Unit by an independent and authority.
What is the present composition of the Certification Panel?
The Certification Panel (CP) is an independent body comprising leaders from the civil society, corporate sector and the government. Following comprise the Panel for a three-year term ending December 2006.
1. Dr. Humayun Khan (Chair Certification Panel)
Rtd. Foreign Secretary;
Ex-Chair, Commonwealth Foundation
2. Mr. Shamim Ahmad Khan
Former Chairman, Securities & Exchange Commission of Pakistan
3. Ms. Bushra Gohar
Director, Human Resource Management & Development Centre (HRMDC)
Peshawar
4. Dr. Qurat-ul-Ain Bakhteari
Chairperson, Institute of Development Studies & Practices (IDSP), Quetta
5. Mr. Arshad Saeed
Former Director, Shell Pakistan Ltd.
6. Mrs. Rashida Ikhlaq
Consultant Administrator, Lady Duffrin Hospital, Karachi
7. Mr. Khawar Khurshid Butt
Chief Direct Tax Operations, CBR
8. Mian Iftikhar ud Din
Chairman, National Council for Social Welfare (NCSW)
Will the government representatives in the Panel be present in their official capacity? What role will they play in this panel?
The certification panel comprises of 5 members. Of these 2 members are representatives from the Government of Pakistan and serve the panel as ex-officio members. One of these is an officer not below the rank of a joint secretary, from the Ministry of Social Welfare Development and the other is at least of the rank of Chief of Section, from the CBR.
The reason for involving these representatives of the Government is to build ownership of the concept and system of certification within the government. These representatives are from those two divisions of the government, which are major stakeholders in the certification process. Therefore, the input and perspective given by these members into the evaluation and certification process will play an important role in making this process multidimensional.
What is a Nonprofit Organisation (NPO)?
Nonprofit organisation is an organisation that is established in Pakistan for religious, educational, charitable, welfare or development purposes, or for the promotion of amateur sports. It is established with the express declaration that its assets and income will be utilised solely in the furtherance of its objectives and no portion thereof shall be distributed, paid or transferred directly or indirectly by way of dividend, bonus, profit or by any other means to its Board of Directors, organisers or any member of its general body.
Broadly speaking, an NPO would have the following distinguishing features:
* Institutionally separate from state
* Non profit distributing
* Some level of voluntary contribution in terms of time or resources
* Control of its own affairs
* Membership is not legally required
* Institutional presence and structure
An NPO can be registered under any of the Registration Laws in Pakistan. The most popular instruments of registration are (in that order) The Societies Act, 1880, The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961, The Trust Act, 1882, The Companies Ordinance, 1984. An organisation, however, may be registered under more than one Registration Laws.
A nonprofit organisation can still make a profit. The profit (more appropriately surplus) so made, however, must be applied for carrying out the objects of the organisation only and must not be distributed to the members, Trustees, or other private persons, directly or indirectly, under any circumstances.
The Income Tax Ordinance, 2001, however, defines an NPO in a different context. For the purposes of Income Tax, an NPO is an organisation approved by the CBR (or Commissioner of Income Tax) as a nonprofit organisation. So for the purposes of income tax exemptions, approval by the CBR or the Commissioner of Income Tax is necessary to be a nonprofit organisation.
Is ‘Charity’ and ‘Nonprofit organisation’ one and the same thing?
Yes, they are. A ‘charity’ or a ‘nonprofit organisation’ is an organisation established for any of the following purposes;
* Advancement of education
* Relief of the poor
* Medical relief
* Orphanage
* Homeless hostels
* Relief of special needs of people with disabilities
* Promotion of fine arts, literature, music etc.
* Natural disaster relief
* Rehabilitation of victims
* Legal assistance
* Advancement of religion (but not sectarianism)
* Welfare of the community
* Development of agriculture, aviation, fishing, horticulture and industries etc.
* Social development
* Promotion of amateur sport
* Advancement of any other object of general public utility
This is a fairly exhaustive list, and the very broad last item (advancement of any other object of general public utility) includes almost all kinds of public benefit activities. Thus service delivery and advocacy organisations of all hues qualify to be nonprofit organisations. The only condition is that their activities (and their assets) should not be for the sake of earning profit or gain for the private benefit of its individual Trustees, members, directors etc. So non profit-distribution is the key.
This is not to say that a nonprofit organisation cannot make profit. Sure it can, but such profit (or surplus) should be ploughed back to further the mission of the organisation and not be distributed in any way amongst its members, directors, staff etc.
Why does a Family Trust need certification?
Certification is voluntary and optional. It is not mandatory for any organisation to get certified. However in view of the various short and long term benefits provided by certification, organisations seek to take advantage of this process.
“Family Trust” is not a term defined under law. However, it is commonly understood to be a private Trust established and run for the benefit of a family (or a closed group of persons). It may also mean a public Trust established and run by a family for the benefit of public at large. Both kinds of Trusts may seek certification for the benefits it promises.
Tax exemptions are, however, available only to the latter i.e. the public benefit Trusts. A Trust established or being run exclusively for the benefit of a family or a group of persons is not a Public Trust and hence does not qualify for the exemptions offered by the Government of Pakistan.
Are Trusts treated differently than organisations registered under other laws as far as certification is concerned?
A Trust on filing a formal application to PCP for the purpose of certification will undergo the same procedure for evaluation and certification as any other nonprofit organisation.
However keeping in view the nature of its structure and work there are a few clauses in the Certification Model, which will be applied to the Trust somewhat differently. These include;
* One of the mandatory requirements for certification is regarding the quorum of meetings of the governing body of the organisation. In this it has been specified that for an NPO the number of members of the governing body should not be less than 4 whereas for Trusts this requirement in accordance with the Trust Act, 1882 has been reduced to only 3 members.
* Parameter (1.8 which inquires about the existence of a policy dealing with the issue of absenteeism of governing body members from the meetings of the organisation) applies to Trusts only when they apply for renewal of certification.
* Parameter 1.9 (dealing with the specification of the term of office for the governing body members) does not apply on Trusts.
* Parameter 1.11 (which investigates the existence of relations among the governing body members of the organisation) applies to a Trust only at the time of renewal of its certification.
Are religious organisations excluded from the certification system?
Any organisation involved in religious, social, welfare, charitable or developmental work is entitled to apply for certification and if interested, take benefit from tax exemptions. A religious organisation, if it applies for certification, would be considered as any other NPO and will be assessed and evaluated as such. The certification regime does not discriminate, in any way, against religious organisations.
However, any organisation promoting sectarianism is expressly excluded. PCP will not evaluate any organisation that propagates the views of any political party or religious sect.
‘Promoting the views of any political party or religious sect’ needs further elaboration. An organisation may be run by people of a particular religious sect and/ or may work for the benefit of a particular sect. This does not exclude it from the certification process. But if an organisation is promoting sectarianism (i.e. hatred or violence against other sects), it is excluded from the certification process.
Why does an NPO need Certification?
Certification is purely optional and voluntary. Hence it is not compulsory (in any way) for an organisation to get itself evaluated and certified. However, if an organisation so prefers, certification offers a range of benefits. It is a window of opportunity. Some of the benefits are listed below.
· Certification adds credibility to the NPOs as having been evaluated and certified by an independent agency. The NPO’s performance, transparency and sense of mission get acknowledged once it is certified.
· It provides donors (individual, corporate, diaspora and international) and the government assistance in identifying credible partners for social development. It provides them with a menu of choices, a list of credible organisations, their areas of intervention and above all comfort and confidence about the antecedents of partner organisations. It acts as a filtering mechanism saving considerable time and resources spent on sifting through funding applications.
· The certified NPOs are promoted through PCP’s databases, which assist these NPOs in diversifying their resource base, and accessing donor assistance.
· It forms the basis for an NPO to claim tax benefits from the Central Board of Revenue (CBR). Through an amendment in the Income Tax Rules 2002, the CBR has statutorily linked grant of tax exemptions under section 61 and clause 58 of II schedule with evaluation and certification by a duly notified certification agency. Certification offers a hassle-free and convenient mode of accessing these exemptions. It frees the certified NPOs from the arbitrary and bureaucratic procedures of the CBR.
An important dimension is capacity building of NPOs. By identifying weak areas and providing professional advice, PCP builds the capacity of NPOs in the course of certification. Additionally, the centre also establishes linkages between specialised capacity building organisations and NPOs to prepare the latter according to certification benchmarks.
What has broadly been the response from the NPO sector?
PCP’s certification programme is a new initiative and like all new ideas major stakeholders have subjected it to thorough debate, argument and discussion. The response from the NPOs has been mixed. Mostly indigenously financed, service delivery type organisations have been supportive of the idea of certification considering it as a means for enhancing their credibility. Some prominent members of the Pakistan NGO Forum (PNF), a major network of nonprofit organisations in Pakistan, have however been critical of the concept and process of certification, at least initially.
This resistance on their part is quite understandable; not only is certification a new concept but also reluctance by some NPOs to pass through the sieve is comprehensible, given the rigorous process of evaluation that certification involved.
Not everybody, however, shared these reservations. It may be pointed out that PNF’s provincial chapters, most notably Punjab NGO Coordination Council (PNCC) and Sarhad NGO Ittehad (SNI)) have all along been very supportive of the concept and process of certification.
