An investment guru has cautioned donors to take every precaution when choosing a worthwhile NGO to contribute to.
As a Portfolio Manager and Business Unit Head at Sasfin Securities, Mohil Bandulal has been in the business for over 30 years, and consequently, watched a number of companies become incredibly successful in their businesses, professions, and seen them accumulate significant assets.
“Many of my clients have invested in the country’s future and made significant contributions to many communities.
“The constitution of South Africa provides individuals with several fundamental socioeconomic rights that are important for them to live honourable lives. Some of them include the rights to habitation, sustenance, hydration, and medical care,” he said.
Bandulal declared that while the government is responsible for many of these obligations, non-governmental organisations (NGOs) have taken on some of these needs. “The spirit of Ubuntu becomes resilient in times of adversity and every penny and donation in kind matters when it comes to managing a charity or NGO,” he explained.
Making investment decisions and carrying out investment operations on behalf of clients or institutions is a core responsibility as a portfolio manager and it is therefore critical to fully research not only the worthiness but also the viability of an NGO, especially in the wake of some seemingly legitimate organisations that are in fact, not legit.
“Most of us are drawn to a cause/charity/NGO by an emotional tug. It touches our heart and sensibilities. However, before committing to a cause, I would respectfully submit that one does due diligence on the organisation before you commit your funds or your time to it,” he said.
The first step in determining the legitimacy of a charity is to check if is registered with the Department of Social Development.
Although registration is optional, one must keep in mind that it is frequently requested by donors as it gives them some assurance that the organisation can demonstrate that it has been properly set up and that appropriate management structures have been implemented.
“Proper documentation is imperative, requesting an NGO certificate, a public benefit organisation (PBO) certificate, and approval from the SA Revenue Service. If you are concerned about donating to an unknown organization, it is vital to get registration evidence, such as an NGO certificate,” Bandulal said.
Annual financial statements
Additionally, ask for three to five years of annual financial statements to get a sense of how the organisation handles, manages, and cares for their funds and assets. Furthermore, a lot of NGOs provide section 18A tax certificates. In principle, section 18A permits a taxpayer to claim a tax deduction up to a specified amount after making a genuine contribution to a PBO or other institution. As a result, a company will benefit from a tax decrease while doing good.
“Doing good requires reciprocity, so it’s crucial to hold NGOs accountable for their commitment to assist communities. Some NGOs assert that they significantly impact society, yet there is no supporting data.
“Even if it isn’t very complex, they should at least feature pictures of the job they perform, endorsements from individuals who believe in them, and numbers indicating how many people they helped. Most importantly, get to know the organisation’s CEO and staff. As a result, you will be able to have a deeper understanding of the abilities, dedication, and experience present within the organisational structure as a result,” Bandulal added.
Here is a checklist albeit not exhaustive ,that will further guide donors in deciding their NGO choice:
- How much of your donor funds are used for management expenses?
- How is an NGO governed?
- Is the board a voluntary one or not? If not, what are the board fees and what percentage does the board fee represent of the expenses?
- Are the board members creditable, honest, and trustworthy? Or are they there to simply add their position to their CV and to heighten their personal profile?
- Do the board members have the necessary skills, expertise, and experience to contribute to the organization?
- How involved is the board in the affairs of the NGO? Is their commitment to the cause limited to their board meetings or are they active in the affairs of the organization?
- How strong is the governance structure of the organization? Do they subscribe to any governance code or governance charter?
- Transparency: How transparent is the NGO in its activities and donor engagements
- How strong are the organization’s financial controls over the organization?
- What is the impact of the work that the NGO does?
- Does the NGO have a succession plan and is there sufficient departmental management experience?
“Everyone wants to live in an equitable world and working for an NGO has given me a full understanding of issues at the grassroots level. Understanding the actual difficulties individuals in less fortunate circumstances endure is, in fact, emotionally gratifying and makes one strive to do more and go the extra mile. More importantly, it cultivates a sense of contentment and gratitude for everything in my life,” he said