Why CSR funds go unspent and how you can ensure you’re fully utilizing them
With the onset of the FY 2019-20, India Inc moved into the 5th year of mandated CSR spending. The journey to this threshold has come with a mixed bag of achievements, issues and challenges.
Let’s hear the good news first. Under the aegis of the CSR mandate, India Inc has cumulatively spent more than INR 50,000 Cr on social development activities. The companies have spent this amount through various channels like implementing partners (NGOs), through a trust / society / section 8 company, through government partnerships or directly on their own. Among these channels, the most favoured was the partnership with the NGOs with 43% companies choosing this way. Merely 2% companies implemented their CSR programs in partnership with the central or state Government.
The not-so-good news is that companies have favoured only a handful social causes over the others. Cause areas like education and healthcare were heavily preferred over those such as reducing gender inequalities and rural development. The point to ponder is the huge rise in contributions made by companies towards the Prime Minister’s Relief Funds (PMRF). The law implies to contribute to the PMRF as a last resort for the companies who fail to channelize their CSR funds to any social cause through a structure program. the 667% rise in the contributions to PMRF indicates the failure of companies to identify social causes to invest in, design impactful programs and identify right partners to implement the CSR programs.
Although the companies have significantly invested in social development programs through CSR, the amount that has remained unspent is dispiriting. 53% companies spent lesser than the stipulated amount as per the law. About INR 10,000 Cr was not put to use owing to multiple reasons cited by the companies.
Some of the frequently mentioned reasons had to deal with lack of robust planning and execution methods. In other words, companies struggled to come up with a concrete policy backed CSR plan with clearly mentioned cause areas to support, programs to implement, partnerships to be forged and tracking mechanisms to be adopted. It is ironical in a country like India where there are more than 30 lakhs registered NGOs that companies find it hard to identify credible partners. Companies also mentioned lack of expert team to drive the CSR mission and vision into action. There were also instances when the implementing partner caused severe delays in executing the planned projects on ground. These delays were mainly due to implementing partners not accounting for the real needs of the target communities and thereby wasting considerable time in mobilizing them to be a part of the project. It also led to wrong timing of execution of the program activities. All put together, the CSR funds couldn’t be channelized to the target beneficiaries during the agreed timelines.
Some companies carry forward the unspent amount into the next year’s CSR budget. Others with the unspent funds, struggle to assign them to the NGOs in the last month of the financial year. These disbursals that are generally made in a haste are not milestone based and often backdated. This results in lack of accountability from the implementing partners towards the execution of funds in a structured and planned manner. Recently the Government had suggested that the unspent amount can be put into an escrow account and can be utilized over the period of three years. If still unused, the money will be then deposited to National CSR Fund. However, there hasn’t been any official notification in this regard yet.
The journey of five years into the CSR mandate indicates that the companies do find it challenging to identify impactful programs, credible and efficient implementation partners, build a robust monitoring and evaluation structures and communicate impact to the concerned stakeholders.
With our tool : Impact 360, companies can choose their impact journey, co-create the desired impact with the implementation partners and communicate the same to expand the circle of goodness. We aim to assist the companies to adopt CSR strategy aligned to the national priorities and SDGs by sourcing the impactful partnership opportunities. Impact 360 ensures that companies invest in the programs that align with their social responsibility vision and fulfil the needs of the target beneficiaries leading to the large scale and meaningful impact. Goodera platform supports Impact 360 to provide robust tech-based program monitoring with last mile visibility. This ensures that the CSR funds are being utilized in a pre-planned manner to undertake the program activities.
We are already in the third quarter of the Financial Year 2019-20. This is the right time for the companies to chalk out the plan to execute 100% of their CSR funds. Often, the CSR budget plans made in the beginning of the financial year are not exactly translated on the ground for all the reasons mentioned earlier. Impact 360 provides a curated bouquet of high-impact programs that cover various cause areas such as skill development, water, women empowerment to name a few. It allows companies to save time and hassle in scouting for projects especially in the last quarter to invest the leftover funds.
At Goodera, we aim to support companies to discover an assured way to create and communicate stories of change. The proven programs implemented by trusted NGO partners and socially tuned technology together, can ensure lasting impact.