Saturday, November 22, 2008

SE Session 11: Social accounting and auditing

Today’s session was on an interesting topic called social accounting and auditing. Financial accounting and auditing are tried and tested methods for tracking and verifying the financial status of an organization and finding out if the financial goals are met are violated. Social accounting and auditing is a parallel concept developed on the lines of financial accounting and auditing in order to measure and verify the social goals of a social enterprise.

In case of a business enterprise, when a project is taken up, one sets a financial goal for the project. As the project progresses one tracks certain financial metrics of the project that will help assess the financial performance of the project when financial audit is done.

However a social enterprise has a double bottom line of financial profit and a social impact. So, when a project is taken up in a social enterprise, similar to having a standardized financial accounting procedure that can be used for enterprises catering to different sectors, one may have standard social accounting procedure that can be used be social enterprises irrespective of the sectors they are catering to.

In social accounting, one will set a social objective that complies to the mission of the enterprise, and plan activities that achieve the social objective, while upholding the values of the organization. For each activity planned, social metrics has to be measured that provides feedback about the social impact of the activities when a social audit is conducted. This is the basic idea behind social accounting and auditing. One difference between financial and social accounting is, for the former, quantitative metrics will suffice to accurately assess the financial performance of the enterprise. But for the latter, the both quantitative and qualitative measure has to be captured to assess the social impact.

Social accounting has three steps

  1. Getting ready: Social accounting is process that has to be assimilated as an inherent part of the social activity and is effective in giving a measure of social impact only in a long term (3 years). So, it is important for the members of the enterprise and stakeholders to understand the importance of the accounting. Steps have to be taken to get everyone’s approval to adopt social accounting as part of the enterprise’s initiatives.
  2. Social, Economic and environmental planning: We went through a case study of a social enterprise called Good Crafts that trains women from a Mumbai slum in employment related skills like making baskets, wall-hangings, soft-toys etc., and procures their products to sell it in overseas markets and shares the profit with the women. From the case study write-up we identified the
    1. mission statement of Good Crafts that addresses the purpose for which the organization is formed

Example: Good crafts aims to empower women and thus build sustainable and self-reliant communities in slums of Mumbai.

    1. the values it has to uphold in the organization as it strives to achieve its mission

Example: Being non-discriminatory to the beneficiaries (slum women), etc

    1. Objectives that are aligned towards the mission statement and the activities that achieve the objectives

Example: To empower women through training and creating of employment by

a) Providing relevant skill training

b) Encouraging and supporting self-employment

c) Providing crèche facilities for the working women’s children

    1. Metrics that measure the effectiveness of the activities

a)      Number of courses provided (quantitative)

b)      Number of self-employed women (quantitative) and how satisfactory to the women is the quality of support provided (qualitative)

c)      Number women whose kids are enrolled in the crèche.

During the exercise we learnt that

-         the mission statement should be specific, clear and should remain the same through the completion of the project

-         each activity taken up must  be tied to a specific objective. This is because; the metric that we measure should provide us feedback about the efficacy of the activity in achieving the objective.

  1. Social Economic and environmental implementation: This amounts to ensuring that relevant metrics are measured and qualitative data collected during the activity. Standard ways of collecting qualitative metrics are focus group discussions, questionnaires, surveys, and analyzing the minutes-of-meetings and status reports
  2. Social, Economic and environmental auditing: Once the data is collected, a social auditor may audit the accounted metrics to analyze the social, economic and environmental impact that the social enterprise has caused and provide feedback on how much the objectives are achieved.  Based on the inputs the implementation strategy may be modified for the better. Then the social audit may be repeated the next cycle to measure the efficacy of the modified strategy. So, the minimum recommended period for the audit is two years.


1.      It’s a standard auditing based on a proven model. It can be applied to all sorts of social enterprise, irrespective of their area of interest

2.      Scalable: Can be applied to a whole organization or just one program of the organization

3.      It is a process. It can accommodate other tools of measurement like “Social return on Investment” within itself to make social auditing complete.

4.      Can  be used as a strategic tool; can sell the results of the audit to stakeholders and to generate more support (money or the like)


  1. Need to allocate time, finances and resources
  2. Inaccuracy of surveys or scanty response to questionnaires
  3. Long term project, needs change in business model to accommodate the process

Wednesday, November 19, 2008

Face-to-Face with Comat technologies

Cross-posted from ThinkChange-India

TC-I Fundwatch has recently reported a Rs. 60-crore investment by Omidyar Network and Unitus Equity Fund (UEF) on Comat technologies, a profitable social enterprise doing business with the rural poor.

The CEO of Comat technologies Sriram Raghavan recently talked to NASSCOM Emerge Blog and offered some good insights into Comat's success in becoming a profitable social business.

Sriram's answer to one question explains the business model of Comat technologies succinctly.

"Q. Your own business is built around the Rural Business Centres. What exactly are these?

SR: It is a very simple concept. The rural business centre is primarily an access point for rural citizens, where we use technology to deliver different kinds of services - only those that help improve the quality of life in villages. We don’t want to sell soaps and consumer goods.

I’ll give you two examples. Take government certificates such as birth, death, land and property related papers. If you have to get one from the taluk or the district office, you have to go to that particular office, wait in a long line and follow cumbersome processes. We deliver it to the village directly – it takes about five minutes for the same cost, i.e., Rs. 15 per certificate. This makes a very big difference to the rural consumer.

The other area we are in is education. There are teachers in rural areas, but the quality of education is very poor. Our centres bring live classes from best teachers in cities who broadcast their lessons online, much like the erstwhile UGC programmes. Except that here, we have two- way interaction and the students and teachers can speak to each other."

Sriram Raghavan also shared a few of his experiences with rural consumers that can come handy to a new social enterprise venturing into the villages.

"In a typical agrarian set up, income generation is a twice-a-year cycle – unlike in urban areas where we earn monthly salaries. It is important to bear this in mind as you have to position your product around this insight."

With a turnover of Rs.55 crore while improving the lives of about 10 million rural inhabitants, there should be little doubt about the success of this unique business model. But the best aspect about the venture is that it has identified one critical handicap of the Indian villages and working successfully towards eliminating it. Better said by the man himself.

"All these years, rural India has been isolated; they have been “informationally disabled”. It is now time for a change and we want to ensure that."

SE session 10: Writing fund-raising proposal

I couldn't attend this class. So, this post owes its credit to my classmate, Manmohan Jain.

1. Most NGOs overseas average about 51% earned income. The percentage for Indian NGOs is much lower. Earned income is income generated by the NGO. It could be either by
- sales of goods (T-shirts, auction of paintings by hearing-impaired children)
- volunteer activities e.g organizing a qawali nite / music concert
- beneficiary created products (hand made carpets or some other handicraft of a particular community)
2. People give to People -
At the end of the day it is a person that you are making the appeal to. It may be a foundation that makes grants, or a government body or a corporate that you are seeking funds from, but eventually the pitch is made to a person - for e.g a trustee or board member.
Similarly when making their decision they are considering you, your credibility etc. You may have a great cause, your NPO may have good track record, but still it does matter in terms who is the person appealing to them.
A fraction of funds raised may be impersonal but any large grants - the "people to people" principle applies.
3. Understand donor - what appeals to them, what is important to them, what is their process for selection.
4. Pareto principle - how 80 % efforts might only give 20% returns and often it is core 20% activities that give most of the Return Of Investments so focus on those.
5. Acronym for sources of income - GGCIE (you can refer to the slide on this)
6. Fund raising cycle - PDCA Plan -> Do -> Check -> Act
Or on similar lines
Need -> Sources -> Method -> Select / Evaluate
with the last step feeding back into the first in each case. For example, you evaluate you results and re assess/replan your needs.
A good question to answer is "How will you sustain the work after the grant runs out?"

Plan: Research sources - who will you target? Refer to GGCIE. If it is Government what schemes and programmes are available?
V K Puri's "Government funding schemes for NGOs/NPOs in India" lists several hundred schemes and can be very useful resource.
7. We went over SSA proposal format and some of the sections in that.

If applying to Companies and CSR departments, they will certainly need metrics/measures

8. A good exercise in planning phase is to project the need over time and match to appropriate sources. For example
- quick or short term needs - selling T-shirts, individual volunteer donations of small amounts
- long term needs - grants from foundations/governments. This will have long lead time and typically be larger amounts.

9. Objectives of CSR:
- branding
- employee motivation and feel good factor
- shared objective e.g KidSmart ?
- good business
- social responsibility
Went through exercise in actual writing of funding proposal. The template used is in slides 10 to 14 The class broke up into 4 groups of 2 each and spent about 30 mins preparing a proposal and then presented to rest of class.

Each was critiqued by Prof Bhargava, pointing out what was good and what needed improvement.
Some key points
- be specific in your title if you can
- have facts, clear breakdown of expenses/projected needs
- shows you have done your homework
- have measures or impact - short term/long term, even can mention associated/corollary impact
e.g rehabilitation of street children addicted to drugs will reduce crime in the locality - in 1 year impact can be seen

After the exercise we saw short video where a trustee/grant making body official talked about how they decide and how it is never a cut and dry Yes/NO answer.
- donors would want to review and evaluate
- they would want to visit and assess
- they are assessing the individual /invidividuals making the application, what is their credibility, integrity, commitment etc
- the decision takes time and combines several factors
So it is not black and white - yes/no.
Caution: Never put any fact or any statistic that is not real or cannot be substantiated

We then saw a real proposal example . Hindi Martin Institute and went over its salient points. It was a real life actual proposal that got funding.
Finally he touched briefly on results versus indicators and the LFA - problem solving technique. (I need to learn more about this).