>> Mr. Azim Premji's keynote address at the "National Conference for Not for Profit Organizations

AHP’s Speech at National Conference on Social Accounting Standards in Bangalore on 9 August, 2002 for Not For Profit Organizations : Towards Best Governance, Financial reporting and accounting practices

Mr. Chandak, Dr. Haldia of ICAI, Special invitees, and distinguished delegates

I am very happy to be with you at this workshop organized by Institute of Chartered Accountants of India, in association with the Azim Premji Foundation.

The twin forces of liberalization and globalization have helped Indian companies not only in terms of improved quality in Products and Services, but also in building greater transparency in their accounting standards. Many companies have adopted global standards of governance, disclosures, accounting and financial reporting. At Wipro, for instance, we have been very stringent in ensuring that our Corporate governance and financial practices are on par with the best in the world. This helped us immensely when we listed ourselves at the NYSE. Other companies, who have been listed on exchanges outside India, have also realized the importance of such practices. Our own SEBI has been evolving continuously over the past five years to match global practices on governance and financial practices.

In contrast, when we started working in the social and development sector through the Azim Premji Foundation, we found certain important differences. There are enough NGOs and not-for-profit organisations working in India on various social and developmental issues. Most of them are genuine and consist of people who are passionate, competent and dedicated to the cause for which their organisations work. However, as compared to the corporate organisations, the key differences we found in their working styles were: (a) lack of result/outcome orientation and (b) lack of uniform accounting and financial practices.

Initially, many of these organizations threw up their hands when we requested them for quarterly reports and utilisation statements. For us, coming as we did from an organization used to quarterly reporting of audited accounts within 14 days of the end of the quarter, we found it difficult to adjust to such organisations. However, with the passage of time and with constant training, the very same organizations were comfortable in giving us audited reports on the information we sought.

We must appreciate that the demands on not-for-profit organization are growing at a much faster pace than what used to be the case five years ago. They have multiple challenges such as working in areas where the results are not completely within their control or where results are not tangible. Other challenges include having to interact with various state governments and manage in spite of a shortage of key talent, since few people find it very attractive to join the development sector. Combined with this now is the added pressure for most not-for-profit organizations to demonstrate global standards of uniformity and quality in governance, accounting, financial reporting and disclosure norms.

But there are many advantages and benefits too. Such uniform standards will enormously facilitate partnerships and collaborations among the not-for-profit organizations in an ongoing manner, for achieving common goals. It will also make it convenient for multilateral agencies to work with them without fear and suspicion. It is our experience that financial resources are not the constraint. There are many global organisations willing and wanting to provide financial assistance provided they are convinced about the merits of the organisations and of the organization’s ability to establish that the funds have been utilized for the purpose for which they have been granted.

Mandatory reporting with complete transparency and using global standards of reporting will have a great salutary effect. The immediate benefit will be the tremendous confidence it will generate among international donor organizations, leading developmental agencies and top corporate houses, which want to actively contribute towards corporate social responsibility. The second benefit we foresee is that it will inject the necessary self-discipline and self-assessment that such governance will bring. The third lasting benefit will be greater productivity, as the self-regulation and mandatory norms will encourage organizations to analyze the funds utilization in a more systematic and comprehensive manner.

Today, we have a gathering of some of the best minds and experts in the field of accounting and financial practices. I am confident that over the next one and a half days the deliberations in the conference will result in a comprehensive and usable set of guidelines towards the stated objectives of the conference. Thereafter, we will request ICAI to initiate necessary steps to ensure that these guidelines get incorporated as recommended standards of financial and accounting reporting for all the not-for-profit organizations.

I personally thank ICAI for taking the necessary lead in this issue. It is a pleasure for the Azim Premji Foundation to be part of this initiative and we are committed to extend the necessary support to make this happen.

I thank you all for your presence and participation in this conference and wish you all the best.

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