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INTERNATIONAL COMMISSION ON IRRIGATION AND
DRAINAGE
2017
Report on Financial Sustainability
Version 2.0 Dated 25/08/2017
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Report on Financial Sustainability
TTaabbllee ooff CCoonntteennttss
I. Introduction 2 II. Distinctive Features of ICID as A
Non-Profit Organization 2 III. Financial Sustainability 4 1.
Strategic and Financial Planning 4
2. Sound Financial Administration 5
2.1 Organizational Structure 5
2.2 Financial and Accounting System 5
3. Analysis of Financial Position 6
3.1 Financial Analysis (2005-16) 6
3.1.1 Income 6 3.1.2 Expenses 9
3.2 Financial Prediction 11
3.2.1 Expenditure Prediction 11 3.2.2 Income Prediction 12
4. Sustainability Analysis 14
4.1 Financial Sustainability Assessment 15
4.2 Long-Term Financial Sustainability 16
5. Resource Mobilization for Vision to Action Plan 17
5.1 Income Enhancement 17
5.2 Resource Mobilization 18
5.3 Income Generation through Establishing Businesses Related to
a Specific Mission 19
5.4 Challenges of Resource Mobilization 19
5.5 Strategies for Achieving Financial Sustainability 20 IV.
Summary, Conclusions and Recommendations 20 Summary 20
Conclusions 21
Recommendations 22
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Report on Financial Sustainability
I Introduction Many factors, such as the operating environment,
national and local policy, the activities of other related
organizations, the availability of skilled personnel, and the more,
influence the sustainability of any organization. Understanding the
nature and impact of the factors that take place in its external
environment are critical for the existence of the organization with
a view to anticipate and respond to such changes. Financial
capacity of an organization, which consists of resources that give
an organization the ability to seize opportunities and react to
unexpected threats while maintaining general operations of the
organization is one of them. It reflects the degree of managerial
flexibility to reallocate assets in response to opportunities and
threats.
Financial sustainability refers to the ability of an
organization to maintain financial capacity over time. For an
organization to provide a level of stability in its outputs and
objectives, the organization should be able to maintain a flow of
funds from annual to multiyear time span. It enables the
organization to cover administrative costs and to prioritize
activities that enable the organization to accomplish its missions.
The challenges of establishing financial sustainability are central
to organization’s success.
Like any other non-profit or civil society organisation,
financial sustainability is crucial for the long-term survival and
effectiveness of the International Commission on Irrigation and
Drainage (ICID). This report assesses the financial sustainability
of ICID as of now, and identifies the challenges ahead to achieve
the desired levels of financial stability that guarantees its
operational success in achieving its vision, mission and goals. It
takes stock of the financial health of ICID starting 2005 up to the
present and examines the financial sustainability of ICID
operations for the next 10 years based on the projected revenues
and expenses, within the current scope of activities. The report
explores the ways and means to achieve financial sustainability,
the ability of ICID to diversify income and access new resources.
It also touches upon the need for resource mobilization in order to
realize the newly adopted Vision to Action 2030 through the
identified goals.
This report has been prepared by the Secretary General ICID, in
consultation with the Management Experts from Indian Institute of
Management, Calcutta and the data analysis has been carried out
in-house by Executive Director, ICID.
II Distinctive Features of ICID as a Non-Profit Organization
ICID is an international professional non-profit organization, set
up in 1950 with National Committees (NCs) in various countries as
its members. It is essentially a network of networks that caters to
the needs of all the stakeholders involved in agriculture water
management in member countries around the world. Most of the NCs
are closely linked to government departments dealing with
irrigation and drainage in the respective countries and represent
various stakeholders engaged in agriculture water management.
Together with International Commission on Large Dams (ICOLD), it is
one of the earliest international non-profit organizations working
in the field of water.
In the absence of any single identified agency responsible for
the water related issues within the UN System, many UN specialised
agencies have been dealing with water related subjects close to
their core activities. Water related issues, such as Weather (WMO),
Food (FAO), Droughts (CBBD), and Environment (UNEP), have been
dealt by the Specialised UN agencies or the UN Programs specified
within brackets. Twenty three such agencies are presently
coordinating their activities under the banner of UN-Water.
The membership of ICID, which has reduced from 80 in 1983 to the
present 60 is an indication of the dwindling global interest in the
irrigation and drainage and how the sector is perceived to
contribute to the GDP of the country. Interest of many governments
in the agriculture sector has waned steadily after
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peaking in mid 1990s. As such, in many countries, there is
dwindling interest of governments in supporting their NCs for
participating in ICID activities.
With the increasing climate variability due to climate change
and its impact on food production, which resulted in global food
crisis in 2007, agriculture has once again gained some attention
from the policy makers. Agriculture water management is a
multi-disciplinary and multi-stakeholder pursuit. To address this
issue, at least partially, ICID NCs have started to broad base
their membership to include various stakeholders from within the
country. At the same time, starting 2012, ICID has opened up its
membership for individuals, institutions and corporates.
Scope of activities desired to be undertaken to fulfil the
objectives of ICID has been increasing steadily since 1990s,
encompassing the social, economic and environmental aspects of
irrigation and drainage management. With the adoption of the
Sustainable Development Goals by the United Nations, requiring the
countries to achieve these goals by 2030, ICID has reoriented its
Vision, Mission and Goals and drawn up strategies to support NCs in
fulfilling their role in achieving SDGs related to agriculture
water management.
Following the 1992 Environmental Conference, a number of new
international NGOs such as World Water Council (WWC) and Global
Water Partnership (GWP) with open agenda have entered the global
water scene. Late 1990s and early 21st Century has seen these new
NGOs attracting the attention of various donors such as national
development agencies, foundations and philanthropic organizations.
Many UN organizations and agencies who had been running programs
related to their core expertise, started seeking more funds from
member countries for their respective water programs.
Streams of income for NGOs typically include membership
subscription, contributions, contracts, fee for service, donations,
and grants. These funding generally come from four kinds of
sources: a) The federal, state, and or local government agencies;
b) Financial institutions; c) Foundations; and d) Philanthropic
organizations. In most of the cases, apart from federal, state or
local agency funding, which are unrestricted i.e., they can be used
by the organization according to its mission and goals, the funding
from all other sources are largely restricted and designated
against certain programs and activities that are aligned with the
mission of the funding agency. These funds are termed restricted
funds.
Sources of revenue for ICID activities largely consist of
membership subscription contributed by its National Committees,
which have largely been financially supported by the respective
government organizations. Apart from this a periodical revenue
source has been the special contributions made by the NCs hosting
ICID triennial event: the ICID Congress once in every three years.
It was only at the turn of the last century that other sources of
revenue, such as royalty from the ICID Journal and rent from the
letting out of office space started. Apart from the funding to the
tune of Euro 1 million provided by Government of the Netherlands
from 1999-2003 for the Country Policy Support Program (CPSP)
Project, funding from donors have been restricted to minor
activities such as one-off trainings, preparation of country
reports etc. There have been isolated cases of the family of Dr N D
Gulhati providing an endowment fund to organize a lecture in his
name as part of ICID’s triennial Congress.
The unrestricted funds constitute the bulk of the revenue for
ICID and are used as per the directions of the International
Executive Council, the general body of ICID for the activities that
help ICID to achieve its mission and goals. These unrestricted
sources of revenue do not constrain ICID in implementing its
programs and activities. ICID has not tapped other three sources of
funding such as financial institutions, foundations or
philanthropic organizations, which provide funding to implement
programs and activities that are strictly aligned with the mission
of the funding agency. Restricted funds that can only be used for
specific purposes, which are contributed by a specific donor, have
been an exception rather than the norm in the 68 years history of
ICID. As such the need to maintain a balance between restricted and
unrestricted funds has never been under serious consideration of
ICID management.
In practical terms this means that the financially
sustainability of ICID is directly linked to the annual
subscription being agreed to be contributed by its members and as
such is directly related to their capacity to contribute and the
financial models being followed by the NCs themselves. The
over-dependence of ICID on the subscription revenue, the inability
of NCs to raise enough resources to be
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able to contribute to higher level of program activities has
resulted in curtailment of many desired programs and activities and
the financial sustainability and is discussed in the following
section.
III Financial Sustainability Financial sustainability of a
non-profit organization like ICID needs to be evaluated in relation
to its four fundamental pillars:
1. Strategic and financial planning;
2. Sound financial administration;
3. Sound financial position; and
4. Income diversification and generation.
Strategic planning, supported by financial planning on one hand,
and transparent, financial administration are the most important
pillars on which the financial sustainability of a
non-profit-organization is built. These two determine the financial
soundness of the organization that enables it to meet the financial
requirements for undertaking its activities. Financial analysis
that includes a study of the past trends in income and expenditure
and helps to set up a model for financial projections for the next
10 years, are presented. The factors that determine the financial
sustainability are analysed. In concluding section resources
mobilization for income diversification and own income generation
are discussed.
1. Strategic and Financial Planning
Strategic planning helps clarify an organization’s mission and
objectives as well as prioritize the actions needed to accomplish
them. Effective planning is also a prerequisite for accessing
international funds. Over the years, the mission and objectives as
defined in the constitution of ICID essentially serves as the
‘action plan’ which is reviewed from time to time by the Executive
Council. In the absence of a specific strategic plan, the
activities have been largely driven by the priorities set by
various working groups.
Following adoption of Action 2030 for Sustainable Development by
the UN in 2015, ICID, based on its Vision 2030, adopted in the 66th
IEC in October 2015, has developed a strategic plan to meet its
organizational goals. The Vision to Action, prepared to realize the
vision, is vastly ambitious. It will require implementation of
certain new programs, a reorientation of a number of its existing
programs and accelerate others requiring allocation of adequate
resources. Since a strategic plan evolves from a conceptual level,
it does not adequately take into account the resources available to
an organization, or its capacity to obtain new resources. It is
therefore essential to examine the financial sustainability of the
organization and identify the actions required to bridge the gap
between the present resources and the resources required to
implement the vision.
Financial planning makes it possible to implement the actions
envisaged under the strategic plan. Presently, ICID works through a
short term (1-3 years) financial plan, where CO presents the
projected available resources and the activities that could be
undertaken, which has often resulted in pruning down on the
activities and priority being given to the activities that are
indispensable to continuing the mission of the network.
If the Vision to Action is to be made a reality, an reassessment
of its traditional sources of revenue need to be re-explored and
develop a, a mid-term (4-10 years) financial plan based on
different scenarios, ranging from the minimum feasible to the
ideal, needs to be prepared. This report on financial
sustainability will serve as an inquest into the need and potential
of the organization and help undertake the next steps in developing
a financial plan for journey from Vision to Action.
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2. Sound Financial Administration
2.1 Organizational Structure Registered as a Society under the
Indian Society Act 1860, ICID has enshrined in its Constitution and
Bye-laws, procedures for administration and financial management
largely set out in the Financial Rules and Regulations for
government organizations in India. It is governed by the Income Tax
Rules, Property Tax Rules, Employees Provident Fund Rules (EPF
Rules), Goods and Service Tax Rules promulgated by the government
and changed from time to time. Efforts are made to use ICID
resources effectively and ensure transparency in fiscal management.
Secretary General, as the Treasurer of the Society, is assisted by
a qualified Accounts Officer and an Accounts Assistant in this
effort. Internal controls were strengthened starting 2012 by
outsourcing the concurrent audit to ensure timely submission of
various returns and other statutory compliances etc.
The financial accounts of the Commission, duly audited by
independent Statutory Auditors, have to be presented to its General
Assembly, the International Executive Council (IEC), the Income Tax
Department and the Registrar of Societies in India.
As a non-profit organization earning its income in foreign
currency, it is mandatory for ICID to annually file multifarious
returns applicable to any other not-for-profit organization. Over
the last ten years, driven largely by the reform process in India,
there have been substantial changes and updating in most of the Tax
laws governing non-profit organizations. The small finance team in
the Central Office has to keep track of these changes and to comply
with them.
Due to the abolition of the post of Accounts Officer since 2006,
as part of compulsive reduction in the staff strength in Central
Office, the changes in financial regulatory structure in the
country and some lack of oversight, during 2005-2013, the
accounting system could not fully meet organization’s needs, which
resulted in shortfalls in regulatory compliances that resulted in
loss of revenues on account of non-compliance such as:
(a) Delayed filling up of the Income Tax return for the EPF
Trust Fund; (b) Non- adherence to the FCRA rules; and (c)
Non-adherence to the Service Tax Rules
Due to gaps in organizational structure, effective financial
management of available assets such as bank accounts, property and
investments, could not be carried out effectively resulting in loss
of income. Due to lack of oversight, certain checks and balances in
the reporting procedures also went un-noticed.
2.2 Financial and Accounting System
Diligent stewardship of financial resources and prudent
decision-making are critical to the financial sustainability of any
organization. Transparent financial accounting serves the
information needs of not only the internal stakeholders - NCs and
government officials, but also the external users - funding/
collaborating organizations, potential donors, bankers, and
partners as well as fulfilling statutory compliances. Financial
accounting in ICID follows the accounting principles accepted of
non-profit organizations in India. These include design,
implementation and maintenance of internal controls relevant to the
preparation and presentation of annual Financial Statements.
Statutory Audit is carried out by an external registered Chartered
Accountant, appointed by the Council for a three-year period, at a
time, in accordance with the ICID bye-laws. The statutory audit
produces summary-level statements that describe the financial
status of the organization using regulated and standardized formats
of financial book-keeping such as: balance sheet,
income/expenditure statement, and cash flow in accordance with the
standards prescribed by Institute of Chartered Accountants in
India.
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A Permanent Finance Committee (PFC), established in accordance
with the Constitution, undertakes yearly financial analysis of the
organization and makes appropriate recommendations to the IEC
regarding various financial matters. It keeps a watch on the
expenditure vis-à-vis the desired services and activities and makes
appropriate suggestions. The mechanism is effective in principle
but needs more active participation from financial experts
representing NCs.
Annual budget is presented to IEC, generally held between
Sept-November for the next Financial Year (April-March), duly
scrutinized by PFC. A rolling short-term financial plan, projecting
expenditure and revenues for next three financial years, is
presented along with the next years’ budget. Any additional
expenditure deviating from the sanctioned budget is put up to the
Management Board for interim approval, which is later put up to the
IEC for final approval.
Grant reports are submitted to the donor agencies for activity
related funds. As and when ICID decides to generate income through
business activities and gets funding from the donors, it will have
to undertake financial reporting according to the requirements of
donors as well and would need strengthening of its financial
unit.
3. Analysis of Financial position
A not-for-profit organization can fulfil its objectives if it
has healthy financial position i.e. if it has sufficient funds to
meet the expenditure required to be incurred for its planned
activities based on long-term strategic plan, aimed at realizing
its vision and goals. This section undertakes detailed financial
analysis of the financial position of ICID during 2005-2016, and
makes financial projections for the next 10 years.
3.1 Financial Analysis (2005-16) Analysis of the financial
position since 2005 has been carried out to identify the
constraints the organization had to face in fulfilling its
objectives and to identify the actions required to overcome those
limitations in the future. The year 2005, has been chosen as the
base year for present analysis, as the last review of ICID was
undertaken following the decision at the 56th IEC in Beijing held
in 20051.
3.1.1 Income
There are five major streams of income of ICID: a) annual
membership subscription from NCs; b) share of registration fee
collected by the host NCs while organizing ICID events (as special
contribution); c) rent from letting out of the office space in the
Central Office Building in Chanakyapuri, New Delhi, India; d)
royalty from the sales of Irrigation and Drainage Journal, the
flagship knowledge management (sharing and dissemination) tool; and
e) the interest from the bank deposits. For ease of presentation,
income from royalty, bank interest are clubbed under the heading
“others”. Yearly income since financial year 2005-06, from each
category, both in percentage of the total income as well as in
absolute terms, is presented in Figure 1a and Figure 1b.
Annual membership subscription (30-32%)
ICID is essentially a membership network of National Committees
from (55-60) countries engaged in agriculture water management
activities. Formulae for calculating the membership subscription
due from a NC is very well thought of and was agreed to, for the
first time during the 16th IEC meeting in 1966. It is based on the
three components: a) The fixed amount, b) Capacity of the country
to pay, and c) The interest of the country in the irrigation and
drainage. Over the years these components have been reviewed by IEC
thereby determining the subscription made by each of the NC. Based
on the formulae agreed to in 1991, and using the updated area
benefitted, the subscription were recalculated and form the base
subscription value ever since. The subscription were increased by
10% in 1996 over the base subscription and by another 4.5% in 1999
on an ad-hoc basis. Due to falling effective revenues, a
uniform
1 At the 56th IEC meeting held in Beijing on 17 September 2005,
a decision was taken to constitute a Steering Committee for
External Review of ICID. Towards this purpose, Internal Review
Committees in respect of all the three Permanent Committees,
i.e. PCSPOA, PCTA and PFC were also constituted.
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annual increase of 3% in subscription, starting from the year
2008, remained in force till 2014 when the 66th IEC of ICID decided
to maintain a status quo regarding annual membership subscription,
till a decision is arrived in this respect.
Year-wise subscription due from the member NCs and the
subscription actually realized is presented in Figure 1c. During
the period under consideration, on an average, in Dollar terms,
there has been an annual increase of 2.6% in the subscription due
from the NCs while the average annual increase in the revenue
realised on this account by ICID has been 1.95%. The reason of
slower rise in subscription revenue realised by ICID is withdrawal
of some of the European NCs from membership of ICID.
0.00
10.00
20.00
30.00
40.00
50.00 Figure 1(a). Categorywise Income
Subscription Special contribution Rent Others
INR in
0%
20%
40%
60%
80%
100%
Figure 1(b). Categorywise Income as % of Total Income
Subscription Special contribution
150.00
200.00
250.00
300.00
350.00 Figure 1(c). Yearwise Subscription
Subscription Received
US$ in
'B' Linear fitting of subscription received'A' Linear fitting
of
subscription invoice
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During the last five years, some of the NCs such as Chinese
National Committee and Korean National Committee have made special
subscription (grants), earmarked for the specific activities
envisaged by ICID as part of its annual action plans, such as,
training and capacity development, WID Prize etc. JNCID, CTCID and
CNCID have also contributed for bringing out special publications
such as special issue of Irrigation and Drainage Journal. On a
couple of occasions, grants were received from World Meteorological
Organization for implementing trainings and workshops identified as
part of ICID activities.
Share from the registration fee of ICID events hosted by NCs
(8-10 %)
Share from the registration fee of ICID events is one of the
most unstable source of income both in frequency as well as amount.
Three-yearly cycle of ICID events has two large events one Congress
and another World Irrigation Forum, with large gatherings as well
as larger share of 35% in the registration fee. The third being the
Regional Conference with smaller participation and lower share of
15% generate smaller revenue. Other less frequent events are the
International Drainage Workshop and International Micro-Irrigation
Conference which are held every five years or so. The events are
specialised with comparatively smaller gathering and only 5% share.
In certain cases, the host NCs are unable to make the required
contribution for various reasons. As such, there is large variation
in the fee so generated from year to year.
Share in revenue from registration fee collected by host NCs of
ICID events is received as special subscription. This revenue
sharing is for the support provided by CO towards organization of
the events, encouraging international organizations to participate
in ICID events following the practice in other international
organizations in respect of registration fee charged, waiver of
registration fee on reciprocal basis, and encouraging participation
of Young Professionals etc. that makes the events internationally
relevant.
Rent from letting out of the Office Space (35-60%)
In 1962, ICID was presented a piece of land measuring 4046 sq. m
by the Government of India on lease for 99 years. NCs and
governments from 30 member countries contributed funds to build
office accommodation of 1950 sq. m in 1964-65. During the late
1990s there was acute financial crunch. While there was reduction
in staff in CO, a number of activities were also had to be
curtailed. In order to increase revenue sources, additional floor
area of 690 sq. m was constructed which was rented out in June
2004. By reorganizing the space occupied by ICID staff, the rented
area was increased to 1025 sq. m in June 2013 and to 1121 sq. m in
2015. This was made possible by making certain modifications in the
sitting arrangements and consolidating the ICID library facilities.
Presently, 1121 sq. m area is rented out at the current market
rates with provision for increase by 18% every three years.
During the last ten years, as could be seen from Fig. 1(a), rent
from letting out of office space, on an average, has contributed
35-60% of total revenue. This asset, crucial to the financial
sustainability of the organization, needs to be managed
efficiently.
Royalty from the publication of Irrigation and Drainage Journal
(2-3 %)
Sale of ICID publications has been one of the sources of revenue
since the early days of ICID. With the spread of IT, during the
last ten years, the hard copy sale of publications has lost its
ground and more and more institutions have been making available
their publications in the public domain in electronic format. ICID
has also changed its publication policy, thereby bringing out
publications in electronic formats and making them available free
of charge to all of its stakeholders. Therefore, the last ten years
the average contribution to the revenues under this head has
reduced almost to be negligible.
From the beginning of this millennium, when the publication of
the ICID Journal on Irrigation and Drainage was assigned to M/s
Wiley and sons, London, in 2001, ICID has been receiving royalty on
the sale of the Journal which accounts to about 2-3% of the total
annual income of ICID. It is expected to remain at this level in
the future as well, since no substantial increase in the sale of
the Journal is expected.
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Interest from the bank deposits (6-8%)
Due to good interest rates in Indian banks, during the last ten
years, there is a significant contribution from the interest earned
on the deposits in the banks, which accounts for 6-8%. Since 2013
it has increased, mainly on account of substantial Security Deposit
received from the lease of office space. A substantial part of the
surplus is kept with the HSBC Bank in London, apparently with a
view to guard against any restrictive changes in the foreign
currency regulations in India. This bank asset does not earn any
interest.
Foreign exchange fluctuation Out of the above five categories of
income, first three largely depend on the exchange rate of US$ and
Indian Rupee. During the period under consideration, the exchange
rate has changed considerably which is presented in Figure 1d.
Starting from an exchange rate of 1 US$= Rs 44 in 2005, it rose
slowly to Rs 50 up to 2011. Thereafter, it has steadily increased
and was at its maximum of Rs 66 in January 2016. Presently, it
hovers around 1 US$= Rs 64. 3.1.2 Expenses
Major components of expenditures are: a) salaries of staff at
the Central Office, b) knowledge management activities, c) running
and maintenance of the office and, the assets and d) the taxes on
various activities. These are discussed in brief. Category wise
expenditure over the period is presented in bar charts in Fig. 2a
and Fig. 2b.
Salaries of staff
The major expenditure of ICID is in terms of the salary towards
the staff at Central Office deployed for undertaking the activities
that accomplish the mission of ICID. These activities include: a)
exchanging information among the member NCs; b) providing technical
support for organization of Congresses, WIFs, Conferences and IEC
meetings; c) publishing conference proceedings, technical reports
and special publications; maintaining website; d) facilitating
collaboration among NCs; e) cooperating with other international
organizations; f) organizing trainings; g) supporting programs such
as WatSave; and h) maintenance of the assets. A number of new
initiatives such as IRPID, Heritage Irrigation Structure2,
Technical Support Unit3; and World Water System Heritage program4
have been taken up during the last three years, without any
additional staff through efficient management and introduction of
ICT tools.
2 http://www.icid.org/icid_his1.php 3
http://www.icid.org/tsu.html
0
10
20
30
40
50
60
70
0
5
10
15
20
Figure 1(d). Yearwise Subscription and US$ Exchnage rate
Subscription received Exchange Fluatuation Exchange rate
(1US$)
INR in 1UD$= INR
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Expenditure on staff salaries has varied from 50% during 2005-06
to 80% during 2010-11, after which it has come down to about 40% of
the total expenditure (Fig. 2c). During the period under
consideration, substantial cuts were made in the staff strength
which was reduced from 25 in 2005 to 17 in 2011. In general the
salaries in India and consequently in ICID have increased by about
10% per annum on an average due to inflation5 of 7.8% (annual
average) and the normal staff increments.
Knowledge Management activities
Expenditure related to organization of technical conferences,
translation of conference documents in to French, purchasing of
mandatory number of ICID Journals from M/s Wiley for distribution
among the NCs and WG members, organization of training and
workshops, constitute about 10-18% of the total expenditure. In
absolute terms, the expenditure on account of knowledge management
has steadily increased during the last 5 years. ”Vision to Action”
has identified many such activities under this head.
Maintenance
Maintenance that includes upkeep of the office and maintenance
and updating of hardware and software; maintenance and renovation
of the Central Office Building, and professionals’ charges for
security, gardening, auditors’ fee, etc. have varied between
10-18%. During the last five years, expenditure on maintenance and
renovation of office has increased taking care of the deferred
maintenance and bringing up of the Office Building to safe
standards and in order to retain the lease of office space. The
office building is an important asset that serves as the source of
major chunk of ICID’s revenue.
Taxes
Expenditure under head taxes includes property tax (which
depends on the commercial value of the building and is around 25%
of the rent received) and the land and development tax (which is
10% of the rent earned from the building on the land acquired on
lease) has varied between 5-18%. During the period 2008-2012 some
of these liabilities could not be settled in full due to cash flow
constraints. These liabilities were cleared later during 2013-14
and 2015-16 (see Figure 2a and 2c).
4 http://www.icid.org/wsh_icid.html 5 As per the World Bank
Reports, the annual inflation based on CPI in India during the
years 2005-2016 has been: 4.2, 6.1, 6.4, 8.4,
10.9, 12.0, 8.9, 9.3, 10.9, 6.6, 4.9 and 4.9, respectively (Avg=
7.8%).
http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?end=2016&locations=IN&start=2005&view=chart
0
5
10
15
20
25
30
2005-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
15-16
Figure 2(a). Categorywise Expenditure
Salaries KM Maintenance+Others Taxes
INR in
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3.2 Financial Prediction Financial prediction or forecast6 is a
fiscal management tool that presents estimated information based on
past, current, and projected financial conditions. A financial
forecast identifies trends in external and internal historical
data, and projects those trends in order to provide the
decision-makers with information about what the financial status of
the organization is likely to be at some point in the future.
3.2.1 Expenditure prediction
The financial model used to forecast the revenue and expenditure
for the next 10 years is based on the historical trend during the
last 11 years presented in the sections above. Projected
expenditure is based on the following assumptions:
(a) the programs and activities will remain at the present
level, (b) the inflation at the rate of 5% per annum7, and (c) the
asset base of the organization will be maintained
The topmost line in Figure 3a shows the total expenditure. The
lowest graph represents expenditure only on salaries of the staff,
while the middle graph represents the expenditure on salaries and
obligatory maintenance. The bump in projected expenditure during
the 2017-18 is attributed to the payment of arrears due to
anticipated rise in salaries as a consequence of proposed revision
of pay structure in ICID.
6
http://www.businessdictionary.com/definition/financial-forecast.html
7 Average inflation forecast for India by IMF and OECD is 5 and 4.5
percent respectively.
https://knoema.com/sllksof/india-inflation-
forecast-2015-2020-and-up-to-2060-data-and-charts
0%
20%
40%
60%
80%
100%
Figure 2(b). Categorywise Expenditure as % of Total
Expenditure
Salaries Knowledge Management Maintenance Taxes
0.0
20.0
40.0
60.0
80.0
100.0
2005-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
15-16
Figure 2(c). Salary as percentage of Total Income and
Expenditure
Salary as % of total Income Salary as % of total expenditure
%
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3.2.2 Income prediction
While the expenditures is easy to predict and can be controlled
to some extent, income projection for the future suffers from a
number of uncertainties and therefore remains the trickiest aspect
of financial modelling. The model, therefore, incorporates risks to
various revenue streams by assuming a set of uncertainties that
impact the projected revenue the most. Three major variables that
have been considered are:
(a) Risk due to exchange rate variation; (b) Risk due to
reduction in subscription; and/or (c) Risks to rent from letting
the office space on lease.
It is assumed that the revenue from the subscription, royalty
from ICID Journal and contribution from the share of registration
fee from ICID events, which together constitute 40-45 percent of
the revenues would steadily increase at a moderate rate of 2%. As
already pointed out, the revenues under this stream are a function
of the current exchange rate of US$ and Rupees. The revenue
projected under various scenarios are represented in the form of
bar charts in Figure 3(b) to Figure 3 (d).
Exchange rate variation
One of the major uncertain factors in ICID’s revenue prediction
is the exchange rate between US$ and Indian Rupee. Revenue from
this stream is projected assuming four different scenarios with
exchange rate of 1 US$ equal to Rs 50, Rs 55, Rs 60 and Rs 66 and
is presented in Fig. 3b, using the vertical bars superimposed with
expenditure scenarios as presented in Fig 3a. It can be seen that
even if the present
35.00
45.00
55.00
65.00
75.00
85.00
2016-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26
26-27
Figure 3(a). Forecast of Expenditure for different
Categories
Salaries Sal+Maintenance Total
INR in
0.00
20.00
40.00
60.00
80.00
100.00
2016-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26
26-27
Figure 3(b). Different Scenarios of Total Income and
ExpenditureCurrency rate vaying and others constant
(1$=66) (1$=60) (1$=55) (1$=50)
INR in Million
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exchange rate (1US$ = Rs 64) remains stable, there is likely to
be a small net deficit during last three years of the decade.
Changes in revenue due to subscription
During the last 10 years, number of ICID member countries has
varied within a narrow zone of 55-60. As mentioned earlier, there
is variable membership subscription applicable based on the
capacity for the country to pay, based on their share in the UN
contribution. Developed countries and the countries that have large
irrigated areas pay higher subscription than the developing
countries and the countries with limited irrigation activities.
More than 35 percent of the subscription from NCs is contributed by
10 countries8. However, the recent trend in relinquishing the
membership by developed countries from Europe (Germany, Spain etc.)
has posed additional risk to this revenue stream. There is a need
to stabilize the present subscription income.
Considering the possibility of reduction in total membership and
a possible reduction in the rate of subscription [hypothetically],
three scenarios have been considered. Fig. 3c represents the
scenarios with revenues at the present level i.e., the number of
member countries and the rate of subscription remaining at the
present level; the total revenue from the subscription and special
contributions reducing to 70% of the present; and the total revenue
from the subscription and special contributions reducing to 50% of
the present. With superimposition of the expenditure, it can be
averred that if the present level of income due to subscription is
not maintained, there will be a net deficit during the last three
years of the decade, despite the exchange rate remaining
favourable. Therefore, even to maintain the present level of
activities, we need to continue to maintain the income due to
subscriptions and special contributions.
Revenue from lease of office space
Since about 60% of the revenue of the organization is
contributed through rent from office space, the impact of different
scenarios on this revenue stream are crucial. Presently the entire
leasable office space is rented out to M/s Yes Bank. In the past,
there has been a steady increase in the revenue from rent which is
directly proportional to the rate of inflation. It is expected that
the rent will continue to steadily increase at the same rate. The
factors which can adversely impact this income are:
(a) Litigation of any kind with the tenant that may abruptly
disrupt the flow of the rent in medium or long term;
(b) Departure of the tenant, and likely gap in flow of rent
income; and/or (c) Lowering of the market rents.
Four scenarios have been considered and are represented in
Figure 3d. Scenario 1 is business as usual where the present income
from rent continues, with about 18% increase in rent every three
years. Scenario 2 considers that the present tenant leaves the
building and there is transition period in reaching agreement with
the new tenant for six months, resulting in short-term loss of
rent, thereby causing reduction in the present level of revenue up
to 50% that year. Scenario 3 considers a situation
where, for some reasons, there is litigation with the present
tenant on a minor issue and the rent realisation is suspended in
medium-term, say for more than 9-12 months, resulting in reduction
in income due to rent up to 30% of its present level. Although,
preventive action by reaching out to some settlement could be
taken, the scenario is quite probable. Scenario 4, although highly
unlikely, may develop if there is long drawn litigation with the
tenant which may extend up to 3-5 years during which the rent
income is lost or suspended for the period of litigation and the
rent income could reduce to zero.
It may be pointed out that in case of change of tenant, there is
always a loss of revenue of 2-3 months, which can be easily
absorbed in the normal fluctuation of revenue stream.
Administrative measures can and would have to be taken to reduce
the period of loss of rent to a minimum. Thus, there is a
likelihood that the rent gets disrupted and is reduced by 30%; by
50%; and by 100% in the above stated three scenarios. Figure 3d
presents the four scenarios in bar charts, vis-a-vis the projected
expenditure. Any
8 USA, India, China, Russia, Canada, Italy, Japan, France,
Brazil, Pakistan and Mexico
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shortcoming in this stream of income will have to be absorbed by
the ‘operating reserves9’ that need to be maintained. The tenant
management and the management of the office building as an asset
have to be taken extra care of.
4. Sustainability Analysis The financial sustainability of an
organization is judged by three measures:
(a) Net income: the surplus of revenue over expenses;
(b) Liquidity: the ability to meet cash requirements to pay
bills; and
(c) Solvency: the relationship between assets and debt or
liabilities.
9 Operating reserves are essentially the accumulation of
unrestricted surpluses that are liquid (as opposed to invested in
fixed
assets) and thus available for use at the discretion of an
organization's board. The presence of an operating reserve
increases an
organization's ability to take mission-related risks and to
absorb or respond to temporary changes in its environment or
circumstances, such as the unanticipated event of significant
unbudgeted increases in operating expenses and/or losses in
operating revenues.
http://www.nonprofitaccountingbasics.org/reporting-operations/about-operating-reserves-nonprofits
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2016-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26
26-27
Figure 3(c). Different Scenarios of Total Income and
ExpenditureSubscription and Special Contribution vaying and others
constant
Subcrip+spl contribution-100% Subcrip+spl contribution-70%
Subcrip+spl contribution-50%
INR in Million
0.00
20.00
40.00
60.00
80.00
100.00
2016-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26
26-27
Figure 3(d). Different Scenarios of Net Total Receipt and
ExpenditureNet Rent Varying and Others constant
Net Rent-100% Net Rent-50% Net Rent-30% Net Rent-Nil
INR in Million
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4.1 Financial Sustainability Assessment In the case of a
not-for-profit organization, its survival depends on having
sufficient ‘operating reserve’ also referred to working capital to
sustain operations in the face of unexpected emergencies and
economic downturns. They suffer from cash deficits because they
fail to plan their liquidity or cash reserves to cope with
unexpected drops in income or increases in expenditure. In order to
assess the liquidity of the organization one way is to monitor the
Quick Ratio:
Quick ratio = (Cash in hand +Cash at Bank)/ Total Cash
Requirements over the Next Year
For the financial sustainability, a healthy Quick Ratio needs to
be maintained. Ideal Quick Ratio for any organization can be
established by its management depending on the diversification of
its revenues across various streams; the likely risks faced by
these revenue streams; the history of the organization in dealing
with crisis situations; long-term liabilities and assets and how
they are managed; and the flexibility of the base program. The
Quick Ratio should normally be more than one and for a healthy
organization, it should be maintained at around 1.4 to 1.5.
Fig. 4a presents the total income and expenditure since 2005. In
general, there is a steady increase in the expenses mainly due to
general inflationary pressures in India and lately since 2012-13
due to expansion of services. Sudden variations in expenditure in
the last three years is attributed to payment of outstanding tax
liabilities as explained earlier. On the other hand, the income
varies considerably from year to year due to varying exchange rates
and contributions from the ICID events that are being received in a
triennial cycle.
During the last four years, there has been an increase in the
revenues due to the upward revision of the rent on the renewal of
the lease agreement with the tenants and letting out of additional
office area. It may be pertinent to mention that with the increase
in the revenue from rent, there is a corresponding increase in the
expenditure through higher taxes. Till the last year the total
revenue receipts and expenditures have almost matched, with
revenues falling short of committed expenditures in certain years.
The net income has been in negative despite the commitments having
been postponed due to constraints in cash flow.
During the period 2005-2011, the liquidity and cash flow have
caused concerns resulting in scaling down of activities of the
organization. The yearly operating reserves for the period,
presented in Fig. 4b indicate that they reduced to as low as Rs 10
million in 2008, less than 60 percent of the budget of the previous
years. In general, they have remained limited to 60-80% of the
yearly budget.
Salary has been one of the major components of total expenditure
which has varied between 60-80% of the expenditure in the past.
There has been a steady decrease in staff strength over the years.
While some of the reduced strength was compensated by improved work
procedures and new technology, some activities were adversely hit.
The duties performed by some of the retrenched staff could not even
be outsourced due to financial constraints. The financial oversight
suffered due to the absence of a qualified Accountant. Some of the
services were also curtailed such as reducing French translation to
a minimum. The WGs could not be supported in certain activities
such as maintaining their websites for lack of staff in CO.
At the same time the existing staff could not be re-trained in
the new technologies to enable them to provide better services to
the NCs. For example, the staff could not efficiently use the new
software tools available for financial accounting. In a number of
cases, the program support was constrained as it was not possible
to invest in new software etc.
Apparently, the situation was overcome by postponing some of the
commitments to the next financial years wherever feasible.
Liabilities towards taxes had to be postponed. Long-term
liabilities towards staff such as pensions, gratuity, etc. could
not be fully provisioned for separately. The office building, which
constitutes the main source of income, could not be maintained in
good conditions and the tax liabilities towards it had to be
allowed to be accumulated.
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4.2 Long-term Financial Sustainability The projected expenditure
and projected revenues for the next 10 years, under various
scenarios, are presented in Figure 3(b) to Figure 3(d). In Figure
3(b) the impact of exchange rate variation (or decrease as compared
to the existing exchange rate) has been projected vis-a-vis the
expenditure. Four scenarios have been projected by assuming four
different exchange rates through four bars. It may be pointed out
that these bars include not only the income due to subscription
plus special contribution but also income due to other revenue
streams such as rent. It is observed that beyond 2023-24 the
expenditures will exceed the income.
Figure 3(c) represents scenarios with the revenue due to
subscription and special contribution limited to 70 and 50 percent.
The figure shows that the total projected expenditure during almost
all the years beyond 2020 will fall short of the revenues and
result in net deficits year after year if the present rate of
subscription are not maintained steady.
The impact of likely changes in revenue due to rent is presented
in Fig 3(d) which presents four scenarios as already described. The
bars represent the total revenues including these reduced rents and
the revenues on account of subscriptions, etc being maintained at
100% and the exchange rate continue to
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2005-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
15-16
Figure 4(a). Variation of Total Income and Expenditure
Total Income Total Expenditure
INR in Million
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
15-16
Figure 4(b). Variation of operating reservesINR in Million
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maintain at Rs. 64. It can be seen that with decrease in revenue
due to zero rent in any given year(s), expenditure, even on
salaries, would not be fully met. Even in the case of decrease in
rent by 50%, total projected expenditure could not be met beyond
2021-23 from other streams of revenue. In order to maintain the
financial sustainability and to tide over the years when there is
deficit in income over expenditure, under different scenarios, it
is important that Quick Ratio of more than 1.5 is maintained by
keeping healthy operating reserve.
5. Resource Mobilization for Vision to Action Plan The new ICID
Vision and the strategies and activities identified to realise the
organizational goals are ambitious and have the potential to take
ICID to a higher level of service to the member countries. Program
and activities identified under the Technical Support Unit and
International Collaborations Programs, call for additional efforts
and participation in international activities. In order to achieve
these goals and realize the vision, the organization, both at
national and global level, requires greater vigour, collaboration
among its stakeholders and efficient coordination across the
network. Additional manpower and financial resources would be
required to implement the Action Plan. At the same time, the NCs
themselves need resource mobilization for their own sustainability
and fulfilling their national objectives.
This section, very briefly explores various ways by which ICID
can generate unrestricted income that the organization can spend on
priority programs set out by its Executive Council, not the donor,
to execute the Action Plan at a pace that is decided by the
members. Further unrestricted funds are required for institution
building, fundraising campaigns, and brand projection.
Unrestricted funds can be generated in the form of:
(a) Augment the existing sources of income (b) Contributions
through a trust or endowment fund (c) Fundraising for institution
building (d) Invite public contributions (e) Sale of goods and/or
services (f) Establishing businesses related to a specific
mission
5.1 Income enhancement To begin with, it is important to
consolidate current streams of revenue, and where possible, augment
them. Rent from office space in the Central Office in accordance
with the prevailing rules of lease of the land on which the Office
Building is constructed, constitute the largest component of income
is a kind of self-generation of income that needs to be maintained,
protected against possible risks and augmented, where possible. The
possibility of increase in this rent income by construction of more
office space, in accordance with the existing lease agreement with
the government of India and building bye laws of the area, needs to
be explored. An additional area of 1640 sq. m office space can be
built out of which an additional 830 sq. m can be leased out on
rent. However, the funds required for construction (Approx. Rs 70
million) will be required to be mobilized. At the same time the
tenancy of the new space would need to be diversified as it would
not be advisable to depend on one tenant i.e., M/s Yes Bank for all
the rental income.
Diversification and increase in income from subscription fee is
only feasible if more countries are brought into the membership
fold of ICID. This does not appear to be a very feasible option
since, at the country level, particularly in developed countries,
agriculture is no more a priority sector as it does not contribute
substantially to the GDP of these countries. One has to wait for
the change in global priorities for this option to be extended on
advantageously large scale. Presently, some of the countries with
large interest in irrigation and drainage, particularly from Latin
America, are not part of ICID network, mainly due to the language
gap. ICID may have to take a call on using Spanish as the third
working language in some of its activities, in line with the
French. At national level, NCs need to maintain their relevance and
help themselves generate sufficient financial resources to be able
to participate in ICID activities and maintaining its
membership.
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Another diversification in membership subscription, which in a
way has been adopted since 2013, is by providing direct membership
to individuals and institutions from the countries which are
presently not the members of ICID. Although DM was initiated mainly
to broaden the base of experts in ICID and giving a platform to all
the multi-disciplinary stakeholders, the move has not proved very
attractive as the direct membership has not been quite popular as
it was anticipated to be. Perhaps there is a need to look at the
ways and means to make the direct membership more attractive. It is
also pertinent to note that in financial terms, DM is not a net
income generation mechanism.
Contribution by host NCs from the share in the registration fee
from ICID events needs to be enhanced. While there is scope for
expanding the WIF where the participation could be expanded up to
2000 participants and beyond, attendance in other ICID events such
as Congresses, Regional Conferences IDW etc need to be contained to
keep the sanctity and focus of these events. At the same time
registration fee to ICID events has to be kept within the reach of
participants from developing countries for the event to serve its
purpose as a mechanism of sharing knowledge and information. The
registration fee cannot be increased on commercial considerations
as the main objective of these events is definitely not income
generation. The share of ICID in registration fee has also to take
in to account that in certain cases, these events do serve to
generate revenue for the host organization. However, there is a
case to make the hosting of ICID events more professional by having
a clear definition of obligations of the host and Central Office.
ICID Central Office may also consider directly hosting some ICID
events on a commercial basis in order to generate direct surplus
income from time to time.
Interest from the bank deposits: Presently, a large amount of
cash to the tune of US$ 165,000 or Rs 11 million, as part of the
operating reserve, is parked in HSBC Branch in London, which fails
to attract any interest. Similar funds in parked in Indian Banks
could be earning an interest of about 8%. There is a loss of
revenue of half a million Rupees every year. Moreover, HSBC London
is not willing to maintain this account and have intimated its
closure in May 2017 for want of transactions. Possibility of
investing some of the operating reserves in other financial
instruments such as Mutual Funds (with low risks), needs to be
explored.
5.2 Resource Mobilization Opportunities A number of
international funding agencies, including development funds, aid
agencies, philanthropic organizations support programs and
activities in the water sector. These agencies have their defined
areas of activities, geographical and political preferences and
timeframes of action. ICID could seek funding from such agencies,
provided ICID programs and activities are aligned to the objectives
and programs of these agencies. Such restricted funds can be used
for implementing, partially or fully, some of ICID’s program
activities. However, such donor agencies require complementary
funding from the recipient organizations for the programs.
Due to changes in the funding climate and the financial
challenges faced by many non-profit organizations they have begun
to consider formalized collaborations as a way to respond to the
changing resource environment and minimize competition for funding
sources. Non-profit organizations are seeking each other out to
explore potential partnerships. Strategic alliances or
collaborations provide capacity building to organizations that may
not otherwise achieve independently. Collaborations help acquire
critical resources and reduce financial uncertainty, which offsets
costs associated with reduced autonomy of operations and may
improve ICID’s abilities to serve their communities.
Endowment funds are generally created for specific purpose to
derive benefits from the interest generated by the capital. ICID
has created an endowment fund to finance the once in three years
World Irrigation and Drainage Prize. Capital for the endowment fund
has been contributed by ICID National Committees. The rules for
establishing a Trust with international trustees are cumbersome. As
such a separate Trust for WID was avoided.
Fundraising for institution building refers to requesting
donations from individuals, corporations, or agencies willing to
make contributions in support of the institutional development of
the organization. ICID, while constructing Central Office building
in 1964-66, utilized this route under which the funds were
contributed by a number of Governments from around the World. This
route of generating funds needs to be explored again for
construction of additional office space in Central Office
building.
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In certain cases, with organization dealing with issues that are
close to the heart of general public, particularly the social
causes, it can turn to the public to solicit support for their
mission. Public can be approached by offering of membership in the
organization or it can be as simple as the sale of promotional
products (t-shirts, posters, or other products with the
organization’s logo) or by organizing events which people pay to
attend such as parades, raffles or dinner parties. Unfortunately,
ICID does not deal with publically emotional issues to be able to
harness public support. However, NCs, within their own countries
can adopt this route by adding other water issues that are close to
people’s heart. All these options are feasible but need substantial
planning and collaboration across all NCs. Particularly these
methods could be more successful for raising resources at NC level
and need to be explored.
5.3 Income generation through establishing businesses related to
a specific mission
Many institutions offer products or services as an
income-generating strategy. The objective is that the future income
from selling products or services will supplement the programs and
activities in achieving the organizational vision and goals. This
is the most sophisticated and complex form of income-generation.
ICID can generate income by offering professional consulting
services in the field of its activities. ICID Central Office, is
presently not institutionally eligible to undertake such
consultancy services, as it avails the benefit of Income-tax
exemption.
Establishing a business involves establishing for-profit
corporations, in which ICID has full or part ownership and would
require creating a fully owned separate entity according to section
25(1)(a) and (b) of the Indian Companies Act, 1956. ICID can
establish a section-25 company 'for promoting the vision and
mission of ICID’, provided the profit, or other income is applied
for promoting only the objects of the company.
It is an option that needs to be carefully weighed. It is not
easy to make a profit. It involves considerable effort and work,
and in this case, companies compete directly in the marketplace.
Moreover, there must be a clearly established policy regarding the
allocation of profits corresponding to the organization. There
should never be any doubt as to how these profits are used. A
policy usually is established stipulating that all profits
earmarked for the organization must be invested in it
immediately!
5.4 Challenges of resource mobilization In recent years, the
economic recession has dramatically affected the NGO sector,
resulting in an increased number of NGOs competing for decreasing
funding sources during these turbulent economic times. This is
particularly relevant to water sector as not only a plethora of
international professional not-for-profit organizations dealing
with various aspects of water, but also the 23 UN organizations
dealing with water are out there in the market chasing the limited
funds ear-marked by the donors to be invested in the water
sector.
Due to this reduction in available resources, increasing
attention is being given to the need for collaborative solutions
among NGOs working in the water sector. In such cases, applicants
for government or foundational funds are often required to file
joint grant applications and demonstrate their commitment to
sharing organizational resources or formal coordination of services
with other service providers. However, the potential cost of
reduced operating autonomy and compromised social missions poses a
challenge for non-profits trying to balance the needs and
operations of the collaboration with their own social mission and
financial needs.
The success of the organization in reaching out to the donors’,
collaborators and clients hinges on the success of communicating
its organizational mission and services it offers to the community
in need of these services. Establishing a not-for-profit “brand”
that clearly and consistently communicates the mission of the
organization and the services provided in a way that differentiates
it from alternative non-profit or for-profit organizations is
crucial.
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5.5 Strategies for Achieving Financial Sustainability10
An important aspect of financial sustainability is income
diversification, referring not only to internal income generation,
but also to the number of income sources that provide the main
funding as change in obliquely dominant stream of income can induce
a major crisis. ICID needs to diversify its sources of income in
order to undertake the programs and activities that the Vision to
Action envisages to achieve the Vision 2030. Own income generation
is one way for an organization to diversify its sources of
revenue.
Strategies to achieve financial sustainability are not just
about developing new fundraising campaigns or writing successful
funding proposals but is more about building relationships, risk
management, and basic good financial practice. It is important,
therefore, to invest in developing and maintaining strong
stakeholder relationships with donors, supporters, volunteers,
staff, and beneficiaries. The essential requirements for achieving
financial sustainability in an organization are: long-term
commitment; investment of time and money; effective management
team; and team work.
In order to improve financial sustainability, ICID needs to:
maintain a range of different types of funding, particularly
unrestricted funds; strategically manage and finance all
organisational costs; effectively assess and manage the risks
associated with funding and financial resources; and build
sufficient financial reserves.
While it is essential that the most advanced strategies and
methods possible are adopted in order to maximize financial
sustainability, it needs to be monitored and evaluated on a regular
basis. As an ongoing process it has to become part of
organization’s day-to-day management. The monitoring needs to be
undertaken on all the basic pillars: strategic planning,
appropriate administration and finances, fundraising policies and
the planning. It is both a necessity and an obligation since it
ensures organizations’ ability to accomplish its respective
missions.
IV Summary, Conclusions and Recommendations
Summary Financial sustainability of any not-for-profit
organization like ICID has to be a long-term goal as it is both a
necessity and an obligation towards its stakeholders. It sustains
ICID’s ability to accomplish its goals and mission and requires
concerted efforts of the entire organization.
Although, ICID, as a network with more than 60 years of
experience, has worked towards well defined objectives as enshrined
in its constitution, no need was felt to spell out a strategic plan
or a long-term financial plan. Only recently, it has drawn up ICID
Vision 2030 and a Vision to Action Plan based on organization-wide
consultation. It is essential that ICID management, at this crucial
juncture where the organization is transforming into a professional
organization that has consciously and strategically aligned itself
with the global vision of the “Future We Want” and its UN adopted
Sustainable Development Goals, reviews the present situation and
evolve new strategies and methods within the overall objectives of
the network.
Income streams of ICID, in the past, have largely comprised of
membership subscription contributed by its National Committees,
which have largely been financially supported by the respective
government organizations. Except in isolated cases, ICID has not
tapped other sources of funding, such as from financial
institutions, foundations or philanthropic organizations, on a
regular basis.
At the management level, the mechanism such as Permanent Finance
Committee (PFC), has been established to undertake financial
analysis, and is effective in principle, but needs active
participation from financial experts representing NCs. At
operational level, the accounting management system that is
followed is largely robust.
10 http://www.mango.org.uk/guide/financialsustainability.
http://www.mango.org.uk/guide/financialsustainability
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Although a short-term financial analysis is carried out by PFC
every year, a long-term review was attempted in 2005-07 when the
decision to enhance members’ support by raising annual membership
at the rate of 3% annually. The present financial sustainability
analysis has been carried out for the period 2005-06 to 2015-16.
The report also models the future (10 year) scenarios and explores
the ways and means to liberate ICID from its chronic resource
constraints to meet the requirements of the new Vision to Action
Plan. Conclusions from the study and the recommendations to achieve
the desired goals are presented in the following sections.
Conclusions There are five major categories of income of ICID:
(i) annual membership subscription from NCs; (ii) share of
registration fee collected by the host NCs while organizing ICID
events; (iv) royalty from the sales of Irrigation and Drainage
Journal; (v) the interest from the bank; and (vi) rent from letting
out of the office space in the Central Office Building. Since 2004,
rent from office building space leased out on hire has steadily
gained prominence in its revenue stream.
Once in a while in the past, and on a more regular basis during
the last five years, some of the National Committees have made
special contributions to the ICID budget for activities such as:
training and capacity development, special publications, WatSave
Awards, and WID Prize, etc. On a couple of occasions, grants were
also received from World Meteorological Organization for training
and workshops identified as part of ICID activities. The Central
Office building is an important asset with the organization that
serves as a major source of ICID’s revenue in the form of rent.
Major components of expenditures are: (i) salaries of staff, (i)
knowledge management activities, (iii) running and maintenance of
the office and the assets, and (iv) the taxes. In general, the
salaries in India and consequently in ICID have increased by about
10% per annum, on an average, due to inflationary pressure. Broadly
speaking ICID, as an organization, has been able to keep itself
financially afloat during the period under review largely due to
the revenue generated from the rent and the weakening of the Indian
Rupee against Dollar, thereby increasing the revenue due to
subscription in rupee term.
In order to maintain the financial sustainability and to tide
over the years when there is deficit in income over expenditure, it
is important that a healthy Quick ratio is maintained, which for
the period under study, has been very low, presenting many cash
flow crisis situations. During the period under consideration, in
order to reduce the expenditure, substantial cuts were affected in
the staff strength which were brought down from 25 in 2005 to 17 in
2011. These led to the curtailment of program support, curtailed
services to the members, reduction in support to the WGs. Some of
the commitments, and liabilities towards taxes were postponed to
the next financial years wherever it was feasible. Long-term
liabilities towards staff such as pensions, gratuity, etc. could
not be fully provisioned for. The office building, which
constitutes the main source of income, could not be maintained in
good conditions and the tax liabilities towards it had to be
allowed to be carried forward and accumulated and could not be
settled in full due to cash flow constraints. During this period,
despite an organizational structure being in place, effective
financial management of available assets such as bank accounts,
property and investments, could not be copiously followed in order
to maximize their financial potential. In the accounting system,
certain checks and balances in the reporting procedures went
un-noticed.
For assessing the financial sustainability during the coming
decade, a financial model has been used that use the historical
trends of both revenues and expenditure under certain assumptions.
It is assumed that the programs and activities will remain at the
present level, the inflation rate will be 5% per annum, and the
asset base of the organization would be maintained.
Income projection incorporates risks to various revenue streams
by assuming sets of uncertainties that impact the projected revenue
the most: (i) risk due to exchange rate variation; (ii) risk due to
reduction in subscription; and/or (iii) risks due to rent from
letting out the office space. Since about 60% of the revenue of the
organization is contributed through rent from office space, the
impacts of different scenarios, which can adversely impact this
income such as litigation of any kind with the tenant that may
disrupt the flow of
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the rent in medium or long term; departure of the tenant with
likely gap in rent income; and lowering of the rents, have been
considered.
Recommendations ICID’s efforts towards financial sustainability
have to remain in harmony with NCs’ and stakeholders' interests.
NCs should be able to appropriately recognize and share in the
benefits of such a strategy. Keeping this in view and based on the
financial analysis over the period 2005-2016 and the financial
model generated to assess the future requirements following
recommendations are made. These recommendations are classified into
three categories.
General (a) PFC should be able to draw upon the experience of
financial experts from more NCs. It needs to
review the financial position of the organization more closely
vis-a-vis the Action Plan of the organization. The format of the
Financial Report presented to the IEC needs to be standardised.
(b) PFC should monitor the long-term financial sustainability of
the organization on a regular basis, once in every three years.
Quick Ratio should normally be maintained at around 1.4 to 1.5. For
this, it is important that the present streams of revenue are not
only maintained but better be enhanced.
To maintain present level of services
(a) Membership subscription needs to sustain its binding role
and at least a 2% annual increase in subscription needs to be
maintained to take care of inflation. This is also psychologically
important for the NCs to continue to have an ownership over the
network.
(b) ICID events (WIF, Congresses and Regional Conferences) need
to be made more effective and given a more professional touch and
enhancing contribution by making formal professional arrangements
between Central Office and host NC.
(c) There is need to look at the ways and means to make the
direct membership more attractive.
(d) An additional area of 1640 sq. m office space needs to be
built out of which an additional 830 sq. m can be leased out on
rent. The funds required for construction (Approx. Rs 70 million)
need to be organized partially through contrition from NCs.
(e) The financial assets such as operating fund in the banks
should be invested more professionally. Possibility of investing
some of the operating reserves in other financial instruments such
as Mutual Funds (with low risks), need to be explored.
To implement strategies, programs and activities as per the
Vision to Action (a) In order to ensure its survival and
independence, ICID should not just diversifying income sources
but adopting more entrepreneurial routes to financial
sustainability by investigating scope for additional resource
mobilization.
(b) Income generation by establishing business (es) related to a
specific mission (e.g., capacity development and professional
certification) needs to be explored. It is an option that needs to
be carefully weighed as it involves considerable effort and work,
and such businesses have to compete directly in the
marketplace.
(c) The success of the organization in mobilizing more resources
and reaching out to the donors hinges on the success of
communicating its organizational mission and services to the
community in need of their services. For this, ICID needs to be
consciously visible at national as well as international events for
the government agencies providing support, and donors interested in
the cause.
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(d) Much like for-profit organizations, ICID would have to
undertake marketing and branding efforts with the help of
professional organization to promote and sustain its programs and
services.
It needs to be realized that achieving financial sustainability
is an ongoing process which needs to
become part of the organization’s day-to-day management
practices involving strategic planning,
administration and finances, and fundraising policies,
strategies, plans and implementation process
enabling generation of additional income. In case of ICID, this
will have major consequences, not only in
terms of managing change but also in the types of competencies
needed by staff within the Central Office
but also management board members. It will have significant
implications for the identity, values and
culture of ICID. However, the benefits will be seen in terms of
greater independence, resilience and
sustainability.
