www.pcp.org .pk

AT A GLANCEPCP CERTIFIED NPOs

“In the coming years, the Civil Society Sector is expected to play an important role in achieving the 2030 Sustainable Develop-

ment Goals (SDGs) agenda globally as well as in Pakistan”

Voluntary Na�onal Review (SDG)- UN

PCP reserves all rights of ownership of this document

“In the coming years, the Civil Society Sector is expected to play an important role in achieving the 2030 Sustainable Develop-

ment Goals (SDGs) agenda globally as well as in Pakistan”

Voluntary Na�onal Review (SDG)- UN

Non Profit organizations (NPOs) are key actors in the social development, whose efforts supplement those of the government, private sector, and donors. NPOs play an important role in drawing attention to issues such as human rights, democratic governance, equitable development, inclusive growth, participatory democracy, social and environmental justice, sustainability, gender equality, citizen engagement, and by providing essential services, etc. However, the ability of NPOs to operate effectively and to their full potential depends upon the social, and economic context in which they function.

Pakistan Centre for Philanthropy (PCP) plays a crucial role in strengthening NPOs through its certification program which undertakes performance evaluation of Nonprofit Organizations (NPOs) in terms of its internal governance, financial management, and programme delivery. Till June 2021, PCP Certification Unit has certified about 1,751 NPOs including National Non-Government Organisations, International Non- Government Organisations, Micro finance institutes and Universities, by using the data collected at the time of application and the subsequent field evaluations of NPOs.

PCP Certification ProcessThe Certification process of NPOs is rigorous and methodical, involving various steps of evaluation starting from the submission of application to the approval for certification. The NPO evaluation process captures information on their year of registration, governing legislation, size, thematic areas of work, accounting reporting system, and geographical location.

The certification process focuses on examining the structures, systems, and procedures put in place by an organisation to deliver its services and to ensure sustainability of its programmes. Once an organization completes its process of evaluation and gets approval for certification from the assigned panel of experts, it becomes eligible for getting tax exemptions and other benefits as permitted under the law.

NPO

PCP

Initial Scrutiny

Evaluation

IndependantCertification Panel(Non-GoP & GoP)

Increased Donor Assistance

Capacity Building

Standards Not Met

Taxation Authority

Enhanced Credibility Tax Benifits

Capacity Building

PCP Directory

Standards Met

Figure 1: Various Steps of Certi�cation Process

Mandatory Requirements Met

De�ered

Approved

Rejected

MandatoryRequirements

Not Met

Desk Review Field Evaluation

KEY FINDINGS

PCP Certification Unit has certified about 1,751 NPOs till June 2021.Majority of NPOs are registered after the year 2000 and the number excelled from 330 during 2001-10 to 1059 between 2011-20.The registration of NPOs is the highest under the Societies Registration Act 1860, followed by the Com-panies Act 2017, Trust Act 1882, and Voluntary Social Welfare Agencies Ordinance 1961.78% of certified NPOs reported that the purpose of certification is both for getting tax exemption and inclusion in PCP directory.38% of certified NPOs mentioned PCP website as the major source of information about certification.About 42% of the NPO’s are concentrated in the province of Punjab, followed by Sind at 28%. Based on the last 3 years’ receipts, 81% of certified NPOs are Large Sized entities categorized as Large 1 (27.4%), Large 2 (12.2%), Large 3 (27.6%), and Large 4 (13.2%).63% of the certified NPOs carry out their accounting on accrual basis and 77% certified NPOs prepare their annual reports.The employment structure of NPOs constitutes of both full-time workers (3.4 million) and part-time workers (about 1.0 million).The certified NPOs major areas of work relate to health and provision of quality education.

NPO

PCP

Initial Scrutiny

Evaluation

IndependantCertification Panel(Non-GoP & GoP)

Increased Donor Assistance

Capacity Building

Standards Not Met

Taxation Authority

Enhanced Credibility Tax Benifits

Capacity Building

PCP Directory

Standards Met

Figure 1: Various Steps of Certi�cation Process

Mandatory Requirements Met

De�ered

Approved

Rejected

MandatoryRequirements

Not Met

Desk Review Field Evaluation

Evaluation CriteriaThe original framework to evaluate NPOs was based on three main standards that assessed and scored NPOs on internal governance, financial management, and program delivery based on the following requirements (Table 1)

1. Out of a total of 80 parameters under the 3 areas, an NPO could attain a maximum score of 1000 in all 3 areas combined.

2. The minimum score that should be attained by an NPO against each area is 50% of total score in each area to make it eligible for certification (last column of Table 1)

3. Even if an NPO obtains minimum requisite scores in each category, it has to score an aggregate of 600 marks to be certified.

Evaluation Areas Parameters % Total Score Minimum Score Required

Internal Governance 26 30% 300 150

Financial Management 25 30% 300 150

Program Delivery 29 40% 400 200

Total 80 100% 1000 600

Main Areas Parameters % Total Score Minimum Score RequiredLegal & Regulatory Com-pliance 1 5% 50 25

General Public Utility Compliance 1 8% 75 37.5

Institutional Mechanisms for Oversight 20 20% 200 100

Tax Laws Compliance 5 8% 75 37.5

Financial Management 22 20% 200 100

Policies 11 10% 100 50

Program Delivery 25 30% 300 150

Total 85 100% 1000 600

Table 1: The Original Evaluation Framework with Three Dimensions

Table 2: The New Evaluation Framework with Seven Dimensions

The need for improving the evaluation process of NPOs was felt over the years. After extensive deliberations and discussions, the original evaluation framework was substantially amended and a new framework was developed comprising of seven pillars, which was then approved, and operationalized in the year 2018 (Table 2).This scoring system aims to ensure that an NPO must possess institutionalized capacity to perform through existing systems and processes. The new evaluation framework assesses NPOs on seven main dimensions as shown in table below. There are now a total of 85 parameters under the 7 areas on which an NPO is assessed. As is original model, the new criteria also require that an NPO should attain a minimum of 50% of total score in each category and an aggregate of 600 marks out of 1000 to be certified.

Salient Features of Certified NPOsThe PCP Certification Program has played an instrumental role in providing a minimum standard of self-reg-ulation of the NPO sector. A total of 1,751 evaluations of NPOs have been carried out by PCP Certification Unit till End-June 2021. This section presents an in-depth analysis of different features and dimensions of PCP certified NPOs, using the data collected at time of application and the subsequent field evaluations of NPOs.

1. Registration Laws

There are about thirteen laws under which NPOs can get registered. However, for the certified NPOs, the highest share – 32%- has been registered under the Societies Registration Act 1860, followed by 27% being registered under Section 42 of the Companies Act 2017 (previously named as Companies Ordinance 1984), 22% registered under the Trust Act 1882, and another 15% under the Social Welfare Agencies Ordinance 1961.

2. Year of Registration

A substantial number of certified NPOs got registered during the years 2001 to 2010 i.e., Companies Act; Societies Registration Act 1984; Trust Act 1882 and others. However, a majority are relatively new as 60% got registered between 2001 to 2020. In 2021, 8% certified NPOs got their registration form the relevant reg-istration bodies, and this number is expected to follow an upward trend, as PCP Certification Unit has also increased the frequency of evaluation panels to process the incoming applications.

Others 3% Societies RegistrationAct 1860

27 %

Voluntary SocialWelfare Agen. Ord. 1961

16 %

Trust Act 188222 %

Companies Act 201727 %

Year of Registration

1947-2000 2001-2010 2011-2020 2020-2021

No.

of N

POs

100

300

500

700

900

1100

13%19%

60%

08%

3. Purpose of Certification

About 78 percent of certified NPOs have reported that obtaining both tax exemptions from FBR and inclu-sion in PCP directory are the main reasons of applying for PCP certification. Their interest in getting included in PCP directory is 14 percent, while obtaining tax exemption is reported as only 8 percent.

4. Renewal of Certification

PCP Certification trends reveal that majority of the reviewed NPOs are new applicants (60 percent). Out of the total, about one-third have applied for renewal of certification for the first or second time (33 percent), whereas others have got renewals for three times or more.

PCPDirectory

14% 8% 78%

TaxExemption

Both

5. Sources of Information about PCP

The NPOs learning about PCP Certification is the highest for PCP Website (38 percent) followed by FBR (35 percent). The other sources of information about PCP Certification include donors, government institutions i.e., Bait ul Maal, PTA etc, which forms about 27% of certified NPOs.

PCP Website

38 %

FBR

35 %

Others

27 %

6. Geographical Spread

The distribution of certified NPOs by location of their head office shows that 42 percent are based in the province of Punjab, followed by about 28 percent in Sindh and 19 percent in the ICT. A relatively small pro-portion of the certified NPOs are working in smaller provinces and regions, with 7 percent based in Khyber Pakhtunkhwa, 3 percent located in Balochistan and only 1 percent each reported to be working from AJK and Gilgit Baltistan. It may be noted that many NPOs having head offices in the bigger provinces are implement-ing development interventions in the smaller and less developed areas.

Balochistan3.0%

KPK7.0%

GB1.0%

AJ&K1.0%

Islamabad19.4%

Sindh27.8%

PUNJAB41.5%

7. Size of NPO

Based on the average receipts/ income of the last three years, the categorization of certified NPOs by size is determined by PCP. The highest proportion of NPOs falls in the Large 3 and Large 1 category (27%) followed by Large 4 (13.2%) and Large 2 (12.2%), adding up-to 81 percent of all certified NPOs categorized as Large NPOs. Another 8% and 7%, respectively of the NPOs fall in the Medium I and Medium II size category.

8. Thematic Area of Work

It is observed that NPO’s area of work is pre-dominantly in health and education sectors. Around 36 percent of the certified NPOs are working in the health sector, while 32 percent are engaged in provision of education services. The remaining NPOs are working in capacity building initiatives, human and civil rights and com-munity development as well but their share is much less than the provision of health and education services.

9. Accounting Reporting System

About two-third of certified NPOs carry out their accounting on accrual basis, while 36 percent work on cash based accounting system, indicating that majority of certified NPO have modern accounting frameworks to manage their finances.

Small 2.2%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

2.3%

0.3%

0.2%

6.7%

7.9%

13.2%

27.6%

12.2%

27.4%

Size 2

Size 1

Medium 3

Medium 2

Medium 1

Large 4

Large 3

Large 2

Large 1

Animal

Rights

Arts, C

ulture

and Sp

orts

Capaci

ty Building

Community D

evelo

pment

Disaste

r Risk

Man

agem

ent

Education

Environmen

t

Health

Human an

d Civil R

ights

Livelihood

Microfinance

Researc

h and Public

Policy

WASH

0.3% 2.6%8.0%

4.1%0.9%

31.6%

3.5% 3.0% 1.9% 1.9% 3.8% 1.5%

35.9%

10. NPOs’ Annual Reporting

About 77 percent of the certified NPOs reported preparing their annual reports compared to 20 percent that do not prepare annual reports, and only 3 percent of the entities did not respond to this question in the ap-plication form.

11. Human Resource

Considering the employment structure of certified NPOs over the years, a majority of NPOs have full-time employees (195,028), of which male staff is 222,310 compared to female staff at 126,179 . The number of part time workers is substantially lower than full-time staff, of which female staff members are over four times higher than the male part-time staff (80,371 vs. 18,473). The number of volunteer workers however, shows that around 60 percent women are doing more volunteer work as compared to 40 percent of men.

NR3%

NO20%

YES77%

36% Cash

64% Accrual

250,000222,310

126,179

50,000

0

100,000

150,000

200,000

Full-time Part-time

18,473

80,371

ABOUT THE CENTREPCP is an independent nonprofit support organization with a mission to promote the volume and effective-ness of philanthropy for social development in Pakistan. The Centre is licensed under Section 42 of the Com-panies Act 2017, with the Securities and Exchange Commission of Pakistan (SECP). PCP is the first Govern-ment authorized Certification Agency in Pakistan notified by Federal Board of Revenue’s SRO 1116 (1)/83 dated December 18,2003. Instead of getting into direct service delivery mode or receiving grants, PCP seeks to promote altruistic efforts of national and international philanthropists (individual, corporate, and diaspo-ra) by establishing effective linkage between the grant maker and nonprofit organisations (NPO). This requires bridging the information and credibility gap that exist between these two and is often a major impediment in the promotion of philanthropy. In line with the vision and mission and to achieve the objec-tives, PCP has designed innovative programs (i)Nonprofit Organisations Certification, (ii)Philanthropy Sup-port Service, mobilizing corporate philanthropy for education under Public Private Partnership (3Ps), (iii) expanding the philanthropic knowledge map through evidence based Research, and (iv) communication and

advocacy to enhance societal understanding of philanthropy and development.

VISIONThe three sectors of society business, civil society, and government work in a strengthened partnership for

social development in Pakistan.

MISSIONTo increase the volume and effectiveness of philanthropy for social development in Pakistan.

Expanding Knowledge of Philanthropy