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CS Professional · CSR and Social Governance · Contribution of Non-Corporate Entities in Social Governance

Mitra Society, an NGO, receives donations from the public for relief work. The treasurer suggests that, because it is non-profit, its surplus may be shared among the managing committee members as annual bonus. Which response is correct as a matter of non-profit governance?

The suggestion is incorrect. A non-profit NGO cannot distribute its surplus among members or committee office bearers; any surplus must be applied towards its stated objects. Unanimous approval or a small percentage cap does not override this non-distribution principle.

  1. AIncorrect; surplus must be applied to the organisation's objects and not distributed to members or office bearersCorrect
  2. BCorrect, since any surplus belongs to the committee
  3. CCorrect, if the committee votes unanimously
  4. DCorrect, provided the amount is under 10% of surplus

Explanation

A defining feature of non-profit organisations is the non-distribution constraint: surplus is applied to promoting the objects and cannot be paid out as profit to members or managers. Voting or a percentage cap does not change this.

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