Making Fund Transfer and Relief Work Through NGOs

Earthquake Lessons for Nepal: Series 1

On May 01, 2015, the Minister of Finance made a statement allowing registered NGOs to be engaged in relief work by receiving development relief and funds intended for relief victims. While it is encouraging to hear such a statement, as we have seen in the past, issues tend to emerge at the time of renewal of NGOs, audits, and submission of records to tax offices. What is needed is therefore a clear circular released by the Government providing clarification on the following key issues:

Amnesty on NGO Objective Clause

As most Non-Governmental Organizations (NGOs) working towards earthquake relief are not established with the core objective of disaster management and relief, an amnesty is required so that these tasks are not questioned in the future by government agencies.

Allow Cash and Non-VAT Expenses without Tax Deduction

At this time of crisis, funds raised outside the country are being transferred to individuals for purchase and transfer of relief materials. Payments for the same are subsequently being made in cash without tax receipts. These payments are often well above the limits set by tax laws.  There has to be a government notification on the exemption of the above provisions. Further, payments are being made to individuals for services without tax deduction. The NGO should be responsible for all these expenses and necessary audits conducted on the same.

Notification to SWC Instead of Prior Approvals

As per current legal provisions, designated funds for relief received require prior approval from the Social Welfare Council (SWC).  This through a government directive needs to be changed to a notification for a specific period of time. Further, a notification of the receipt of funds should also be made to the PM Disaster Relief Fund.

Amendment to NRB Directive of 29 May 2015

The Nepal Rastra Bank (NRB) issued a written directive on 29 May 2015 requesting banks to make all accounts related to disaster relief a non-operative account and has instructed the funds to be transferred to the PM Relief Fund. According to the directive, NRB can take control over all individual and institutional transfers. NRB, therefore, needs to issue a directive making this provision apply only to accounts opened after 25 April 2015.

Further, people making donations for specific relief purposes would like to see specific utilization of donated funds. In absence of a designated account, NGOs will have to disclose everything, even unrelated expenses to the donors, which may be seen as a transparency issue by the people providing these funds.

The law of Nepal along with government Circulars relating to taxation, compliance, payment modalities, money laundering, and transfer of funds are very clear. The decisions relating to special arrangements being made by the government in relation to earthquake relief need to specify which of the sections of the law of land are being exempted. Further, all these decisions have to be communicated to officials at all concerned government offices up to the Ward level.

These new arrangements should not compromise on the regulation, transparency, and accountability of the money and goods coming in or disbursed. Notifications should be made mandatory to PM Relief Fund and SWC.