KATHMANDU: Last year, the Municipal Association of Nepal (MuAN) received financial assistance of Rs 78 million from donor agencies for various projects. During the same period, the National Association of Rural Municipalities in Nepal (NARMIN) received over Rs 35 million. Any social organization is required to obtain approval from various government bodies before receiving such financial assistance. However, both of these organizations have not taken approval from any government body. In Nepal, social organizations are required to get pre-approval from the Social Welfare Council before running projects, but these organizations have become an exception.

Bhim Dhungana, president of MuAN, says the association’s nature is different from other non-governmental organizations. He says, “Our organization does not need to continuously get approval from the Social Welfare Council to run projects. This organization is not registered under the Associations Registration Act, 1977.”

According to Dhungana, MuAN and NARMIN receive an exemption because they were formed under the National Guidance Act, 1961. “Not just approval, they don’t even need to renew their registration every year,” Dhungana says, “These organizations are not like Barbar’s Association or the Fruit Association. They are distinct institutions of elected representatives.”

MuAN and NARMIN are not the only ones; about three dozen social organizations in the country similarly receive special exemptions. However, the programs run by these exempted institutions are similar in nature to those operated by non-governmental organizations (NGOs). MuAN is seen to have received grants and financial assistance from donors including USAID, the Australian Government’s Department of Foreign Affairs and Trade (DFAT), GIZ, Helvetas, The Asia Foundation, South South North, and Local Governments for Sustainability (ICLEI).

NARMIN has also received support from various donor agencies. It has financial partnerships with the Asian Development Bank (ADB), UNICEF, The Asia Foundation, GIZ, SDC, UNDP, Iwmi, IDEA International, and Niti Foundation. In addition, it has received support from World Vision, UKaid, Open Society Foundation, and USAID. “The money was not taken directly; it was approved by the donor agencies through a one-door policy and released by the Ministry of Finance,” Dhungana says.

In Nepal, in addition to the Guidance Act, there are the Associations Registration Act, 1977 and the Company Act, 2006 for the registration of non-governmental and non-profit organizations. Organizations registered under the Guidance Act do not need to renew their registration after a one-time registration.

Although organizations registered under the National Guidance Act claim to be different from other NGOs, the donor budget and the programs run with it are similar to those of other NGOs. The Federation of Nepali Journalists, Nepal Bar Association, Federation of Nepalese Chambers of Commerce and Industry, Nepal Children’s Organisation, Association of Community Radio Broadcasters (ACORAB), Nepal National Federation of Transport Entrepreneurs, Madan Bhandari Foundation, Municipal Association of Nepal (MuAN), and National Association of Rural Municipalities in Nepal (NARMIN) are registered under the National Guidance Act. Similarly, institutions including the District Coordination Committee Federation of Nepal, National Federation of Youth Non-Government Organizations Nepal, Nepal Medical Association, Nepal Engineers Association, and Federation of Contractors’ Associations of Nepal are registered under this Act.

Ramkrishna Adhikari, Treasurer of the Federation of Nepali Journalists, says, “We present our financial details in the general assembly. We provide the necessary details to the Revenue Investigation Department for tax clearance.”

The details submitted by the Federation and other specially privileged organizations to the Department are kept confidential. The work of many of these institutions is no different from that of general NGOs, yet the special exemptions and facilities they receive are different from those of NGOs. The work and the organizations are similar, but the state’s treatment is different and surprising.

The marvel of the Panchayat-era act

The National Guidance Act, 1961, was introduced during the Panchayat system to restrict pluralism. Accordingly, a few select privileged social institutions have been operating opaquely and arbitrarily. There is no clear legal provision to ensure the transparency of such institutions, which do not require annual renewal. Therefore, the special privilege granted by the law has been misused. The National Guidance Act provides for the registration of class-based and professional umbrella organizations with nationwide networks. These institutions were registered under this provision. However, in recent times, commercial enterprises and politically motivated organizations have also been registered under it.

Former Home Secretary Govinda Kusum says that there is a lack of transparency in organizations registered under the Guidance Act. He says, “Organizations registered under the Associations Registration Act must follow formal procedures, from maintaining all accounts and auditing to renewal. But institutions registered under the Guidance Act do not have to comply with such formalities. It is considered a safe law.”

Organizations registered under the Guidance Act do not need to renew their registration after a one-time registration. Similarly, there is a provision that another organization of the same nature cannot be registered. Only institutions recognized as national institutions by the government can be registered under this law. The law mandates that an institution registered under the National Act must represent class-based or professional groups or organizations across the country as an umbrella organization. Once one organization working in the same sector is registered, another similar organization is not registered under the National Guidance Act.

The Ministry of Home Affairs does not have exact details on how many institutions are registered under the Guidance Act within the country and how they are operating.

The National Guidance Act, 1961, which has five pages and 10 sections, does not clearly specify how such institutions should be operated. Organizations registered under this Act have been taking advantage of this. The law does provide that the government can issue directives to such institutions on certain matters, but the Act itself stipulates that government directives cannot be challenged in any court.

Indeed, institutions close to the palace during the Panchayat system and close to political parties after the start of the multiparty system have been registered under this Act. In the past, various class organizations were opened claiming to run a partyless system. During the Panchayat era, the Nepal Women’s Organisation, Nepal Peasants’ Organisation, Nepal Youth Organisation, Nepal Elders’ Organisation, Nepal Labour Organisation, and Nepal Ex-Servicemen’s Organisation were registered. During the Panchayat system, there was a provision that a candidate for office had to be a member of a class organization. These organizations were dissolved after the advent of the multiparty system.

The rationale for issuing the National Guidance Act states the necessity ‘to maintain good relations, goodwill, facilities, economic interest, and morality among the people of various classes, professions, or regions, and to utilize the power of organization for national development and construction alongside their own interests.’

More than six decades have passed since the Guidance Act was issued. Even as the Panchayat system ended and the country transitioned from a multiparty system to a republican government, the Act has not been substantially amended. While linguistic improvements have been made in the Act following the change in the system, the subject matter has not been reformed. ‘His Majesty’s Government’ has been replaced by ‘Government of Nepal’ and ‘throughout the kingdom’ by ‘throughout Nepal,’ but other things remain the same.

Amendments were made in the Act on Strengthening the Republic and Amending Nepal Laws in 2009 and the Act Amending and Repealing Some Nepal Laws in 2015.

The Ministry of Home Affairs lacks data

The Ministry of Home Affairs, which registers such institutions, does not have exact details on how many institutions are registered under the Guidance Act within the country and how they are operating. The Local Administration and Provincial Coordination Section of the Ministry of Home Affairs looks after the matters of such institutions. According to Chhabilal Paudel, head of the section, the government does not have precise details on how many institutions are registered. “We have issued a 35-day notice asking for information about the institutions registered under the Guidance Act,” Paudel says, “The work of collecting details is underway.”

The Ministry of Home Affairs and District Administration Offices published a 30-day notice in March asking institutions registered under the National Guidance Act to update their information. In that notice, the Ministry of Home Affairs requested the ‘name, registration office, date of registration, registration number and certificate, audit report, tax clearance certificate, updated details of executive committee members, annual report, and constitution’ of the registered institutions within 30 days of the notice.

Paudel says that no details have been received from any of the institutions. According to him, although registration under the Guidance Act was initially done at the Ministry of Home Affairs itself, it was done through the District Administration Offices for the last 30 years. “Now this authority has been transferred back to the Ministry of Home Affairs,” he says, “We are working to update the details of the associations and organizations registered during this period.”

The Nepal Bar Association has partnerships with donors including the Norwegian Embassy, UNDP, International Bar Association, International Commission of Jurists, UN Women, New Perimeter, Swedish International Development Cooperation Agency (SIDA), the Swiss Government, the Japanese Government, and OHCHR.

Arjun Kumar Bhattarai, president of the NGO Federation, estimates that about 32 institutions are under the National Guidance Act. “We also don’t have details of all the institutions,” Bhattarai says. Institutions outside the scope envisioned by the Act have also started registering under it. Bhattarai says the problem has been exacerbated because institutions of a political nature have also started registering under the Guidance Act recently. “It is the state’s prerogative to decide who to grant registration to or not. Institutions that should not be given this status are found to be registered under the Guidance Act,” Bhattarai says. He suggests that foundations affiliated with political parties should be classified and registered separately. “Because of such organizations, we are also facing difficulties. Can a politically motivated institution, a non-governmental organization, and a professional organization like the Federation of Nepali Journalists be in the same category?” Bhattarai asks.

Lack of transparency and good governance

The internal operation and accounting of some of the institutions formed under the National Guidance Act are not transparent. Such institutions are not required to submit details of grants received from donors, projects operated, and expenses to any authority. The expenses incurred by these institutions, apart from being audited and approved by the general assembly, are not made publicly accessible. “There is a lack of transparency in organizations registered under the National Guidance Act,” says former secretary Kusum.

Organizations registered under the Guidance Act are not required to submit audit reports to government bodies, unlike those registered under other laws. Similarly, foreign aid received does not have to be shown to the Social Welfare Council. Associations and organizations registered under this Act are automatically renewed.

Although the budget is approved through the general assembly, the project operation and its financial details are far from public access.

The financial activities of these institutions are outside the public domain. The National Federation of Youth Non-Government Organizations Nepal has received support from the Japan International Support Program, but the amount of assistance is not disclosed. The Federation has not taken approval from the Social Welfare Council or even the Ministry of Finance. Yet, this institution has received the exemption.

The Federation of Nepali Journalists’ webpage has a separate column for financial activities. However, no details are found there about which donor provided how much assistance since September 2021. The Federation has received financial assistance from organizations like the European Union, The Asia Foundation, UNESCO, and IFJ, but the details are missing.

Devraj Humagain, a researcher at Martin Chautari who has studied non-governmental organizations, also says that organizations should work to ensure transparency. “The institutions should be transparent with their members. A general assembly is held. Information should be made accessible to everyone. It can be put on websites,” Humagain says, “The question of why those registered under the Guidance Act are given immunity has been continuously raised.”