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The International Journal
of Not-for-Profit Law

Volume 13, Issue 3, June 2011

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Democracy and Civil Society

Civil Society and the Duty to Dissent
Helen James

The Abandonment of Democracy Promotion
Tara McKelvey

"When We Raise the Issue of the Corruption of Local Authorities, It's the Rebels Who Descend on Us"
Frank van Lierde

Interview: Civil Society Organizations Respond to Government Regulations in Ecuador
Susan Appe

Articles

The Financial Crisis and the Nonprofit Sector: Can Philanthropic Foundations Support the Creation of a Civic Watchdog of International Finance
Lorenzo Fioramonti and Ekkehard Thumler

The NGO Law: Azerbaijan Loses Another Case in the European Court
Mahammad Guluzade and Natalia Bourjaily

A Reflection on the Legal Framework for Civil Society in Nepal
Uttam Uprety

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Editorial Board

A Reflection on the Legal Framework for Civil Society in Nepal

By Uttam Uprety[1]

Introduction

Whether in formal or informal gatherings, open expression of thoughts has always played a key role in social transformation. Moreover, civilization and participatory democracy in any nation state are attributable to its commitment to basic human rights such asfreedom of speech, association, and peaceful assembly. Hence for any developed and democratic state it is obligatory to ensure that its citizens enjoy human rights.

It has been proven in many cases that, while legal provisions do not ensure the freedoms of speech, assembly, and association, without such legal insurance people are unable to claim their rights. For a state to claim it is an “open society,” its citizens should be able to join hands for the cause for which they strive without state interference, regardless of the size, scope of work, or legal identity of their association. Moreover, it is widely acknowledged that society has been transformed as a result of collective actions regardless of whether such collective action is formal or informal in nature.

There are several reasons for a country to develop a legal framework protecting the right to associate freely. A state’s commitment to the international treaties and covenants to which it is a signatory may be a compelling force toward the adoption of an enabling legal framework that ensures the protection of freedoms of expression, association, and peaceful assembly.

Is it necessary for individuals and civic organizations to have legal identity to enjoy freedom? Remarkable numbers of vibrant social institutions are not registered with any formal state authority but are highly effective in social mobilization. However, it is worth considering that laws that permit groups to establish themselves as entities with legal personality strengthen these freedoms through guarantees provided for legal protection, possible specific benefits for registered organizations, and practical rights, for example, to open bank accounts, sue and be sued, and make contracts. Hence, the existence of a genuinely enabling legal framework will encourage such social institutions to have formal and legal identity and become more effective.

The enabling environment for civil society is directly proportional to the governance circumstances of the state. Strong civil society makes the state accountable, whereas a democratic and accountable state ensures its citizens enjoy freedoms of speech, assembly, and association. Democratic society is inherently pluralistic and respects the rule of law. Civil societies play a significant role in supporting democracy and therefore the rule of law. Moreover, civic organizations provide an opportunity for communities with diverse ethnic, religious, cultural, and racial identities to come to the common platform and work together. The existence of an enabling legal framework makes it practicable for such social groups to function.

The civic sector, by virtue of its nature, is diverse. Generally, civil society organizations (CSOs) consist of mutual benefit organizations (MBOs) and public benefit organizations (PBOs). PBOs have a range of differing characteristics as well as some characteristics in common. Sometimes CSOs are categorized as operating organizations, donor institutions, or service providers. Thus a legal framework should permit, encourage, protect, and, to the extent appropriate, regulate the diverse organizations that make up the formal civic sector. Moreover, it should serve to balance the rights of individuals to exercise their freedoms and the need for protection of the public. Voluntary regulations, such as codes of conduct, for example, developed by CSOs themselves, also contribute by providing additional protections for members, participants, and the general public.

Background

Nepali Context

CSOs of various forms and types have been a vibrant vehicle for social transformation in Nepal, facilitating the democratization of society, rule of law, governance, and delivery of services to poor and marginalized groups. Democratization of the state is both the cause and consequence of the civil society movement in Nepal.

The emergence and development of CSOs in Nepal, particularly in the form of NGOs and interest-based networks, increased after the democratic movement in 1990.Before 1990, the political regime had policies that discouraged registering organizations and did not protect the freedom of speech and freedom of association. As a result, there were limited numbers of NGOs/CSOs in existence. In addition, most of the CSOs in existence were, in many ways, under direct supervision of the royal family members. Even so, these CSOs made significant contributions in restoring the democratic system.

Soon after the democratic movement in 1990 had overthrown the autocratic political regime and constitutionally guaranteed the freedoms of speech, assembly, and association, the number of CSOs began to rise. A conducive policy framework helped NGOs and community-based organizations to flourish and facilitated the formation of various interest-based networks later. Moreover, a second popular people's movement in 1996 furtherresulted in a favorable environment for identity-based associations and networks. However, it also created some challenges for the effective implementation of the legal framework. Because it does not accommodate a diverse range of CSOs, the prevailing legal framework’s inherently limited scope is unlikely to facilitate the democratization process.

Nepal's civil society evolved into a vibrant movement for defending democracy and human rights during the people's movement in 2006, while the political parties were taking a back seat in the King's autocratic regime. The vacuum of democratic movement was filled in by the NGO Federation, human rights organizations, and natural resource management networks, as well as women, indigenous people, and other marginalized groups throughout the country. The mobilization by these federations and networks created a common platform for promoting and extending democracy and justice. This collective and collaborative action was a major reason for the success of the movement.

CSOs: Image in Nepal

The broad concept of “a CSO” seems not yet to have been fully understood in Nepal. A large segment of CSO members do not actually consider themselves as “real” CSOs or part of the CSO community. Moreover, they identify CSO leaders essentially as politically motivated activists whose job is to pressure on the government on policy issues.

Despite enormous contributions and longtime involvement, CSOs in Nepal continue to suffer from the misconception of being cunning, donor-driven “dollar harvesters.” This negative image has partly been created by the media and partly by civil society members themselves. The media often presents CSOs as an urban-based “dollar earning group” that prefer a luxurious lifestyle. Accordingly, some CSO members are reluctant to introduce themselves as affiliated with the sector.

Growing international support has contributed to an explosive growth in the number of CSOs, while promoting criticism of CSOs as well. CSOs, in general, were expected to be more innovative, less corrupt, less bureaucratic, more efficient, and generally more reliable than government. Instead, they are often criticized for being non-transparent, donor-driven, and unreliable. This perception gives impetus to those who want strict regulations and restrictions on CSO operations. Significantly, some CSOs are blamed for working to spread Christianity, a damning accusation in the non-Christian Nepali culture.

Perhaps most important, CSOs in Nepal are being criticized for lack of accountability. A popular perception is that NGOs are in practice unaccountable to anyone not in government or private donor institutions. Transparency and governance are critical issues in this regard.

It can be said that CSOs in Nepal, despite operating in improved legal and political environments, have not been successful in winning the support of large segments of society.

Despite such allegation and counter-allegations, civil society in Nepal is on the rise, and even the government has accepted it as one of the key social agents with which it should partner. The core issue remains the need for a sound legal framework that will address the internal governance, transparency, and political issues within the CSO sector.

There are several types of CSOs in Nepal, including:

Despite the range of CSOs, the sector faces considerable challenges. It seems that the concept of privately funded and managed public interest organizations is not well understood or widely encouraged. Moreover, corporate social responsibility is in its infancy. The legal framework for corporate philanthropy is unclear, and tax exemption is not guaranteed to promote public engagement. Raising funds locally is very difficult for local organizations in Nepal, and sustainability remains a vital issue for most CSOs. Though charitable contributions have been integral part of Nepali society irrespective of caste and religion, CSOs, other than religious associations, have not effectively mobilized local resources to the extent possible, largely because of their public image. The vast majority of people believe that NGOs and CSOs are supported financially by international sources, especially INGOs, and that they need no local support. However, research shows that local contributions are on the rise, especially those related to welfare work. Positive public appraisals of CSO operations have played a key role in promoting the sector and its contributions. The media plays a significant role in giving CSOs' activities favorable coverage, thereby encouraging others to contribute.

But “private” nonprofit organizations are very few in number, and they have been unable to persuade concerned stakeholders and, in particular, bureaucrats that they have a legitimate right to participate in making public policy and implementing public programs. The absence of a conducive environment makes it difficult to motivate CSOs to become involved in the areas of public policy and public programming.

The attitude of political parties towards CSOs remains unclear. They will support CSOs as long as they feel it is in their particular political interest. If a CSO has a different vision or approach from their own, politicians will blame the organization for being “anti-people” and supporting elite interests. (Of course, the organizations are free to make such a choice if they wish.) Recently, private sector CSOs demonstrated peacefully against an opposition political party for not following democratic norms or supporting progress. The opposition expressed its displeasure by saying CSOs were supporters of the establishment. Interestingly, the same opposition parties were very supportive of those CSOs and their campaign as long as the CSOs were demanding the Government’s resignation. On a similar note, CSOs were blamed for political activities targeting the Government.

Rationale and Key Questions of the Study

There is a growing concern among CSOs and people in general about the future of democracy, governance, and rule of law in Nepal. CSOs have demanded reform to the legal framework governing civil society for many years. Now, however, such change must wait for the new constitution to be drafted. Although the interim constitution contains clauses that protect human rights, democracy, and the rule of law as fundamental principles, these provisions must be ratified in the new constitution to make any significant contribution to CSO activity in Nepal. Political parties with contrasting ideologies and interests have made the situation volatile, and as a result the public is still uncertain about the constitutional guarantees of fundamental human rights. Frequent inter- and intra-party disputes that surface in public further increase such worries.

Despite their significant contribution, CSOs in Nepal continue to struggle. Although the sector successfully defeated proposed rules and regulations to further restrict CSO activity, verbal attacks on CSOs have been taken as attempts to justify CSO restrictions. NGOs, one of the key CSOs that appear in forefront of democratic movements, have been defamed and portrayed as corrupt and dollar-harvesting groups. Such characterizations damage CSOs as a whole. Developing the appropriate legal framework and requiring CSO compliance might help the sector replace the negative connotations, stop the attacks, and flourish in Nepal.

Now is the right time to review the legal framework for CSOs in Nepal and identify issues for advocacy. For the first time in its political history, the Nepali people are represented in the constitutional drafting process. However, the process has been delayed and there are still some key issues/principles to be agreed upon among the political parties. The issues are crucial and will have far-reaching effects in deciding the nature and scope of democracy, governance, and the rule of law in post-conflict Nepal. Moreover, despite the fact that political parties have expressed their commitment to respect fundamental human rights in the new constitution and to promote democracy and the rule of law, debate continues about the power-sharing and demarcation for the federal structure. The emphasis on federalism and power-sharing among the central and federal governments will also have an important impact on the legal environment for CSOs to function.

Another challenge facing the nascent government is managing a diverse population. CSOs can play an integral role by providing a social safety net for those sectors not adequately addressed by the government. Identity-based CSOs are especially adept at providing for underrepresented populations. Identity-based CSOs are usually treated as NGOs, despite differences in the issues they address and the methods they use.

The Society Registration Act 1960 was the first legal instrument in Nepal to legitimize the private sector’s involvement in development. In 1977, the Society Registration Act was amended and renamed the Association Registration Act; it included clubs, public libraries, literary societies, self-help groups, NGOs, and cultural groupings. The Social Welfare Council, which replaces the pre-1990 Social Service National Coordination Council (SSNCC), was reconstituted and the Social Welfare Act of 1992 was promulgated with the mandate to facilitate, promote, mobilize, and coordinate the activities of NGOs. Despite this new legislation, Nepal still lacks legislation that would provide an overall framework for civil society.

Due to the lack of a coherent civil society act and confusion of the government regarding its nature and functions, many civil society groups in Nepal are being treated as NGOs, and the establishment and functioning of a range of both mutual benefit CSOs and public benefit organizations are discouraged. Unlike NGOs and INGOs whose de factoand de jureoperation in Nepal requires registration with the Social Welfare Council, civil society organizations operate under diverse mandates, and many of them work as unregistered informal organizations. For example, trade unions are registered with the Department of Labor, students unions with the universities, private consulting firms under the Department of Industry, and a few civic organizations with the Social Welfare Council.

Similarly, although government plans and policies claim to create a conducive environment for civil society, government involvement in the sector can be confusing and bureaucratic. First, Nepali NGOs must register with the Chief District Office and with the Social Welfare Council. Then, each NGO must submit progress reports to its District Development Committee, a local government body that must approve the progress reports before the organization’s registration may be renewed for the next year. This complex system contributes, to some extent, to the poor functioning of civil society organizations in Nepal.

Moreover, philosophical questions are being raised about the origins of civil society in Nepal: Is the civil society rooted in the actual needs, experiences, and aspirations of Nepalese citizens, or do these organizations actually reflect the aspirations of donors and their aid conditionality?

Given the confusing legal framework, civil society in Nepal is likely to suffer more after the Constitutional Assembly finally sets the agreed-upon federal-state boundaries. The need for a clear legal and policy framework to ensure a conducive environment for civil society in the changed political atmosphere is clear.

With this backdrop, this study aims to answer following research questions:

B. Legal Frameworks in Nepal

Nepali CSOs are guided by several legal and policy documents. These include the Constitution, international treaties and covenants, the National Directorate Act, the Association Registration Act, the Social Welfare Act, the Good Governance Act, the Local Self-Governance Act, and various government plans and other policy documents. This section briefly highlights characteristics of those documents in regards to CSOs.

a. Constitution

The rapid rise in the number of CSOs in the recent past was a result of certain favorable developments.

The constitutional guarantees for freedom of speech, freedom of assembly, and respect for the International Declaration of Human Rights and other International Covenants are a key step towards the growth of the sector in Nepal.

The Constitution of the Kingdom of Nepal, 1990, was a milestone in this regard. Though the earlier constitution also had provisions to protect human rights, the Social Welfare Council (“SWC”), then chaired by the Royal Family, exerted such control over the general population that citizens were unable to establish CSOs of their choice without permission of the SWC. Some successfully registered CSOs had one of the royal family members as the “Patron” or “Chair.” The regime perceived CSOs as an agent of change that might enable people to raise their voices against the existing political system. The regime tried to control the number of CSOs and their activities. Although largely banned by law, political parties were successful in mobilizing people through civil society organizations. Political parties tried to make people aware of their fundamental rights.

Ever since the formulation of Constitution of the Kingdom of Nepal, 1990,and the people's movement, the state and political parties have been more positive towards civil society and its role in promoting the rule of law, governance, and service delivery at the community level. Accordingly, legislation has been more positive towards civil society, despite certain continued shortcomings and confusion.

In addition to listing substantive human rights and freedoms, national constitutions also often include procedural and institutional provisions that help to give effect to the substantive rights provisions. Thus, constitutions foresee systems for judicial remedy, lay down state responsibility for human rights protection and promotion, and establish independent national human rights institutions. Other provisions may relate to the incorporation of international human rights treaties in national legislation and their applicability and direct effect for individuals. Nepal has signed and ratified more than 20 important treaties. According to the Section 9 of the Treaty Act, 2047 BS (1991), all ratified treaties become the law in Nepal.

In Nepal, human rights are laid down as fundamental rights. Nepal has acceded to many international human rights instruments, and has set forth a comprehensive catalogue of human rights in the existing and previous constitutions. The Interim Constitution, 2007, is considered the most progressive of all the constitutions promulgated in Nepal in terms of the provisions related to human rights(mentioned in Part 3, “Fundamental rights”). In this constitution, Articles 12, 13, 16, 24, 25, 26, 29, and 31 relate to various individual freedoms, including the provisions of civil rights (rights to life, dignity, equality, freedom, etc.) and to political rights (rights to association, expression and exchange of ideas, participation in the state system, etc.). Similarly, Articles 12, 15, 27, and 28 protect economic rights (rights relating to the opportunity of proper employment, emancipation from hunger, the right to work for livelihood, the right to select one's own occupation, etc.). Articles 12, 13, 18, 19, 29, and 30 refer to social rights (rights to education, health and safety, medical facilities, maternal and infant health care, safety and security of children, etc.). Cultural rights (rights to participate in religious, cultural, and traditional practices without hurting the sensitivities and dignity of others) are mentioned in Article 23.

As per Part 3, Section (12): (3) of the Constitution of Nepal, every citizen shall have the following freedoms:

(a) freedom of opinion and expression;

(b) freedom to assemble peaceably and without arms;

(c) freedom to form political parties or organizations;

(d) freedom to form unions and associations;

(e) freedom to move and reside in any part of Nepal; and

(f) freedom to practice any profession, or to carry on any occupation, industry, or trade.

The Constitution has made the state accountable for fulfilling its responsibility towards international treaties. Part 4 of the Constitution requires the state

“to implement international treaties and agreements effectively, to which State is a party.”

Similarly section 34 (“Directive Principles of the State”) provides:

(1) It shall be the chief objective of the State to promote conditions of welfare on the basis of the principles of an open society, by establishing a just system in all aspect of national life, including social, economic and political life, while at the same time protecting the lives, property, equality and liberty of the people.

(2) It shall be the objective of the State to maintain conditions suitable to the enjoyment of the benefits of democracy through maximum participation of the people in the governance of the country by the means of self-governance tribal, linguistic cultural or regional and to promote general welfare by making provisions for the protection and promotion of human rights, by maintaining tranquility and order in the society.

The Constitution has even foreseen the need to enact a legal framework that facilitates civil society. As mentioned in Section 35, under “State Policies,”

(19) The State shall pursue a special policy to regulate the operation and management of public and non-governmental organizations established in the country.

Moreover, the Constitution envisages popular participation in governance and democratic exercise. Part 17, Section 139, of the Constitution includes the “Provision for Local Self Governance”:

(1) Arrangements shall be made to set up local self governance bodies to ensure the people's exercise of their sovereignty by creating congenial atmosphere and thereby ensuring maximum peoples' participation in the country's governance, and also by providing services to the people at the local level and for the institutional development of democracy, based on the principle of decentralization and devolution of power.

As a part of the Constituent Assembly, several thematic groups are currently working to draft the key principles to be included in a new Constitution. Despite some disagreement over the demarcation criteria for the federal structure and priority rights for ethnic groups, the fundamental rights as already guaranteed by the current constitution will remain unchanged.

b. Act & Regulations

1. National Directorate Act

This is a special Act, and registration of entities under it may not be cancelled without an action of the cabinet. There are a few CSOs registered under this Act, including the Nepal Bar Association, Nepal Press Council, and NGO Federation of Nepal. Though the NGO Federation was initially registered under the Association Registration Act, it subsequently changed status and is registered under the National Directorate Act.

2. Association Registration Act

The Association Registration Act is the primary legal framework for CSOs in Nepal. Most of the CSOs in Nepal are registered under this Act. It was first promulgated in 1976 and has since has been amended. However, CSOs in Nepal are not satisfied with its “controlling legacy.” The Act has not been able to address emerging issues and is not CSO-friendly in many ways. Hence, CSOs are demanding an update to the Act. Detailed provisions of the Act are discussed in the next section.

3. Social Welfare Act, 1992

After repealing the Social Service National Coordination Council Act, 1977, the Social Welfare Act was promulgated. The Act, as detailed in the preamble, provides a limited scope for CSOs to function, except in relief and service-delivery types of activities.
One of the important acts to regulate NGOs/CSOs is the 1976 Social Service Act under which most of the organizations are affiliated. While user groups are registered in their respective government authorities (line agencies)—such as Community Forest User Groups (CFUGs) in the District Forest Office and Water User Groups in the District Irrigation Office—all other organizations such as NGOs, federations, networks, professional associations, clubs, and community organizations are to be affiliated under the 1976 Social Service Act.

This Act (Social Service Act) was enacted in duringthe autocratic regime that sought to control NGOs and ban political parties. However, the same Act remains in effect despite the dramatic political and social changes over the last two decades. The Act has created some problems in the changing political and social contexts of Nepal, for example:

NGOs and CSOs in Nepal are lobbying for a new act, called the Social Development Act, which will properly categorize organizations based on their objectivesand field of activities and interests.

4. Local Self-Governance Act

The Local Self-Governance Act has envisaged local government playing a pivotal role towards promotion of a CSO-friendly environment at the local level. It aspires to mobilize CSOs in democratization of the society, promoting transparency and accountability. To do so, it defines the functions, duties, and powers of two key local government institutions: the District Development Committee and the Village Development Committee (“VDC”).

As stated in Section 3on “Principles and Policies of Local Self-governance, “local bodies should be oriented towards establishing a civil society based on democratic processes, transparent practices, public accountability, and people’s participation in carrying out the functions devolved to them. Similarly, local bodies should encourage the private sector to participate in local self-governance by providing basic services for sustainable development.

Section 28 of the Act describes “Functions, Duties, and Powers of a Village Development Committee”:

The Village Development Committee shall encourage consumer groups and other non-governmental organizations for the development and construction works to be done in the village development area and it shall have such works done through such groups or organizations.”

Similarly, the Act has clearly described one of the key functions of VDC: coordination with governmental and non-governmental agencies. As per section 47,

In formulating its plans and service program, the Village Development Committee shall have to maintain coordination with governmental, non-governmental and donor agencies implementing different services and development program in the village development area.

Moreover VDCs are given the responsibility of encouraging NGOs in many different aspects of development. As per section 51 of the Act,

The Village Development Committee shall have to encourage the non-governmental organizations for the acts of identification, formulation, approval, operation, supervision, evaluation, repair, and maintenance of the village development program within each village development area.”

Similarly, local government is given the responsibility to supervise and approve the project implemented by CSOs. Section 53provides that:

“(1) After the completion of the project, it shall have to be examined, released and cleared as prescribed; (2) After receiving the information of the completion of a project from the project operating agency, the Village Development Committee shall examine, release and clear the project on the basis of the work completion report and the evaluation submitted by the technician.”

Very similar provisions exist for District Development Committees (“DDCs”), a higher level of local government. As per Section 204 of the Act, DDCs are supposed to coordinate with CSOs during annual planning. It explicitly states that:

“In formulating the integrated district development plan, there shall be held a meeting of governmental and non-governmental organizations implementing different services and development program within the District and coordination shall be maintained between annual development plans.”

Similarly, it has a provision to mobilize community-based organizations, such as consumer's groups, in development activities. As per section 205 (4),

“The projects under the district level plan may be implemented and operated through consumers’ group. The District Development Committee may, as per necessity, contribute to the implementation by obtaining external consultancy service.”

It defines the accountability of those CSOs to DDCs in Section 209 (4) of the Act:

“The consumers' group and non-governmental organization implementing the project shall have to give a report of the accounts of their transactions to the District Development Committee and the body implementing the project and the District Development Committee shall have the responsibility for getting the accounts audited.”

Despite the conducive policy framework, the absence of a legal structure and mandatory provisions makes implementing the policy framework ineffective. As a result, engagement of CSOs in development activities depends solely on the discretion of the individuals in the local government authority; it has not been something that CSOs can claim as a legal right.

5. Civil Rights Act, 1955

The Civil Rights Act, 1955, is a pioneering piece of legislation that guarantees the rights of Nepali people. As per the section 6 of the Act,

“Subject to the provision of the prevailing laws, all citizens shall have the following rights:

(1) Freedom of expression and publication.

(2) To assemble peaceably and without arms and ammunitions.

(3) To run organizations and associations.

(4) To move all over Nepal without any obstacle.

(5) To reside and maintain household in any part of Nepal.

(6) To acquire, possess and sell property.

(7) To choose any profession, employment, industry or trade.

Case Study:

NEPAN, a network of participatory development practitioners, was given responsibility for facilitating regional-level consultations to help draft regulations for the Senior Citizen Act. Similarly, while formulating the Act itself, the Government of Nepal consulted with key stakeholders, such as NEPAN and NNSCON, on aging issues.

6. Good Governance Act, 2007

The Good Governance Act reinforces the state’s commitment to strengthen the foundation of democracy and, in turn, mobilize CSOs. As stated in the Act, the government of Nepal has specifically provided that the rule of law, respect for and promotion of human rights, participation of the people, transparency, and accountability may give rise to administrative actions. Further, Section 20 (1) of the Act says that the government may consult CSOs in a matter of public interest when it is deemed necessary and solicit and acknowledge their responses when formulating a new policy or upgrading an existing one.

c. Policy and Program

National policy documents, such as five-year development plans, master plans, and long-term perspective plans developed after 1990, recognize the role of NGOs/CSOs as development partners. Those documents emphasize the promotion of participatory development through local user groups. The Ninth and Tenth Five-Year Plans recognized the role of NGOs as development partners, especially in the role of service providers. In another example, sectoral plans like the Master Plan for the Forestry Sector recognize the role of local communities in the management of particular resources. Community Forest User Groups (CFUGs) are given management rights over local forest resources, a move that has further facilitated the emergence and growth ofthousands of CFUGs across the country. The CFUGs example demonstrates that a federated structure can provide a conducive policy and legal environment for interest-based networks and associations.

Three-Year Interim Plan, July 2007

The Three-Year Interim Plan formulated in 2007 reinforced the national commitment to democracy and the promotion of public participation. The challenges identified in the document include: to promote people's participation in the country's governance system by pushing forward decentralization and devolution, to make effective local-level service delivery, and to carry out institutional development of democracy from the grassroots level.

Moreover, the Plan recognizes that civil society and non-governmental sectors are becoming dynamic and empowered and are useful for the development process. One of the strategies adopted in the Plan is the “Promotion of good-governance and effective service delivery.”Its goals are to strengthen the rule of law and state machinery; increase public participation, transparency, and accountability; create a corruption-free environment; and increase access for all Nepalese, including those traditionally excluded, to economic and social service delivery. As stated in the document, the private sector and civil society (including NGOs and community organizations) will be partners in development, and necessary laws, policies, and programs will be revised, formulated, and implemented to emphasis decentralization, institutional strengthening, and capacity development.

The plan has adapted various policies, including:

The plan states that activities will be implemented to make NGOs, communities, and the civil society active in the empowerment and development of the target groups. It further suggests that there remains a need for coordination with INGOs, as well as for evaluation of their contributions. The plan addresses some of the key issues for which CSOs in Nepal have been advocating. Action points described in the plan include:

C. Specific Provisions for CSOs in Nepal

This section describes specific legal provisions that permit, encourage, protect, and regulate the range of civil society organizations. The existing specific legal provisions included in this section are related to Legal Existence of CSOs; Structure and Governance Prohibition on Direct and Indirect Private Benefit Activities of Civic Organizations; Fundraising; Reporting, Supervision, and Enforcement; Tax Preferences; Foreign Civic Organizations and Foreign Sources of Funding; and Methods of Voluntary Regulations. Legal provisions under each theme are analyzed based on the key principles as suggested in the Guidelines for Laws Affecting Civic Organizations published by the Open Society Institute.

1. Legal Existence of CSOs:

Establishment:

a. Laws may require that certain specific acts must occur to create a formal civic organization.

No person shall establish or cause to be established any Association without having it registered pursuant to the Association Registration Act. Moreover, according to the Section 12 of the Act,

“If an Association is established without having it registered pursuant to Section 3 or if an Association is operated without having been registered pursuant to Section 7, the Local Authority may impose a fine of up to Two Thousand Rupees on each member of the Management Committee of such an Association.

b. The establishment of a civic organization should require filing only a small number of clearly defined documents.

Section 4 of the Association Registration Act provides that any seven or more persons willing to establish an Association shall have to submit to the Local Authority an application setting out the following details on the Association, accompanied by one copy of the Statute of the Association, and with the prescribed fee:

(a) Name of the Association,

(b) Objectives,

(c) Name, address and occupation of the members of the Management Committee,

(d) Financial sources,

(e) Address of the office.

c. Civic organization laws should be written and administered so that it is quick, easy, and inexpensive to establish a civic organization as a legal person.

The Association Registration Act, in most cases, is the only Act under which all CSOs are to be registered unless otherwise stated in other Nepal Law. As per the Section 16 (of Association Registration Act (Requirement of Registration or Establishment Pursuant to Other Nepal Law)):

“If any other Nepal Act contains separate provisions on registration and establishment of any Association, notwithstanding anything contained in this Act, such an Association must be registered or established in accordance with such Act.”

d. The establishment of a civic organization should involve relatively little bureaucratic judgment or discretion as to the permitted purposes of the organization and the means by which it intends to pursue those purposes.

Subsection (2) of Section 4 provides:

“Upon receipt of the application referred to in Sub-section (1), the Local Authority shall make necessary inquiry, and register the Association, if he/she deems it appropriate to register the Association, and shall issue the certificate of registration.”

e. The rules for legal establishment should set short time limits within which the responsible state agency must act (e.g., a maximum of 60 days) and should provide that failure to act on complete applications within the required time results in presumptive approval. In certain situations (e.g., disaster relief), establishment should occur more quickly.

Subsection (3) of Section 4 provides:

“If the Local Authority makes a decision not to register the Association, a notice of such decision must be given to the applicant; and the applicant may make a complaint to the Authority specified by Government of Nepal against such decision within thirty five days of receipt of such a notice.”

f. The responsible state agency should be required to provide a detailed written statement of reasons for any refusal to establish a civic organization. Decisions to refuse to establish a civic organization should be appealable to an independent court. A reasonable time period should be available for such appeals. Where necessary, the civic organization law should specifically reinforce these rights.

Subsection (4) of Section 4 provides:

“Upon receipt of a complaint pursuant to Sub-section (3), the authority specified by Government of Nepal may, if he/she deems reasonable to register such Association upon making necessary inquiry, give an order to the Local Authority to register the Association; and upon receipt of such an order, the Local Authority shall register the Association.

As per Section 13 of the Act, CSOs may appeal decisions of the concerned authority in the Appellate Court, but the Act does not specify where to appeal a denial of registration.

g. There should be no extraneous requirements for establishment, such as a minimum endowment requirement for an association or other membership organization or a burdensome minimum membership requirement. Minimum endowment requirements for grant making organizations should be nominal.

As per Section 4, seven is the minimum number of members required to apply for the registration.

h. The permitted purposes stated in the law for formal civic organizations should embrace all activities that can legally be engaged in by individuals.

The Act’s Preamble states: “Whereas, it is expedient to make provisions on establishment and registration of social, religious, literary, cultural, scientific, educational, intellectual, physical, economical, vocational and philanthropic associations.” This language provides for the existence of both public benefit organizations (“PBOs”) and mutual benefit organizations (“MBOs”) but requires that all associations be non-political. Preventing associations from engaging in partisan political activities is not an unusual requirement in many countries. However, preventing activities in support of or opposed to particular policies is clearly a restraint on freedom of expression and prevents associations from raising issues related to their rights.

i. Civic organizations should be allowed to have perpetual existence (or limited existence, if chosen by the founders).

As per Section (1) of Section 5, “Each Association registered pursuant to this Act shall be an autonomous body corporate with perpetual succession.”

j. Both natural and legal domestic or foreign persons should be entitled to create civic organizations. Consideration should be given to allowing minors to participate as members in civic organizations.

Though minors are allowed to participate as members in civic organizations, foreign persons are not entitled to create civic organizations. All of the CSO members associated with an organization should submit their citizenship certificates when they apply for registration.

k. The law should clearly state the rights and duties incurred by a civic organization during the period of creation, including issues about transfers of property.

While there are no provisions governing transfers of assets during the period of creation, if the organization ceases to operate for any reason, properties owned by the organization will be transferred to the Social Welfare Council of the government.

l. Both mutual benefit and public benefit organizations should be allowed to exist.

There are number of MBOs and PBOs functioning as registered legal entities, including professional associations which are registered under the Association Registration Act.

m. As a general matter, membership in a civic organization should be voluntary; no person should be required to join or continue to belong to an organization.

The Association Registration Act does not mandate membership in a civic organization.

B. Responsible State Agency

a. The state agency or court vested with the responsibility for establishing civic organizations should be adequately staffed with competent professionals and be evenhanded in fulfilling its role.

There are insufficient staff and facilities in the responsible government agency to meet the needs of the burgeoning civil society sector. Moreover, the frequent transfer of staff hinders efficiency.

C. Amendments to Governing Documents

a. A civic organization should be allowed to amend its governing documents, without having to entirely reestablish the organization. Amendments should be filed with the responsible state agency.

“Section 8 of Association Registration Act, “Alterations in Objectives of Association,” states:

(1) If it deems it necessary to alter the objectives of the Association or deems it appropriate to amalgamate the Association with any other Association, the Management Committee of the Association shall prepare a proposal therefore and shall have to call an extraordinary general meeting pursuant to the statute of the Association to discuss the proposal.

(2) If more than two-thirds members out of the total number of members present at the extraordinary general meeting support the proposal, the proposal shall be deemed to have been adopted by the extraordinary general meeting.

Provided that, in order to implement the said proposal, prior approval of the Local Authority shall have to be taken.

Section 12 (4) provides:

“If changes are made in the objectives of the Association or the Association is amalgamated with another Association without obtaining approval of the Local Authority pursuant to Section 8, or if the Association performs any acts contrary to the objectives of the Association or fails to follow the directions given by Government of Nepal, the Local Authority may suspend or terminate the registration of such an Association.”

D. Public Registry

a. There should be a single, national registry of all civic organizations that is accessible to the public.

The Nepal Constitution guarantees public access to registry information. The Act governing access to registration information is in place, and therefore the public technically should have access to this information. However, in practice, there have not been many public inquiries about registration information, outside of media inquiries.

Unless otherwise stated in legislation, the District Administration Office is responsible for the registration of associations. However, the Social Welfare Council is meant to be a single national registry, but as the membership of the Social Welfare Council is not mandatory unless CSOs seek government funding or donor money, they are not required to affiliate with the Council. Hence, the government does not know exactly how many organizations actually exist and which are functional.

As per the Local Self Governance Act, Section 212, District Development Committees will function as information and records centers. The Act states:

“There shall be one information and records center in each District Development Committee to identify the real situation of the district and enhance the planned development process. Such information and records center shall have to collect information and records as follows:

(a) Updated objective report of each Village Development Committee, Municipality situated in the District and the District Development Committee....

(h) Description and progress of program of the non- governmental and private sector being operated in the district.

(i) Reports on study and research done in the District.”

E. Mergers and Divisions

There should be clear rules allowing, but not compelling, civic organizations to merge, divide, or modify themselves in ways that are permitted for other legal entities. There may be restrictions, however, on the ability of civic organizations to merge with for-profit entities or on the ability of PBOs to convert to MBO status through merger or division.

Section 8, Alterations in Objectives of Association, provides:

“(1) If it deems necessary to alter the objectives of the Association or deems it appropriate to amalgamate the Association with any other Association, the Management Committee of the Association shall prepare a proposal therefor and shall call an extraordinary general meeting pursuant to the statute of the Association to discuss the proposal.

(2) If more than two-thirds of the total number of members present at the extraordinary general meeting supports the proposal, the proposal shall be deemed to have been adopted by the extraordinary general meeting. Provided that, in order to implement the said proposal, prior approval of the Local Authority shall have to be taken.”

F. Termination, Dissolution, and Liquidation

The highest governing body of a civic organization, upon application, should be permitted to terminate the organization’s activities voluntarily, go through legal dissolution proceedings, and liquidate the organization’s assets pursuant to the decision of a court. Determinations to involuntarily terminate or dissolve a civic organization should be ordered by or be appealable to independent courts. A reasonable time period should be available for such appeals. Where necessary, the civic organization law should specifically reinforce these rights.

As per the Section 14 of the Association Registration Act,

“If an Association is dissolved due to its failure to carry out the functions pursuant to its Statute or for any other reasons whatsoever, all the assets of such Association shall devolve on Government of Nepal.

(2) In the case of the liabilities of the Association dissolved pursuant to Sub-section (1), Government of Nepal shall bear such liabilities to the extent that the assets of the Association cover[the liabilities].”

Section 20 of the Social Welfare Act, Subsection (1), provides:

“The Government of Nepal on the recommendations of the Council may suspend or dissolve the executive committee or those social organizations or institutions affiliated with the council or receiving economic assistance from the Council, if they do their business against prevailing laws or their own constitutions. However, a reasonable opportunity to provide an explanation shall be given to the executive committees before their suspension or dissolution.

Furthermore, Subsection (2) says

“The Government of Nepal may constitute and hoc committee from the general members of that organization and institution to carry out the business of that organization and institution until any suspension of that organization and institution is lifted, and until the constitution of new executive committee, when dissolved pursuant to Subsection (1).”

2. Structure and Governance

a. Mandatory Provisions for Governing Documents

Basic rights, limits, and powers of civic organizations should be defined by law. In addition, certain minimum provisions necessary for the operation and governance of a civic organization should be required in an organization’s governing documents. The requirements may be different for membership and non-membership organizations.

The Association Registration Act clearly defines the basic rights, limits, and powers of CSOs. Similarly, basic minimum provisions necessary for the operation and governance of a CSO should be a part of an organization’s governing documents. Sample governing documents for CSOs are made available at every District Administrative Office and those interested can make a copy. Organizations are encouraged to model their governing documents on the sample documents and maintain the key aspects, including section titles.

b. Optional Provisions for Governing Documents

A formal civic organization (through its founders or its highest governing body) should have broad discretion to set and change the governance structure and operations of the organization within the limits provided by law.

It is possible for an organization to change its governance structure and operations only with prior consent from the government authority. Organizations may not have fewer than seven members in the executive committee.

c. Liability of Founders, Officers, Board Members, and Employees

Founders, officers, members of the governing or management boards, and employees of a formally established civic organization should not be personally liable for the obligations of the civic organization.

Subsection 3 of Section 6:

“If any person including the member or employee of the Association commits any crime or wrong against the property, document, or reputation of the Association, the Association, any member of the Association, or the Local Authority may institute a case pursuant to the prevailing laws.”

Officers and board members should ensure that the organization operates within the requirements of the law (e.g., the Civil Code, the Labor Code, and other general laws) and should be liable to the organization and/or to injured third parties for willful or negligent performance or omission.

Every CSO must follow pertinent legal requirements. Even if not specifically mentioned in the organization’s governing documents, failure to comply with all existing laws will be considered as a violation of law. All staff and board members are supposed to comply with the organization’s rules and regulations, and violations of organizational rules and regulations should be dealt with internally. If a situation arises that was not envisaged when the organizational rules were drafted, the board of directors or executive committee should make a decision that will set a precedent for the future.

d. Duties of Loyalty, Diligence, and Confidentiality

a. Officers and board members of a civic organization should be required by law to exercise loyalty to the organization, to execute their responsibilities to the organization with care and diligence, and to maintain the confidentiality of nonpublic information about the organization.

A CSO develops its code of conduct and it applies to all staff members, as well as governing body members, and the code addresses these affirmative duties of officers and Board members.

b. The civic organization itself, or any affected person in the society, should be allowed to sue for redress of any violations of these duties.

CSOs have the right to sue to protect their interests. As per Subsection (3) of Section 5:

“The Association may sue by its own name and may be sued by the same name as an individual.”

e. Prohibition on Conflicts of Interest

As stated in Section (6) of Association Registration Act:

“(1) If any person, including a member or employee of an Association, misuses, possesses or holds up any property of the Association contrary to the statute of the Association, the Local Authority may obtain such property from such person who has misused, possessed, or held it up , and return it to the Association.

(2) A person who is not satisfied with the action taken by the Local Authority to return the property of the Association pursuant to Subsection (1) may appeal to the Court of Appeal.

(3) If any person including the member or employee of the Association commits any crime or wrong against the property or document or reputation of the Association, the Association, any member of the Association or the Local Authority may institute a case pursuant to the prevailing laws.

As per the Social Welfare Act, Section 22,

“The employees of the Council shall not be allowed to involve as authority or members of the executive committees of those social organizations or institutions affiliated with the Council.”

3. Prohibition on Direct or Indirect Private Benefit

Prohibition on the Distribution of Profits

a. Profits of a formal civic organization should not be permitted to be distributed as such to any person.

No CSO, especially a not-for-profit organization, is allowed to distribute profits.

b. Prohibition on Private Inurement

Employees, as well as officers, board members, and members of a civic organization should be permitted to be paid appropriate compensation for work actually performed for the organization, including appropriate fringe benefits and reimbursement for appropriate expenses.

The executive committee or board of directors shall decide/approve appropriate levels of compensation for employees, officers, and board members, in line with the existing fiscal policy of the organization. Traditionally, board members of a CSO serve without compensation. However, in those cases where board members are required to devote many hours to the organization and give technical input, organizations may pay board members appropriate compensation for their time. Such payments should be approved by the executive committee. Usually, board members are remunerated at no more than normal market rates.

A civic organization should be prohibited from providing special personal benefits, directly or indirectly (e.g., scholarships for relatives), to any person connected with the organization (e.g., founder, officer, board member, employee, or donor). Benefits may be made available to members of an MBO if they are made available on a nondiscriminatory basis to all members (e.g., special educational programs or life insurance plans).

Though the Association Registration Act and the Social Welfare Act do not specifically mention the issue, in practice conflicts of interest are resolved according to an organization’s bylaws. The NGO Federation has developed a code of conduct that is useful as a model, but particular issues vary from organization to organization. Some mutual benefit CSOs work to promote the rights of specific groups of people and, despite their CSO legal status, provide benefits to some of their members, though they are founders and may be associated as board members. They provide such services and make benefits available to them solely because they are included in the classification of beneficiaries defined in the organization’s statutes.

c. Prohibition on Self-Dealing

Any transaction (e.g., sale, lease, or loan) between a civic organization and any person connected with it (e.g., founder, officer, board member, member, employee, or donor) should be able to be consummated only after legitimate negotiation and only at a price and on terms that are not disadvantageous to the organization.

The Nepal Constitution and organizational financial policies and rules address the financial transactions between a civic organization and any person connected with it. The executive committee or board of directors is mainly responsible for ensuring that such transactions are fair. However, this remains one of the areas where CSOs are criticized, and clearer legal guidelines should be applied to prevent actual conflicts or the appearance of such conflicts.

d. Prohibition on the Reversion of Assets

a. No civic organization that has received significant funding from the public or the state should be permitted to distribute assets to its founders, officers, board members, employees, donors, or members upon its liquidation.

As per Section 6, Subsection (1), of Association Registration Act:

“If any person including the member or employee of an Association misuses, possesses, or holds up any property of the Association contrary to the statute of the Association, the Local Authority may obtain such property from such person who has misused, possessed, or held it up, and return it to the Association.”

b. An exception permitting distribution of assets to members upon dissolution and after the payment of all liabilities of the civic organization may be appropriate in the case of an MBO that never received significant contributions from the public (i.e., persons not affiliated with it as founders, donors, officers, board members, employees, members, or donors) or significant grants, contracts, or tax benefits from the state.

As provided in Social Welfare Act, when an organization ceases to function, the property is transferred to the government, through the Social Welfare Council.

4. Activities of Civic Organizations

Public Benefit Activities

a. Civic organization laws should allow organizations to qualify as “public benefit organizations” for the purpose of receiving special benefits from the state, such as special tax benefits or the right to compete for certain state contracts. Qualification may be accomplished through an application procedure to a specific state agency, such as the department of revenue, or a special commission set up specifically for that purpose.

Organizations are allowed to apply for a tax-exemption certificate. The Department of Internal Revenue is the agency that gives an organization its tax-exemption certificate once the required documents/evidence has been produced.

b. Determinations of public benefit status should not be time limited.

The tax exemption certificate is the only document required to demonstrate that an organization has public benefit status, and the certificate remains valid so long as the organization carries out its exempt/public benefit purpose.

c. All civic organizations should be permitted to engage in public benefit or charitable activities.

So far there is no legal restriction for civic organizations to engage in public benefit or charitable activities, provided the activity falls within the scope of the objectives mentioned in the organization’s by-laws.

Public Policy and Political Activities

a. Civic organizations are key participants in framing and debating issues of public policy, and, just as is true for individuals, they should have the right to speak freely on all matters of public significance, including existing or proposed legislation, state actions, and policies. Likewise, civic organizations should have the right to criticize (or praise) state officials and candidates for political office. There should be no restrictions on the right of civic organizations to carry out public policy activities, such as education, research, advocacy, and the publication of position papers.

CSOs are involved in public policy to some extent. There are some success stories where civic organizations have been involved in policy framing. However, without mandatory provisions, participation depends on the discretion of the state authority and the personal will of officials.

b. Formal civic organizations should be permitted to engage in public-interest litigation.

Registered CSOs are allowed to be engaged in public-interest litigation, and there are several cases where CSOs have made government agencies accountable on public-interest issues through their exercise of legal procedures.

c. It may be appropriate to limit civic organizations with respect to activities such as fundraising to support candidates for public office or establishing candidates to qualify for public office.

Organizations are required to declare themselves non-political. An organization’s statute should mention that the organization is “non-political” and does not support any specific political party, in order to be registered with District Administration Office.

Economic Activities

a. A civic organization should be permitted to engage in lawful economic activities provided that it is organized and operated principally for appropriate noncommercial purposes, and that no profits or earnings are distributed as such to founders, officers, board members, employees, or members. Such activities may be engaged in provided that any applicable requirements for licensing and permits are met.

Civic organizations are allowed to engage in lawful economic activities, provided that profits are used for the organizational benefit rather than distribution to individuals.

Economic Development Organizations

Laws should allow civic organizations to participate in economic development activities, such as microcredit, small business incubation, etc., through the borrowing and lending of funds. Economic development activities should be considered to be public benefit activities.

CSOs are, in many cases, involved in economic development activities. However, to start a microcredit cooperative, an organization must be registered under Cooperative Development Act. Nepal Rastra Bank also gives permission to selected CSOs to engage in microcredit activities

Licenses and Permits

Any civic organization engaging in an activity that is subject to licensing or regulation by a government agency (e.g., health care, education, social services to those living with HIV/AIDS) should be subject to the same generally applicable licensing and regulatory requirements and procedures that apply to similar activities of individuals, business organizations, or public agencies. If a permit is required for certain activities (e.g., a parade permit), including public policy activities, civic organizations should not be subject to requirements for obtaining permits that are more stringent than those applicable to individuals, business organizations, or public agencies. Licensing and permit requirements should not be used to stifle legitimate activities of civic organizations, including legitimate public policy activities

CSOs registered with the concerned authority are allowed to engage in activities that are subject to licensing or regulation by a government agency and, in some cases, government agencies partner with CSOs.

5. Fundraising

Permissible Fundraising Activities

a. Formal civic organizations should generally be permitted to engage in any legitimate fundraising activity, including door-to-door, telephone, direct mail, television, campaigns, lotteries, raffles, and other fundraising events.

The Home Ministry webpage states that one of its activities is to control public fundraising. However, with prior permission, CSOs are allowed to undertake certain fundraising activities. For some CSOs, a large part of their budget comes from locally raised funds.

Fundraising Activities – Limitations, Standards, and Remedies

a. It may be appropriate to require advance registration of public fundraising campaigns with a public agency responsible for issuing permits and, for in-person solicitations, issuing badges and other identification materials to the fundraisers. However, the government should not be permitted to screen or require approval of specific grants or sources of funds.

CSOs must obtain prior approval from the Ministry of Finance or the Social Welfare Council to receive grants from INGOs and other donors. Violations of this rule are subject to penalty.

b. Through either laws regulating fundraising or under rules established by voluntary self-regulatory mechanisms, civic organizations should be required to disclose publicly the way in which funds received from public donations are spent, and, specifically, the extent to which the funds raised are used or expected to be used to defray the direct and indirect costs of fundraising.

The Association Registration Act provides:

“Section 9: The Management Committee shall have to submit each year the statements of accounts of its Association to the Local Authority, along with the report of the auditor.

Section 10: (1) Examination of Accounts: (1) The Local Authority may, if it deems necessary, cause the accounts of the Association to be examined by an officer appointed by him/her.

(2) For the examination of the accounts pursuant to Subsection (1), the Local Authority may collect the fee in such a sum as may be determined by him/her not exceeding three per cent of the balance of the Association as shown upon the examination.”

c. General fraud and other criminal laws should apply to civic organizations and can be invoked if there is any misrepresentation or fraud in connection with the solicitation of funds from others.

Criminal laws and sanctions on fraud apply to all people, irrespective of their profession.

6. Reporting, Supervision, and Enforcement

Internal Reporting and Supervision

a. Civic organizations should be required to keep financial documentation, reports, and records of their activities. They should also be required to maintain records of meetings of their governing bodies.

The statute of a civic organization should mention who is specifically responsible for reporting. Unless this provision is thoroughly described in the statute, the organization will not be registered.

b. The highest governing body of a civic organization (e.g., the assembly of members or the governing board) should be required to receive and approve reports on the activities and finances of the organization to ensure that they are consistent with the purposes stated in its governing documents.

The Annual General Assembly of CSO, as set forth in its statute, is the forum where responsible persons present the reports on behalf of a CSO and get the Assembly’s approval. Reports should also be presented to the District Administration Office when applying for the renewal process

c. Some organ of the civic organization (e.g., the governing board or an audit committee created by the governing board) should be given the responsibility, and each member of an MBO the right, to inspect the books and records of the organization.

Inspection policies are guided by the particular organization’s policy and the self-regulatory system it has developed. Mostly, organizations create executive and subcommittees and give them the inspection duties.

d. Accounting records of civic organizations should be kept in accordance with generally accepted accounting principles.

Nepal has generally accepted accounting principles, developed by the Department for Fiscal Regulation, and these principles act as guidelines for both internal and external financial management for all organizations.

e. As a matter of good practice, any civic organization with substantial activities or assets should have its financial reports audited by an independent certified or chartered accountant, assuming such services are available at a reasonable cost. This should be a requirement for any sizable PBO.

This is a common practice and an external auditor should verify that financial rules and regulations are being followed. An external auditor is necessary for looking into the internal as well as external consistency of an organization’s financial records at the end of each fiscal year (FY).

Reporting to and Audit by the Responsible State Agency

a. Any civic organization receiving more than minimal benefits from the state or engaging in a significant amount of public fundraising should be required at least annually to file appropriate reports on its finances and operations with the state agency that is responsible for general supervision of civic organizations.

As per Section 9 of the Association Registration Act:

The Management Committee shall have to submit each year the statements of accounts of its Association to the Local Authority, along with the report of the auditor.”

If the statement of accounts is not submitted pursuant to Section 9, the Local Authority may impose a fine of up to five-hundred rupees on each member of the Management Committee. Provided that, if a member produces a satisfactory evidence that he/she has tried his/her best not to violate Section 9, such a member shall not be liable to punishment.

Reporting to the responsible state agency, such as a District Development Committee or District Administrative Office, is a mandatory part of an organization’s renewal application. Organizations are supposed to renew their registration within three months (after the expiry) of Nepali fiscal year. If they fail to register, they will be subjected to penalties, the amount of which will increase every year. If, for example, they fail to register for five years, they can pay a sum of Rs5,000 on the top of the regular yearly renewal fee (Rs500) in order to be renewed. Sometimes officers, in their discretion, can charge an Rs 500 lump sum for five years and renew the organization. Five years is the critical deadline because after five years of non-renewal, it is not possible to simply pay the fine and obtain a renewal. If not renewed for five years, the organization’s registration will automatically be cancelled.

Section 18, subsection (5) of the Social Welfare Act says that the Council, if it so wishes, may inspect or cause to be inspected the accounts document along with cash and in-kind receipts of the social organization and institutions affiliated with the Council, at any time.

b. Reporting requirements should include a document retention policy that will enable the responsible state agency to adequately supervise the organizations required to file reports.

As per Section 10:

“(1) The Local Authority may, if it deems necessary, cause the accounts of the Association to be examined by an officer appointed by him/her.

(2) For the examination of the accounts pursuant to Subsection (1), the Local Authority may collect the fee in such a sum as may be determined by him/her not exceeding three per cent of the balance of the Association as shown upon the examination.

(3) It shall be the duty of the official, member and employee of the Association to submit the statement and documents or to answer the questions asked by the officer examining the accounts.”

c. All MBOs and small PBOs should be allowed to file simplified reports or none at all.

As per the Section 22 (2) of Social Welfare Act:

“Social organizations or institutions affiliated with the Council shall submit audit report, to the Council within the period of six months after the completion of fiscal year along with the detail descriptions of their work and activities.”

However, there is no reporting format so the CSO may choose to produce a simple report. Similarly to District Administration Offices and District Development Committees, Village Development Committees are supposed to receive reports by the end of every fiscal year for the organizations that are to be renewed in the next year.

Reporting to and Audit by Tax Authorities

a. Although reporting should be standardized as much as possible, it is appropriate for separate reports to be filed with the tax authorities. Different kinds of reports should be required for different kinds of taxes (e.g., income or profits taxes and the value-added tax or VAT).

The tax office has its standard format for all auditors to use. Moreover, CSOs are required to get a Permanent Account Number (PAN) and/or VAT number that is equally applicable for business sector. This practice discourages CSOs as it is a complex process, and many community-based organizations especially find it troublesome.

b. It is generally inappropriate for the tax authorities to examine any aspects of a civic organization other than those directly related to taxation (including whether the requirements for exemption from taxation have been satisfied) or the use of monies received from the state or the public.

Tax authorities do not examine any aspects of a CSO other than those directly related to taxation. Usually, the District Administration Office first reviews the audited financial report and, if it is not satisfied, it will not renew the organization.

c. Civic organizations with small amounts of income should be exempt from filing tax reports or allowed to file simplified ones.

Regardless of the amount of income, all CSOs are required to prepare financial reports to be audited.

Disclosure or Availability of Information to the Public

Any civic organization receiving more than minimal benefits from the state or engaging in a significant amount of public fundraising should be required to publish or make available to the public a report of its general finances and operations. This report may be less detailed than the reports filed with the responsible state agency, the tax authorities, or any licensing or regulatory agency and should permit anonymity for donors and recipients of benefits in addition to protecting other confidential or proprietary information.

Although CSOs are not compelled to disclose general finances and operations to the public, the Information Rights Act is intended to ensure that members of the public have the right to demand or obtain information on any matters that are consequential to themselves or the public. Section 27 of the Information Rights Act, Subsection (1), provides that

“Every citizen shall have the right to demand or obtain information on any matters of his/her own or of public importance. Provided that nothing shall compel any person to provide information on any matter about which secrecy is to be maintained by law.”

This provision is limited by Section 28 of the same Act:

“Except on the circumstance as provided by law, the privacy of the person, residence, property, document, statistics, correspondence, and character of anyone is inviolable.”

Special Sanctions

In addition to the general sanctions to which a civic organization is subject equally with other legal persons (e.g., in laws governing contracts and negligence), it is appropriate to have special sanctions (e.g., fines, penalty taxes, or the possibility of replacement of governing board members or involuntary termination) for violations peculiar to civic organizations (e.g., reporting violations, carrying on very substantial business activities, self-dealing, improper public fundraising practices, violations of expenditure limitations contained in tax legislation). Decisions to impose fines, taxes, or other sanctions, however, should be appealable to independent courts. A reasonable time period should be available for such appeals. Where necessary, the civic organization law should specifically reinforce the rights of notice and appeal.

Section 9 of the Association Registration Act provides:

“If the statement of accounts is not submitted pursuant, the Local Authority may impose a fine of up to Five Hundred Rupees on each member of the Management Committee. Provided that, if a member produces a satisfactory evidence that he/she had tried his/her best not to violate Section 9, such a member shall not be liable to punishment.”

As noted above, reporting to the responsible state agency, such as the District Development Committee and District Administrative Office, is a mandatory part of an organization’s renewal application. Organizations are supposed to renew their registration within three months (after the expiry) of Nepali fiscal year. If they fail to register, they will be subjected to penalties, the amount of which will increase every year. If, for example, they fail to register for five years, they can pay sum of Rs5,000 on the top of the regular yearly renewal fee (Rs500) and get a renewal. Sometimes officers, in their discretion, can charge an Rs 500 lump sum for five years and renew the organization. Five years is the critical deadline because after five years of non-renewal, it is not possible to simply pay the fine and obtain renewal. If not renewed for five years, the organization’s registration will automatically be cancelled.

7. Tax Preferences

Income or Profits Tax Exemption for Civic Organizations

a. Every formal civic organization, whether organized for mutual benefit or for public benefit, and whether a membership or non-membership organization, should be exempt from income taxation on money or other items of value received from donors or state agencies (by grant or contract) and regular membership dues, if any. A variety of approaches may be taken with respect to exemption of interest, dividends, or capital gains earned on assets or the sale of assets, with full tax exemption on such items generally being made available to PBOs.

CSOs’ income is generally tax free. Gifts (donations) and membership dues are not regarded as “income,” while interest is taxed by the banks at source. If CSOs are providing services and are paid for that, they are supposed to pay tax unless they have a tax-exemption certificate, for which they must apply to the Tax Office.

8. Foreign Civic Organizations and Foreign Sources of Funds

Establishment and Supervision of Foreign Civic Organizations

a. A formal civic organization that is organized and operated under the laws of one country but that has, or intends to have, operations, programs, or assets in another country should generally be allowed to establish a branch office in that other country, and such branch office should enjoy all of the rights and be subject to all of the requirements of civic organizations in that other country.

Section 9 of the Social Welfare Act addresses the

Functions, Duties and Powers of the Council and states:

 

“(a) To run or cause to run the social welfare activities smoothly and effectively, to extend help to the social organizations and institutions and to develop co-ordinations among them and to supervise, follow-up and carry out evaluations of their activities....

(c) To work or cause to work as coordinator between Government of Nepal and social organizations and institutions....

(f) To work or cause to work as a center for dissemination of information and documentation to the affiliated service oriented organizations and institutions with Council....

(j) To make or cause to make contract or agreement with the local, foreign or international organizations and foreign countries....

(k) To collect grant from the national and international agency and to manage the received grant.”

b. A foreign civic organization should also be permitted, if it wants a separate legal entity, to create a subsidiary or affiliated organization under the generally applicable civic organization laws.

Foreign Funding

a. A formal civic organization that is properly established in one country generally should be allowed to receive cash or in-kind donations, transfers, or loans from sources outside the country so long as all generally applicable foreign exchange and customs laws are satisfied. Such laws should not impose confiscatory taxes or unfair rates of exchange.

CSOs in Nepal are allowed to utilize resources from local as well as foreign sources. For foreign grants, CSOs must receive prior permission to receive funding from outside the country on a case-by-case basis.

As per the Social Welfare Act, social organizations and institutions wishing to receive any kind of assistance from the Government of Nepal, foreign countries, international social organizations and institutions, missions, or individuals shall submit a project proposal and application along with other details to the Council as prescribed. However, projects that shall be finished quickly and for up to Rs 200,000may be undertaken with a simplified procedure. For these projects, organizations must only give prior notice to the Council, and after the completion of said work, a report should be submitted to the Council within three months.

(2) After receiving an application pursuant to Sub-section (1), the Council shall provide permission in coordination with the concerned ministry or agency within the period of forty-five days.

9. Methods of Voluntary Regulation

a. Methods and Subjects of Voluntary Regulation

a. Although basic, minimum standards of conduct and requirements for all formal civic organizations should be enacted as published laws, civic organizations should be permitted and encouraged to set higher standards of conduct and performance through voluntary self-regulation.

CSOs in Nepal have a growing practice of developing and implementing a self-regulating code of conduct. For instance, the Association of INGOs in Nepal (AIN) has developed a Basic Minimum Standard. Similarly, the NGO Federation has also developed a Code for all of its member organizations.

b. The laws should permit, and society should encourage, the formation of umbrella organizations to adopt, promulgate, and enforce principles and standards of conduct and management.

A number of umbrella organizations, such as interest-based networks, federations, and alliances, are working in Nepal, and the legal framework in the Association Registration Act is open to all types of associations, unless otherwise stated in another Nepal Act.

D. Reflection on Existing Legal Framework

This section briefly reflects on the current legal environment for CSOs in Nepal. While doing so, key study questions are considered as well.

The Nepali constitution reflects its commitment towards all of the international treaties, covenants, and guarantees for freedom of speech, freedom of assembly, and respect for the Universal Declaration of Human Rights. The constitutions have foreseen systems for judicial remedy, laid down state responsibility for human rights protection and promotion, and established independent national human rights institutions. Other provisions in national legislation may incorporate the terms of international human rights treaties and their applicability to and direct effect upon individuals. Following the successful people's movement in 1990, the state and political parties have been more positive towards the civil society and its role in promoting the rule of law, governance, and service delivery at the community level. However, there remain some provisions and contradictions in legal frameworks that carry forward the legacy of a controlling mindset from autocratic regimes of the past.

Part 3, Section (12): (3) of the Constitution of Nepal provides that every citizen shall have the freedom to form organizations, unions, and associations of their choice. Apart from what is mentioned in the Directive Principles of the State to Promote Open Society, which encourages freedom of speech and association, the State has foreseen the need to enact a legal framework that facilitates CSOs.[3]

Apart from the constitution, there are several Acts that regulate the functioning of CSOs in Nepal. Principal among them are the Association Registration Act, the Social Welfare Act, and the Local Self-Governance Act. One Act that governs some of the key and leading CSOs, such as the Nepal Bar Association, the NGO Federation, and the Nepal Press Council, is the National Directorate Act.
The Association Registration Act is the primary legal framework for CSOs in Nepal. It was first promulgated in 1976 and since has been amended. However, CSOs in Nepal are not satisfied with its “controlling legacy.” While most CSOs are registered under this Act, it has not addressed emerging issues and is largely not “CSO-friendly.” Hence, CSOs are now demanding to update the Act to meet current conditions. Detailed provisions of the Act are discussed in next section.

Case Study:

Madheshi Janaadhikar Forum was established in 2004 as human rights NGO in Terai aiming to work for the rights of marginalized Madheshi people. When they felt their issues were not addressed they had pressure from the public to call a strike. The strike continued for 29 days. During the Constitution Assembly election, this Ngo was registered as a political party.

Similarly, the Social Welfare Act, 1992, is another key legal framework that regulates CSOs in Nepal. This Act is criticized for treating diverse CSOs as “NGOs” and hereby creating confusion and limiting its scope to a “welfare” (service-delivery) approach to development. Hence CSOs in Nepal are lobbying for a new Act in the form of a Social Development Act that can properly categorize organizations based on their objectivesand fields of interests.

Other policy documents and programs have repeatedly emphasized the need and the state's commitment to create a conducive environment for CSOs to function. As a result, formation of CSOs is skyrocketing. At the same time, it has been very difficult to facilitate the enabling legal environment as stated in 3rd Interim Plan. However, CSOs blame the government for taking a “use and throw away policy. Due to the poor implementation of the plan and policies, CSOs are suspicious that the government strategically is making a policy and program to demonstrate its commitment to the international community as well as local stakeholders, but has no will to implement these policies and programs. Frustrated, one of the CSOs established as human rights NGO later turned out to be a political party.

Legal Existence of CSOs

Registration has been made

mandatory for any CSO to be established. Forming a CSO without registering it is considered a violation and is subject to penalty. The application process requires filing certain essential documents. Primarily, all CSOs are to get registered under the Association Registration Act unless otherwise provided by law. No date is fixed for the submission of a registration application, or for the Local Authority to issue notice to the applicant if the association fails to register. On the other hand, the Act has made a provision for appealing any such decision. With this provision the applicant may make a complaint to the Authority specified by Government of Nepal against a notice of failure to register within thirty-five days of receipt of the notice. Upon receipt of a complaint the authority specified by Government of Nepal may, if he/she deems it reasonable, register such Association upon making necessary inquiry, or order the Local Authority to register the Association; and upon receipt of such an order, the Local Authority shall register the Association.

Such a mandatory registration requirement for CSOs constitutes a clear violation of the freedom of association, placing an impediment to free association. The sole reason for an organization to seek registration is in order for it to obtain legal personality, with all the rights and opportunities that status provides. If a group wishes simply to associate for its own purposes, the freedom of association to which Nepal has agreed as a nation should permit such a group to form, without constraint, if the group does not desire tax benefits, licenses, and or limited liability. The mandatory registration requirement appears to be intended to enable state control over the entity, rather than facilitating its functioning.

Another restricting provision that reflects controlling legacy inherited from past autocratic regimes is the condition that compels CSOs to declare their purposes as “non-political,” when “political” is defined so broadly as to apply to any group that expresses views on policy issues, and is not limited to preventing partisan political activity by CSOs. Otherwise, the condition is susceptible to misuse to control the advocacy activities that typically address policymaking issues.

The current provision has a minimum membership requirement. However, the Act provides legal space for both PBOs and MBOs to be established as autonomous bodies corporate with perpetual succession. Another restricting provision in the Act is about the disentitlement of foreign persons to create CSOs. Though it is open to all segments of Nepali people, foreign persons are not permitted to establish any CSOs in Nepal. Founders of CSOs have to submit their citizenship certificate along with other necessary documents.

There are some Trusts established under special legal provision but the Act fails to specify whether individuals are allowed to create a civic organization by testamentary act.

The state agency vested with the responsibility for establishing CSOs is not adequately staffed with competent professionals. Considering the ever-increasing number of civil society organizations in Nepal, staff and facilities are insufficient to carry out the work of the concerned government agency. Moreover, the frequent transfer of those competent staff significantly slows the governance process.

CSOs are allowed to amend governing documents, in compliance with the provided process. An amendment must be first approved by two-thirds of the CSO’s members and then filed with the Local Authority for approval. Moreover, a CSO is allowed to terminate its activities voluntarily and all of its assets will devolve on the Government of Nepal, while in the case of the liabilities of a dissolved Association, the government shall bear such liability to the extent that the assets of the Association cover such expenses. It should be noted that common, and preferred, international practice is for any such remaining funds to be transferred to another CSO performing the same or similar activities as the dissolving organization, especially in cases where the CSO is designated as a “public benefit” organization.

Structure and governance

Governance represents a key focus of the Act, which provides clearly defined basic rights, limits, and powers of CSO governing bodies. Basic minimum provisions necessary for the operation and governance of a CSO should be defined well in one of the prime documents, preferably the organization’s statute. However, though it is possible to change an organization’s governance structure and operations, it must receive approval from the government authority. As a legal entity, an organization is supposed to operate within the requirements of the law, and it is a responsibility of board members to ensure lawful operations. Furthermore, a CSO must develop its code of conduct, applicable to all staff members as well as governing body members.

CSOs have the right to sue to protect their interests. Subsection 3 of Section 5 provides:

“The Association may sue by its own name and may be sued by the same name as an individual.”

Conflicts of interest are prohibited by law, as is misuse of the organizational property for individual benefit.

Other governance issues: A critical and ever-rising concern in Nepal is “to whom are the CSOs accountable?” Also, can an Executive Committee/Board of Directors member work as a program staff member? While government can make registration of organizations compulsory, why can't the same government make them accountable and disclose their report and financial reports to the public?

Prohibition on direct or indirect private benefit

No CSOs, as not-for-profit organizations, are allowed to distribute profits. However, within the limit of established norms, employees and board members of a CSO are entitled to be paid appropriate compensation for their professional input. Nepali CSOs are attacked if they provide any special personal benefits, directly or indirectly, to any person connected with the organization. As the Association Registration Act and Social Welfare Act do not specifically address the issue, CSOs are guided only by their bylaws. In order to address the question of benefits, the NGO Federation has developed and circulated a code of conduct among its member organizations. The Executive Committee or Board of Directors is ordinarily responsible for ensuring that any transaction between a CSO and any person connected with it is undertaken only after legitimate negotiation and is in the best interest of organization. Moreover, no CSO that has received significant funding from the public or the state should be permitted to distribute assets to its founders, officers, board members, employees, donors, or members upon its liquidation.

Activities of Civic Organizations

Though the Local Self-Governance Act and other policy documents envisage civic organizations' participation in development activities and even in competing for certain state contracts, due to absence of law and other mandatory provisions, such participation depends on the sole discretion of concerned authority. However, CSOs are eligible to apply for tax-exempt status.

CSOs are allowed to be engaged in different kind of activities without any legal constraint. So far there is no legal restriction on civic organizations’ undertaking public benefit or charitable activities, provided they come within the scope of the objectives mentioned in the statute. Moreover, CSOs have the right to speak freely on all matters of public significance, and there is no legal restriction on the right of civic organizations to carry out public policy activities, such as education, research, advocacy, and the publication of position papers. CSOs are allowed to be engaged in public interest litigation and there are several cases where CSOs have made government agencies accountable on public interest issues through legal procedure.

However, “political” activity by CSOs is one of the most controversial issues in Nepal. The statute of a civic organization should state that it is a nonpolitical organization and doesn't support any specific political party. It has thus created a unique image of CSOs among people that it is an apolitical group. Whenever CSOs participate in a public demonstration as one of the strategic activities to advocate for some public issue, they are accused of being “political.”

Civic organizations are permitted to engage in lawful economic activities, provided that profits are used for the organizational benefit rather than being distributed to the persons operating the organization. CSOs are in many cases involved in economic development activities. However, starting a cooperative requires its registration under Cooperative Development Act. Nepal Rastra Bank also gives permission to selected CSOs for financial activities, such as money-lending institutions.

Fund raising

Registered CSOs are permitted to engage in legitimate fundraising activity provided they have prior permission from Home Ministry and its line agencies. The Home Ministry webpage mentions that one of its activities is to oversee raising public funds. There are some local CSOs running regular fundraising activities locally to sustain their activities. Technically, all CSOs need prior approval from the Ministry of Finance and the Social Welfare Council to receive foreign grants; otherwise they will be penalized. One of the criticisms that civic organizations face in Nepal concerns their lack of transparency. Though they submit audited reports to the concerned authority, and a few organizations disclose publicly the way in which funds received are spent through their publication, mostly such information is beyond view of the general public. Just a few organizations have initiated a public and social auditing process where they present the financial transactions and respond to the queries raised. Though all of the laws are applicable to CSOs, implementation remains worryingly weak.

Reporting, supervision and auditing

CSOs are required to maintain financial documentation, reports, and records of their activities. All CSOs are supposed to follow generally accepted accounting principles. It is a common practice that financial reports of CSOs are audited by an independent certified or chartered accountant. The widespread comment on this aspect is that CSOs hire a certified auditor who just helps CSOs legalize mishandling of the fund. However, the professional ethics of some Chartered Accountants and certified auditors have been raised by the Chartered Accountants Association of Nepal recently. CSOs are also required to maintain records of meetings of their governing bodies. Statutes of the CSOs describe who is specifically responsible for these specific tasks. The report is available for Executive Committee members to inspect throughout. Moreover, the general assembly must approve reports on the activities and finances of the organizations. Then the approved report will be submitted to the District Administration Office and District Development Committee and Village Development Committee wherever applicable for the renewal process. As per the Association Registration Act, the Management Committee must submit annually the statements of accounts of its Association to the Local Authority, along with the report of the auditor.

Organizations are supposed to renew within three months (after the expiry) of Nepali fiscal year. If not, they will be subject to penalty, with amounts year. Not renewing the organizations continuously for five years results in automatic cancellation of the registration. This provision has restricted some CSOs from continuing to function legally after five years where they have temporarily voluntarily suspended operations. In order to resume their work, such organizations must essentially establish themselves anew, a process that is burdensome and costly.

Though all CSOs have to submit reports to various agencies such as the Direct Administration Office, the District Development Committee/Village Development Committee, and the Social Welfare Council, there is no simplified reporting format, and this provision has increased the cost and level of effort required from CSOs.

So far the tax office has a standard format that all auditors use. Moreover, CSOs are required to get PAN numbers and/or VAT numbers, as is the business sector. This requirement discourages CSOs as it is a complex process and many community-based organizations especially find it troublesome. However, this condition is not the part of the Act, and the Act itself has not been revisited and updated for a long time. This requirement is imposed through a Government order, and not a legislative process, and a large segment of people are not aware of it.

Though the Information Rights Act guarantees that “every citizen has the right to demand or obtain information on any matters of his/her own or of public importance. Provided that nothing shall compel any person to provide information on any matter about which secrecy is to be maintained by law,” most of the information on CSOs is still far from reach of general people and there is no mandatory provision to make it public. Weak enforcement of the law is one of the reasons for this.

The Social Welfare Council is responsible for monitoring and evaluation of the projects implemented by INGOs in partnership with local CSOs, but its technical capacity is not adequate to perform this task. Moreover, the Social Welfare Council charges NGOs and INGOs for any monitoring and evaluation work it performs. So I/NGOs are compelled to pay for such tasks to be done by the Social Welfare Council. Due to weak technical capacity the Council does not even maintain accurate proper data of functioning/non-functioning NGOs/INGOs in Nepal.

Tax preferences

 

CSO income is generally tax free. Gifts (donations) and membership dues are not regarded as “income,” while interest is taxed by the banks at source. If CSOs are providing paid services, they are required to pay tax unless they have a tax-exemption certificate from the Tax Office.

Foreign Civic Organizations and Foreign Sources of Funds

Foreign CSOs are generally allowed to establish branch offices under a general agreement with the Social Welfare Council, and they must also enter into project-specific agreements, a burdensome requirement for many. Moreover, foreign CSOs, under current law, may implement their programs only through local partners (CSOs).

There are some typical problems that foreign CSOs face in Nepal. Though the government talks about a one-door policy, it is multi-door in reality. One organization has to go through seven ministries to reach the required project-specific agreement. Moreover, the Social Welfare Council is supposed to work directly with foreign CSOs, but some CSOs must work directly with other line ministries. Out of 250 INGOsworking in the country, only about 100 are working with the Social Welfare Council while other are working with line ministries, including the Ministry of Finance, the Ministry of Foreign Affairs, and the Ministry of Women, Children and Social Affairs. Similarly, even a single project involves an inordinately complex approval process. After overall agreement with the Social Welfare Council and the Ministry of Finance, the CSO must obtain thematic program approval. Social Welfare Council preapproval of plans and budgets has been made mandatory. Though agreement between donor and recipient organization has been previously reached, it may not be implemented until it has been approved by the Social Welfare Council. Moreover, the introduction of the Project Advisory Committee at various levels is challenges CSO autonomy and impedes smooth project implementation.

CSOs in Nepal are allowed to mobilize resources from local as well as foreign sources. Despite prior approval of the statute during registration, CSOs must obtain prior permission to receive funds from outside the country on case-by-case basis. Moreover, because not all proposals submitted to foreign donors will be funded, and in such cases obtaining permission from the Social Welfare Council is a fruitless exercise.

Case Study:

Early in 2010, a Finish woman ran a campaign to reduce the weight of Finish people to make them healthier. As an incentive, she proposed to pay 15 Euro/kg weight lost for teacher education in Nepal. However, the proposal has not been approved by the government of Nepal, as so far there is no legal provision for an individual to support the Government and CSOs directly.

As an example of restrictions on funding to CSOs, the Peace Trust Fund, established by the government of Nepal, has funds, but NGOs are not allowed to apply for that resource. Moreover, there is a technical problem with the international community as well. They often do not work directly with local CSOs. Despite the global commitment to contribute 0.7% of GDP to the developing countries, foreign support comes through the government, and it is impossible for civil society organizations to access those funds directly.

Government policy does not encourage promotion of resource mobilization. There is no tax bracket for donating to CSOs, and, as a result, corporate sectors are not stimulated to make donations. Lack of a supportive policy has limited the promotion of corporate social responsibility in Nepal. Similarly, foreign individuals have no legal vehicle for support of government institutions and the CSOs.

E. Conclusions

References
Center for Constitutional Dialogue. 2009. “Human Rights in the Constitution” Kathmandu
Center for Civil Society & London School of Economics, 2007, Aid, Security and Civil Society in the Post-911 Context: Briefing Report of an International Workshop
Dhungel, Dr. Surya, NGO Bewildered in ICNL online library, http://www.icnl.org.org/knowledge/library/indes.php
ICNL and ECNL, Global Trends in NGO Law, A Quarterly Review of NGO Legal Trends Around the World in ICNL online Library, http://www.icnl.org/knowledge/library/index.php
Klingelhofer, Stephan, & David Robinson, 2001. “The Rule of Law, Custom and Civil Society in the South Pacific: An Overview,” ICNL, Washington D.C.
Nepal Law Commission, Association Registration Act, 2034 (1977) in www.lawcommissiongov.np
Nepal Law Commission, Civil Rights Act, 2012 (1955) in www.lawcommissiongov.np
Nepal Law Commission, Interim Constitution of Nepal 2063 (2007) in www.lawcommissiongov.np
Nepal Law Commission, Local Self-Governance Act 2055 (1999) in www.lawcommissiongov.np
Nepal Law Commission, Right to Information Act, 2064 (2007) in www.lawcommissiongov.np
Nepal Law Commission, The Social Welfare Act, 2049 (1992) in www.lawcommissiongov.np
National Planning Commission, GoN. 2007 Three-Year Interim Plan: Approach Paper (2064/65-2066/67)
Pandy, Devendra Raj, NGO Movement in Nepal: An Analysis of Legal and Institutional Framework in ICNL online library, http://www.icnl.org/knowledge/library/index.php
Simon et al. 1997, “Guidelines for Laws Affecting Civic Organizations.” Open Society Institute
Shah, Saubhagya, 2008 Civil Society in Uncivil Places: Soft State and Regime Change in Nepal, East West Center Policy Studies 48
Timsina, Netra Prasad, 2009 “Institutionalizing the Achievements of Nepal's Democratic Struggle” in Democracy: Reflections on the Asian Experiences 2009, Volume 5, Korea Democracy Foundation
Vesselin Popovski et.al., 2008. “Governance through Civil Society Engagement in Asia.” United Nations University Policy Brief Number 7.

Appendix: List of Acronyms

AIN: Association of INGOs in Nepal
CBOs: Community-based organizations
CDO: Chief District Officer
CFUGs: Community Forest User's Group
CSOs: Civil society organizations
CSR: Corporate Social Responsibility
DAO: District Administration Office
DDC: District Development Committee
FONIN: Federation of Nationalities and Indigenous NGOs
FY: Fiscal year
GAAP: Generally accepted accounting principles
GDP: Gross Domestic Production
GoN: Government of Nepal
INGOs: International non-governmental organizations
PAN: Permanent Account Number
PBOs: Public benefit organizations
MBOs: Mutual benefit organizations
MoF: Ministry of Finance
M&E: Monitoring and evaluation
NBA: Nepal Bar Association
NEPAN: Nepal Participatory Action Network
NGOs: Non-governmental organizations
SSNCC Social Service National Coordination Council
SWC: Social Welfare Council
UDHR: Universal Declaration of Human Rights
VAT: Value added tax
VDCs: Village Development Committees

Acknowledgments

This report is an outcome of a study under a research fellowship to support an enabling legal environment for Civil Society in Africa and Asia jointly implemented by the International Center for Not-for-Profit Law (ICNL) and the United States Agency for International Development (USAID). I am grateful to ICNL and USAID for awarding me the fellowship that has made my research possible. I have been associated with Nepali civil society since 1990 and was keen to study the topic. However, without this fellowship it would not have been possible to accomplish this study. Similarly, I am indebted to my wife Rosly whose insistence and support motivated me to apply for the fellowship. She helped me to allocate my time while I was already busy with various professional assignments.

I owe special gratitude to some of the people whose support has remained crucial during the research. Mr. Stephan Klingelhofer was an excellent supervisor who always kept his room open for me to interrupt his work and supported me the best possible way he could. His patience and empowering approach has been appreciable. Douglas Rutzen, ICNL President, Elaine Scudder, Program Assistant, and other staff members supported us and made us feel at home in Washington DC. Rebecca Ullman helped improve the quality of this report with her brilliant editing skills. Similarly Mr. Bishnu Adhikari, Democracy and Governance Specialist, USAID Nepal Mission Office and Mr. Tulsi Acharya were extremely supportive in my home country – Mr. Adhikari provided feedback for my study plan, while Mr. Acharya facilitated all the administrative issues for my travel to the USA.

I particularly thank Mr. Neil Kendrick, ELD Director, for his support. He allowed me to suspend our regular program for a month during my travel to the USA. Similarly, Mr. Bhola Dahal, whom I consulted as soon as received word from ICNL that I had received the fellowship, deserves special thanks; his broad knowledge helped me start my study. Moreover, Dr. Netra Prasad Timsina, Chairman, NGO Federation provided me with literatures and shared his in-depth knowledge and experiences on the civil society movement in Nepal. I am grateful to Mr. Dammar Rai, a civil society activist associated with FONIN, who organized a useful meeting with indigenous people's right activists.

I also need to acknowledge the series of interactions I had with team from USAID Washington DC, World Movement for Democracy, and PACT in their respective premises. Their enthusiasm and concerns about the CSO legal environment in Nepal is worth praising. The meetings were highly successful in achieving their purpose, and the meeting with WMD even provided another opportunity, for I was asked to write a country report for Nepal as a part of the Defending Civil Society series. Though I cannot recall the name of all those with whom I interacted during my study in Nepal and in Washington D.C., I want to thank them all for sharing their valuable knowledge that helped me to accomplish the study.

Last, but not least, I want to thank Open Society Institute for its wonderful publication, Guidelines for Laws Affecting Civic Organizations, which I have taken as a basis for analysis of legal framework for CSOs.

Notes

[1] uttam.uprety2010@gmail.com. This study is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the author and do not necessarily reflect the views of USAID or the United States Government.

[2] A single government authority to supervise and facilitate CSOs’ activity.

[3] Part 4, section 35 (19) of the Interim Constitution.

 

 
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