NGOs’ regulatory framework
Aug 16 2016 (Dawn, Pakistan) – IN a country like Pakistan, where the government finds it challenging to deal with the many socio-economic problems faced by its populace, the role of NGOs in contributing to solve and support government policies to address these problems is vital.
By ‘NGO’, we typically mean a non-governmental organisation that is not for profit and independent from the government. Considering the type of work and level of operations, there are many types of NGOs, including trusts, societies, cooperatives, social welfare organisations, professional associations, unions, etc. Moreover, NGOs that operate internationally are categorised as INGOs.
According to a study conducted by the Aga Khan Development Network, in Pakistan, NGOs can be registered with local, provincial or federal authorities under 13 different local laws. The availability of such a generous choice for registration creates incentives for registering under more relaxed laws, in terms of compliance requirements. Although provisions for regulatory mechanisms under each registration law do exist, their relevance and effectiveness — vis-à-vis how the overall NGO sector has changed over time — is a big question mark for many reasons.
Firstly, the authority to register a local NGO in Pakistan is segregated and diluted. There is no centralised system for registering NGOs even at the local, provincial or federal levels. Even the government, given the various laws, is not sure about the total number of registered NGOs or how many of them still exist and are presently functional.
Adding to this confusion is the fact that the various laws under which an NGO may register do not explicitly demarcate the exact purpose for the creation of an NGO. Subject to the fulfilment of a few specific requirements, practically speaking, an NGO can be registered for the same purposes under the Trust Act of 1882, the Societies Registration Act of 1860, the Voluntary Social Welfare Agencies (Registration and Control) Ordinance of 1961, and so forth. As is apparent by their dates, many of these laws are legislative relics of the British Raj. There has been no serious governmental effort to update existing arcane NGO registration laws since the time of their enactment and enforcement.
Reporting requirements, as specified under each NGO registration law, are inconsistent in comparison to the other laws. Some laws require very few, whereas others require stringent conditions to be met. Section 42 of the Companies Ordinance, 1984 is considered the most stringent law in terms of reporting requirements for local NGOs.
Neither are any of the current NGO registration laws aligned with the income tax law that governs taxation matters of NGOs. Therefore, in order for any non-profit organisation to obtain approval, tax credit or exemption under the Income Tax Ordinance of 2001, it has to amend its governing document in light of the Income Tax Rules, 2002. Even the governing documents of ‘Section 42 companies’ are not aligned with current income tax laws.
With regard to coordination and oversight, there is minimal to no coordination within or among different local, provincial or federal regulatory authorities dealing with different types of NGOs. For example, at the district level, there is no coordination between the registrar (regulating trusts), district officer (regulating social welfare organisations), and EDO Finance (the focal person for registered societies at the district level). The situation is almost the same at the provincial and federal levels.
These are just some of the many issues on account of which there is urgent need to revamp the existing regulatory framework for local NGOs — and work towards making it more efficient , relevant, up-to-date and in line with international best practices. Dialogue among key stakeholders can explore, identify and suggest possible ways and best options in this regard. One such initiative has taken place under the auspices of Nacta in order to develop a strategy to frame a comprehensive model law for the orderly operations of NGOs. Let us hope that the initiative reaches its logical conclusion. However, it is likely that such a strategy developed under Nacta shall only be seen from a security perspective. Considering that most of our laws originate from British ones, the UK’s Charity Commission may be a good model to begin with.
In addition to the many local NGOs, around 160 INGOs are also operating in Pakistan. Until the end of 2015, INGOs had been allowed to work in Pakistan through a memorandum of understanding signed with the government’s Economic Affairs Division (EAD). Recently, the federal government introduced a new registration process for INGOs through the interior ministry (MoI), which is in progress.
Regulating INGOs working in Pakistan can very much be seen in an international context. Since the inception of the finance action task force in 1989, many countries in the world have put in place a mechanism to regulate INGOs. FTAF is an inter-governmental body which sets standards and promotes mechanisms to control money laundering, terrorist financing and threats to international financial systems. Recommendation 8 (R8) of FTAF requires that laws governing non-profit organisations be reviewed so that organisations can’t be abused to finance terrorism. China has also recently legislated and put in place stringent mechanisms to regulate INGOs working in its territorial jurisdiction.
Pakistan is currently faced with numerous sets of challenges, both on the security and development front. Given Pakistan’s security situation and FTAF R8, the government is justified in initiating a strategy under the umbrella of Nacta and putting up a comprehensive regulatory framework for INGOs — one that involves all the concerned ministries dealing with INGOs, directly or indirectly, including EAD, MoI, Federal Board of Revenue, etc.
It is encouraging that, to promote transparency, performance evaluations of INGOs in terms of governance, financial management and programme delivery are being conducted for the first time. However, at the same time, we must be careful not to overregulate NGOs. Many local and international NGOs work in humanitarian crisis situations; subjecting them to lengthy and stringent procedures shall not help the causes of those in need. We must strike an optimum balance when deciding what and how to regulate.
The writer is manager (certifications) at the Pakistan Centre for Philanthropy.
Published in Dawn, August 16th, 2016
This story was originally published by Dawn, Pakistan