Understanding the Differences Between INGOs and NFPs in Nepal for Humanitarian Aid

Nepal, nestled in the majestic Himalayan range, has long been a critical focal point for humanitarian aid due to its intricate blend of geographic, socio-economic, and environmental challenges. The country’s geographic location makes it highly susceptible to natural disasters, including devastating earthquakes such as the one in 2015, recurring floods, and landslides exacerbated by deforestation and unsustainable land use practices. Compounding these environmental vulnerabilities, Nepal grapples with persistent socio-economic issues such as widespread poverty, limited access to quality education and healthcare services, gender disparities, and a significant portion of its population living in remote and hard-to-reach areas without basic infrastructure. Climate change further intensifies these problems, threatening agricultural productivity and exacerbating food insecurity in a predominantly agrarian economy.

The socio-political landscape of Nepal, marked by periods of political instability and transitions, often complicates the effective delivery of humanitarian aid. Additionally, systemic issues such as bureaucratic inefficiencies and inadequate governance structures pose significant barriers to development initiatives.

Non-governmental entities play a vital role in addressing these challenges by bridging gaps left by government resources and fostering sustainable development across various sectors. These organizations, operating within Nepal, are broadly categorised into International Non-Governmental Organisations (INGOs) and Not-for-Profit (NFP) entities. While both share the common objective of contributing to Nepal’s socio-economic progress, their operational models, regulatory requirements, and areas of focus differ significantly. This e-book provides a comprehensive examination of these two types of organisations, equipping policymakers, development professionals, and stakeholders with the nuanced understanding needed to navigate the complexities of Nepal’s humanitarian aid framework effectively.

INGOs

• Definition: International Non-Governmental Organisations (INGOs) are defined under the Social Welfare Act, 1992 as entities established outside Nepal to address global or regional humanitarian and development issues. These organisations aim to contribute to areas such as poverty alleviation, health improvement, education, disaster relief, and the promotion of human rights. INGOs often bring international expertise, funding, and a network of resources to implement their programs effectively.

• Scope: INGOs generally operate on large-scale, long-term projects often financed by international donors, including governments, United Nations agencies, and private foundations. Their operations usually involve partnerships with local government bodies, community-based organisations (CBOs), and Not-for-Profit (NFP) entities to ensure alignment with national priorities and effective project execution. The scope of their work is governed by the General Agreement and Project Agreements signed with the Social Welfare Council (SWC).

• Examples: Prominent INGOs in Nepal include organisations such as:

  • Red Cross: Focused on disaster response and health services.

  • World Vision: Specialising in child protection, education, and livelihood programs.

  • Save the Children: Concentrating on education, child health, and emergency response.

NFPs

• Definition: Not-for-Profit (NFP) entities, referred to as Non-Governmental Organisations (NGOs) under the Association Registration Act, 1977, are locally established entities that operate without a profit motive. Their primary objective is to address specific social, cultural, or humanitarian needs within Nepal. These entities play a crucial role in community development, advocacy, and the delivery of essential services.

• Scope: NFPs typically work at the grassroots level, focusing on localised projects tailored to meet the unique needs of specific communities. Their funding sources include domestic contributions, membership fees, and grants from INGOs or international donors. NFPs are required to comply with the regulatory frameworks set by the District Administration Office (DAO) and other relevant ministries, ensuring their activities align with local development goals.

• Examples: Examples of notable NFPs include:

  • Women for Human Rights (WHR): Advocating for women’s rights and empowerment.

  • Nepal Youth Foundation: Providing education and healthcare support to underprivileged children.

  • Rural Reconstruction Nepal (RRN): Working on rural development and livelihood enhancement programs.

2. Legal Framework and Registration

INGOs

Registration:

International Non-Governmental Organisations (INGOs) are required to register with the Social Welfare Council (SWC) under the provisions of the Social Welfare Act, 1992. This registration process mandates the submission of foundational documents, including the Articles of Incorporation, Memorandum of Understanding (MoU), and project proposals, to demonstrate alignment with national development priorities. INGOs must also execute a General Agreement with the SWC, which serves as the principal regulatory document governing their operations within Nepal.

Regulatory Authority:

The SWC, established under the Social Welfare Act, 1992, functions as the primary oversight body for INGOs. It ensures that their activities align with national policies, comply with legal requirements, and contribute effectively to Nepal’s development goals. Additionally, the Nepal Rastra Bank (NRB) oversees foreign currency transactions involving INGOs under the Foreign Exchange Regulation Act, 1962.

Key Legal Provisions:

• Social Welfare Act, 1992:

  • Governs the registration, monitoring, and operational scope of INGOs.

  • Empowers the SWC to approve, monitor, and evaluate projects implemented by INGOs.

• Foreign Exchange Regulation Act, 1962:

  • Regulates the inflow and outflow of foreign currency for INGOs to ensure transparency and compliance.

  • Mandates that all foreign funding must be routed through formal banking channels and reported to the NRB.

• Income Tax Act, 2002:

  • Provides exemptions from income tax for INGOs engaged in activities deemed to be in the public interest.

  • Requires INGOs to submit audited financial statements annually to the SWC and the Department of Inland Revenue.

• Public Procurement Act, 2007:

  • Stipulates procurement processes for INGOs, emphasising transparency, competitive bidding, and accountability.

Key Requirements:

1. General Agreement:

   • A binding agreement signed between the INGO and the SWC to outline operational parameters.

2. Memorandum of Understanding (MoU):

   • Project-specific agreements with relevant government ministries to define roles, objectives, and expected outcomes.

3. Periodic Reporting:

   • Submission of quarterly and annual progress and financial reports to the SWC.

4. Auditing:

   • INGOs must conduct financial audits annually through SWC-approved auditors.

5. Foreign Exchange Compliance:

   • Adherence to the Foreign Exchange Regulation Act for all financial transactions involving foreign funds.

Registration:

Not-for-Profit (NFP) entities, also referred to as Non-Governmental Organisations (NGOs), must register under the Association Registration Act, 1977, with the local District Administration Office (DAO). The registration process requires submission of the organisation’s constitution, objectives, and operational guidelines. NFPs are subject to annual renewal of their registration to maintain active status.

Regulatory Authority:

The District Administration Offices (DAOs) are the primary regulators for NFPs, ensuring compliance with the Association Registration Act, 1977, and other applicable laws. In addition, sectoral ministries, such as the Ministry of Women, Children, and Senior Citizens or the Ministry of Education, may exercise oversight based on the nature of the NFP’s activities. Local governments, under the Local Governance Act, 2017, also have the authority to monitor and coordinate the activities of NFPs.

Key Legal Provisions:

• Association Registration Act, 1977:

  • Provides the legal framework for the registration, renewal, and dissolution of NFPs.

  • Mandates submission of activity reports and audited financial statements annually.

• Income Tax Act, 2002:

  • Offers tax exemptions for NFPs engaged in public welfare activities.

  • Requires NFPs to file tax returns and maintain financial transparency.

• Local Governance Act, 2017:

  • Empowers local governments to monitor, regulate, and collaborate with NFPs operating within their jurisdiction.

• VAT Act, 1996:

  • Regulates value-added tax compliance for NFPs engaged in commercial activities, if any, to generate supplementary income.

Key Requirements:

1. Annual Renewal:

   • NFPs must renew their registration annually with the DAO by submitting activity and financial reports.

2. Activity Reporting:

   • Submission of an annual report detailing the organisation’s activities, achievements, and challenges.

3. Audited Financial Statements:

   • Mandatory submission of audited accounts to ensure compliance with the Income Tax Act and maintain tax-exempt status.

4. Local Coordination:

   • Collaboration with local governments to align activities with community needs and development goals.

5. Compliance with Tax Laws:

   • Strict adherence to tax laws, including timely filing of returns and VAT compliance, where applicable.

INGOs

Sources of Funding:

1. International Donors: INGOs predominantly rely on financial contributions from international donors, which include foreign governments, multilateral agencies such as the United Nations, international financial institutions like the World Bank, and private philanthropic foundations.

2. Global Fundraising Campaigns: Contributions from global campaigns, often targeting individuals and corporate donors, form a significant portion of their resources. These campaigns are frequently carried out through digital platforms, corporate social responsibility (CSR) partnerships, and crowd-funding initiatives.

3. Project-Specific Grants: INGOs may receive earmarked grants for specific projects or programs, which are governed by donor agreements detailing fund utilisation, reporting obligations, and performance benchmarks.

Financial Regulations:

1. Banking and Foreign Exchange Compliance:

   • All funds must be routed through formal banking channels, in compliance with the Foreign Exchange Regulation Act, 1962, ensuring transparency in the inflow of foreign currency.

   • INGOs are required to maintain foreign currency accounts with banks approved by the Nepal Rastra Bank (NRB) and report periodic fund utilisation statements.

2. Auditing Standards:

   • INGOs must adhere to stringent auditing requirements, with annual audits conducted by auditors approved by the Social Welfare Council (SWC).

   • Audit reports must align with international standards, such as the International Financial Reporting Standards (IFRS), and be submitted to both the SWC and the Department of Inland Revenue.

3. Financial Reporting:

   • INGOs are obligated to submit detailed financial reports quarterly and annually to the SWC, including income, expenditure, and project-specific fund utilisation.

   • Compliance with the Income Tax Act, 2002 is mandatory for claiming exemptions, necessitating precise financial disclosures.

4. Procurement Compliance:

   • All procurement activities must conform to the Public Procurement Act, 2007, ensuring competitive bidding, fairness, and cost-efficiency.

Sources of Funding:

1. Domestic Donations: NFPs primarily depend on contributions from individuals and corporate entities within Nepal. These may be in the form of monetary support, in-kind donations, or endowments.

2. Membership Fees: Organisations structured as associations may generate revenue through membership subscriptions and service fees.

3. Grants and Partnerships: NFPs often receive grants from INGOs, international donors, and government bodies for specific projects or capacity-building programs.

4. Local Fundraising Initiatives: Fundraising events, community drives, and partnerships with local businesses are common methods employed by NFPs to generate funds.

Financial Regulations:

1. Transparency in Accounts:

   • NFPs are required to maintain transparent accounting practices, as mandated by the Association Registration Act, 1977. Records must include detailed income and expenditure statements, donor-specific reports, and project financials.

   • Compliance with the Local Governance Act, 2017 necessitates coordination with local governments, ensuring alignment of activities with community development goals.

2. Auditing Requirements:

   • Annual financial audits must be conducted by auditors registered with the Institute of Chartered Accountants of Nepal (ICAN). The audit reports are submitted to the District Administration Office (DAO) and relevant government ministries.

3. Tax Exemptions:

   • NFPs registered as public welfare entities under the Income Tax Act, 2002 are eligible for exemptions on income generated from activities aligned with their objectives. However, compliance with all reporting requirements is a prerequisite for retaining this status.

   • Any income derived from commercial activities must adhere to VAT registration and payment obligations under the VAT Act, 1996.

4. Project Fund Management:

   • Funds received for specific projects must be segregated and utilised strictly for the intended purpose, with detailed utilisation reports provided to donors and regulatory authorities.

5. Internal Controls:

   • NFPs are expected to implement robust internal control mechanisms to mitigate risks of fund mismanagement, fraud, and non-compliance.

INGO

Focus Areas:

1. Disaster Relief and Emergency Response:

   • INGOs play a pivotal role in large-scale disaster relief efforts, including immediate response, post-disaster rehabilitation, and long-term resilience building. For example, INGOs such as the Red Cross and Save the Children have been instrumental in providing emergency shelter, medical aid, and psychological support following the 2015 earthquake in Nepal.

   • These operations are governed by the Disaster Risk Reduction and Management Act, 2017, which mandates coordination with the National Disaster Risk Reduction and Management Authority (NDRRMA) to ensure compliance with national disaster response protocols.

2. Healthcare and Education:

   • INGOs work extensively to enhance healthcare access and quality, focusing on areas such as maternal and child health, disease prevention, immunisation, and pandemic responses. Partnerships with the Ministry of Health and Population (MoHP) ensure alignment with the Public Health Service Act, 2018, which governs healthcare service delivery.

   • In education, INGOs contribute to literacy improvement, infrastructure development, and teacher training programs, following the mandates of the Education Act, 1971, which outlines education sector priorities.

3. Capacity Building:

   • INGOs invest significantly in capacity-building initiatives, such as training programs for local government officials, community leaders, and partner organisations. These activities are framed under the Social Welfare Act, 1992, which emphasises the importance of building institutional and individual capacities to enhance development outcomes.

Implementation:

1. Collaborative Approach:

   • INGOs operate in close collaboration with government agencies, NFPs, and community-based organisations (CBOs). These partnerships are formalised through Memorandums of Understanding (MoUs) with relevant ministries and agreements with the Social Welfare Council (SWC).

   • INGOs often act as facilitators, providing financial resources, technical expertise, and policy advocacy, while delegating project execution to local partners to enhance efficiency and local ownership.

2. Monitoring and Evaluation (M&E):

   • INGOs are subject to rigorous M&E protocols, requiring them to submit quarterly and annual reports to the SWC. These reports include comprehensive data on project progress, financial expenditures, and impact assessments, as mandated by the Social Welfare Act, 1992.

3. Procurement and Financial Compliance:

   • INGOs must adhere to the Public Procurement Act, 2007, which ensures transparency, accountability, and fairness in procurement processes.

   • Financial transactions are monitored under the Foreign Exchange Regulation Act, 1962, requiring INGOs to report foreign funding inflows and expenditures to the Nepal Rastra Bank (NRB).

Focus Areas:

1. Grassroots Development:

   • NFPs address community-specific challenges through targeted interventions, including women’s empowerment, youth education, and livelihood support. These initiatives are governed by the Local Governance Act, 2017, which prioritizes participatory development approaches at the municipal and provincial levels.

   • Examples include vocational training programs, microcredit schemes, and sustainable agriculture projects tailored to local needs.

2. Advocacy and Policy Reform:

   • NFPs are integral to advocating for marginalized communities, influencing public policy, and raising awareness on critical social issues. This function is supported by the Association Registration Act, 1977, which permits NGOs to engage in advocacy activities to advance social justice.

   • Common advocacy areas include gender equality, environmental conservation, and the protection of child rights.

Implementation:

1. Direct Project Execution:

   • Unlike INGOs, NFPs are directly responsible for implementing their programs, often mobilizing local volunteers and leveraging community resources to maximize impact.

   • Compliance with the Local Governance Act, 2017, ensures their activities are integrated with local government development plans, fostering sustainability and alignment with community priorities.

2. Community Engagement:

   • NFPs maintain strong ties with local communities, enabling them to build trust and ensure active participation in their programs. This approach enhances the cultural relevance and long-term acceptance of interventions.

3. Capacity Building and Empowerment:

   • NFPs frequently focus on empowering local stakeholders by building the capacity of community-based organizations, cooperatives, and self-help groups. These efforts contribute to long-term self-reliance and resilience.

4. Monitoring, Reporting, and Accountability:

   • Under the Association Registration Act, 1977, NFPs are required to submit annual activity and financial reports to the District Administration Office (DAO).

   • Adherence to the Income Tax Act, 2002, ensures tax compliance and accountability for financial transactions, including proper documentation of donations and grants.

Challenges for INGOs

1. Bureaucratic Hurdles:

   • INGOs face prolonged approval processes for project proposals and fund disbursements, often requiring multiple levels of authorisation from the Social Welfare Council (SWC), sectoral ministries, and local governments. This can delay project implementation and increase administrative costs.

   • Compliance with the Public Procurement Act, 2007, and stringent monitoring by the National Vigilance Centre (NVC) further complicate procurement and operational timelines.

2. Cultural Sensitivity:

   • INGOs often encounter resistance when their programs are perceived to conflict with local cultural or religious values. For example, initiatives promoting gender equality or reproductive health may face opposition in conservative communities.

   • Misalignment with community priorities can erode trust and hinder project outcomes, requiring INGOs to invest in community engagement and stakeholder consultations.

3. Regulatory Scrutiny:

   • Growing government oversight, including the imposition of stringent reporting requirements under the Social Welfare Act, 1992, increases operational complexity. Recent amendments to foreign funding guidelines under the Foreign Exchange Regulation Act, 1962, have further tightened controls on INGOs.

   • INGOs must navigate political sensitivities, especially when working on governance or human rights issues, as these areas are subject to heightened scrutiny.

1. Limited Resources:

   • NFPs often rely on local donors, who may have limited financial capacity, restricting their ability to scale projects. Access to international funding is constrained by stringent eligibility criteria and reporting requirements set by INGOs and foreign donors.

   • Limited funding makes it difficult for NFPs to invest in technology, infrastructure, and skilled human resources.

2. Capacity Constraints:

   • Many NFPs lack the technical expertise needed to design and implement complex projects, especially those requiring advanced monitoring and evaluation (M&E) systems.

   • Inadequate training for staff and volunteers affects project quality and efficiency.

3. Sustainability:

   • Over-dependence on project-based funding creates challenges in sustaining operations once donor support ends. Few NFPs have diversified revenue streams, such as income-generating activities or endowments.

   • Compliance with the Association Registration Act, 1977, and annual renewal requirements can strain limited administrative capacities.

1. Political Instability:

   • Frequent changes in government policies and political unrest can disrupt INGOs' operations, particularly in areas affected by local conflicts.

   • INGOs must constantly adapt to shifts in regulatory frameworks and development priorities, as outlined in the Local Governance Act, 2017.

2. Reputation Risk:

   • Negative publicity arising from perceived interference in local politics or failure to meet community expectations can damage an INGO’s credibility and donor trust.

   • Issues such as misuse of funds or cultural insensitivity can lead to public backlash and reduced community cooperation.

3. Financial Mismanagement:

   • Non-compliance with financial regulations, such as the Income Tax Act, 2002, or errors in fund allocation can result in penalties, withdrawal of donor support, or loss of operational licenses.

   • Failure to conduct proper audits as mandated by the Social Welfare Act, 1992, exposes INGOs to legal and reputational risks.

1. Dependence on External Support:

   • Over-reliance on INGOs or donors for funding creates vulnerabilities if external support is withdrawn or reallocated to other priorities.

   • A lack of financial reserves makes NFPs particularly susceptible to funding shortfalls during emergencies.

2. Operational Risks:

   • Limited resources and capacity can lead to project delays, inefficiencies, and unmet deliverables, undermining donor confidence.

   • Poor governance structures and internal controls increase the risk of mismanagement and fraud.

3. Regulatory Non-Compliance:

   • Failure to comply with legal requirements, such as submitting audited financial reports to the District Administration Office (DAO), can result in penalties, suspension of activities, or loss of registration.

   • Misinterpretation of tax obligations under the Income Tax Act, 2002, or improper VAT filings under the VAT Act, 1996, can lead to financial and legal repercussions.

1. Access to Global Networks:

   • INGOs benefit from global expertise, innovation, and resource-sharing through their affiliations with international donor agencies and development institutions.

   • Partnerships with entities such as the United Nations and World Bank enhance their ability to influence systemic change.

2. Systemic Change through Interventions:

   • INGOs have the capacity to implement large-scale, transformative projects, such as policy reforms, infrastructure development, and capacity-building initiatives, which smaller organizations may lack the resources to undertake.

3. Local Partnerships:

   • Collaborating with NFPs enables INGOs to leverage local knowledge, foster trust within communities, and ensure sustainable implementation of projects.

1. Strong Community Ties:

   • NFPs' deep understanding of local contexts allows them to design culturally appropriate and relevant interventions.

   • Their ability to mobilise community participation enhances the effectiveness and sustainability of development initiatives.

2. Collaboration with INGOs:

   • Partnerships with INGOs provide access to funding, technical expertise, and capacity-building opportunities, strengthening NFPs' operational capabilities.

   • Joint ventures with INGOs can increase visibility and credibility, attracting further support from donors.

3. Flexibility and Grassroots Innovation:

   • NFPs are often more agile than larger organisations, enabling them to quickly adapt to emerging needs and experiment with innovative solutions.

   • Their grassroots focus positions them as key contributors to local development efforts under frameworks like the Local Governance Act, 2017.

INGOs

1. Income Tax Exemptions:

   • INGOs engaged in humanitarian aid and development activities are generally exempt from income tax under Section 2(j) of the Income Tax Act, 2002, provided their activities align with recognized public welfare objectives.

   • To qualify for tax exemptions, INGOs must submit annual financial statements, audited reports, and a declaration of public welfare activities to the Department of Inland Revenue.

2. Value-Added Tax (VAT) Compliance:

   • While INGOs are typically exempt from VAT on goods and services directly related to humanitarian aid, they must adhere to the procedural requirements outlined in the VAT Act, 1996.

   • Any commercial activities conducted by INGOs to supplement project funding may be subject to VAT registration and compliance.

3. Customs Regulations:

   • The import of goods and materials for INGOs’ projects, such as medical supplies, educational materials, and relief goods, is subject to customs exemptions under the Customs Act, 2007, provided the items are approved by the Social Welfare Council (SWC) and align with the project’s objectives.

   • INGOs must submit a detailed inventory of imported goods and obtain prior approval from the Department of Customs to benefit from exemptions.

4. Foreign Currency Transactions:

   • INGOs must comply with the Foreign Exchange Regulation Act, 1962, which governs the inflow and utilisation of foreign funds.

   • All foreign currency transactions must be routed through accounts with Nepal Rastra Bank (NRB)-approved financial institutions. INGOs are required to maintain detailed records and submit periodic reports to the NRB, ensuring full transparency.

5. Auditing and Reporting:

   • INGOs are required to conduct annual audits by SWC-approved auditors, as mandated by the Social Welfare Act, 1992.

   • Detailed financial and operational reports must be submitted to the SWC, donor agencies, and relevant tax authorities to maintain their exempt status and ensure compliance.

1. Income Tax Exemptions:

   • NFPs registered as public welfare entities under the Income Tax Act, 2002, are eligible for exemptions on income generated from activities directly aligned with their charitable objectives.

   • However, income derived from commercial activities is taxable unless explicitly exempted. NFPs must file income tax returns annually to the Department of Inland Revenue, regardless of their exempt status.

2. Value-Added Tax (VAT):

   • NFPs must register for VAT if their annual taxable supply exceeds the threshold defined under the VAT Act, 1996.

   • Goods and services procured for public welfare projects may be eligible for VAT refunds, provided the NFP complies with reporting and documentation requirements.

3. Payroll Tax Compliance:

   • NFPs must deduct and remit taxes on employee salaries as per the provisions of the Income Tax Act, 2002. This includes contributions to the Social Security Fund (SSF) under the Social Security Act, 2017.

   • Failure to comply with payroll tax obligations may result in penalties and fines imposed by the Department of Inland Revenue.

4. Financial Reporting:

   • Accurate and detailed financial records must be maintained, including income, expenditure, and donor-specific fund utilisation reports. These records are subject to annual audits by auditors registered with the Institute of Chartered Accountants of Nepal (ICAN).

   • NFPs are required to submit audited financial statements to the District Administration Office (DAO) and other relevant authorities as mandated by the Association Registration Act, 1977.

5. Local Tax Compliance:

   • NFPs must adhere to local tax regulations, including property taxes and municipal fees, when applicable. Coordination with local government authorities under the Local Governance Act, 2017, ensures compliance with community-specific tax obligations.

6. Transparency and Accountability:

   • NFPs must demonstrate transparency in the utilisation of funds by maintaining donor agreements, receipts, and disbursement records. This is critical for retaining tax-exempt status and ensuring compliance with the Income Tax Act, 2002.

INGOs

1. Reporting Obligations:

   • INGOs must submit comprehensive progress reports to the Social Welfare Council (SWC), as mandated by the Social Welfare Act, 1992. These reports include:

     • Financial audits prepared by SWC-approved auditors, ensuring compliance with accounting standards such as International Financial Reporting Standards (IFRS).

     • Project-specific impact assessments detailing achievements against planned objectives, timelines, and budgets.

   • INGOs are required to report on the utilisation of foreign funds under the Foreign Exchange Regulation Act, 1962, to the Nepal Rastra Bank (NRB).

2. International Standards for Impact Evaluation:

   • INGOs commonly adopt global best practices and frameworks to measure the effectiveness of their programs. Prominent methodologies include:

     • Logical Framework Approach (LFA): Used for setting clear objectives, identifying risks, and defining measurable indicators.

     • Theory of Change (ToC): Helps trace causal pathways linking activities to intended outcomes and long-term impact.

     • Results-Based Management (RBM): Focuses on achieving tangible outcomes and continuously improving performance.

   • Many INGOs also align their impact reporting with the Sustainable Development Goals (SDGs) to demonstrate contributions to global targets.

3. Transparency and Accountability:

   • INGOs must provide detailed breakdowns of project expenditures, fund allocations, and donor-specific outcomes to maintain transparency.

   • Periodic monitoring visits by SWC representatives ensure that INGOs’ operations align with approved project agreements and national priorities.

   • Non-compliance with reporting requirements can lead to penalties, suspension of operations, or revocation of registration.

4. Technology Integration:

   • INGOs increasingly leverage digital tools such as Geographic Information Systems (GIS) and mobile-based data collection platforms for real-time monitoring and evaluation (M&E).

   • Advanced analytics software is employed to generate insights from field data, enabling evidence-based decision-making.

1. Reporting to the District Administration Office (DAO):

   • NFPs are required to submit annual activity and financial reports to the DAO under the Association Registration Act, 1977. These reports must include:

     • A detailed account of project activities, achievements, and challenges.

     • Financial statements audited by an auditor registered with the Institute of Chartered Accountants of Nepal (ICAN).

   • NFPs must also provide copies of their reports to relevant sectoral ministries for oversight and coordination.

2. Informal Impact Measurement:

   • Historically, NFPs have relied on informal methods of assessing impact, such as beneficiary feedback, anecdotal evidence, and basic statistical summaries.

   • However, collaboration with INGOs and exposure to donor requirements are driving the adoption of structured approaches, including:

     • Baseline and end-line surveys to measure changes in community conditions.

     • Participatory Rural Appraisal (PRA) techniques to involve communities in identifying and evaluating project outcomes.

     • Simple logical frameworks tailored to smaller-scale projects.

3. Capacity-Building for M&E:

   • Many NFPs face challenges in developing robust monitoring and evaluation (M&E) systems due to limited resources and technical expertise. INGOs often provide training and tools to bridge this gap.

   • Partnerships with academic institutions and consultancy firms further enhance NFPs' capacity for rigorous impact assessments.

4. Transparency and Local Accountability:

   • NFPs’ close ties with local communities necessitate transparency in fund utilisation and decision-making processes.

   • Community scorecards and focus group discussions are increasingly being used to ensure accountability and gather actionable insights.

5. Emerging Trends:

   • NFPs are exploring digital solutions for data collection and impact reporting, such as mobile surveys and cloud-based reporting systems.

   • The alignment of project goals with the Local Governance Act, 2017, ensures that NFP activities contribute to provincial and municipal development plans.

While INGOs and NFPs in Nepal share a common goal of humanitarian aid, their approaches, structures, and regulatory environments differ significantly. Understanding these differences is crucial for stakeholders to optimize collaboration, ensure compliance, and minimize risks while maximizing impact. By leveraging their unique strengths, INGOs and NFPs can work together to