NGO Compliance

NGO WORLD at NCRD

INTERNATIONAL DAY OF NGOs NGOs

By M.Yousaf Khan FCMA

Thursday February 27’ 2014By: M.Yousaf Khan FCMA,CEO MYC.President ICMAP TMs Club.

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By: M.Yousaf Khan FCMA,CEO MYC.President ICMAP TMs Club.

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ISSUES & CHALLENGES IN PAKISTANISSUES & CHALLENGES IN PAKISTAN


Regulatory Structure in Pakistan

The kinds of laws that govern NGOs fall into two categories: No1: Registration laws that define No1: Registration laws that define internal governance and No2: The Reporting relationship between the state and the NGO, and taxation laws.


Expected benefits of registration

1. The ability to enforce by-laws;

2. statutory requirements that force an NGO to become organized;

3. legal status “at the official level and among donors;”

4. the ability to open a bank account;

5. the ability to sign contracts;

6. the ability to indemnify employees; and

7. the ability to qualify for financial assistance and tax exemption.


Regulatory Structure in Pakistan

Registration

COMPANIES ORDINANCE

1984

VSWA 1961TRUST ACT


Registration VSWA 1961

SOCIETIES ACT 1860

TRUST ACT 1882

Compliance Requirements for NGOs

NGO

Taxation

CorporateInternal NGO Corporate

Donors specific

Compliance

Internal /Finance


COMPLIANCE BY REGULATORS

FederalGovernment

ProvincialGovernments

InternationalDonor requirements

PCP,SECP,FBR & EADetc.

Social Welfare Departments in

USAID,UNDP,UNICEF,CIDA,


etc. Departments in provinces

UNICEF,CIDA,AUSAID.etc

ISSUES & CHALLENGES

� Lack of formal regulatory & monitoring mechanism

� Lack of central data base of NGOs

� Lack of proactive approach by government.

� Lack of coordination among various bodies governing � Lack of coordination among various bodies governing NGOs in provinces as well as at Federal government level.

� High cost of compliance specially at SECP &

� Tough evaluation criteria by PCP


RECOMMENDATIONS FOR IMPROVEMENT

� Development of central data base of NGOs

� Single registration authority like Central Registration Authority (CRA) may be created to regulate an online registration process for applicants other than SECP.

�CRA may constitute member from SWD,ICMAP,ICAP,PCP,FBR Representatives from leading NGOs to standardize & stream line registration process. line registration process.

� Initially the process may provide registration option under any of the existing statutes under the centralized process.

� In future a new unified registration may be issued as per international best practices prevailing in the world.

� FBR,PCP ,CRA or any registration authority may access the information from the central data base of the CRA and process relevant their registration on step by step basis.



�Training & Development facility may be provided by central registration authority .

�Initial training shall be made mandatory for new NGOs for better governance & compliance in Accounting, Finance, Taxation , HRM, Program, governance, Procurement.

�However specialized trainings (optional) like Proposal �However specialized trainings (optional) like Proposal Writing, Financial Management & Reporting , Internal Controls may be provided at nominal charges to interested NGOs.

�Online training programs may also be organized in collaboration with ICMAP/Allama Iqbal Open University for easy access & flexible timing of NGO people.



� License of NGOs may be issued initially for a one year period and its annual renewal may be linked with presentation of Audited Accounts & Filing of Income Tax Returns by NGOs.

�In order to promote easy and cost effective compliance, Central Registration Authority (CRA) may issue complete Central Registration Authority (CRA) may issue complete rules & regulations for monitoring and subsequent compliance like annual audit & compliance including fee fixation for audit.

�CRA may conclude an MOU with ICMAP for compliance services to NGOs at standardized terms & conditions for general support to NGOs.



� License of NGOs may be issued initially for a one year period and its annual renewal may be linked with presentation of Audited Accounts & Filing of Income Tax Returns by NGOs.

�FBR may allow basic exemption u/s 2(36) without PCP certification , however afterwards same may be required after 3 years or as the period CRA may decide.

�In order to promote easy and cost effective compliance, Central Registration Authority (CRA) may issue complete rules & regulations for monitoring and subsequent compliance like annual audit & compliance including fee fixation for audit.

�CRA may conclude an MOU with ICMAP for compliance services to NGOs at standardized terms & conditions for general support to NGOs.


NOTES TO BE CONSIDERED

� This document is open for comments from all stake holders.

�The purpose is to start a reform process for improvement in governance , compliance and effective management of NGOs

�This document is a suggestive for stake holders and may be revised ,upon relevant comments from stake holders.

�Process relating to registration u/s 42 of the Companies Ordinance has not been changed at this point of time as ICMAP has already been actively involved in revised Code f corporate governance with SECP as well as with EAD.


Documents

NGO Compliance