Laws · Analysis

After-the-fact approval of foreign-funded NGO spending: a Social Welfare Council directive provides a route the Social Welfare Act does not mention

Not yet implementedMedium confidenceEnacted ActRegulationReform recommendation

The Social Welfare Act 2049 requires international NGOs to obtain permission and sign an agreement before working in Nepal (s.12), and requires social organisations to apply for approval before receiving foreign or other assistance (s.16). The Social Welfare Council's Directive on Approval of Foreign Assistance 2071 lets organisations that ran programmes without prior approval have the spending approved afterwards, once, after paying a fee. The Auditor General found this not in line with the law, and in two successive years reported several billion rupees of spending in this approval process. The Act itself contains no penalty for proceeding without approval.

Laws and sections involved

समाज कल्याण ऐन, २०४९ · Social Welfare Act, 1992 s.12(1)–(3); s.16(1)–(2); s.26
Our paraphrase: a foreign NGO wishing to work in Nepal must apply to the Council for permission 'before working' and must sign an agreement with the Council before operating (s.12). A social organisation wishing to receive assistance from the government, a foreign government, an international organisation or a person must apply to the Council with the project proposal; the Council approves within 45 days; up to Rs 2 lakh a year for urgent work may be received with prior notice and reported within three months (s.16). The Council may make necessary rules (s.26). We found no provision on approving spending after the fact and no penalty provision.
Law Commission consolidated text (royal seal 2049/7/17; Act No. 29 of 2049); four amending Acts listed, the latest the 2075 constitutional-conformity amendment (2075/11/19). ss.12 and 16 on PDF pp.7–8. The CIAA reports that a draft consolidated bill on the Social Welfare Council and related Acts was being prepared; not opened. Official text
clause 5 (as described by the Auditor General)
As described by the Auditor General: where an organisation has run a programme without the Council's prior approval or its renewal has stopped, it is given, once, a chance to correct this: its foreign-assistance spending is put into an approval process, it is warned, it deposits an amount equal to the monitoring/evaluation fee, and after monitoring the spending is approved.
The directive itself was not opened; its content is taken from the Auditor General's 62nd report. Whether it has been amended or withdrawn is not confirmed. It is an administrative instrument of the Council, not an Act or Cabinet-approved regulation; its exact legal status is not confirmed. Official text

The apparent issue

The Act is built on prior permission and prior approval, but it sets no consequence for organisations that proceed without them. The Council's directive fills that space with a one-time after-the-fact approval in exchange for a fee. The Auditor General considers the directive not in line with the Act. The question is whether a directive can create a regularisation route the Act does not provide, and whether, without such a route, the Act leaves the Council any lawful way to deal with spending already made.

Evidence

The Auditor General found that clause 5 of the Council's Directive on Approval of Foreign Assistance 2071, which lets organisations that ran programmes without prior approval have their foreign-assistance spending approved once after paying a fee equal to the monitoring fee, was not in line with the law; that the Act has no provision on approving expenditure; and that in FY 2080/81 the spending of 176 of 179 applicant organisations, Rs 6.36 billion, was in the approval process. The Council's annual reports did not publish which projects were approved. Office of the Auditor General Ministry of Women, Children and Senior Citizens chapter (Social Welfare Council), paras 36, 36.1–36.2, printed p.412 (PDF p.442)
In the following year the Auditor General reported that, under the same 2071 directive, the spending of 139 organisations, Rs 2.89 billion, was in the approval process, and that although the Council's annual report said programmes run without prior approval were being approved, it did not publish the details. Office of the Auditor General Ministry of Women, Children and Senior Citizens chapter (Social Welfare Council), para 20, printed p.351 (PDF p.383)
The CIAA's 35th report records, among actions taken by the Ministry, that a draft consolidated bill on the Social Welfare Council Act and related Acts was being prepared. Commission for the Investigation of Abuse of Authority §5.2.12(2), printed p.322 (PDF p.339)
Sections 12, 16 and 23–27 of the Act were read in the Law Commission's consolidated text; no provision on after-the-fact approval or on penalties was found. Nepal Law Commission PDF pp.7–8, 11

Possible readings

Reading 1 (the Auditor General's view): the Act requires prior permission and approval; a directive cannot create an exception the Act does not authorise, so after-the-fact approval has no legal basis and such spending should be treated as unauthorised.
Reading 2: because the Act sets no penalty and gives the Council general responsibility for coordinating and monitoring organisations, a transparent, one-time regularisation with monitoring may be a reasonable administrative measure to bring past activity into the record, though it would be on firmer ground if the Act or rules provided for it.
Reading 3: the directive may be valid in principle but its repeated use over many years, with large sums and no published list, departs from its own 'one-time' design; the issue is then implementation and transparency rather than legal power.

Why it matters in practice

If after-the-fact approval is routinely available for a fee, the prior-approval requirement in ss.12 and 16 may lose much of its effect. If instead it has no legal basis, organisations that relied on it, and their beneficiaries, face uncertainty about the status of past projects. Either way, without published approvals the public cannot see which foreign-funded projects were regularised.

Hypothetical example

Hypothetical: a local organisation receives a foreign grant for flood relief and spends it over two years before applying to the Council. It then applies under the directive, pays the fee and is approved. A second organisation applies in advance and waits several months for approval. The two end in the same position, though only one followed the Act's sequence.

Possible improvements and trade-offs

In the planned new or consolidated law, state expressly whether after-the-fact approval is allowed, on what conditions, and with what penalty or fee, and require the list of approvals to be published.
Gives the practice a legal footing and transparency; legitimising regularisation may reduce the incentive to seek approval in advance.
Withdraw the regularisation clause and instead add proportionate penalties to the Act for working without permission or approval.
Reinforces prior approval; may deter legitimate emergency work unless the existing small-amount exception in s.16 is widened, and requires capacity to enforce.
Speed up prior approval (the Act already sets 45 days) so that fewer organisations proceed without it.
Addresses one likely cause; does not settle the legal status of the existing directive or past approvals.

Questions for legal review

Under s.26 (rule-making) or any other provision, can the Social Welfare Council by directive approve spending that ss.12 and 16 require to be approved in advance?
What is the legal status of spending approved under the 2071 directive, and of the fees collected?
Does the absence of any penalty in the Social Welfare Act limit what the Council may lawfully do when it finds unapproved activity?

Research status

Researched: 2026-10-12
Confidence: Medium confidence — The Auditor General states the inconsistency in two reports and the Act's text was read. Confidence is medium because the directive itself was not opened and the Council's legal justification for it was not found.
Review: Not yet reviewed by a qualified lawyer.

Still unresolved

The text of the Directive on Approval of Foreign Assistance 2071 and its legal basis as cited by the Council were not opened.
The Social Welfare Regulation 2049 was not opened; it may contain relevant provisions.
The status and content of the draft consolidated Social Welfare bill were not checked.