Is PM Disaster Relief Fund Transparent?

By Puru Shah

There has been a great deal of discussion about whether or not Nepal's Prime Minister Disaster Relief Fund (PMDRF) is transparent and effective in delivering relief. See my previous post, "What is Wrong With Donations For Nepal's Earthquake Relief?" for a background to this discussion. Given the choices to donate through local NGOs, INGOs, UN agencies and the PMDRF, this dilemma is a legitimate one. In this post, I will evaluate transparency of the PMDRF.

First of all, the PMDRF is one of the few entities that has been publishing data about funds received and disbursed in near real-time on its website. Besides a few local NGOs like Bibeksheel Nepali and Ktmshapers, most of the funds received and spent by NGOs, INGOs and UN agencies have not been published on the web.

Although it is possible to calculate funds received by INGOs and UN agencies through Financial Tracking Service, these recipients have not published this data voluntarily. More importantly, there is no way to track funds spent for relief projects in Nepal by INGOs like Red Cross, Oxfam and Care Nepal because they publish financial data in its annual report.

The next post will cover the transparency issue and its challenges for INGOs who have received donations for earthquake relief in Nepal. The chart below shows a quick summary of funds flowing in and out of the Nepal's PM Disaster Relief Fund.
Graph 1 - A brief summary of funds flowing in and out of the Nepal's PM Disaster Relief Fund. Graph by Puru Shah. Data Source: PMDRF Website as of May 22, 2015.

A Graphical Analysis of UN Flash Appeal For Nepal

By Puru Shah

On May 15, 2015, the UN General Assembly held a special session during which they passed a resolution on ‘Strengthening emergency relief, rehabilitation and reconstruction in response to the devastating effects of the earthquake’. UN Secretary-General Ban Ki-moon pointed out that The Nepal Earthquake Flash Appeal launched by the UN Office for the Coordination of Humanitarian Affairs (OCHA) is currently only 14 per cent funded. He requested foreign donors to provide more aid so that emergency relief and shelter can be provided to affected victims before the monsoon season starts (UN News).

The UN Flash Appeal is one of the more important relief funding requests for Nepal that is not very well understood. This post will include a guide for dummies that will briefly describe what the UN Flash appeal is, who makes this appeal, who coordinates relief action, the amount requested, the amount received and how the funds will be utilized.

It also includes graphs and charts to explain total funding received and requested per UN cluster and its recipients within respective clusters.

Flash Appeal For Nepal

On April 29, 2015 a flash appeal was made for US$415 million to respond to the humanitarian needs of 8 million Nepalis affected by the earthquake, over the next three months. This has since been revised to US$423 million. As of May 17, only 15.7% of flash appeal funds have been received. This includes $15 million from Central Emergency Response Fund (CERF).

The bar graph below shows total funding received and requested per cluster (12 in total).

The Largest Donors & Recipients of Relief Funds in Nepal

By Puru Shah

In my previous post titled, "What is Wrong With Donations For Nepal's Earthquake Relief?",  I highlighted that a majority of the funds for the earthquake relief in Nepal are being channeled through INGOs, and bypassing the country's systems. To reiterate, I am not advocating for national and international donors to channel all funds through the PM Disaster Relief Fund.

Our team at One Stop Portal has developed a guideline that recommends splitting donations - 40% to NGOs, 30% to INGOs and 30% to the PM Relief Fund. Please visit our donate page to read in detail about why we believe a more balanced approach in delivering funds has a greater chance of success for recovery.

What is Unique About This Article?

A list of the largest overall donors or donors by category can be obtained easily from various sources such as the OpenNepal website. However, this article takes a closer look at where funds from each donor categories are going to. This data is valuable, and understanding it helps us make key informed decisions. But to my knowledge, it has not been published explicitly anywhere, so I have attempted to close that information gap by performing data analysis and sharing the findings with you.

In this post, we will review the largest donors and their recipients based on eight different categories:

1. Countries
2. Corporations
3. INGOs
4. Multilateral
5. Nepalese Government
6. Individuals
7. NGOs
8. Others

First of all, let us look at who the current largest overall donors are. 

Situation Report, May 3, 2015: Needs Unmet

By Saugat Kandel

It has now been more than a week since Nepal was struck by the magnitude 7.8 earthquake. The official death tally has now risen to 7250, and the number is expected to rise still, with some sources estimating the minimum expected tally to reach 20,000, or an even higher estimate of 57,000. The official injury tally stands at 14,122, the number of houses completely destroyed at 20,052, and the number of houses partially destroyed at 186,285. With access to remote areas still scarce, these numbers can only rise still - it is estimated that around 500,000 homes are destroyed and 2.8 million people displaced.

Geographical distribution of the number of deaths due to the earthquake (Data from May 01, 2015). Image credits: Nabin Kafle 

ARE RELIEF MATERIALS TAXED?

A Facebook post by Swarnim Wagle

The relief materials are arriving from abroad and many are wondering what is the proper procedure to clear customs and whether or not it will be taxed. Swarnim Wagle has posted the following on his Facebook page.

I checked with the Ministry of Finance (MOF), and this is the latest position, cleared by the cabinet, as of this evening.

GOVERNMENT'S STANCE ON RELIEF MATERIALS

GOVERNMENT'S STANCE ON RELIEF MATERIALS

• No organized relief materials are taxed. (Nepal signed a Model Agreement on Relief Consignments with the UN on May 31, 2007).
• For things that individuals bring as “relief” materials, you can either deposit them in a warehouse OR distribute them yourself through any not-for-profit agency, local or foreign, as follows:
• 1. Declare in a simple form what you have brought and which district you intend to distribute in. You do NOT need to pay any tax or duty, but your records will be kept
  2. Go to the district of your choice and consult/coordinate with the Head of the District Disaster Relief Committee (i.e., the CDO) on where the greatest needs are within that district.
  3. Within 30 days of your having distributed the relief materials, get a stamp that they were distributed as you intended
• Why is this necessary? The taxes the state is foregoing are not trivial: up to 20% customs duty and 13% VAT in many cases. It wants to ensure that the implicit state subsidy is targeted towards genuine relief. Do not under-estimate the scale of cheating that goes on when there is no monitoring or voluntary code of honor in place (I have been briefed on several episodes of serious abuse by the private sector.
• Nepal should not degenerate into a banana republic where “free-for-all” prevails. There are rules, and officials are, sooner or later, held accountable. A sovereign country needs to know what comes in and for what purpose.
• At a time like this, however, the goal is to facilitate the process to the full extent possible. “Trust, but verify,” as Reagan said, would be the approach here. If you need more clarity, please text or call the following numbers:

The Joint Secretary of MOF: Mr. Laxman Aryal at +977-98510-84622 or
The Director-General of Customs: Shishir Dhungana at +977-98510-97837 or
The Under Secretary: Dikar Dev Bhatta at +977-9841-49620 .
They have worked very hard to balance the need to expedite genuine relief while making sure that state coffer is not robbed in day light.

[UPDATED - IMPORTANT!] NEW CONTROLS TO THE FLOW OF FUNDS TO NEPAL - MISCONCEPTIONS AND CLARIFICATIONS

By Saugat Kandel

Update:
We have recently received information that the government policy has changed, again!

Quoted from Kanak Mani Dixit:

"
Important for NGOs and voluntary groups -
The Social Welfare Council (SWC) and its parent ministry have taken a decision that for earthquake relief purposes NGOs do NOT need prior SWC approval as has been the rule for receiving foreign funds. I double-checked with the officials, that the procedure for now is this - for receiving funds for relief activities from outside the country formally notify in hard copy the District Disaster Relief Committee (headed by CDO) and also send a note to the SWC (the latter you can do by email, but you can also do it in hard copy).
"

In effect, this means that the new NGOs do not need prior government approval, but they do need to establish some accountability by formally notifying  the appropriate government agencies.

Original post:

The Government of Nepal recently introduced new regulations regarding the flow of funds to individuals and organizations in Nepal, regulations which have caused much confusion and anxiety among the local Nepali community as well as the donor community abroad. These regulations first came to light when the central bank of Nepal, Nepal Rastra Bank (NRB), sent a directive to all the local banks in Nepal asking them to provide information about all the organizations collecting funds on the ground, and even directing them to transfer the funds to the Prime Minister's Disaster Relief Fund unless the organizations met very specific but extremely confusing requirements.  We, at the One Stop Portal, have already expressed our confusions regarding these regulations in a previous blog post.
The Government of Nepal has since been working hard to clarify the misconceptions about these regulations through engagement with the local print and digital media. These misconceptions and clarifications can be summed up in three important points:

1. Flow of funds to individuals

• Misconception: There was a widespread fear that these regulations would impede the flow of funds to individuals, be they family members or relief workers. There was a general sense that banks would be forced to direct any such wire transfers to the Prime Minister's Disaster Relief Fund.
• Clarification: The article in the Annapurna Post and the interview in BBC Nepali Service both clarify that any flow of funds to individuals can proceed unimpeded. Individuals who receive the wire transfers are free to do as they wish with the funds they receive. 

2. Flow of funds to established charities

• Misconception: There was also a fear that these regulations would hamper flow of funds to established charities. This led to a lot of anger and suspicions that the government officials were apathetic to the relief efforts, and only really wanted to misappropriate the funds, even if they were earmarked for relief and recovery through the Prime Minister's Disaster Relief Fund.
• Clarification: The sources mentioned above clarify that any already established and registered charities, national or international, that already had bank accounts open before April 25, can still receive and relay the funds as before. The regulations do not hamper this flow.

3. Who is affected?

• Any funds transferred to recently opened accounts that are neither registered to individuals, nor to established and regulated charities, will be transferred to the Prime Minister's Disaster Relief Fund. Any new volunteer groups or organizations establishedafter April 25, working without proper certifications from either the Government of Nepal, or the Nepali embassy in the source country where the money transfer is conducted from, cannot receive the transferred funds. If these transactions were allowed, it would be extremely hard for the Government of Nepal to keep track of these funds, to ensure that these funds are not misappropriated. It is these funds that are directed to the Prime Minister's Disaster Relief Fund. 

Our View

After the aforementioned clarifications, it is now clear that the target of these new directives are neither individuals, nor previously established charities. Even though they were horrendously miscommunicated, these directives seem designed clearly to prevent any fraudulent collection and misappropriation of funds donated by well-meaning individuals abroad.

At this point, we urge all the organizations active in relief efforts in Nepal to get the necessary certifications from both the Government of Nepal, and from the Nepali embassy in the country where their funding originates. We also urge the Government of Nepal to very much expedite the approval process, to ensure that any well-meaning organizations do not get caught up in a bureaucratic black hole. In case there is an emergency need for funds, donors should ensure that they transfer the money directly to the persons behind the relief organizations.

Oh for a better government media strategy!


Sources:
[1] Ekantipur
[2] Annapurna Post
[3] BBC Nepali Service
[4] Prime Minister's Disaster Relief Fund

About the Prime Minister's Disaster Relief Fund

By Saugat Kandel

In the aftermath of the 7.8 magnitude earthquake that hit Nepal, there has been a huge inflow of resources - funds and supplies - into Nepal, an inflow which, while well-intentioned, has been very haphazard and unregulated. The Government of Nepal has been struggling to cope with this inflow, and has made several hasty attempts at regulating it. These new controls have led to severe confusion, anxiety, and some horrendous miscommunication. We, at the
One Stop Portal,  have previously attempted to clarify these regulations: whether the relief materials are taxed, how to clear customs in the Tribhuvan International Airport for relief materials, how to distribute relief materials, and how to effectively fund the relief effort in Nepal.

In it’s attempts to regulate the flow of funds into Nepal, the central bank of Nepal, Nepal Rastriya Bank (NRB), has sent directives to the local banks, asking that any unregulated funds be transferred to the Prime Minister’s Disaster Relief Fund (PMDRF). This attempt has caused widespread confusion and panic among the local Nepali community as well the donor community, an issue which we have tried to resolve in a previous post. Even after our clarifications, an outstanding issue remains - what exactly is the Prime Minister’s Disaster Relief Fund? Wrongly or rightly, there has been a lot of suspicion and anger directed at this fund, suspicion that the government has created this find simply so that the politicians can bide their time and misappropriate the funds, anger that politics is rearing it’s ugly head even in trying times like these. This has even led to mass campaigns and petitions that NGOs, INGOs, grassroot activists, and even foreign governments take the leading role in the relief efforts, that the Government of Nepal take a back seat, and that the PMDRF be abolished even. These campaigns, however, arise from misconjectures about how the PMDRF functions, about what role it plays in the disaster relief efforts.

As Swarnim Wagle covers in his excellent Facebook post, the PMDRF is composed entirely of technocrats, not politicians. It is headed by the Vice-Chairperson of the National Planning Commission, and is composed of 8 Secretaries from the National Civil Service. This structure of the PMDRF provides a layer of shielding against direct political interference, ensuring that the political parties cannot easily do as they wish with the the funds collected.

Part of the confusion also stems from differing ideas on what the role of the government should be in the disaster relief efforts. Since past experience tells us that many public officials in Nepal are either corrupt or just plain incompetent, it is natural that people ask that NGOs, INGOs, grassroot activists, and even foreign governments control the relief effort. This argument ignores the situation in the ground, both for the short term, and the long term.

For the short term, we have to realize that there are tens of thousands of Police, Armed Police, and Army servicemen active on the ground, spearheading the relief and rescue operations. These operations are funded through government funds, and work under government authority. Removing either the funds or the authority could seriously hamper the relief efforts.

For the long term, we have to understand that the scale of the reconstruction effort required is massive. Rebuilding the roads, the houses, and any other affected infrastructure is going to take funds, manpower, and resources at a scale which only a central authority like the government can really provide. Again, there is no option to having the government involved.

We do not, however, argue that the government be let off scot-free. Given that the public officials have previously shown a tendency towards corruption and incompetence, it is important that the Nepali public, the media, and the grassroot activists all always maintain a watchful eye over how the PMDRF is spent, forcefully ask for accountability, and carefully scrutinize every transaction conducted. Only in such eternal vigilance lies an opportunity to build a new and better Nepal.


Here is the excellent post by Swarnim Wagle in its entirety:

**What is the PM's Disaster Relief Fund and What it is Not?**
I have been swamped with queries on what the recent Central Bank directive on transfer of funds AFTER the April 25 earthquake means. **I share your concerns.** But it only affects bank accounts that were opened in the last 6 days under the direct subject of "quake relief." People, agencies, NGOs, donors with established bank accounts before April 25 can continue to receive and mobilize funds just as they used to in the past. But I am verifying some more facts, and will post separately on this topic later.
In the mean time, there is a lot of misunderstanding about the PM’s Disaster Relief Fund. Let me clarify based on what I know:
1. The Prime Minister (or his party) have absolutely nothing to do with it. The PM cannot access this fund himself. It is coordinated by the Vice Chairperson of the NPC and 8 Secretaries through a unanimous decision.
2. It is purely a relief fund, channeled through the Chief District Officer in each disaster-hit district, and is meant to follow a “fast track” to cut through the usual procedural delays in a slow bureaucracy.
3. The fund cannot be used to provide donations or any other administrative or overhead costs including facilities and allowances to civil servants. (They get no helicopter rides or random “incentives.”)
4. This is *completely* different from the Prime Minister’s “Assistance Fund” which he can use with discretion.
5. Is there some leakage, abuse, waste? I bet there is, just like there is scope for foul play in any large fund run by multilaterals (WB/ADB), bilaterals (UK/US) or NGOs. But what are the safeguards against potential abuse? Unlike the PM’s “Assistance Fund” which is not legally required to be audited, the “Disaster Relief Fund” is audited regularly and annually by the Office of the Auditor General of Nepal. There is a clear “Karyabidhi” (Operation Regulations 2006:http://opmcm.gov.np/…/cm…/file/niyamawali_20110717014805.pdf). “Akhtiyaar” can also look into cases and folks can go to jail.
6. The Government will most likely also add an extra layer of third party, independent auditing to enhance credibility and transparency.
7. No political party or leader has any access to these funds at the Centre. My personal view is that to prevent misuse in the districts, vigilance and scrutiny is required by the media and civil society. Do ask tough questions and hold officials to account.
8. The website lists all contributions so far (file downloadable in Excel), including the US$1 million cash donation from Bhutan:http://pmrelief.opmcm.gov.np/contributors.aspx
9. In view of the above, the premise of this article in a British newspaper that “funds are being directed to a political party” is completely untrue.http://www.telegraph.co.uk/…/Nepal-aid-donors-may-halt-fund…
10. For further clarity, please contact the Coordinator of the Fund, Prof. Dr. Govind Raj Pokharel (NPC Vice Chair) on his mobile: 98511 00407 or the Secretary of the Office of the Prime Minister and Council of Ministers Mr. Narayan Gopal Malego on 98415 16505.