As non-governmental and not-for-profit organisations, usually known as charities, NGOs serve the market needs unserved by the profit-seeking private sector or the welfare-oriented government. The private sector is disinterested in investing in unprofitable sectors, while the government may not have the resources to solve social problems. This is where NGOs come in. The belief that NGOs exist or are needed only in underdeveloped nations is a misconception. Developed countries also have several social problems that they must address. Although the state and the market play important roles in their respective fields, their engagement nonetheless leave a need that the NGO sector must fill. Thus, NGOs are significant in addressing social problems in any country.

NGOs began establishing in Nepal in the 1950s, reaching 1,210 by 1993. After the restoration of multiparty democracy, their growth has been the fastest among other entities in the country. As per the current Social Welfare Council (SWC) record, there are over 50,000 registered NGOs. However, the SWC records do not reflect how many are inactive or dysfunctional. Despite decades of the growth of NGOs and substantial overseas aid, Nepal remains one of the world’s poorest countries. Thus, the case of Nepal justifies that the thick density of development agencies and foreign aid alone cannot achieve long-lasting progress.

Challenges

Although NGOs are vital for solving societal problems and promoting development in Nepal, the country faces several challenges. The governance of NGOs in Nepal has been a subject of long-standing debate. To address the lack of discipline in NGOs, the SWC developed a “Code of Conduct” in 2005. Likewise, the government introduced the “National Integrity Policy 2018” to monitor NGOs and enhance governance. However, both policies were never implemented due to heavy flak from NGO leaders.

Most NGOs receiving overseas funding limit their financial disclosure to funding agencies or to comply with regulations. Non-disclosure of information about organisational activities to its major stakeholders, such as beneficiaries and the public, supports the accusation of their lack of transparency. Rarely do NGOs in Nepal disclose transparent financial statements on their websites. A basic search on reputed NGOs’ websites to lookout financial disclosure would suffice to realise the urgency to implement good governance practices. Development agencies are on the frontline to abhor government ineffectiveness and corruption.

Furthermore, NGO activities are spread in nooks and corners of the country, making it challenging and expensive for governments to monitor their operations. Hence, to improve confidence and trust, it is better for NGOs to voluntarily disclose transparent financial and operational information rather than just comply with regulators. Improved monitoring and governance of NGOs will not only prevent possible corruption and abuse of resources but also avoid duplication of work and ineffective use of resources, improving cooperation instead of competition among them. For example, dozens of anti-trafficking NGOs are found in major India-Nepal border stations. This creates an unnecessary nuisance as they stop travellers and ask similar questions at each booth.

As required by law, Nepali-listed firms must publish their financial reports quarterly. How much more financial transparency should NGOs adopt? Besides, the overseas funds received by NGOs raise questions about a country’s reputation if misused. To question the responsibilities of other social actors, NGOs must be open and responsible; otherwise, their credibility will decline. Some requirements, such as programme and budget approval from SWC, annual NGO registration renewal, tax clearances and social audits, are in place. Unfortunately, these processes are documented just to comply with regulations.

With poor governance and weak institutions, the efforts of NGOs and foreign contributions may be ineffectual and excluded from a country’s primary development strategy. Poor governance and a shortage of public resources led to the emergence of NGOs. By imposing their objectives and programmes with little to no consideration for the official agenda of the host nation, NGOs may contribute to a weaker government. Attributed to the prominence of NGOs, issues with programmes overlapping with government programmes may arise, making it challenging to develop consistent, effective policies and potentially resulting in duplication of services. The ethical side of NGO governance is a crucial issue that needs to be investigated.

Ethics in nonprofit

Nonprofit organisations highly value ethics as their fundamental principles. If nonprofit executives use their positions to unethically gain from nonprofit activities, the pursuit of social good remains impaired. Because of their inadequate performance, engagement, accountability, and trustworthiness, organisations in Nepal are unable to meet community expectations. Profits from nonprofit operations become assets of the organisation rather than equity of the nonprofit executives because nonprofit organisations operate as trustees for the people they serve and agents for donors.

Rumours and news of NGO executives attempting to make unethical gains from nonprofit resources have defamed not only NGO professionals as “dollar eaters” but also disdained trust in NGOs. Furthermore, scandals in nonprofit organisations have negatively impacted the benefits flow to beneficiaries and public perception. To enhance trust, NGO managers should be more responsive and accountable to the increasing public demand by voluntarily implementing good governance practices. Financial disclosure not only makes information accessible but also reflects intentions, behaviours, and actions. NGO leaders must uphold a high standard of moral conduct to be recognised by the public.