Nearly three years after deciding to scrap the Poverty Alleviation Fund, the government is moving forward to dismantle the institution formed in 2003 to run anti-poverty measures at the local level during the conflict period.

With elected local governments in place, the Cabinet had decided to scrap the fund in November 2018. But it has been allowed to continue without assigning it any task, and the government’s resources are being spent in administrative expenditure including the payment of staff salaries for nearly three years. The budget for the next fiscal year 2021-22 has once again announced that the fund would be scrapped.

“We have received a letter from the Finance Ministry on Friday asking us for details on our bank accounts and assets including vehicles by mid-October,” Nirmal Kumar Bhattarai, vice-chairperson of the fund, said. “The letter received through the Prime Minister’s Office has also stated that the Prime Minister’s Office will take ahead the process of scrapping the Poverty Alleviation Fund Act.”

As the institution was formed under the Act, scrapping of the Act is a must to discontinue the legal existence of the fund. With the Supreme Court on Monday ordering reinstatement of the House of Representatives, the government might need to take the proposal to scrap the law to Parliament.

According to Bhattarai, the Finance Ministry’s letter has also asked the fund to extend the employee contracts until mid-October—until the entire accounts of the fund are handed over to the ministry.

There are about a dozen staff, mostly junior-level, running the office for the last three years.

“We have also been asked to update accounts of the revolving funds and close some of the accounts which are currently not in operation,” said Bhattarai.

In order to implement the anti-poverty programmes, the fund had created around 32,000 revolving funds to be managed by local communities. These funds are being used to provide credit to people in local communities for income generation activities.

The revolving funds have combined resources of Rs19 billion. Rs15 billion of the funds came from the government, most of them in the form of grants from the World Bank, while Rs4 billion was generated by local communities across the country.

When the government decided to scrap the fund in November 2018, it had also appointed Bhattarai the vice-chair with the responsibility of clearing arrears and preparing the exit strategy.

According to Bhattarai, he has already submitted the exit strategy.

But, during the board meeting on April 7, 2019, the Prime Minister had insisted that the PAF would be continued, Bhattarai said.

The government had allocated Rs150 million to the fund in the current fiscal year. The fund was supposed to help local governments form 600 cooperatives involving the users of more than 32,000 revolving funds set up across the country to provide credit for income generation activities.

But, with several board member positions remaining vacant, it could not take any decision regarding the utilisation of Rs150 million. While the Poverty Alleviation Act-2006 has envisaged nine board members, there are at present only four members on the board, with the Prime Minister as chairperson. The government has not appointed the other members.

The Finance Ministry had then transferred the unused budget for other purposes.

“The fund had no work throughout the current fiscal year,” said Bhattarai.

According to officials and experts, the fund is no longer needed as the local governments are in place to work on poverty alleviation at the local level.

In fact, they say giving continuity to the fund would contradict the Guidelines on Operation of Community Organisations and Small Infrastructure Development Programmes promoted by the fund.

The guidelines, approved by the fund’s board on April 7, 2019, make local governments responsible for keeping records of community organisations and small infrastructure projects; facilitating community organisations to continue anti-poverty initiatives; monitoring the operation of revolving funds established at the community level; involving community organisations in policymaking of local governments and monitoring their transactions; and launching skills development programmes.

Former minister and finance secretary Bidyadhar Mallik said following the formation of elected local governments, the fund was no longer indispensable.

“The federal government can have a unit to provide technical assistance and advisory services to local governments to implement programmes related to poverty alleviation,” he said. “The fund can play this role if it is continued but its existence should not be prolonged without giving any responsibility as the government’s resources are being wasted.”

Poverty alleviation comes under concurrent jurisdictions of the federal, provincial and local governments as per the constitution.

Mallik, however, said that the revolving fund should be allowed to be operated by local communities because it is a community-driven programme and it empowers local communities.

“The local governments should be involved in monitoring their works,” he said.

When it was established in 2003, the country was in conflict and the government agencies could not be mobilised in rural areas. So the fund was established to run anti-poverty programmes through the mobilisation of local communities.

“Winning the hearts and minds of people to prevent the influence of the then rebel—the Maoists—was another objective of the initiative,” said Mallik, who was also involved in the fund.

But its performance remained mixed, according to the World Bank’s assessment. In an assessment in 2017, the World Bank termed the outcome of the fund’s programmes as well as the performance of the government as satisfactory. But the fund has had its share of scandals.

The Commission for the Investigation of Abuse of Authority filed two corruption cases at the Special Court against 50 senior officials and staff members of the fund in March 2015 and April 2016. In September 2018, the Special Court convicted nine Poverty Alleviation Fund officials, including then executive director Raj Babu Shrestha, of corruption.

In 2019, a probe conducted by the National Vigilance Centre, a corruption watchdog under the Prime Minister’s Office, also unearthed several irregularities in the fund.

According to a report obtained by the Post, the centre found possible irregularities worth Rs185.96 million under the fund’s Infrastructure Sub Project and Income Generation Programme. The centre also found equipment from its Kathmandu office valued at Rs41.47 million missing.