Disbursing Funds To NGOs

Source: The Hitavada      Date: 10 Jul 2017 11:22:33

 

 

 

 


 

 

A suggestion was made by the Apex Court to the Central Government to frame guidelines/rules for being implemented, for accreditation and allied measures before finances are extended to NGOs/VOs. It was suggested, that guidelines/rules should also be framed, for the manner in which accounts are to be maintained by NGOs/VOs, and eventually for laying down the manner of auditing the utilisation of the disbursed grants.

IN THE judgement of the case - Manohar Lal Sharma, Advocate, vs State of Maharashtra and Others, delivered on April 26, 2017, CJI Jagdish Singh Khehar, Justice Dr. D. Y. Chandrachud and Justice Sanjay Kishan Kaul, at the Supreme Court, have underscored the need for Union of India to frame guidelines/rules for being implemented, for accreditation and allied measures, before disbursing finances to Non-Governmental Organisations (NGOs) and Voluntary Organisations (VOs).


It was also suggested that guidelines/rules should also be framed, for the manner in which accounts are to be maintained by NGOs/VOs, and eventually for laying down the manner of auditing the utilisation of the disbursed grants.
The Apex Court has directed the Government of India to examine and consider, the desirability of giving a statutory status to the entire process.


According to one estimate before the court, the Central Government grants are approximately Rs. 4756 crores to NGOs and VOs during financial years 2002-03 to 2008-09. During the same period, State Government grants were approximately Rs. 1897 crores. This depiction indicates annual grants of approximately Rs. 950 crores by the Central and State Governments to the NGOs/VOs.


Keeping in mind the enormity of the amount involved and having found that there was a regulatory measure contemplated under the General Financial Rules, 2005, it was felt that the public funds disbursed need to be properly audited in consonance with these rules.


Therefore, a suggestion was made by the Apex Court to the Central Government to frame guidelines/rules for being implemented, for accreditation and allied measures before finances are extended to NGOs/VOs. It was suggested that guidelines/rules should also be framed for the manner in which accounts are to be maintained by NGOs/VOs, and eventually for laying down the manner of auditing the utilisation of the disbursed grants.

The eventual purpose sought to be achieved by the motion bench order of January 10, 2017, was to formulate a procedure to initiate action for recovering disbursed grants in cases involving defalcation/misappropriation by NGOs and VOs, including the initiation of civil action for recovery, and criminal action for penal consequences, when called for.


In compliance with the Supreme Court’s order of January 10, 2017, the Union Rural Development Ministry framed guidelines for accreditation of Voluntary Organisations/Non-Governmental Organisations, which prescribe institutional arrangements for accreditation of VOs/NGOs, their registration, application review, sanction and fund release for projects, monitoring, accounting of audit of VOs/NGOs etc. The proposed guidelines/rules have been also placed on the record of this case, along with an affidavit of March 31, 2017, filed on behalf of the Union Rural Development Secretary. The suggestions sought to be given effect to, in the proposed guidelines/rules, can be deciphered from the copy of the guidelines.


The disbursements of public funds to NGOs and VOs by the Union Rural Development Ministry are effectuated through the Council for Advancement of People’s Action and Rural Technology (CAPART). It is disbursing agency under one of the ministries/departments of the Union Government out of the 76 ministries/departments of the Central Government. Hence, it is necessary to highlight that CAPART is responsible for disbursal of a miniscule amount of the public funds, which are provided to NGOs and VOs by the Union Government through its ministries and departments. After examining all old files of financial assistance since its inception with reference to General Financial Rules, 2005, and also with reference to the future course of action for initiating civil and criminal proceedings against the defaulting organisations, CAPART has stated in its separate affidavit, that it has started conducting audit in terms of Rule 211 of GF Rules, 2005.


There is no organisation which has received financial assistance of Rs 1 crore or more in a single financial year.
However, there were 13 VOs which received financial assistance of Rs 25 lakhs or more since July, 2005. These organisations come within the purview of CAG Audit in terms of Rule 211(2)(a) of GF Rules, 2005, and therefore, CAPART has written a letter in respect of these VOs to Senior Audit Officer (Special Audit) on March 23 last requesting for audit of the 13 VOs. The list of these 13 VOs is enclosed with the affidavit.


On January 10, 2017, the enormity of the issue was effectively presented before the court by the senior counsel Rakesh Dwivedi, the amicus curiae. The issue in hand involves the disbursement of public funds. It is necessary to record, that on the earlier occasion, when the court had passed a detailed order on January 10, 2017, the magnitude of the funds involved in the task contemplated was perhaps not brought to the attention of the court. The court highlighted the different aspects, which are required to be regulated, after extracting the opening paragraph of the Office Memorandum of April 18, 2017.


The guidelines which are being prepared by the Government of India, on being asked by the court, may not truly and effectively redress the entire process requiring regulation, commencing from accreditation and encompassing the manner of utilization of the funds, and their eventual audit.


Therefore, the court has stated that it would like the Central Government to give statutory status to the entire process. This suggestion was made by the court keeping in mind entry 76 of the Union List and entries 1 and 2 of the Concurrent List, which could also be read with entry 97 of the Union List to the Seventh Schedule to the Constitution.
These entries would enable the central legislature to provide regulatory measures, including the consequences (civil as well as criminal) flowing out of misutilisation of funds by NGOs/VOs.

If the Government of India desires to extend statutory status to the entire process, the statute would not only provide enforceable consequences, but could also envisage such civil and criminal action, as may be considered proper by the legislature.


Ordering listing of the case before it on July 12 next, the court has instructed the Union of India’s counsel, P. K. Dey to obtain instructions in the matter, and provide necessary inputs to the court on the next date of hearing, as to whether the Central Government would like to regulate the issue in hand, by finalising guidelines or would rather regulate the process through legislation.


The court has cautioned that this order should not be treated as any restraint on the on-going steps being taken by the disbursing agencies, including initiation of civil and criminal action against the defaulting parties. The District Magistrates/Senior Superintendents of Police are expected to render all necessary assistance, as may be called for.