Private Sector, Gov’t Work to Develop Trust Law for NGO’s

The government and members of the private sector met last week to discuss a draft law that would require international and domestic NGOs and associations to register trust funds and submit finance statements to the government.

Financial trusts, which are not currently regulated by the government, are a tool NGOs use to manage the allocation of funds.

Officials say such measures will create transparency and offer security to investors with ties to such organizations.

“Some NGOs don’t want us to see their finances,” Finance Minister Keat Chhon said at the meeting held at the Ministry of Economics and Finance. Under the law, “funds will not…serve for personal benefit. So we will submit this and see their reactions.”

According to the draft law, domestic organizations will need to submit annual financial reports to the Ministry of Interior, while international organizations operating in Cambodia will need to file information with the Ministry of Foreign Affairs.

Mr Chhon also alluded to an undisclosed sub-decree that indicates that when an NGO registers its financial trust, it will be subject to a review period by the Securities Exchange Commission of Cambodia. If the government deems additional information is required, the NGO will have 45 days to reply. If it does not comply, the government may withdraw the organization’s operational licenses for up to a year.

According to Bretton Sciaroni, co-chairman of the Government-Private Sector Forum’s working group on law, tax and good governance and partner at the legal consultancy Sciaroni & Associates, the original trust fund law was first intended as a way to officially declare ownership of donor funding at NGOs that transferred into commercial enterprises as an NGO expanded and sought to maximize donor funds.

“A lot of the original capital from NGOs came from donors to help fight poverty or go into alleviation,” he said. “They don’t want that money back, so it’s logical to place it in trust…. We are way past that point now.”

In Channy, CEO of Acleda Bank, which was founded as an NGO and is now a multinational private enterprise, believes the proposed law is a good one.

“Donors will want to know where the money is going,” he said. This will also protect an NGO from having its funds being used fraudulently by board members, he added.

The draft law comes as the government is drafting separate legislation that would require NGOs to reveal sources for funding, restrict assistance to political parties, and list staff members.

Mr Chhon said the draft would be “polished” through a seminar that will meet in the third week of December, before submitting a final draft of the law to the Council of Ministers.


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