CSO SUSTAINABILITY:REGIONAL CHALLANGES

BELGRADE, 24. 03. 2011.

Dr Dragan Golubović,

European Center for Not-for-Profit Law (ECNL),

Budapest

CSO SUSTAINABILITY: ELEMENTS

ENABLING LEGAL FRAMEWORK.

CSO FINANCING (public funding and tax framework.)

INSTITUTIONAL MECHANISMS OF COLLABORATION (CSO quality assurance instead).

CSO SUSTAINABILITY: WHY SHOULD THE GOVERNMENT CARE?

BASIC PREMISE:

CSO STRENGTHEN PARTICIPATORY DEMOCRACY;

CSO PLAY AN IMPORTANT ROLE IN THE DELIVERY OF SOCIAL SERVICES.

CSO SUSTAINABILITY: WHY SHOULD THE GOVERNMENT CARE?

THOSE PREMISES ARE STILL PERTINENT:

RECENT GLOBAL EVENTS UNDERSCORE THE ROLE OF PARTICIPATORY DEMOCRACY (STABILITY VERSUS DEMOCRACY);

CSO SOCIAL SERVICE PROVISION IS ON THE RISE: MAJORITY OF CHARITIES SURVEYED IN U.K. EXPECT THE DEMAND FOR THEIR SERVICES TO INCREASE IN 2011.

LEGAL FRAMEWORK FOR CSO

Framework regulation for associations modernized (ECHR):

small number of founders required to establish an association;

legal persons and foreigners allowed to be founders; informal associations allowed to operate

(Montenegro); branch offices of foreign CSO allowed to operate; effective legal protection afforded to associations

during registration, operation, and dissolution; associations allowed to engage directly in economic

activities.

LEGAL FRAMEWORK FOR CSO

Framework regulations for foundations less favorable (Croatia) – lack of binding international standards.

Challenge: fair and consistent implementation of CSO framework regulations (Bosnia, Montenegro, Turkey).

regressive framework for volunteers (Serbia, Montenegro, Bosnia):

volunteerism treated as labor, rather than private voluntary activity.

CSO FINANCIAL SUSTAINABILITY

PUBLIC FUNDING OF CSO.

TAX FRAMEWORK FOR CSO.

CSO PUBLIC FUNDING: RATIONALE

PROMOTE PUBLIC GOODS (culture, amateur sport, voluntarism and other activities deemed for public benefit).

DELIVER SOCIAL SERVICES TO THIRD PARTIES (better quality, cheaper services).

PROVIDE SERVICES TO THE GOVERNMENT (public policy papers, feasibility studies, etc).

PUBLIC FUNDING OF CSO

THE MOST SIGNIFICANT SOURCE OF FUNDING FOR CSO:

OECD COUNTRIES (2006) – 15 BILLION US$ TO CSO.

HUNGARY: 42% OF OVERALL FINANCING OF CSO.

PUBLIC FUNDING OF CSO:

CROATIA (1999-2009): 320 million Euro (27,593 projects funded);

CROATIA: 70% DEPENDENT ON PUBLIC FUNDS (2008);

SERBIA (2008) – 60 million Euro to “CSOs”;

BOSNIA (2008) – 59 million Euro.

PUBLIC FUNDING OF CSO

1) BUDGETARY SUPPORT.

2) CONTRACTING.

3) INNOVATIVE SCHEMES (in CEE countries).

1) BUDGETARY SUPPORT

Grants distributed to CSO through various mechanisms: open calls (state, regional and municipality public bodies); foundations/funds for civil society developments (Croatia,

Vojvodina); other bodies specifically designated for this purpose (Albania,

Montenegro).

2) CONTRACTING;

3) INNOVATIVE SCHEMES.

2) CONTRACTING:

PROCUREMENT OF SOCIAL SERVICES BY CSOs to THIRD PARTIES (at the state, local or regional level);

PROCUREMENT OF CSO SERVICES DIRECTLY TO THE GOVERNMENT.

AS A RULE, COVERED WITH TENDER AND PROCUREMENT RULES AND PROCEDURES (to ensure transparency and fair competition).

3) INNOVATIVE SCHEMES: A LOOK AT CEE

TAX PERCANTAGE DESIGNATION TO PUBLIC BENEFIT ORGANIZATIONS (PBO).

TAX PAYER HAS AN OPTION TO DESIGNATE PERCANTAGE OF TAXABLE INCOME (1% or 2%) TO PBO.

THE SCHEME IS OPEN TO NATURAL PERSONS (Hungary, Poland, Romania), BUT ALSO LEGAL PERSONS (Slovakia).

3) TAX PERCANTAGE DESIGNATION – RATIONALE:

TO ALLOW TAX PAYERS TO PARTICIPATE DIRECTLY IN THE BUDGET EXPENDITURE DECISION MAKING PROCESS;

TO ALLOW TAX PAYERS TO ADDITIONALLY CONTRIBUTE TO PUBLIC GOODS;

TO CREATE AN ADDITIONAL SOURCE OF INCOME, IN PARTICULAR FOR COMMUNITY GRASS CSO;

TO BRING CSO CLOSER TO THE PUBLIC, AND MAKE THEM MORE TRANSPARENT AND ACCOUNTABLE.

3) TAX PERCANTAGE DESIGNATION:

POSITIVE SIDES (HUNGARY): SIGNIFICANT ADDITIONAL SOURCE OF INCOME FOR

CSO (2008 – 35 MILLION EURO). DOWNSIDES: DID NOT CONTRIBUTE TO THE CULTURE OF GIVING; HUGE TRANSACTIONAL COSTS TO OPERATE THE

SCHEME; NET BENEFICIARIES LARGE CSO - with PR SKILLS

AND RESOURCES.

PUBLIC FUNDING OF CSO - CHALLENGES IN THE REGION:

DEPENDENCE ON FOREIGN DONORS AND GOVERNMENT FUNDING (Turkey, Kosovo exceptions in

regard to the latter); RULES ON GRANT MAKING NOT

ALWAYS TRANSPARENT; LACK OF CLEAR PUBLIC POLICY

BEHIND PUBLIC FUNDING.

TAX FRAMEWORK FOR CSO:

ALL COUNTRIES IN THE REGION PROVIDE TAX BENEFITS FOR CORPORATE GIVING TO CSO;

ALLMOST ALL COUNTRIES IN THE REGION PROVIDE TAX BENEFITS FOR INDIVIDUAL GIVING TO CSO (exceptions: Albania, Serbia).

TAX FRAMEWORK FOR CSO - CHALLENGES:

NARROWLY CONSTRUED NOTION OF PUBLIC BENEFIT FOR WHICH TAX BREAKS ARE PROVIDED (Albania, Serbia, Montenegro);

VAT LAW DOES NOT EXEMPT CSO FROM IMPORTS OF HUMANITARIAN GOODS (Bosnia);

INTRODUCTION OF FLAT TAX RATES MIGHT POSE A CHALLENGE FOR THE REGION (Slovakia).

CSO QUALITY ASSURANCE

EMERGING IN THE REGION AS CSO TAKE ON A MORE PROMINENT ROLE AS SERVICE PROVIDERS (PQASSO, SOKNO, ISO):

PARTNERSHIP WITH THE STATE IN THE DESIGN AND IMPLEMENTATION OF QA PERTINENT TO SOCIAL SERVICES;

SELF GOVERNING INSTRUMENTS (CODE OF GOOD PRACTICES, ETC.) IN ENSURING THE IMPLEMENTATION OF QA STANDARS.

CSO QUALITY ASSURANCE

CSO NEED TO CONSIDER FINANCIAL AND OPERATIONAL IMPLICATIONS OF QA STANDARDS.

EXAMINE THE NATURE OF PARTNERSHIP WITH THE GOVERNMENT.

MAKE SURE IT DOES NOT JEOPARDIZE ITS RELATIONSHIP WITH CSO AND OTHER STAKEHOLDERS.

CSO SUSTAINABILITY: CHALLENGES IN THE REGION

DEPENDENCE ON PUBLIC AND FOREIGN DONORS’ FUNDS.

LACK OF TRANSPARENCY AND CLEAR PUBLIC POLICY BEHIND PUBLIC FUNDING.

NARROWLY CONSTRUED NOTION OF PUBLIC BENEFIT IN TAX LAWS, AND NACENT CULTURE OF GIVING.

REGRESSIVE FRAMEWROK FOR VOLUNTEERS;

NEED TO IMPROVE TRANSPARENCY AND GOOD GOVERNANCE OF CSO.

THANK YOU FOR YOUR ATTENTION!

Apaczai Csere Janos u.17, 1st floor,

Budapest 1052,Hungaryphone: + 361 318 6923

fax: + 361 266 1479  www.ecnl.org.hu/icnl.org

Email: dragan@ecnl.org.hu