КАНЦЕЛАРИЈА ЗА САРАДЊУ СА ЦИВИЛНИМ ДРУШТВОМ ВЛАДА РЕПУБЛИКЕ СРБИЈЕ Примери међународне и европске добре праксе за одрживи развој цивилног друштва Lindsay Driscoll www. civilnodrustvo. gov. rs
Current issues for CSOs in UK and Internationally Lindsay Driscoll Charity Law and Governance Consultant
Provision of Enabling Legal environment for CSOs • Freedoms of Association , Expression and Assembly • International Human Rights Instruments – Universal Declaration of Human Rights (UDHR )-not binding – International Covenant on Civil and Political Rights (ICCPR ) – most countries have ratified – European Convention on Human Rights – Many countries include these rights in their Constitution • Informal associations of individuals pursuing common interests are protected by the framework on human rights law. • ECHR has held that the right to form an association is an inherent part of the freedom of association • International norms. 2007 Council of Europe recommendation on legal status of NGOs
Public benefit organisations (1) • • CSO established for public benefit purposes Will not always be referred to as PBO In common law countries term charity often used Law of each country will set out what are public benefit purposes. Can be list or test or wide definition, this can be subject to revision • Public benefit status often linked to tax advantages and / or access to public and other funding.
Public benefit organisations (2) • CSO will normally be created and registered according to legal structure and then register again with authority to be recognised as public benefit organisation • PBOs will usually have higher accounting and reporting requirements • PBOs will often be linked to greater monitoring and supervision as receive funds and support from government , donors and public
Registration process • Legislation should provide that process is – – – Simple Minimum discretion Transparent process Time limit Appeals to court where refusal • Often more detailed process for PBOs as need to check whether within definition and status often linked to receipt of benefits • Detailed provisions often in secondary legislation • Practice must correspond with law
Registration body • Several models – – – – – Courts Police Tax authorities-for PBOs e. g. US Canada One government ministry Several government ministries Regional authorities Independent Commission e. g. England New Zealand CSO Co-ordination board with CSO reps e. g. Kenya CSO Umbrella body e. g. Philippines
Reporting and monitoring of CSOs by registration authority • Registration usually linked to reporting and accounting requirements • In past often not enforced • Now internationally more emphasis on accountability of CSOs • Includes accounting standards • Some countries require future plans, details of donors etc • Higher requirements for public benefit organisations • Need for proportionality-i. e. requirements linked to size of CSO or other risk factor • Link to other means of accountability ?
Restrictions on activities of CSOs • Political activities – – Definition Party political Advocacy to change law or government policy Should there be limit on political activities ? • Receipt of foreign funding • In case of PBOs – Restriction on private benefits. This may include restrictions on payments to board members – Conflicts of interest – Restrictions on destination of funds on winding up.
Restrictions on Activities of CSOs • Business activities. – Often treated as tax issue. ( see below) – Competition ? • Control of Fundraising – Licensing of public collections – Professional fundraisers – Fundraising statements • Other restrictions
Regulation of CSOs 1 • • • Monitoring of reports, accounts and returns Pro active monitoring Risk based regulation Powers of regulator to investigate and enforce Sanctions where non compliance or misconduct or mismanagement – Revocation of registration may be linked to ban on operations – Dissolution – Transfer of assets
Regulation of CSOs 2 • Intermediate Sanctions – – – – • • Fines Criminal offences Personal liability Removal of tax privileges Removal of Board members Appointment of interim managers Freeze bank accounts etc Balance between regulation and control Is position different for PBOs ? Is the answer self regulation ? Why should regulation of CSOs be greater than for commercial organisations ? • Code of conduct for regulator
CSO/State relations • Mutual trust important for many reasons including effective regulation • Many countries now have formal document e g Compact in England , Accord in Canada , NGO Policy in Kenya and Tanzania, Concept for the Development of Civil Society in Estonia, NGO Charter in France, Government Civil Society Strategy in Hungary, Program for Co operation with NGOs in Croatia • Areas covered – – – Independence Advocacy Funding Consultation Policy • Mechanism for review/ enforcement • Mechanism for engagement • Role of umbrella bodies
Compact for England Wales • First signed in 1998. Refreshed in 2009 and 2010 • Several changes have been made to supporting structures over the years. changed again by present Coalition government. • Present version 2010 following consultation. Short document in broad terms • Not legally binding but failure to follow Compact commitments can form part of Judicial Review case where there is a legitimate expectation for these to be met • The Compact Accountability and Transparency Guide 2011 deals with implementation of Compact and gives details of how to complain about individual Government Ministries and Agencies • Separate Compacts in Scotland, Wales and Northern Ireland • Local Compacts govern relations with local government. Often more important in practice
Compact commitments • Commitment by both government and CSOs to achieve five outcomes – A strong diverse and independent civil society – Effective and transparent design and development of policies, programmes and public services – Responsive and high quality programmes and services – Clear arrangements for managing changes to programmes and services – An equal and fair society
Bodies to support the Compact • Office for Civil Society- has responsibility within Government • Informal Ministerial Group on the Big Society and Localism jointly chaired by the Minister for the Cabinet Office and the Secretary of State for Communities and Local Government monitors progress of the renewed Compact • Compact Voice- represents civil society organisations • Compact Advocacy-supports CSOs having problems with Government at national and local level. Also uses case work to campaign for long term change • Compact champions-promote the Compact at a regional and local level • Used to be Compact Commission but this abolished in 2011 • National Audit Office is to carry out study into operation of the Compact in 2011 -12
Code of Practice on Consultation • Formal consultation should take place at stage where scope to influence • normally for at least 12 weeks • Documents should be clear about the consultation process • Should be accessible to those intended to reach • Keeping burden of consultation to a minimum is essential • Responses should be analysed carefully with clear feedback • Officials running consultation should seek guidance on how to run effective consultation exercise and share lessons learnt • Better Regulation Executive offers guidance to officials planning to run formal consultation exercise • See also Compact provisions under Outcome 2
Procedures for participation in Decision making processes • • Council of Europe Code of Good Practice for Civil Participation in the Decision Making Process. Adopted October 2009 Principles for Civil Participation – – • Contribution of CSOs – – – • • Participation Trust Accountability Independence Advocating Information and awareness building Expertise and advice Innovation Service provision Watchdog ECNL paper. Comparative Overview of European Standards and Practices in Regulating Public Participation. Overview of European Standards and comparative study of 9 countries. Starts with Art 10 of the Lisbon treaty “ every citizen shall have the right to participate in the democratic life of the Union. Decisions shall be taken as openly and closely as possible to the citizen”
CSO/State relations 2 • Other institutional mechanisms for CSO/State cooperation – Dedicated office within government to lead on issues and coordinate CSO relations in other ministries e. g. in Albania, Croatia, Bosnia and Herzegovina, Bulgaria Hungary, Kosovo, Romania, Macedonia, Montenegro Latvia, Slovenia and Serbia • Comparative studies. European Practices on Implementation of Policy Documents and Liaison offices. ICNL 2009 www. icnl. org
Office for Civil Society • • Section of Cabinet Office Responsible for charities, voluntary organisations and social enterprises Mandate has changed under the Coalition Government Now different functions in the context of the Big Society Agenda – Funder of 11 strategic partners reduced from 47 – Funds 3 specific programmes. National Citizenship Service, Community Organisers and Community First Programme – Responsible for the Compact – Responsibility for the National Lottery – Acts as liaison between other Government departments and CSOs – Oversees charity law reform. • Current review of Charities Act 2006 • Giving White Paper • • • Limited direct communication with CSOs. Through strategic partners Minister for Civil Society attends many events , conferences etc Website quite limited
The Big Society • Major Policy for Coalition government • Enabling people to come together to solve problems and improve lives for themselves and their communities • Key elements – Empowering communities. Localism ( right to buy community assets, right to run local services, enabling local residents to call local authorities to account ( Localism Act 2011) – Opening up public services – Promoting social action • Philanthropy • Volunteering • Review burden and reduce red tape
The Big Society • Criticisms – Only rhetoric – Cover for substantial government cuts – Opening up of public services favours private businesses. First round of contracts under Work Programme mainly to private sector – Small organisations will lose out in contracts
CSOs in the UK • CSOs may be established under a number of different legal structures. • Other terms used voluntary and community organisations and the third sector • Number estimated at 870, 000. Half charities. • Total income £ 116 bn • Employs 765, 000 people. ( 2. 7% of work force) More than half in health and social work • May be registered or unregistered • CSOs not regulated as such but in some cases regulated by legal structure e. g. company limited by guarantee registered with Register of Companies
Community organisations • New research suggests that there are 900, 000 under the radar grass roots groups • Tend to operate for target community such as faith or ethnic community elderly or disabled people or neghbourhood watch groups • Most will be unincorporated asscoaitions. not required to register with any body and not subject to regulation as such althuogh rules on fundraising etc will apply
Charity Law in England Wales (1) • Charities are PBOs and qualify for tax and other advantages • Charities may be established under a number of different legal structures • Most usual are as trusts, unincorporated associations and companies limited by guarantee • Charities Act 2006 introduces the charitable incorporated organisation, a new legal structure • Much of charity law is in case law and broad principles rather than statute e. g. much of the law covering charity trustees( board members) • Most recent statute Charities Act 2011 which is consolidating Act. Also Charities Act 1992 covers some forms of fundraising.
Charity Law in England Wales (2) • To be a charity must be established for exclusively charitable purposes which are for the public benefit • Charitable Purposes now set out in Charities Act 2006 • Requirement of Public Benefit based on case law and set out in Guidance issued by Commission in January 2008. This was challenged in Tribunal case in 2011 and Charity Commission has amended Guidance following this – Identifiable benefit weighed against harm – Public at large or sufficient section – Any private benefit must be incidental • Most charities are registered with and regulated by the Charity Commission. Some remain exempt from need to register ( those with income under £ 5000 pa some schools and universities and churches with income under £ 100, 000
Charitable purposes in Charities Act 2006 (1) • • Prevention or relief of poverty Advancement of education Advancement of religion Advancement of health or saving lives Advancement of citizenship or community development Advancement of arts, culture, heritage or science Advancement of amateur sport Advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality or diversity
Charitable purposes in Charities Act 2006 (2) • The advancement of environmental protection or improvement • The relief of those in need by reason of youth, age, ill health, disability, financial hardship or other disadvantage • Advancement of animal welfare • Promotion of efficiency of armed forces, police, fire and rescue services or ambulance services • Any other purposes already recognised as charitable under existing case law • Any purposes reasonably regarded as analogous to or within the spirit of any of above purposes. This enables charity law to develop with changing social and economic conditions
Charity Commission (1) • Independent regulator established by statute • Charities Act 2006 says that Commission shall not be subject to direction or control of Government • 165, 000 registered charities • 300 staff in four offices • Board consists of chairman plus up to 8 non executive members appointed by Minister after open competition. • Open Board meetings. • Annual Report and Accounts • Accountable to committee of Parliament and National Audit Office
Charity Commission (2) • Objectives – – – increase Public trust and confidence in charities promote awareness of Public benefit requirement Promote compliance with legal obligations Promote effective use of charitable resources Enhance the accountability of charities to donors, beneficiaries and the public • Approach. Risk based proportionate regulation • Strategic Plan 2012 -2015
Functions of Charity Commission (1) • Registration – Compulsory for charities with income over £ 5000 pa but no sanction for failure to register – Procedures. online registration and filings • Maintenance of accurate Register – Register on line – Includes names of trustees and whether trustees of other charities) details of governing document – Trustees can update information on line • Charity Information. – Reports and accounts and Annual returns – Highlighting those in default in Register on website. ( accounts must be filed within 10 months of year end) • Proportionate approach, reporting and audit requirements linked to size of charity. Charities under £ 25, 000 pa not required to file accounts. Those under £ 500, 000 do not need full audit.
Functions of Charity Commission (2) • Advice and support – Website. Guidance including operational guidance ( for Commission staff). Publications. Q and As. Videos. – Recent cuts in funding have meant that the Commission gives much less one to one advice – Working with umbrella bodies to encourage good practice
Key Issues for Guidance • Governance of charities • Guidance for trustees – Conflicts of interest – Unauthorised benefits – Failure to exercise due control • • • Public Benefit Public Service Delivery Campaigning by Charities Mergers and Partnerships between charities Guidance covers both law and good practice but clear distinction drawn
Functions of Charity Commission (1) • Consents and Orders – Schemes and orders to authorise actions and amend constitutions – Self certification for some consents e. g. to pay trustees small payments and to wind up charity • Investigations – Now concentrates on serious( zero tolerance ) cases such as fraud, terrorist financing and child and vulnerable adult protection cases
Terrorist Financing • • • FATF Recommendation V 11 called governments to take measures to ensure that NPOs are not misused for terrorism financing purposes 2008 Charity Commission Counter Terrorism Strategy Charity Commission International Programme – Red Flad Indictors • • • December 2009 CC Compliance Toolkit: Protection charities from harm 2005 Proposal for a Europe wide Framework for a Code of Conduct to enhance transparency and accountability of NPOs and to reduce the risk of abuse of the non-profit sector Concerns of Sector 2009 EC Directorate General of Justice Freedom and Security published ECNL study of Recent Public and Self Regulatory initiatives enhancing NPO transparency and accountability 2010 EC (DG Home) Discussion Paper on voluntary guidelines for EU based NPOs 2010 Joint comments on discussion paper from EFC Cordaid and SBF
Functions of Charity Commission (2) – Powers • • Appointment of interim manager Freeze bank accounts Remove trustees and/or staff Make Scheme for transfer of assets to another charity with similar purposes in some cases personal liability of trustees To obtain warrant from magistrate to search premises ( Charities Act 2006 ) Issue directions to trustees and staff Determine membership • Under Charities Act 2006 will have role to grant permits for public charitable collections
Appeals • Internal review of all decisions • Complaints to Independent Complaints Reviewer • Appeal from Internal Review to Charity Tribunal introduced in March 2008 under Charities Act 2006 • Appeal from Tribunal to High Court • Important cases go direst to upper tier of Tribunal and appeal lies from there to the Court of Appeal
Internal Governance of CSOs • How far should legislation prescribe aspects of internal Governance of CSOs? • 2010 Council of Europe Expert Council on NGO Law second annual Report on The Internal Governance of Non Governmental Organisations • How far should CSO regulators get involved with the internal governance of CSOs ? – In US the annual return required by the IRS for tax exempt organisations requires details of board members , meetings, conflict of interest policies etc – In UK the Charity Commission has requested changes to the governance provisions of a charity in the registration process and carried out inquiries into allegations of poor governance and has wide powers after inquiry including removal of trustees and appointment of new trustees
Self regulation of the governance of CSOs • In many countries umbrella bodies have produced Codes of Governance for their members sometimes backed by sanctions including expulsion. • Other countries have national Codes of Good Governance • In England Good Governance A Code for the Voluntary and Community Sector revised in 2010 produced by group of representatives from umbrella bodies involved in governance work Two versions, one for organisations with paid staff and one for smaller organisations. Sets out – – Six principles Relevant law Why principle is important Examples of application of principles www. goodgovernancecode. org. uk
Taxation of CSOs (1) • Tax treatment of CSOs varies considerably from country to country • Most countries exempt all CSOs from direct taxation on donations, dues etc. Rationale that no profit distribution • Exemption may be allowed for other forms of direct taxation e. g. on income from rents, interest capital gains tax, inheritance tax etc but this may be linked to PBO status as in UK where charities are exempt from most forms of direct taxation
Taxation of NGOs (2) • Tax exemptions sometimes permitted for local taxes and indirect taxes but this often linked to PBO status • Profits from business activities are often taxed. Some tax laws permit exemption where certain conditions met – Destination test i. e. are profits to be used for PBO purposes – Business income tax free if carrying out PBO purpose. In UK primary purpose trading permitted. Also incidental trading, sale of donated goods and business activities which do not exceed £ 50, 000 turnover or 25% of total turnover if less. – related / unrelated business test – Cap on amount of business income permitted
Tax Incentives for giving • Many countries give tax incentives to individuals and companies on gifts to PBOs may take form of tax deduction (deduction from income ) or credit (credit against tax payable ). In UK under gift aid system, where donations made out of taxed income, charity can recover tax deducted on grossed up sum at standard rate ( 20% at present) and higher rate tax payer receives deduction for difference between standard rate and higher rates ( at present 40 and 50 %. Gift aid covers not only gifts of money but also land shares • Often mechanisms to encourage tax effective giving as with payroll giving in UK • One per cent tax designation mechanism – In Hungary and now in other CEE countries tax payers can specify that one per cent of tax may be given to NGO of their choice – disadvantages
New Incentives for Philanthropy • US has generous regime for tax incentives for giving including – Tax deductions for donations of all items – Lifetime legacies • New proposals in the UK to increase giving. The NCVO Funding Commission. The Giving White Paper • reduce inheritance tax rate where legacy of at least 10% of estate to charity – Reduce administrative burdens – Emphasis on volunteering as part of philanthropy. – New initiatives to encourage employers to promote volunteering amongst work force
Civil Society in Europe • European Civil Society Platforms and Stakeholders Forums • Number of key European CSO groupings, many linked to area of interest and others generic such as – – – EFC CEDAG ENNA European Citizen Action Services European Civic From ECNL
Cross border Issues in Europe • • Barriers to cross border operations of European CSOs led to draft Statute for European Association in 1992. At same time as Staute for European Company. This has been reviewed several times over the years but has failed to gain sufficient support EFC informed the EC of need for European Foundation Statute in 2001 2009 European Economic and Social Committee decided to draw up own opinion on EFS 2010 impact assessment Next steps has to go to the Commissioners then to the 27 governments then to the European Parliament for approval The statute will enable a European foundation established for public benefit purposes to have legal recognition within all the EU states. Why is the EF necessary ? An EF can register in any member state and can then operate throughout the EU without the need to set up subsidiaries in different countries in wchih it operates
Cross Border Issues-Tax Reliefs • • ECJ has interpreted freedom of movement to mean that where there is any disadvantageous treatment of resident and non resident tax payers in comparable situations constitutes covert discrimination and is therefore in violation of EU law In Walter Stauffer case in 2006 ECJ held that Italian Philanthropic organisation with property in Germany was entitled to same tax treatment as a similar German organisation where Government could ascertain that foreign organisation met all the conditions of the domestic law and that it may be required to submit accounts etc In Hein Persche case of 2009 ECJ held that inability of German taxpayer to deduct gift to comparable Portuguese charitable organisation constitutes a restriction on freedom of movement Important question is comparability. What evidence is required for this and how provided. The Commission has initiated infringement procedures against member states that have landlocked elements in their tax legislation regarding philanthropic institutions. !2 member states have taken action to address cross border philanthropy In Finance Act 2010 the UK introduced a new fit and proper person test for the trustees and senior staff members of charities which applies both to domestic charities and comparable bodies in all the EU states claiming the tax relief In Netherlands gifts to foreign charities are fully deductible for Dutch donors but Foreign body must seek recognition in the Netherlands which is self certification process
Financing of CSOs in UK • Voluntary income( grants, donations and legacies ) makes up 41% • 58% population give to charity each month. • Many innovative types of fundraising subject to different forms of regulation • Public gave £ 11 bn last year. Average £ 11 per month • Commercial partnerships – Sponsorship – Cause related marketing • National Lottery for good causes. £ 25 bn given to charity in under 20 years. Independent distributors • Earned income makes up half of income
Government Funding • 25% charities receive more than 75% income from public funding • Funding from national and local government and health authorities • New issue is that private bodies are winning public services contracts and CSOs now sub contract them. Call for new guidelines to cover this situation
Compact and Government Funding • Commit to multi year funding where appropriate • Ensure transparency by providing clear rationale for all decisions • Ensure well managed, transparent and proportionate application and tendering processes • Ensure monitoring is and reporting is relevant and proportionate • Recognise when CSOs apply for a grant they can include appropriate and relevant overheads including costs of training and volunteer involvement (full cost recovery) • Discuss and allocate risks to the organisation best equipped to manage them • Payment in advance should be considered on a acase by case basis where this represents value for money • Ensure all bodies contributing funds on Government’s behalf adhere to the commitments in the Compact
Procurement of contracts with CSOs • Public Contracts Regulations 2006 which implement EC’s Consolidated Directive on public procurement may apply but contracts for health, education, recreation, culture and sport are not fully caught • Financial Relationships with third sector organisations. A decision support tool for public bodies in England • Full Cost recovery toolkit at www. fullcostrecovery. org
New Sources of Financing for CSOs in UK • • Big Society Bank Bonds issued by CSOs Social impact bonds Mission connected investment for foundations • Community investment tax relief
Social Enterprises • Definition. Business with a social or environmental mission • Very broad concept. Used in different ways. Sometimes includes co ops and mutuals. Includes charities which generate their income • In UK may be established in different forms but specific legal structure, the community interest company – – – Community interest purpose Asset lock Limit on distributions May be company limited by shares or guarantee Community Interest Company regulator • No tax advantages
CONTACT Lindsay Driscoll lindsayjdriscoll@btopenworld. com
КАНЦЕЛАРИЈА ЗА САРАДЊУ СА ЦИВИЛНИМ ДРУШТВОМ ВЛАДА РЕПУБЛИКЕ СРБИЈЕ www. civilnodrustvo. gov. rs
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