Innovative Approaches to NGO Sustainability

ICNLDouglas Rutzen

Renaissance of Civil Society

• Historical Inspiration

• Development of the Sector’s Identity– Opposition

• Emancipation from communist past

– Independence • Creation of distinct identity for the NGO sector

• Blossoming of NGOs and their impact

– Partnership

Challenges

• Key Challenge: Sustainability• Dependent on numerous factors, from

favorable public image to the availability of competent staff

Focus of Presentation: Legal and structural issues fostering the sector’s financial sustainability

Scope of Discussion

• Direct Governmental Support– Financial and in-kind contributions– NGO-government partnerships

• Indirect Governmental Support / Tax Benefits

• Corporate and Individual Philanthropy

• Economic Activities

Regional Revenue Sources

Regional Survey by the Johns Hopkins Center for Civil Society Studies

• 33% from public sources

• 21% from philanthropy

• 46% from fees and commercial activities

Governmental Support

• Budget Subsidies– Hungary and Poland– Romania (1.3 million Euro) and Bulgaria (1 million

Euro)• Grants

– Slovakia: 23.5 million Euros (.48% of budget) – Croatia: 2.67 million Euros from NGO Office– Special “Funds”: Estonia and Hungary – Romanian Social Fund Law of 1998 and Governmental

Decision 306/1997 (anti-racism, xenophobia, etc.)

Government Support, II

• Government Contracting– Emerging area– Ranges from Bulgaria (NGOs excluded from

procurement law) to Czech Republic

• Local Government– Subsidies, grants and contracts

• Szczecin, Poland: 5 mln PLZ (US$ 1.2 million) to NGOs in 1999

• Goal is to provide 1% of the local budget to NGOs.

• Quasi-Governmental Foundations

Government Support, III

• Use of State or Municipal Property

• Other In-kind Support– Gydnia, Poland: NGO columns in municipal

newspaper; access to government training

• “Per Capita” Fees and Vouchers

• Privatization Proceeds

• Lotteries

NGO-Government Linkages

• Governmental Liaison Offices – Croatia, Hungary (Parliamentary Commission),

Kosovo, Poland (Szczecin)

• Political Liaisons: Estonia, Hungary, Bulgaria

• Compacts– Croatia, Estonia, Macedonia

Tax Exemptions for NGOs

Exemptions for organizations

• Income Tax: Estonian model

• VAT Preferences

• Customs Duties, Excise Taxes

Private Philanthropy

Tax Incentives for Giving

• Tax Deductions– Abrogation of Enterprise Income Tax– Use of business deductions

• Tax Allocations– Hungarian “1+1% Law” (over 2.3 million Euro);

Slovakia and Lithuania

• Legal Framework for Volunteers

Community Foundations

• Independent organizations that receive funding from a variety of donors and make grants within a specific geographic area, with decisions made by people from the same geographic area. – Often, but not always, have endowments– Typically organized at local level

Community Foundations, II

• Benefits– Community identification of issues and

problem solving• Neutral forum for NGO leaders, business

executives, government officials, religious leaders, and academics to address community needs

– Facilitates corporate and individual philanthropy

Community Foundations, III

• Particular interest Western Europe and Central/Eastern Europe– Germany– Slovakia (12 community foundations)– Healthy City Community Foundation of Banska

Bistrica-Zvolen. • US$300,000 endowment

• Third largest Slovak foundation

Community Foundations, IV

• Trend in Africa, Asia, Latin America, Western Europe, former Soviet Union– Fastest growing form of philanthropy in

Australia– Zimbabwe example

Prerequisites

• At least 25,000 people

• Active and creative local government

• Large and economically sound businesses

• Active NGO sector

• Capacity to financially support important

community needs

Economic Activities

• Examples– Selling goods

• related/unrelated• Nephrocentrum in Budapest (paper clip factory)

– Charging fees for service• related/unrelated• Helsinki Watch - Poland (human rights and tolerance training for

police officers and teachers)

– Cause-related marketing– Renting property– Passive investment (bank interest, investing assets)

Conclusions

• Renaissance of Civil Society

• Sectoral Sustainability Challenge

• Emergence of Innovative Practices– Partnerships with Government,

Business Sector, and Public

• Estonia’s Pre-eminent

Role in Region

ICNL Douglas Rutzen