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International Experience
This section of the web site provides a brief overview of experience of various states with respect to cooperation of Government and not-for-profit organizations.
Poland
Hungary
Germany
Estonia
Poland
The Act on Public Benefit and Volunteer Work is the latest regulation with respect to cooperation between Government and not-for-profit sector, introduced in 2003 in Poland1. The law addresses a number of issues related to cooperation between public authorities and non-profit organizations. The Act provides for creation of a new category of non-profits - a Public Benefit Organization, which shall be granted special privileges, but simultaneously will be subjected to detailed public control. Apart from various tax exemptions, public benefit organizations have been given the possibility to collect 1% of individual income tax. Every citizen is given the right to donate 1% of his or her income tax to a selected NGO. That provides NGOs with additional source of financing.
The Act on Public Benefit and Volunteer Work states in pertinent part that public benefit work means work performed to the benefit of the public and society by non-governmental organisations within the publicly assigned tasks. Public tasks sector includes the field of, inter alia, social welfare, including aid offered to families and individuals with social problems, and work to offer equal opportunities to such families and individuals etc. The act stipulates that Public administration authorities shall provide support whenever public tasks are performed by non-governmental organisations engaging in statutory work in a specific area; Moreover, the Act provides that the public administration authorities shall entrust the performance of public tasks to non-governmental organisations.
Under the Act non-governmental organisations may, upon their own initiative submit an offer of engaging in public tasks, including those formerly handled by other entities, public administration authorities included. The public administration authority evaluates the justifiability of having a specific task implemented by non-governmental organisations in consideration of the following: the extent, to which the offer reflects public task priorities and guarantees performance according to standards relevant for a specific task, funds available for the implementation of specific tasks, types of specific tasks, and benefits stemming from the public task being handled and completed by a non-governmental organisation.
The public administration authority announces, upon its own initiative an open bid competition. The Act states that an open bid competition announcement shall contain the following information: the type of task concerned; the amount of public funds allocated for the performance of a specific task; rules of grant approval; terms and conditions of implementing the public task; date of bid filing; term, course, and criteria applied at the offer selection stage; public tasks similar in nature (including all relevant costs) handled and completed by public administration entities throughout the year when the open bid competition was announced and during the immediately preceding year, with particular attention paid to the amount of grants provided to non-governmental organisations.
The Act provides that a public benefit organisation is eligible for a waiver of the following in relation to public benefit activities engaged in by such organisation:
- The corporate income tax;
- The property tax;
- Civil Code procedural fees;
- The stamp duty;
- Court fees.
A public benefit organisation may further gain the right to use property owned by the State Treasury or by local government authorities, with preferential terms applying.
The Act ensures the formation of Public Benefit Works Council as counselling, analyst, and assistant body to the minister responsible for social security issues. The council's membership includes representatives of public administration bodies, representatives of local government authorities and representatives of non-governmental organizations.
Further, Civic Initiatives Fund Program was initiated in Poland, which is a governmental long-term program, passed by the Ministers' Council and administered to the minister responsible for social care issues.
The Civic Initiative Fund is a grant program addressing non-for-profit organizations, formed for the purpose of initiating and strengthening civic initiatives, in cooperation with not-for-profit organizations. It is complementary to the already functioning solutions and practice in this area. Following the resolution concerning Civic Initiative Fund, the Public Benefit Works" Council has passed and forwarded to the Minister of Social Policy priorities for the year 2005.
Civic Initiative Fund's tasks have been defined as follows:
- Providing financial support to activities initiated by NGOs in the area of public tasks, as defined in the article 4 of the public benefit and volunteer work Act of law, following the open competition procedure; preference criteria shall include: innovativeness and guaranteeing equal opportunities and start of NGOs from impoverished environments;
- Financing NGO operations aimed at obtaining EU funds (resources from the FIO shall be treated as the NGO"s contribution in applications for the EU funds);
- Supporting comprehensive civic initiatives demanding integrated forms of NGO activity (due to objective reasons, activities undertaken in diverse types of partnerships need to be supported);
- Promotion of good practice, model solutions serving the idea of civil society development with the collaboration of NGOs, and the cooperation between sectors (financial aid in this field aims at developing appropriate standards, taking into consideration rules and forms of cooperation defined in the public benefit and volunteer work Act of law).
The Fund's size shall be correlated with the "1% institution", provided that the amount can not be lower than the amount paid within the framework of "1%" mechanism to public benefit organizations by taxpayers in the preceding year. The financial resources of the Fund shall be managed and distributed by the office of the minister responsible for social policy issues. Donations within the framework of the Civic Initiative Fund shall be distributed through open grant competitions.
Hungary
Government of Hungary, on October 22, 2002, adopted a Strategy Paper of the Government of Hungary on Civil Society2. The Strategy paper states in pertinent part that "ensuring the non-profit
sector's independence, making funding sources and support grants for non-profit organisations transparent, and the professional delivery of services by NGOs are all important European Union requirements. The government wishes to validate these norms through legislation and collaboration with the non-profit
sector"3. The strategy indicates that the Government of Hungary is ready - in accordance with the principle of sector neutrality - to build on non-governmental organisations' role in delivering public services and to increase the sharing of tasks in areas such as health care, education, social care, culture, environment protection, etc4.
For this purpose the Government of Hungary shall specify the rules of devolving public tasks to public benefit organisations.5 The Strategy paper further states that devolving public tasks to non-profit organisations shall be accompanied with the provision of necessary resources.6 The paper prescribes the creation of a National Civil Fund. The Fund shall be financed from the 1% of citizens' personal income tax not donated directly to non-profit organisations as well as other revenues. Non-profit sector representatives shall constitute the majority of the committee responsible for allocating support grants from the National Civil Fund.7 The Fund is also employed as a tool of supporting the operation of small organisations benefiting mainly small communities, since such organisations lack the capacity or know-how to undertake delegated government tasks, but play a very useful role in civil life.
In accordance with the strategy paper, the Government of Hungary, in 2003 enacted the Law on National Civil Fund.8 The stated objective of National Civil Fund Program is to strengthen civil society, to help civil organisations to play part in a society, to promote the partnership and work share between government and civil society for the sake of a more effective fulfillment of state and local tasks.9 The law establishes the National Civil Fund10, an instrument designed to help provide institutional support to Hungarian not-for-profit organizations. To finance the Fund, the Hungarian government will provide matching funds based on the amount of actual taxpayer designations under the 1% tax designation law each year. The 1% Law permits every Hungarian taxpayer to designate 1% of his or her tax liability to a qualified NGO of their choice each year ("one percent law", adopted by the Hungarian Parliament in 1996 introduced a special mechanism in Hungary by which every taxpayer may designate one percent of his or her paid personal income tax to a qualified beneficiary of his or her choice). Under the Civil Fund Law, the government will match the amount of actual tax designations each year, and will in no case contribute less than the 0.5% of personal income taxes collected.11 Thus, the more money that taxpayers designate, the more money will be contributed by the government to the Fund.
At least sixty 60 % of the Fund's resources each year will have to be dedicated to providing institutional support to NGOs in Hungary. Besides covering the costs of the Fund's administration, the remaining funds may be directed towards the support of various programs related to the development of the NGO sector, including e.g. sector-wide events, festivals, international representation, research, education or publications.12
The highest governing body of the Fund is a Council, consisting of 17 members, the majority of which (12) are delegated by nonprofit organizations. The law prescribes a mechanism of delegation called "the civil nomination mechanism". Implementation regulations shall detail the procedure for achieving a balanced representation among the Council members according to geographic and professional areas in which civil society organizations in Hungary operate. Actual grant decisions will be made by regionally delegated Colleges.13
A significant instrument in Hungarian legislation is Act on Public Benefit Organizations adopted in 1997.14 The Act establishes a new category within Non Governmental Organizations. By creating the category of public benefit organizations, the Hungarian Parliament delimited public benefit organizations (PBOs) and mutual benefit organizations (MBOs) from each other. The objective of the distinction was to provide equal opportunity in receiving direct and indirect state support. The Act realized this goal by establishing a qualification system. The Act contains rules on qualification - procedural requirements - on one hand, and rules on operation - substantive requirements - on the other hand. The basis of the qualification is not the difference between the types of organizations, but the delimitation of activities. The outcome of qualification is a new status, namely the public benefit status. This new status gives rise to rights as an opportunity for receiving state support, and to duties, consisting of a system of terms and guarantees.15
The Act guarantees to all PBOs those tax preferences, which were previously granted only to foundations. These are:
- Tax exemption for core activity;
- Tax benefits for related and unrelated business activities;
- Tax credit for individuals for their donations;
- Tax deduction for business entities for their donations;
- An opportunity to receive one percent of taxpayers' income tax; and Tax exemption for recipients of PBOs' donations.
The procedural requirement of public benefit status is registration: Organizations falling under the scope of the Act can be registered, but only if they undertake the public benefit criteria prescribed by the Act. The substantive requirements relate to the provision of public benefit operation. On the one hand, public benefit status is not only connected to the undertaking of a "public purpose" prescribed by the Civil Code, but also to the pursuance of a public benefit activity enumerated in the new Act. On the other hand, it does not only mean the undertaking of duties set forth in the governing documents, but also the compliance with the operational and management order determined in the Act.16
Further, the Act creates a separate category for PBOs undertaking state responsibility. Organizations, pursuing a public benefit activity, which is qualified as the duty of a state agency or a local government by an act or a government decree authorized by an act, qualify as prominently public benefit. These organizations are entitled additional fiscal benefits.17
The Act on Public Benefit Organizations states in pertinent part: The Government is authorized to determine the specific rules related to concluding contracts with public benefit organizations aimed at fulfilling services under the scope of the Act on Public Purchase.18
Germany
Germany has incorporated the principle of subsidiarity in its constitution. The principle of subsidiarity is defined in the following terms: "Subsidiarity means that the larger social unit (the state) should assist the smaller unit (the family) only if the smaller unit can no longer rely on its own resources. In terms of social policy, it basically translates into a system whereby private provision of services takes precedence over public efforts and local provision over non local"19. This implies that it is only if provision of social services by the private sector is missing that public authorities intervene.20
In this connection, the Federal Social Assistance Act states in its article 93 that government agencies are forbidden to establish their own service providers if suitable associations are available, or can be extended or provided.21
According to the German Social Security Code, the public bodies are obliged to complement effectively by co-operating with the non-public bodies. Also, the local authorities have to respect the independence of these bodies concerning the setting of objectives, carrying out the tasks and arrangement of their organizational structure. However, the local authorities have the right to examine the appropriate use of public means employed by the latter.22
The principle of subsidiarity is also applied in other European countries, for example in Italy and in more recently in Poland, where the principle applies to public tasks, including social services.23
Estonia
Estonia is the first Baltic States to start work in the direction of sustainable development of civil society organizations and elaboration of instruments aimed at establishing cooperation between the Government and the third sector. At this stage, strategy of cooperation between civil society and the Government is defined with participation of political parties, civil society organizations and Government. The Parliament adopted Estonian Civil Society Development Concept in 2002.24 Further, Plan for implementing Estonian Civil Society Development Concept for 2004-2006 was adopted. The section briefly reviews the documents.
Estonian Civil Society Development Concept defines basic principles of cooperation between Government and civil society organizations, emphasizes the need of financing not-for-profit organizations from state budget, the need of enhancing financing mechanisms and ensuring transparency of financing process.
The document states in pertinent part that civil society organizations and the public sector shall use any opportunity to introduce and develop a tax system that supports the civic initiative and charity in order to raise the interest of the business sector to support non-profit activities.25
Further, the two sectors shall elaborate and make public the allocation, use, reporting and controlling of necessary monetary and non-monetary resources from public funds and devises for developing the support system of the non-profit sector.26 According to the document, civil society and public sector shall work to elaborate and make public the principles and order for transferring services to the non-profit organizations and for financing the implementation of co-operation agreements between the public sector offices and citizens' associations.27
Lastly, the Document states that the Government and representatives of civil society organizations shall establish a joint committee for launching a system of elaborating plans of action for implementing the Document, for fulfilment of plans and assessing their results. Once every two years, the parliament of Estonia, will organise deliberations of the implementation of the Document and the development of the civil society as a matter of significant national importance.28
To the foregoing ends, Estonian Government adopted Plan for implementing Estonian Civil Society Development Concept for 2004-2006. The Action Plan prioritizes the issue of financing not-for-profit organizations. The Plan states that Ministry of Internal Affairs of Estonia in cooperation with the joint committee shall elaborate a flexible and transparent mechanism of financing of not-for-profit organizations from state budget.29 The Action Plan further states that Ministry of Finance in cooperation with the joint committee shall elaborate amendments to the tax code to ensure a beneficial tax treatment for public benefit organizations.30
1. Act of Law on Public Benefit and Volunteer Work,, April 24, 2003June 2005
2. "Strategy Paper of the Government of Hungary on Civil
Society", iOctober 22, 2002, (an unofficial working translation commissioned
by the Non-profit Information and Training Centre Foundation)
3. Ibid., Section III, Para. 3
4. Ibid., Section II
5. Ibid., Section III, Para. 1
6. Ibid., Section III, Para. 2
7. Ibid., Section III, Para. 2
8. The Act on National Civil Fund Programme, June
23, 2003
9. Ibid., Preamble
10. For more information on the National Civil Fund,
visit web site of the Fund - www.nca.hu
11. The Act on National Civil Fund Programme, June 23,
2003, para. 2
12. Ibid., Section III, Paras. 1-3
13. Ibid., Section III, Paras. 4-11
14. Act on Public Benefit Organizations, 1997, as amended by Act XIV and Act XXXIII of 1998
15. Improving Civil Society in Hungary, Daniel Csanády,
International Journal of Not-for-Profit Law, Volume 1, Issue 2
16. Ibidem
17. Ibid., See also "A Comparative Analysis of
European Policies and Practices of NGO-Government Cooperation", Nilda
Bullain, Radost Toftisova, The International Journal of Not-for-Profit Law,
Volume 7, Issue 4, September 2005
18. Act on Public Benefit Organizations, 1997, as
amended by Act XIV and Act XXXIII of 1998
19. "Comparative Study of NGO/Government Partnerships",
Caroline L. Newman, The International Journal of Not-for-Profit Law, Volume 2,
Issue 3
20. "Contracting Out Social Services", Caroline L.
Newman, November 2005
21. Helmut Anhier, "An Elaborate Network: Profiling the
Third Sector in Germany", in Government and the Third Sector, Emerging
Relationships in Welfare States, Jossey-Bass Publishers, San Francisco, 1992,
pp. 31-56
22. "Co-operation between Social Service Providers – a
Comparison between Germany and Greece", Petra Claudius, Social Work and
Society
23. "Contracting Out Social Services", Caroline L.
Newman, November 2005
24. Estonian Civil Society Development Concept,
Approved by the Estonian Parliament in Tallinn, December 12, 2002
25. Ibid., Section III, para. 4.4
26. Ibid., Section III, para. 4.3
27. Ibid., Section III, para. 4.5
28. Ibid., Section IV
29. Activity Plan for the implementing Estonian Civil
Society Development Concept for 2004-2006, Goal 5
30. Activity Plan for the implementing Estonian Civil Society
Development Concept for 2004-2006, Goal 6
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