Civil-Partner Program

Enhancing the sustainable fiscal, legal and political

environment for civil society

The Trust-program

With support from Trust for Civil Society in Central and Eastern

Europe, a program to enhance the sustainability of the civil sectors was started in 2003.

In Hungary, Environmental Partnership Foundation contributes to building a supportive legal, fiscal and political environment in which civil society can flourish, through providing grants, carrying out research and expertise.

Goals

Instead of continuously increasing governmental role, the development of the Hungarian civil sector must be based

on strengthening its own sustainability

The sector as a whole must be strengthened in order to fulfill its real tasks!

The approach should represent the real interest

of the civil nonprofit sector

Through formulating recommendations and proposals to reform Hungarian nonprofit legislation we aim at developing laws and regulations adapted to the specific needs of NGOs and contributing to threir sustainabillity.

!Civil Partner program coordinates with its principal partners civic initiatives to help develop nonprofit legislation, the work of experts and undertook to prepare a comprehensive and strategic nonprofit legal reform concept.

Partners

Jogismeret

Alapítvány

Overture: activities between 2003-2006

Public Participation

National Civil Fund

Volunteer

act

Continuous monitoring of the operation, cooperation with the NCF Council, amendment proposals

Cooperation with the Volunteer Center Foundation, expert and advocacy support to their work

Contribution to the draft law on legislationFreedom of electronic information, lobby act

CE 124Initiative to access to European convention on NGO registration abroad

The Civil Vision concept looks at Hungarian nonprofit legislation: with a comprehensive and

strategic approach.

It goal is to provide a theoretic and practical overview of the present legal environment of NGOs, to raise the most important questions and point out major obstacles and to provide alternative solutions to these, as problems related to the creation and operation of NGOs as well as the murky relations between the state administration and civil society can only be resolved through complex thinking.

Nonprofit legal reform concept

Civic Vision

Preliminary conceptual

planning

Collection of comments Final version

Small-group consultations based on interviews with NGO leaders, civil servants, lawyers

Road show: series of

county NGO roundtables

Processing the comments,

finalization of the concept

Civic Vision

17 roundtables in 1,5 months, all round the countryMore then 350 NGOs represented by participantsHundreds of comments and proposalsMedia appearance (both printed and electronic) practically everywhere

Road show: great success!

Civic Vision – issues mentioned

lack of money

administrative burdens

National Civil Fund

outsourcing

foundations

definition of 'civil'

small organizations

public benefit status

non-registered groups

accounting

The concept analyses Hungarian nonprofit legislation along three main, interlinked dimensions.

Autonomy of the civil nonprofit

sector

Relationship between the civil nonprofit sector

and the state

Relationship between the civil nonprofit sector and the private

sector

1.) Increasing the diversity of civil organizational forms

2.) Structural reform of foundations

3.) Simplifying the operation of civil organizations

4.) Redefining the relationship between civil organizations and government

5.) Broadening the institutions of participatory democracy

6.) Making the public benefit status more functional

7.) Strengthening the participation of civil organizations in economic activities

8.) Encouraging public support for civil organizations

9.) Enhancing the transparency and accountability of civil organizations

Civil Vision

Civil Vision – issues 1. Autonomy of the civil nonprofit sector

1.) Increasing the diversity of civil organizational forms „simple/small association” civil societies without legal entity2.) Structural reform of foundations redefining leadership roles: the relationship of the founders(s)

and the board new types: community foundations, endowed foundations3.) Simplifying the operation of civil organizations simplified (electronic, one-window) registration, consistent

implenentation adapting accounting rules to reflect the needs of civil

organizations

Civil Vision – issues 2.

Relationship between the nonprofit sector and the state

4.) Redefining the relationship between civil organizations and government

enhancing civil participation in the provision of public services redefining contractual relations, simplification of funding rules

and procedures National Civil Fund5.) Broadening the institutions of participatory democracy law on public participation and the development of related

legislation enhancing the use of non-legal instruments and institutions6.) Making the public benefit status more functional(see next presentation)

Civil Vision – issues 3.

Relationship between the nonprofit sector and the private sector

7.) Strengthening the participation of civil organizations in economic activities

enhancing private giving – tax benefits

8.) Encouraging public support for civil organizations volunteering law

9.) Enhancing the transparency and accountability of civil organizations regulating the termination organizations (bankruptcy)

Since 2005: further elaboration of specific issues

Primarily, but not exclusively in the following fields: court registration of associations; redifining foundation regulation (leadership, endowment); obstacles to civil participation in the provision of public services; rules and procedures of state/EU funding and contrctual relations; reform of the public benefit system municipal relations of and cooperation with civil organizations public participation

re-introducing tax benefits on charitable donations; amendment of the Act on Volunteering.

Court practices of association registration 1. With HEPF support, Environmental

Management and Law Association launched a program in summer 2005, to carry out a comperhensive study of the court practices of association registration.

During the survey, the founders aimed to establish Nonprofit Sector Analysis (NOSZA) public benefit associations in each of the 19 counties megyében and in the capital.

Identical statutes were submitted to county administrative courts, thus expert could carry out a comparative analysis and study of the courts’ practice.

Court practices of association registration 2.

Number of comments/amendment requests made by the various county courts

Court practices of association registration 3. Typical symptoms of the lack of consistent implementation The demand to repeat the text of legal provisions in the statutes leads to

complicated and uncomprehensibe status documents in practice. The formalities of official documentation proofs should be limited to the request for

registration itself and not its annexes . Registering courts shouldn’t prescribe a multitude of purely formal requirements

towards the founders, which have no consequences, ugarantees or impact on the actual, democratic operation on the association.

Court practice should accept and support the electronic forms of communication in the operation of foundations on condition that their use doesn’t limit the transparency of decisions made this way.

Registering courts should’t prescribe the use of internal and external communication modes causing unnecessary burden and the increase of costs (e.g. the use of mass media).

Courts should return statues for completion only once!

Foundation regulation 1. - problems

De jure:

Designated asset, independent from its founder, endowment

building and grantmaking are the

primary tasks

De facto in Hungary:

95% of the app. 22,500

foundations don’t fit this defintion

-the income earned from the endowmend does not cover operational costs („begging” foundation) - the foundation is established to carry our projects and not for re-distribution of funds- „spiritual” and „legal” founders are different from one another

Foundation regulation 2. - directions

Two avenues

Change the relationship between the founder and the

board

- Cancel the prohibition of the founder’s dominant

inflluence

- Founder’s rights may be transferred to the board

Regulation more appropriate to and reflecting upon the

real needs of „project managing” foundations

Rules to be created to establish a special sub-

type: the endowed foundation

Introduction of the redistributing, grantmaking

type of foundation to Hungarian law (nearest

example: Czech Republic)

Endowed foundationsMain substantial elements: Endowed foundation may only be created for a permanent task. The founder of an endowed foundation provides an initial asset, including the

endowment capital. The endowment should be provided simultanously to registration or within the

deadline – maximum 5 years – prescribed in the statutes.

Main elements of regulation: Types of endowed foundations (2x2) Investment activities (prudence) The use of the proceeds of the endowment Conservation of the endowment Tax benefits on establishing foundation Transformation; rules of naming

Types of endowed foundationsGrantmakingThe majority of endowed foundationsContribute to the sustainability of civil sectorComplement state and local government

financing schemesHelp decrease dependence on state and local

govermentsPolitical parties cannot be beneficiaries of grants

Institution managementMainly (but not exclusively) in the areas of health, social, education, culture and childcare servicesDetail rules to be laid down in specific sectoral regulations

Private (= family foundations)May be established exclusively to benefit the founder and his/her close relatives (e.g. management of private collections, support the education of children)Not entitled to to tax benefitsThrough amending the statutes transformation to public benefit status may be initiated

Public benefit According to public benefit legislation Its activities benefit the larger public Its operation is transparent

Endowment and economic activities

Endowment Minimum 5 million HUF (25,000 USD) or higher as prescribed in detailed

sectoral Assets: money, real estate, tangible assests The annual income of grantmaking foundations must be used at least in 70% for

providing grants, maximum 30% for operational costs

Economic activities Involving only the asset elements outside the endowment Exclusively along the foundation’s goals Normative rules of investment activities: prudence, security, obligatory regulation

of investment, risk analysis and management, supervisory board, auditing

Conservation of the endowment, liability, benefits

In case of public benefit endowed foundation At least 3-member Board of Trustees Supervisory Board (at least one person with financial expertise) Auditor Obligation to conserve the endowment, with strict liability rules

Significant tax (base) benefit to the founders and donors of public benefit endowed foundations

Significant tax benefit on the incomes from the economic activities of public benefit endowed foundations

Tax exceptions on the real estates owned by public benefit endowed foundations

Legal obstacles to civil participation in the provision of public services

An analysis by dr. Endre Bíró

Through the involvement of civil society organizations, public monies can be utilized more efficiently and economically in the provision of public services, while keeping or even improving their quality. Professional civil society organizations can moblize additional, social resources to provide the services and public functions thus improving their effectiveness.

Series of talks with the National Development Agency

November 2009 – April 2010, 8 occasionsAlong the stages of a grant cycle

Set of recommendations – to be used during ongoing review processes

Process-based programming and support schemes,consecutive financing constructions should build on earlier lessons. Longer termplanning.

Training of competent social servants, change their attitude to realize: successful projects are in common interest (Awareness raising: don’t only look for mistakes, but help solve them.)

One financing construction to be launched along the new principles and approach as an experiment and monitor its success anf impacts.

Reform of state financing procedures

Preparation and announcing calls for proposalsThe system of preparing calls should be reformed: information should be published at the start and the main milestones of the process, so that stakeholders can participate at early stages, not only once the documents are finalized; periods for public commeting should be longer with involvement encouraged; revision of confidentiality and conflict of interest rules (CSO representatives cannot collect feedback from their constituents, while in case of special projects the future beneficiary is part of the process).

Application procedures should be adapted to the needs and circumstances of the target group – the most appropriate one to be selected, e.g. global grant mechanisms in case of CSOs check the appropriateness of documents: do they have all the information and only the information necessary to evaluate the proposals (now, fearing audits, much superfluous information in reqiured); the call may be reviewed by future evaluators and/or in focus groups compesed from potential applicants (from the point of view of information content, clarity etc.).

Support to project development

Helping applicants, communication: : the personality, the ‘face’ of the system should strenghtened, instead of general call centers; all calls for proposals should have manager (not only in the administrative sense), who know the goals, understands the target groups and can communicate with them; procedure to address and make decisions regarding individual problems/requests of applicants (at present it is unclear who is competent to decide and when); the capacity building aspect of information days should be strenghtened (instead of simply repeating the call text)

Pre-monitoring, personal site visits are crucial.

More detailed feedback to rejected applicants, maybe to-way communication with them about justification

Contracting

Review of laws and regulations concerning grant contracts: the amendment of the Public Finance Act and its implementation decreee (definition of support, grant and grant contract, precise, exhaustive list of cases of breach of contracts, limit inproportional obligations on the beneficiary) coherence between higher and lower level regulations, eliminate present inconsistencies.

Real project managers should be appointed to each grant – able to follow the complete cycle, have contact to the beneficiary, help it with problems (portfolio system).

Contracting should be an interative negotiation process to clarify e.g conditions, indicators (the contracts should prescribe realistic, accountable expectations).

More specific and clear formulation of conditions of support (not only generlized lists).

Limits on the number of obligatory supporting documents.

Irregularities

It should be communicated towards beneficiaries that contract amendments are part of the normal procedure (now they are often afraid to initiatve it).

Iregularities: its cases and consequences should be specified in the grant contract

(without the ‘other’ category); classes of irrgularities should be defined according to their

graveness, with consequences balanced accordingly; an irregularities procedure should start with negotiations to seek

solutions or consolidate the project (similar to a bankruptcy process), instead of having to bear all negative consequences right away – to this end deadlines need to be amended as well;

appeal rights should be provided and implemented.

Suspension due to public debts should have a minimum limit (a small delay in dues shouldn’t hider project implementation.

Local Interest – Local Values 1. Guide to the cooperation of local governments/municipalitites

and civil organizations

Participation principles (by the NGOs for the Openness of National Development Planning)

Structure

Continuity

Transparency

Participation

Openness, publicity

Evaluation, feedback

Local Interest – Local Values 2.

Participation in decisionmaking (preparation, decision, implementation, monitoring, evaluation) Financial relations (funding: support and outsourcing)Implementation (public services, projects, tasks etc.)

Modes of cooperation

Local Interest – Local Values 3.

Communication and contacting: CSO liaison or other designated person Use of local media Use of electronic communication Local CSO databases Facilitated meetings, reversed order, changing places, „red wallpaper” etc. Involvement of the local public: participatory budgeting, hearings, focus groups, surveys etc.

Clarify terms: joint interpretation of partnership Develop informal relations: building human capacities, training of staff Develop formal relations: set regulatory frameworks, procedures Spread best practices (e.g. Real Civic Partnership Award, publications)

RecommendationsIdeas

Jogalkotás.hu I.

With HEPF support, NOSZA Association Egyesület established a webpage to monitor the implementation of the Act on the Freedom of Electronic Information.

Project managers regularly publish reports about practices of the public consultation of draft legislation.

Jogalkotas.hu II.Analysis first half of 2007

Jogalkotas.hu III.Analysis first half 2009

Thank you!

Veronika Móra

www.okotars.hu/civil_partner

www.civiljogok.hu