Direct State Funding for NGOs Luben Panov Bulgarian Center for Not-for-Profit Law

Why should NGOs be supported? considered closer to the people’s needs and more trusted in their social activity provide services that the market cannot they are more efficient and serve the public good

Main types of indirect support Exemption from income tax for the nonprofit activity Exemption from income tax for business activities Tax benefits for donors – companies and individuals 1 % mechanism Exemptions for volunteers Free use of property Exemption from VAT, customs duties, etc.

Main types of direct state funding Direct budget subsidies for specific organizations (most often representative organizations of people with disabilities) - resembles institutional grants Budget grants after a competition Contracting - for provision of services Other mechanisms – 1 % mechanism, lottery, vouchers

The international perspective Sources of funding: 34 % - from the state (26 %); 12 % - donation (31 %); 53 % - from fees (42 %). 1,3 trillion USD is the GDP of the NGO sector; If it were a separate country - №7 in the world – before Italy, Spain, Canada and Russia.

Sources of income (Bulgaria) TYPES AND SIGNIFICANCE OF THE SOURCES OF FUNDING Distribution of income by source % of income International donors 40% Economic activity 17% Membership fee 11% Subsidy from the state budget 8% Donations from companies Bulgarian non-governmental organizations 6% Donations from individuals Charitable events 3% Subsidy from the local budget 2%

Budget subsidies 2008 (Bulgaria) 4,333 mln. EUR; Direct subsidies for 21 organizations; A competition for 550 000 EUR; Criteria for evaluation of the proposals: 1. In line with the public benefit areas under the NGO Law; 2. Effectiveness of the proposed activities with regard to the expected results and influence over the target groups; 3. Sustainability of results; 4. Effectiveness of the expenses; 5. Capacity of the candidate.

Contracting The state delegates the provision of services to private entities It keeps its role in: Funding; Control of the spending; Control of the quality of the services provided.

What does contracting cover? Public services Through tender, negotiations or other (e.g. vouchers) Contracting vs. Grants – scope of work is given Contracting vs. Procurement – quality, not price

1% mechanism Taxpayers designate 1 or 2 % of their income Hungary (1+1%), Slovakia (2%), Lithuania (2%), Poland (1%), Romania (2%) Not a donation but another mechanism for support Recipients are usually NGOs and public institutions

Separate funding entities Foundation Investment Fund (Czech Republic) National Civil Fund (Hungary) National Foundation for Civil Society Development (Croatia)

Issues to be considered Clear and transparent mechanism (de-politicized) Activity or institutional support Good monitoring Centralized or decentralized system Practical implementation Dependence (independence) of recipients from the state

Bulgarian Center for Not-for-Profit Law (BCNL) THANK YOU! Luben Panov Bulgarian Center for Not-for-Profit Law (BCNL) www.bcnl.org