Principles of good practice Jana Kunická Community Philanthropy Initiative Coordinator European Foundation Centre

Overview: 2 topics to be addressed 1.European Commission action: Code of Conduct for non profit organisations 2. Good Governance – What is at stake for foundations? The European Foundation Centre (EFC) Code of Conduct

1.1. A European framework for a Code of Conduct for NPOs: European Commission Communication COM (2005) 620 Aim:Fight vulnerabilities of non-profit organisations (NPOs) to criminal abuse, including terrorist financing Two pillars of the November 2005 communication: Recommendation to EU Member States and Framework for a Code of Conduct for non- profit organisations

1.2. Context of the EU Commission Communication Financial Action Task Force (FATF) “Special Recommendation VIII ” - non-profit organisations and interpretative note The EU Counter Terrorist Financing Strategy and the European Council Conclusions of December 2004 Council Declaration on the EU response to the London bombings of 13th July 2005

1.3. Who was consulted in the drafting process? Preparatory meetings of selected experts (October 2004, April 2005) EU Member States via a Comitology Committee established to discuss Anti- Money Laundering and Counter Terrorist Financing issues the public/non-profit sector through a consultation (Summer 2005) – main concern by EFC: no « one size fits all » approach, not to overburden the sector and hamper the (cross-border) work of foundations

1.4. What do recommendations for EU Member States include (pillar 1)? -Oversight of the non-profit sector and operation of publicly accessible registration systems for NPOs -Encourage NPO compliance with a Code of Conduct on transparency and accountability -Encourage awareness programmes for NPOs and intermediaries on risk of NPO abuse and detection

1.5. Framework for a Code of Conduct for NPOs (pillar 2): NPOs should - keep available basic identification information on their organisation - follow proper book-keeping practice, prepare annual reports and financial statements of income and expenditure - use formal channels for money flows - follow the “Know your beneficiaries and associate NPOs rule”

1.6. Way forward -Commission wishes to further discuss implementation of the Communication with the public and non-profit sector. -Commission conference in autumn 2006 and setting up of a contact group (EFC will be part of this contact group). -Commission will review results three years after its adoption.

1.7. European Council Declaration of December 2005 Safeguarding the integrity of the sector is a shared responsibility of states and NPOs – more dialogue is needed Member States should continually develop their knowledge of their non-profit-sector, its activities and vulnerabilities. Transparency, accountability and good governance lie at the heart of donor confidence and probity in the non-profit sector. Risks of terrorist finance are managed best where there are effective, proportionate measures for oversight.

2.1.What is at stake for Foundations? The EFC Principles of Good Practice 1996 Approval of EFC Code of Conduct 2004 Working Group formed to revise existing EFC Code of Conduct Fundamental restructuring Focus on core values A concise set of principles A variety of cultures and jurisdictions Illustrative practice options

2.2.The Values Underpinning the EFC Principles of Good Practice Responses to specific challenges in today’s society Acting for the public benefit and to serve the society at large Accordance with donors’ intent Independence and autonomy Efficient use of resources and the exercise of good stewardship Transparency and accountability Responsibilities and obligations to multiple stakeholders

2.3. EFCPrinciple No 1 - Compliance Foundations comply with the laws of the state in which they are based, and act in accordance with their byelaws. They comply with the international and European conventions to which their country of residency is party

2.4. EFCPrinciple No 2 - Governance Foundations have an identifiable decision-making body whose members and successors should be nominated in accordance with established principles and procedures, and act with the highest ethical standards

2.5. Principle No 3 - Informed Policies, Operations and Support Programmes Foundations have an identifiable decision-making body whose members and successors should be nominated in accordance with established principles and procedures, and act with the highest ethical standards

2.6. Principle No 4 - Stewardship: Management and Finance Foundations promote efficient organisation and work while ensuring prudent and sustainable management, investment strategies and procedures, and use of resources Foundations ensure proper accounting/book-keeping according to established rules in the state in which they are headquartered. They may complement such rules with additional measures on a voluntary basis

2.7. Principle No 5 - Disclosure and Communication Foundations act in a transparent manner and comply with the regulations concerning transparency in force in the countries in which they operate. They may complement such regulations with additional measures on a voluntary basis

2.8. Principle No 6 – Monitoring and Evaluation Foundations organise appropriate monitoring and regular evaluation of their action and programmes

2.9. Principle No 7 – Cooperation Foundations share their know-how and experience with peer-organisations and other relevant stakeholders to advance good practice and cooperate whenever appropriate, to maximise their impact in their respective fields of activity

2.10. Work in Progress – way forward All 7 principles are further defined through illustrative practice options Dissemination to all EFC Members for comment EFC members to sign up to the 7 Principles EFC members encouraged to publicise adherence to the 7 Principles EFC learning events to incorporate the Principles Principles to be reviewed more frequently