Public Funding Douglas Rutzen International Center for Not-for-Profit Law

Context: Magnitude of Funding France €4 billion England Lottery proceeds: £2 million per day for “good causes” Hungary €750 million 4.85% of state budget channeled to NGOs in % of total income of the sector Macedonia €4 million in 2007 alone

Illustrative Challenges Hungary State Audit Office Report [2001 and 2002] 80% of funding by the government allocated on the basis of individual decisions 50% of public foundation support provided without a grant announcement Slovakia: : 65% of public funding awarded non-competitively No central data source/lack of info on funding Lack of uniformity: every announcement had different rules Ministries failed to hold grantees accountable

Strategic Vision Because of time and information constraints, programs are often developed on an ad hoc basis Need for Strategic Planning (Hungary) EuropeAid Project Cycle Management 1. “[I]dentify problems, constraints and opportunities which development cooperation could address.” 2. “The purpose is to identify the main objectives and sector priorities for co-operation” -Goal of Tender (Service Delivery, Research, Advocacy, New Capacity, etc.) 3. “For each of these priorities, strategies that take account of the lessons of past experience are formulated.”

Strategic Vision Ministries, Academics, Members of Parliament, NGO representatives (but remember limitations of elite structures) Don’t forget beneficiaries Competitive Review Assess potential competition for sector; estimate costs; determine the most appropriate method for procurement

Illustrative Forms of Support Contracts Principal purpose is the acquisition of property or services for the direct benefit or use of the government Grants Principal purpose is the transfer of money, property, or services to accomplish a public purpose, and the recipient has substantial freedom to pursue its stated program

Illustrative Forms of Support Vouchers Per Capita Fees Loans and Loan Guarantees Access to State Property (offices, videoconference facilities, etc.)

Eligible Bidders “Positive” Rules Should certain tenders be reserved exclusively for NGOs? Should NGOs be required to be in existence for a certain number of years?  Look to goal of tender (project funding, development funding, strategic funding) “Negative” Rules – Should there be blacklisting of organizations engaged in fraud, misconduct, false or misleading statements in bids, etc.

Decision-Maker Entity May Drive Nature of Support Parliaments Can’t Easily “Contract” with organizations; rather give budgetary support. Centralized/Decentralized Homogenization of Themes Accessibility and Accountability Role of Outside Experts Not necessarily “representatives”/different roles (priorities, strategies, evaluation, etc.) Croatia Vouchers (beneficiaries decide)

Selection Criteria and Process Options Qualifications Current and Past Experience with Similar Projects References Professional, Managerial, and Financial Competence of the Organization and Personnel Innovation and Replicability Price Factors that cannot be considered (advocacy or political activities?) Hungarian National Civil Fund: Generally open to public unless closed to protect personal rights or competitive information.

Mechanics One or Two Stage Process Written Responses to Bidders, including those not successful. What documents should unsuccessful bidders have access to (other bids, rating sheets, etc.) Access by members of public/media? Ability to declare information confidential? Review and Challenge

Duration of Agreement Much statutory funding of groups … has heretofore been provided on an ad hoc annual basis. This does not allow groups to plan ahead. It also means that considerable time and energy is spent on a constant and debilitating pursuit of funding. This is detrimental to the service being delivered…. Multi-annual funding benefits the funding Department or agency as well, in that it allows for a more rational approach to planning service delivery and to processing of funding applications. Ireland White Paper on Framework for Supporting Voluntary Activity

Duration of Agreement Generally longer if: Continuity of personal, supportive, or therapeutic relations between caregiver and client is integral part of service (crime victims, juvenile delinquents, battered women) Required to meet goals (proportionality) Competitive Issues Will prospective bidders be less likely to compete because of high proposal writing costs, start-up costs, or capital investments if a short-term agreement?

Multi-Annual Grants Canada: “chronic or systemic social issues are not likely to be solved through short-term project funding” English: Funding and Procurement Compact Code Roll-forward multi-year agreements (often 3 years) for grants 2006 “Improving financial relationships with the third sector: Guidance to funders and purchasers” Length of funding should be tied to length of the objective Croatian National Foundation Institutional Support Grants: 3 years Democratization and Civil Society Development Grants: US approach

Monitoring and Evaluation EU: “Sound Financial Management” “Principles of economy, efficiency, and effectiveness, and compliance with those principles checked by means of performance indicators established per activity and measurable in such a way that results can be assessed.” Regulation 1605/2002 on the Financial Regulation Applicable to the General Budget of the European Communities

Monitoring and Evaluation Distinguish between evaluation of awarded project and of tender itself Financial and Programmatic Reports England Focus on outcomes, proportionate to size of funding, the size of the provider, and the perceived risk. Challenge: Coordinating among Government Agencies Evaluation Quality of Performance Timeliness of Performance Fiscal Administration and Accountability Role of NGO Sector in Entire Cycle, Including the Evaluation Process

Cost-Recovery Administrative Expenses Attached to Program Costs Rent, board meetings, project development, etc. Canada: “it is recognized that overhead costs are necessary part of an organization’s operations … and that the organization has a right to be compensated….” US: NICRA Creating a Level Playing Field with Businesses No profit is allowed Incremental/Marginal Costs

Sectoral Support Distinguish between activities, organizations and sector : Hungarian Parliament challenges Hungary National Civil Fund “Operational” expenses of civil organizations 60% of the resources are used to cover operational costs. First year, 28 million euros distributed to cover operational costs of 3500 organizations. Research, educational activities, statistics.  Need for Strategy based on Participatory Needs Assessment (CSI)

Sectoral Support Canada: “Strategic Investment Approach” Croatia: National Foundation for Civil Society Development Democratization and Civil Society Development Institutional Support €692,000 out of €1.56 million  Need for Strategy based on Participatory Needs Assessment (CSI) Tax/Fiscal Support

Thank you! Doug Rutzen International Center for Not-for-Profit Law