Innovative Approaches to NGO Sustainability ICNL Douglas Rutzen

Renaissance of Civil Society Historical Inspiration Development of the Sector’s Identity –Opposition Emancipation from communist past –Independence Creation of distinct identity for the NGO sector Blossoming of NGOs and their impact –Partnership

Challenges Key Challenge: Sustainability Dependent on numerous factors, from favorable public image to the availability of competent staff  Focus of Presentation: Legal and structural issues fostering the sector’s financial sustainability

Scope of Discussion Direct Governmental Support –Financial and in-kind contributions –NGO-government partnerships Indirect Governmental Support / Tax Benefits Corporate and Individual Philanthropy Economic Activities

Regional Revenue Sources Regional Survey by the Johns Hopkins Center for Civil Society Studies 33% from public sources 21% from philanthropy 46% from fees and commercial activities

Governmental Support Budget Subsidies –Hungary and Poland –Romania (1.3 million Euro) and Bulgaria (1 million Euro) Grants –Slovakia: 23.5 million Euros (.48% of budget) –Croatia: 2.67 million Euros from NGO Office –Special “Funds”: Estonia and Hungary –Romanian Social Fund Law of 1998 and Governmental Decision 306/1997 (anti-racism, xenophobia, etc.)

Government Support, II Government Contracting –Emerging area –Ranges from Bulgaria (NGOs excluded from procurement law) to Czech Republic Local Government –Subsidies, grants and contracts Szczecin, Poland: 5 mln PLZ (US$ 1.2 million) to NGOs in 1999 Goal is to provide 1% of the local budget to NGOs. Quasi-Governmental Foundations

Government Support, III Use of State or Municipal Property Other In-kind Support –Gydnia, Poland: NGO columns in municipal newspaper; access to government training “Per Capita” Fees and Vouchers Privatization Proceeds Lotteries

NGO-Government Linkages Governmental Liaison Offices –Croatia, Hungary (Parliamentary Commission), Kosovo, Poland (Szczecin) Political Liaisons: Estonia, Hungary, Bulgaria Compacts –Croatia, Estonia, Macedonia

Tax Exemptions for NGOs Exemptions for organizations Income Tax: Estonian model VAT Preferences Customs Duties, Excise Taxes

Private Philanthropy Tax Incentives for Giving Tax Deductions –Abrogation of Enterprise Income Tax –Use of business deductions Tax Allocations –Hungarian “1+1% Law” (over 2.3 million Euro); Slovakia and Lithuania Legal Framework for Volunteers

Community Foundations Independent organizations that receive funding from a variety of donors and make grants within a specific geographic area, with decisions made by people from the same geographic area. –Often, but not always, have endowments –Typically organized at local level

Community Foundations, II Benefits –Community identification of issues and problem solving Neutral forum for NGO leaders, business executives, government officials, religious leaders, and academics to address community needs –Facilitates corporate and individual philanthropy

Community Foundations, III Particular interest Western Europe and Central/Eastern Europe –Germany –Slovakia (12 community foundations) –Healthy City Community Foundation of Banska Bistrica-Zvolen. US$300,000 endowment Third largest Slovak foundation

Community Foundations, IV Trend in Africa, Asia, Latin America, Western Europe, former Soviet Union –Fastest growing form of philanthropy in Australia –Zimbabwe example

Prerequisites At least 25,000 people Active and creative local government Large and economically sound businesses Active NGO sector Capacity to financially support important community needs

Economic Activities Examples –Selling goods related/unrelated Nephrocentrum in Budapest (paper clip factory) –Charging fees for service related/unrelated Helsinki Watch - Poland (human rights and tolerance training for police officers and teachers) –Cause-related marketing –Renting property –Passive investment (bank interest, investing assets)

Conclusions Renaissance of Civil Society Sectoral Sustainability Challenge Emergence of Innovative Practices –Partnerships with Government, Business Sector, and Public Estonia’s Pre-eminent Role in Region ICNL Douglas Rutzen