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The International Journal
of Not-for-Profit Law

Volume 6, Issue 2, February 2004

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

The Pacific

Social Inclusion and the Indigenous People of Australia: Achieving a Better Fit Between Social Need and the Charity Law Framework
Kerry O'Halloran

Australia Crawls Closer to Reform of the Definition of Charity
Myles McGregor-Lowndes

Consultations Toward Legal Reform in Tuvalu
James Duckworth and Mose Saitala

Social Capital and Philanthropy in Maori Society
Tuwhakairiora Williams and David Robinson

The Challenges Facing American Nonprofits

Deterring Donors: Anti-Terrorist Financing Rules and American Philanthropy
Barnett F. Baron

A Needless Silence: American Nonprofits and the Right to Lobby
Jeffrey M. Berry

The Nonprofit Paradox: For-Profit Business Models in the Third Sector
Bill E. Landsberg

Articles

Survival Strategies for Civil Society Organizations in China
Julia Greenwood Bentley

An Introduction to Canadian Tax Treatment of the Third Sector
Robert Hayhoe

"Organized" Civil Society and Its Limits
Antonio Itriago and Miguel Angel Itriago

The Fiscal Framework for Corporate Philanthropy in CEE and NIS
David Moore

Defining Characteristics of Civil Society
Timothy J. Peterson and Jon Van Til

The Alchemy of Success: The Case of Corporate Responsibility
Simon Zadek

Civil Society at the Movies
Rod Smolla

Reviews

The Civil Society Reader
Edited by Virginia A. Hodgkinson and Michael W. Foley
Reviewed by Morgan Meis

The Perfect Gift: The Philanthropic Imagination in
Poetry and Prose
Edited by Amy A. Kass

Does Civil Society Matter?: Governance in Contemporary India
Edited by Rajesh Tandon and Ranjita Mohanty

The State of Civil Society in Japan
Edited by Frank J. Schwartz and Susan J. Pharr

Paved With Good Intentions: The NGO Experience in North Korea
Edited by L. Gordon Flake and Scott Snyder

The Legal and Regulatory Framework for CSO Self-Financing in Colombia;
The Legal and Regulatory Framework for CSO Self-Financing in Chile
By Nicole Etchart, Brian Milder, Maria Cecilia Jara, and Lee Davis

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Editorial Board

Consultations Toward Legal Reform in Tuvalu

By James Duckworth and Mose Saitala*

Background

In Tuvalu, an island group in the South Pacific, the law regulating nongovernmental organizations (NGOs) is outdated, piecemeal, and inadequate. A major hindrance is that a group of people pursuing a social or charitable purpose cannot gain legal recognition, which is generally necessary to enter into transactions and to obtain project funding from overseas. A social or charitable body cannot incorporate under the Companies Act or other laws that cover only for-profit business entities. Tuvalu NGOs currently are unincorporated, and thus unable to contribute fully to the nation's development. 

The Tuvalu Association of Non-Governmental Organizations (TANGO) is an umbrella organization that seeks to strengthen civil society. TANGO, which receives an annual grant from the Tuvalu government, has worked with such organizations as the church, the Seaman's Union, and the chamber of commerce to promote project development and implementation as well as capacity building. In 2001, TANGO joined the Pacific Skills Project, with funding provided by the European Union. To clarify the status of civil society organizations, TANGO also joined a regional initiative sponsored by the International Center for Not-for-Profit Law (ICNL). The initiative seeks to analyze the laws of Fiji, Samoa, Vanuatu, and Tuvalu, all small island states with similar problems resulting from size and lack of resources.

A preliminary analysis of Tuvalu law stresses the problems stemming from NGOs' lack of legal recognition. In addition, the analysis indicates that some NGOs have outgrown their original structure by undertaking both charitable and business activities.

Under a proposal for statutory reform, any organization other than a religious body or a cooperative can incorporate by registering its name, purpose, and rules, as well as the names of individuals responsible for its affairs. Such a registry will make registration data and annual filings publicly available, which will promote accountability in several respects. Members will be able to ensure that the NGO promotes their interests effectively and fairly. Anyone with a claim against an organization will be able to locate its office and its officers. The government, acting on behalf of the public, will be able to ensure that NGOs are managed responsibly, and that any complaint of mismanagement is not frustrated because the individuals in charge cannot be found. In all these ways, the registration process will enhance public confidence in NGOs.

As the next step toward legal reform, TANGO consulted with a broad group of stakeholders in both civil society and government. The consultations provided useful suggestions for drafting the NGO law, as well as additional insights into the shortcomings of the status quo, particularly misunderstandings that stakeholders on both sides harbor about their roles.

Accountability of NGOs

Both NGO and government representatives agreed that an NGO must be accountable for its use of assets, regardless of whether the assets come from government, development partners, or private supporters. Accountability for government funds is inevitable, but the other funds are important as well.

All NGOs should also provide financial and performance accountability, not only to their members, management, or founders, but also to the public through Parliament. For financial accountability, NGOs should submit audited accounts to Parliament, and not merely financial statements. Accounts must be audited by external auditors, who are appointed or approved by the Auditor General, and who adhere to internationally recognized best practices. For performance accountability, NGOs should report annually on their activities and achievements. Legislation should clearly spell out these requirements.

The registration process should promote integrity by reminding each NGO to respect appropriate values, such as respect for the law and the system of government; respect for the people represented by the NGO; equal treatment and equal benefits for all members; diligence in dealing with government, members, and the public generally; and efficiency and economy.

The limited resources of NGOs may stand in the way of prompt accountability, as it has done in the past. Indeed, stakeholders listed scarcity of resources and lack of capacity as the main constraints NGOs in Tuvalu face. We must closely assess the role and functions of the Office of the Registrar of NGOs and TANGO in ensuring that NGOs comply. The failure to enforce accountability requirements can invite problems.

Umbrella NGOs such as TANGO and the Tuvalu National Council of Women (TNCW) should heed the same accountability requirements as their affiliated NGOs.

Registration

The registration process should be kept simple to ease compliance. Enforcement of complex legislation has been a problem.  

Some stakeholders further recommended that the new legislation define clearly what types of organizations (social or commercial) can register. This concern grew out of the fact that TANGO has registered for-profit commercial NGOs. 

Two existing NGO types, cooperatives and churches, have their own legislation and their own registration process (as does the Red Cross Society). These organizations need not reregister under the proposed legislation, but they should be recognized as civil society organizations. This is particularly true for churches, given their potential to benefit from government- and donor-funded projects as well as their potential to help implement projects funded by government and development partners. In light of the existing legislation for cooperatives and religious bodies, perhaps the registration process should distinguish between NGOs that qualify for full membership and those that qualify for affiliated or associated membership. The different categories might entail different benefits or different representation in the decision-making process of NGO affairs. Such a distinction would respect both current practice and the civil society role that cooperatives and churches can play. 

We must also determine how many members are necessary for an NGO to register. At present, a cooperative can register with as few as 10 members, whereas a church must have at least 50 members. The NGO Act of 2002 of Kiribati requires a minimum of 15 members. TANGO requires a minimum of 20 members. There is no magical number for how many can constitute an NGO. Present requirements and the small size of Tuvalu suggest a minimum of between 10 and 20. The legislation should stipulate that all members must be at least 18 years old. A provision requiring that members be broadly based, and not from the same family or extended family, should be considered. 

On the basis of current practice by TANGO, another provision deserves consideration: requiring an NGO seeking registration to submit a properly formulated constitution, which sets forth its aim, purpose, and sphere of operations. Such a requirement would help verify the NGO's commitment to its goals. AN NGO without a constitution might need to enact one before registering.

Partnerships Between the State and Civil Society  

In a global trend, international organizations such as the United Nations and the European Union are increasingly allocating a portion of their aid to NGOs. The Canadian fund for development assistance also currently considers proposals submitted by NGOs. To avoid duplication on aid projects, NGOs need to work closely with government. Donors tend to follow the government's priorities and plans.  

In light of NGOs' record of successful projects in Tuvalu, the government should employ appropriate NGOs to implement projects or elements of projects. The registry could help both central and local governments locate, evaluate, and oversee such NGOs.  

But, as our consultations attested, there are obstacles to effective partnership. Both government and NGOs lack clear models for collaboration. Representatives of each side complained about the other, a pattern that reflects the lack of systemic consultation and close collaboration in planning, programming, and implementation. NGOs and their counterparts in government do not adequately understand each other’s priorities and programs. The result is unnecessary duplication, which leads to inefficient use of funds from government and possibly from donors. 

Approved in 2001, the government's Social Development Policy recognizes that NGOs are essential to development, given government's limited resources. The relevant ministry soon will draw up a strategic plan to implement the policy. One hopes that the plan will provide for regular consultations between government departments and NGO representatives.  

NGOs currently fall in the portfolio of the Ministry of Health and Education, and not, as previously, under the Ministry of Home Affairs, where many NGO counterparts are based, such as the Director of Women, Youth Officer, and Social Welfare Officer.

The Role of TANGO

TANGO has played a useful role in promoting the interests of its member NGOs. It has also served as a cost-effective instrument for government and development partners to gauge the needs of NGOs. It has proved useful, too, in implementing development programs that promote the objectives of both government and development partners while also advancing the objectives of the NGO. The fact that the government makes a direct annual grant to TANGO suggests official acknowledgment of its contribution. Although the government has an Aid Coordinator assigned to track funds granted from overseas, the office is staffed by one person.  

TANGO's work to date led to two suggestions for making TANGO a legally recognized body responsible for day-to-day management of NGO affairs. 

The first suggestion was to recognize TANGO as the body responsible for civil society organizations. With legal power, TANGO would ensure that NGOs understand the legislation and comply with it. Most if not all NGOs lack the capacity even to prepare proper acquittal statements for funds provided to them. NGOs suggested that building up the capacity of TANGO to police accountability would require less effort than building up the capacity of all NGOs to comply with the law. In effect, this approach would seek to prevent enforcement problems before they arose. If TANGO were the administrator of NGOs, it might not be required to register as an NGO itself under the legislation. In addition, TANGO might have to be reconfigured because it would no longer register NGOs, but would use the government's NGO registry.  

The second suggestion was to establish TANGO (under that or some other name) by separate legislation as a statutory body that reports directly to Parliament for the use of its resources. The executive committee or board of directors of this body might be chaired by one NGO representative and include two senior representatives of government. This approach in effect creates a quasigovernmental body and specifies its functions while also guaranteeing its independence. The body would not answer to the cabinet, which can give instructions and policy directions to ordinary statutory corporations, but would be accountable to Parliament. The interests of the government would further be served through representation on the board. This method should help ensure that an NGO critical of the government or its policies would be afforded the same rights as other NGOs.

The Way Forward

Based on these consultations, we hope during 2004 to prepare draft legislation; seek comments on the draft from stakeholders, including the attorney general's office; revise the draft in light of the comments; and submit a bill for first reading in Parliament.

Notes

* James Duckworth, an adviser to TANGO, was People's Lawyer in Tuvalu from 1999 to 2003. Mose Saitala is Parliamentary Secretariat, Forum Secretariat of the Pacific, Suva.

 

 
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