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The International Journal
of Not-for-Profit Law

Volume 8, Issue 2, November 2005

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

Table of Contents

Letter from the Editor

Public Benefit Commissions

The Public Benefit Commission: A Comparative Overview
David Moore

Charity Commission for England and Wales
Richard Fries

Moldovan Certification Commission
Ilya Trombitsky

Armenian Governmental Commission Regulating Charitable Programs
Tatshat Stepanyan


From Elections to Democracy in Central Europe: Public Participation and the Role of Civil Society
Susan Rose-Ackerman

Reinventing Liberia: Civil Society, Governance, and a Nation's Post-War Recovery
J. Peter Pham

The Law of Zakat Management and Non-Governmental Zakat Collectors in Indonesia

The Power Shift and the NGO Credibility Crisis
James McGann and Mary Johnstone

Annus Horribilis for Smaller Nonprofits: Restoring Hope Through Building Donor Resiliency
Charles Maclean and Jim Moore


Understanding Organizational Sustainability Through African Proverbs: Insights for Leaders and Facilitators
By Chiku Malunga, with Charles Banda
Reviewed by Emeka Iheme

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Armenian Governmental Commission Regulating Charitable Programs

By Tatshat Stepanyan1

1. Overview

1.1 The Commission Regulating Charitable Programs in Armenia takes a unique approach to “public benefit” or “charitable” status. According to Armenian legislation, the Commission qualifies projects rather than organizations as “charitable.” The receipt of tax benefits is the primary incentive for an organization to seek charitable status for a project, but the organization is entitled to tax benefits only within the framework of the qualified project.

1.2 Only noncommercial organizations have the right to apply to the Commission for qualifying their programs as charitable. Article 51 of the Civil Code defines the types of noncommercial organizations: “Legal persons that are noncommercial organizations may be created in the form of societal amalga­mations, funds, unions of legal persons, and also in other forms provided by a statute.” Thus, noncommercial organizations – including societal amalgamations (i.e., public organizations), foundations, and noncommercial unions of legal persons – alone can qualify their programs as charitable and receive corresponding tax benefits.2 Commercial organizations are free to carry out charitable activities, but without tax benefits.

1.3 Adding complication, the Law on Charities defines “charitable organizations” as “those noncommercial organizations that carry out charitable assistance stipulated by this law.” Yet the Law does not provide for registration, certification, or any other formal recognition of the charitable status of an organization. Nor are charitable organizations automatically entitled to tax benefits according to the Law. Instead, charitable organizations must seek to qualify specific programs as charitable, and, indeed, seek multiple qualifications for multiple programs.

2. Origins of the Commission

2.1 The Armenian Governmental Commission Regulating Charitable Programs dates back 14 years. The original Commission was created on December 31, 1991, by a decree of the Government of the Republic of Armenia (RA).

2.2 In 1991, newly independent Armenia suffered from harsh socioeconomic conditions during the slow transition from a planned Soviet-style economy to a market-based economy. The situation was especially severe due to the tragic earthquake in 1988, which, according to official statistics, killed 25,000 people (more than 100,000, according to unofficial sources) and devastated a number of cities, towns, and villages. Following the earthquake, significant streams of humanitarian aid flowed into Armenia, and numerous charitable and humanitarian international organizations began to operate actively in the country. At the same time, many local humanitarian organizations became registered to help cooperate with international organizations in distributing foreign assistance.

2.3 With the increased volume of humanitarian assistance, the Armenian government grew concerned over the perceived duplication of projects, the concentration of humanitarian aid programs in the same locations, and fraud and abuse. To help ensure that humanitarian aid was effectively managed, the Armenian government created the RA Governmental Central Commission on Humanitarian Aid. The Commission was established to monitor the receipt and distribution of all humanitarian assistance entering Armenia, to determine the order of distribution of the humanitarian assistance, and to coordinate with humanitarian assistance providers.

2.4 Since then, new laws and regulations have changed the name, rights, activities, and obligations of the Commission numerous times. Currently, the Commission is officially known as the Armenian Governmental Commission Regulating Charitable Programs (“Commission”).

3. Legal Basis for the Commission

3.1 The activities of the Commission are regulated by a number of RA legal acts, including the Law on Charity, the Law on State Duties, and Customs and Tax legislation, as well as Governmental Decree #66 of 2003 on Charitable Programs, which approved the Bylaws of the Commission.3 As indicated by its official name, the Commission is attached to the RA Government and receives its financing from the RA State Budget. Indeed, there is no legislative intent for the Commission to be independent from government. Rather, the Commission is meant to present and coordinate the interests of various RA state bodies, as well as the implementers of and participants in charitable programs.

4. Composition of the Commission

4.1 The law gives the Prime Minister authority to determine the composition of the Commission, including the number of members. Only the Head of the Department of the Staff of the RA Government on Credit and Humanitarian Assistance Programs has a reserved spot on the Commission, as the President.

4.2 There are no qualifying requirements for the other Commission members. Governmental Decree #66 of 2003 on Charitable Programs simply provides that “members of the Commission can be representatives of RA State bodies, other organizations, as well as representatives of foreign organizations that are involved in charitable programs, and persons involved in charity.” Thus, the Prime Minister can choose from a broad range of candidates. The criteria for selecting members, however, are unclear. For instance, it is not indicated how representatives of noncommercial organizations are to be chosen. Given that more than 3,000 noncommercial organizations are officially registered in Armenia, the difficulty of selecting a few representatives without any guidance is considerable.

4.3 Under practice in recent years, the Commission is composed of representatives of state bodies (the majority), noncommercial organizations (public organizations and foundations), and religious organizations. Both the qualitative and quantitative composition of the Commission fully depends on the subjective opinion of the Prime Minister. The current Commission has 27 members, of which 19 represent state bodies, five represent public organizations and foundations, and three represent religious organizations.

4.4 Commission members fulfill their obligations without salary or compensation.4 The law does not provide any safeguards against conflicts of interest. Indeed, Commission members are often appointed from organizations that implement charitable programs and enjoy corresponding tax and customs benefits, making them interested parties. As a rule, however, noncommercial organizations constitute less than a third of the Commission, and therefore do not play a decisive role.5

4.5 Officers of the Commission include the President, Deputy President, and Secretary. The rights and responsibilities of these officers are detailed in the Bylaws of the RA Governmental Commission Regulating Charitable Programs.6 The President of the Commission manages and directs the activities of the Commission, oversees Commission meetings, signs Commission decisions, prepares reports, handles the Commission’s media relations and publicity, and represents the Commission. The Deputy President carries out the assignments of the President regarding organizational activities of the Commission, stands in for the President in his absence, coordinates the activities of the working groups of the Commission, receives and examines information regarding charitable programs, and maintains the registry of charitable programs. The Secretary of the Commission prepares materials for Commission meetings, communicates with Commission members, signs decisions adopted by the Commission and protocols of Commission sessions, carries out administrative work, and, in the absence of both the President and the Deputy President, conducts meetings of the Commission. The Commission may create working groups to address specific issues, which operate according to the timetable and manner approved by the Commission. The Commission may also engage workers and specialists of RA State bodies in its activities; indeed, nonmembers may participate in Commission sessions as experts at the invitation of the Commission President or by decision of the Commission.

4.6 Meetings of the Commission are initiated when necessary, but at least once a month. Commission meetings are valid if at least two-thirds of the members are present. Decisions are made by a simple majority of votes of the members present during the session, or by a simple majority of all the members when the discussion is held in absentia. In case of a tie in voting, the vote of the Commission President is decisive.7 Upon demand of the President, the Deputy President, Secretary, or any other member of the Commission, his or her objection or abstention regarding an adopted decision should be reflected in the protocol of the session. Both the President and Secretary must sign decisions of the Commission.

5. Strategy and Objectives of the Commission

5.1 The overarching goal of the RA Governmental Commission is to coordinate charitable programs in Armenia and to oversee the activities of charitable organizations. (See the RA Law on Charity, Articles 18-19).

5.2 As defined in its Bylaws, the Commission is tasked with carrying out the following specific functions:

6. Functions and Powers of the Commission


6.1 The most basic function of the Commission is the qualification of programs as charitable. Only those programs implemented by Armenian noncommercial organizations or religious organizations, individuals, foreign states, or international organizations can qualify as charitable. Charitable status is not available to, among others, any program that includes the provision of monetary or other support to political parties or commercial organizations (with the exception of public health organizations).8

6.2 In order for a program to qualify as charitable, an eligible organization must submit an application – with corresponding materials attached – to the Commission. The decision to apply is purely voluntary.9 Upon receipt of the application, the Commission has 30 days to review it. The review is conducted in the presence of the applicant, who must be informed of the session at least two days in advance. The absence of a properly notified applicant does not prevent the hearing of the application; it may, however, serve as the basis for postponing it. The review of the application may also be postponed where additional examinations are needed for decision. Review of the application may not, however, be postponed beyond 30 days. The Commission must notify the applicant of its decision within five working days. The rejection of an application or the postponement of discussion must be recorded in the meeting minutes with a corresponding explanation, and the relevant excerpt from the meeting minutes must be sent to the applicant.

6.3 In practice, unfortunately, the Commission does not routinely heed these legally defined time limits. More troubling, however, is the fact that the RA legislation does not provide clear and objective criteria for qualifying a program as charitable. As a result, inevitably, the Commission exercises subjective discretion. Because the application process can be lengthy (despite the strict limits in the law) and unpredictable (given the lack of criteria), applicants are typically those organizations implementing large programs.


6.4 The Commission oversees the activities of organizations undertaking qualified charitable activities based on reports and information received. The RA Law on Charities (Article 18) requires charitable organizations to prepare and submit an annual activity report to the Commission. The report must contain information regarding the following:

6.5 In addition, the Commission may receive information on the implementation of a charitable program through other means, including a written report on the results of a program or a report from a person appointed to assess the results (if either of these is envisaged by the program application or imposed as a condition by the Commission in granting charitable status), or a survey of the program's beneficiaries.

6.6 The Commission has no authority to inspect organizations directly. Its authority is limited to petitioning authorized bodies – such as tax bodies and the state inspectorate of labor – to conduct an inspection. The Commission also has the right to request information and analytical materials from state bodies, local government agencies, and organizations.

Support and Guidance

6.7 The Commission does not carry out any consultative or direct assistance to organizations implementing charitable programs.


6.8 If an organization undertaking a charitable project violates RA legislation, the Commission may send it a written warning. The Commission may suspend or revoke the qualification of the project if the organization receives more than one written warning within a year or commits serious violations of law in implementing the program. Suspension or revocation terminates the organization's tax benefits. Where the organization has provided false information about its activities, the state benefits it has received (that is, taxes and other obligatory dues that have not been paid) can be subject to confiscation under RA legislation.10 The charitable organization can appeal all of these actions in court.

Limits on the Powers of the Commission

6.9 The Commission has no authority to directly influence an organization. It has the authority only to suspend or revoke a project's charitable qualification, and only upon sufficient grounds. Suspension or revocation, as noted above, will terminate tax and other benefits, in some cases retroactively.

6.10 The Republic of Armenia protects the legal rights of participants (organizations and individuals) in charitable projects. State officials and other persons hindering these rights are subject to legal liability in the manner stipulated by law.11

6.10 Article 6 of the RA Law on Charity expressly provides as follows: “It is prohibited to put restrictions on the choice of goals and means of implementation of charity.” An organization is thus free to choose the goals and implementation methods of its charitable programs. Furthermore, it can appeal any adverse decision of the Commission to the courts.

7. Accountability of the Commission

7.1 The Commission is accountable to the RA Government. According to the RA Governmental Decree #66 on Charitable Programs, the Commission report to the government on the implementation of charitable programs during the previous year by April 15 of each year.12

7.2 Organizations can appeal adverse Commission decisions to court. An organizations can also present complaints and appeals regarding the Commission to the President of the Commission and to the RA Government, which must review the complaints or appeals in the stipulated manner and respond within one month.

7.3 Overall, though, the selection of Commission members by the RA Prime Minister and the legal requirement that the position of Commission President be filled by the Department of the Staff of the RA Government on Credits and Humanitarian Assistance Programs both serve to underscore the close connection between the RA Government and the Commission.

8. Conclusion

8.1 Undeniably, there are serious problems with the concept and implementation of the Governmental Commission Regulating Charitable Programs in Armenia. As a governmental body, the Commission lacks independence from the government. With its members selected by the Prime Minister and without the guidance of objective criteria, the Commission lacks independence from the political process. With the purpose of providing government oversight over charitable programs, the very concept of a cross-sectoral Commission must come into question.

1 Tatshat Stepanyan is President of Professionals for Civil Society, an NGO that works to support the development of democratic institutions by strengthening civil society in Armenia.

2 There are approximately 3,000 noncommercial organizations currently registered in Armenia. There is no official information, however, regarding the number of qualified charitable programs.

3 It is remarkable that decisions similar to Governmental Decree #66 of 2003 on Charitable Programs have been adopted on numerous occasions, all of them temporary. This leaves the impression that the Government is struggling to establish a system and creates uncertainty in the minds of those implementing charitable programs in Armenia.

4 It would be more appropriate if Commission members at least received reimbursement for the expenses they incur in connection with the Commission’s activities, such as transportation costs and communications expenses.

5 Nothing would prevent a Prime Minister from appointing representatives of noncommercial organizations as the majority of the Commission.

6 The President and Secretary of the Commission are also appointed by the Prime Minister’s decree. Despite the fact that the Head of the Department of Credit and Humanitarian Assistance Programs is necessarily also the President of the Commission, he or she must be officially appointed by the Prime Minister.

7 F or example, if the votes of 28 commission members (including the President) are split equally, it is the decision supported by the President that will pass.

8 RA Governmental Decree #66 of 2003 on Charitable Programs.

9 The main incentives to seek charitable qualification of programs include (1) prestige (that is, the award of honorable titles); (2) benefits on taxes, duties, and obligatory payments; and (3) the receipt of material and technical assistance from the RA Government o r corresponding Community Council.

10 Article 19 of the RA Law on Charities.

11 Article 17 of the RA Law on Charities.

12 Point 4 of the RA Governmental Decree #66 of 2003 on Charitable Programs.


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