A Comparative Analysis of European Policies and Practices of NGO/Government Cooperation

For optimal readability, we highly recommend downloading the document PDF, which you can do below.

Document Information:

This document has been provided by the
International Center for Not-for-Profit Law (ICNL).

ICNL is the leading source for information on th e legal environment for civil society and public
participation. Since 1992, ICNL has served as a resource to civil society leaders, government
officials, and the donor community in over 90 countries.

Visit ICNL’s Online Library at
for further resources and research from countries all over the world.

Disclaimers Content. The information provided herein is for general informational and educational purposes only. It is not intended and should not be
construed to constitute legal advice. The information contai ned herein may not be applicable in all situations and may not, after the date of
its presentation, even reflect the most current authority. Noth ing contained herein should be relied or acted upon without the benefit of legal
advice based upon the particular facts and circumstances pres ented, and nothing herein should be construed otherwise.
Translations. Translations by ICNL of any materials into other languages are intended solely as a convenience. Translation accuracy is not
guaranteed nor implied. If any questions arise related to the accuracy of a translation, please refer to the original language official version of
the document. Any discrepancies or differences created in the tr anslation are not binding and have no legal effect for compliance or
enforcement purposes.
Warranty and Limitation of Liability. Although ICNL uses reasonable efforts to include ac curate and up-to-date information herein, ICNL
makes no warranties or representations of any kind as to its a ccuracy, currency or completeness. You agree that access to and u se of this
document and the content thereof is at your own risk. ICNL discl aims all warranties of any kind, express or implied. Neither ICNL nor any
party involved in creating, producing or delivering this document shall be liable for any damages whatsoever arising out of access to, use of
or inability to use this document, or any e rrors or omissions in the content thereof.

European Comparative Analysis
Report by ECNL

A Comparative Analysis of European Policies and Practices of NGO –
Government Cooperation
Final Report
March 18, 2004

By Nilda Bullain and Radost Toftisova,
European Center for Not-for-Profit Law


This Report is prepared to provide the back ground of a European perspective to the
project Development of Civil Society in Latvia 2002/2003 – Elaboration of Civil Society
Development Strategy For Latvia (Ref. EuropeAid/115919/D/SV/LV). It aims to
provide information and analysis on existing policies and practices in current EU
member states as well as accession countries and other Central and Eastern European
countries regarding government – NGO cooperation.

The Project Team asked us to develop a comparative overview of the following three
areas key to the successful realization of the Project:

1. Review of Policy documents that exist in different countries for facilitating
civil society (best examples in Europe), and description of institutional
governmental mechanisms in different countries to facilitate civil society.

2. National and local government level funding mechanisms for NGOs and
public initiatives, including direct and indirect funding methods, grant giving
systems, subsidies, financing delegated public functions; with a specific view on
the distinction between service and advocacy organizations.

3. Eastern European government policies to assist NGOs in participating in EU
policy making (e.g. in formulation of national positions and in cooperation with
other European organizations), and providing co-financing and pre-financing
opportunities for NGOs to participate in EU projects.

In response to these questions, the Report is structured in four main chapters, dealing
with (i) the overall policy framework of cooperat ion, (ii) the institutional frameworks, (iii)
financing, and (iv) EU accession. We aimed to look at best practices as well as learning
points from failures; innovative solutions as well as common practices; and to include
more information rather than less in order to facilitate “cherry-picking” within a certain
subject area.

The European Center for Not-for-Profit La w works to strengthen a supportive legal
environment for civil society in Europe by developing expertise and building capacity on
legal issues affecting civil society organizations and public participation. It is the hope of
the authors that the information and insights provided in this paper will help lead to the
optimal solutions for a meaningful engagement of Latvian citizens and NGOs in the
development of civil society.

European Comparative Analysis
Report by ECNL

I. Analysis of the framework for cooperation between NGOs and
governments in Europe: policy do cuments on cooperation (PDC)
……. 3
I.1. What are policy documents on NGO – Government cooperation?………………………………….. 3 I.2. Why are PDC important? ………………………………………………………………………………………. ….. 3 I.3. What is the scope of PDC? …………………………………………………………………………………………. 4 I.4. What do PDC cover? …………………………………………………………………………………………………. 5 I.5. How and by whom are PDC “ratified” (adopted, approved)? ………………………………………… 7 I.6. What are learning points from the implementation of PDC?………………………………………….. 9 I.7. The importance of local policy documents …………………………………………………………………. 11 I.7.1. Adoption of local policy documents on the basis of national PDC ………………………….. 11 I.7.2. Adoption of local policy documents as a starting initiative …………………………………….. 12
II. Analysis of the institutional framework regarding cooperation
between NGOs and government
……………………………………………………………. 13
II.1. Parliament ………………………………………………………………………………………………… …………… 14 II.2. Government ………………………………………………………………………………………………… …………. 14 II.3. Ministries……………………………………………………………………………………………………………….. 15 II.4. Councils, joint committees ………………………………………………………………………………….. ….. 15 II.5. Agencies and authorities………………………………………………………………………………………….. 16 II.6. Quangos ………………………………………………………………………………………………………………… 17 II.7. Specific bodies ……………………………………………………………………………………………. …………. 18 II.8. Local forms of cooperation ………………………………………………………………………………….. ….. 19 II.8.1. Innovative examples of local cooperation ……………………………………………………………. 20 II.9. The question of NGO representation………………………………………………………………………… 23
III. Analysis of government level funding policies and mechanisms
for NGOs and public initiatives
…………………………………………………………….. 25
III.1. General policy considerations in support to NGOs……………………………………………………. 26 III.2. Policy considerations in providing direct support to NGOs……………………………………….. 27 III.2.1. Service provision……………………………………………………………………………………….. ……. 27 III.2.2. Principles and mechanisms for direct financing of services that the state should
ensure …………………………………………………………………………………………………………. …………… 29 III.2.3. Advocacy organizations …………………………………………………………………………………… 30 III.3. Forms of direct government support ……………………………………………………………………….. 32 III.3.1. Subsidies ………………………………………………………………………………………………. ……….. 32 III.3.2.Grants …………………………………………………………………………………………………………….. 33 III.3.3. Procurement …………………………………………………………………………………………….. ……. 35 III.3.4. Normative support ……………………………………………………………………………………….. … 36 III.3.5. Vouchers………………………………………………………………………………………………………… 36 III.4. Policy considerations in indirect support …………………………………………………………………. 37 III.4.1. Public benefit activities ………………………………………………………………………………… …. 37 III.4.2. Tax benefits……………………………………………………………………………………………………. 38 III.5. Forms of indirect support………………………………………………………………………………….. …… 39 III.5.1. Use of public property at no cost or at reduced rates…………………………………………… 39 III.5.2. Tax exemptions on income ……………………………………………………………………………… 40 III.5.3.Tax incentives for philanthropy…………………………………………………………………………. 41 III.5.4. The so-called “1%” tax designation mechanism ………………………………………………… 42 III.6. Summary recommendations on an “NGO funding guide”: What shall we consider in
setting up a system for government financing of NGOs? …………………………………………………… 43
IV. Analysis of Eastern European government policies and
practices to assist NGOs in the accession process
……………………………… 45
IV.1. Was NGO empowerment part of policy development during the accession?………………… 46 IV.2. Government Support to NGOs ………………………………………………………………………………… 48 IV.2.1. Capacity building………………………………………………………………………………………… ….. 48 IV.2.2. Financial means………………………………………………………………………………………………. 49 IV.3. Government efforts to apply EU principles on consultation and social dialogue ………….. 50 IV.3.1. Involving NGOs in the decision-making processes …………………………………………….. 50 IV.3.2. Assisting NGO representation in EU bodies ……………………………………………………… 50

European Comparative Analysis
Report by ECNL


I. Analysis of the framework for cooperation between NGOs
and governments in Europe: policy documents on
cooperation (PDC)

The past decade has brought about a remarkable change in the officially recognized role
of civil society in the establishment of stable models of social democracy. As a formal
expression of this recognition, public authorities in several European countries have
adopted documents in which the mutual benefits of a more institutionalized relationship
between the “first” and the “third” sectors have been elaborated.
I.1. What are policy documents on NGO – Government cooperation?

Policy documents on cooperation (PDC) reflect a certain stage of development in the
relationship between governments and civil society organizations. They express the
public authority’s (government, parliament, EU institution) position on the role of civil
society and set up the grounds for future constructive interaction with third sector
organizations. They have two primary objectives as reflected by their content. First, they
aim at encouraging public participation in political life and second, they attempt to
establish mechanisms for cooperation which will ease the burden of public service
delivery on the government’s shoulders.

To achieve this, PDC outline the principles of cooperation between the public sector and
organized civil society and set up the basic structure of the future partnership.
1 The
recognition of the contribution of the nonprofit sector to societal development is
followed by the general intentions and the more specific steps to be undertaken by the
government and by the civic organizations in order to transfer the principles of
cooperation into practical partnership mechanisms.

PDC are usually the result of mutual efforts and negotiations between the two sides.
They may range from bilateral documents of the “agreement” type (UK Compacts), to
de facto agreements actually adopted as official programs by government (Croatian
Program for Cooperation
2) or Parliament (Estonian Civil Society Development
Concept 3), to unilateral statements expressing commitments by one side only (Hungarian
Government Strategy towards the Civil Sector 4).
I.2. Why are PDC important?

The benefits of these agreements or statements of the public authorities are tangible both
to the third sector and the public sector itself. On the one hand, they provide for a
means for civic organizations to receive increased support for their work and hence, to
expand the areas of their activity in the interest of society. On the other hand, including
civil society dialogue and partnership among government policies is also a way for the
government to ensure a more complete perf ormance of its tasks through the help of

1 See Daimar Liiv, Guidelines for the Preparation of Compacts ,
https://www.icnl.org/journal/vol3iss4/Guidelinesforcompacts8.htm 2 H ttp://www.icnl.org/library/cee/docs/croPROGRAMSURADNJE[ENG].htm 3 H ttp://www.ngonet.ee/cfpbaltic /civilsociety/estonia.html 4 Http:// www.no nprofit.hu
Field Code Changed
Field Code Changed
Field Code Changed

European Comparative Analysis
Report by ECNL


The key to the success of a cooperation policy is the guarantee of the mutual interest,
respect and trust for “the other’s goals and mission”
5. NGOs are the more natural and
more likely initiator for the negotiation and adoption of a policy paper on cooperation
with government; however, the Croatian and the Hungarian example shows that the
public authorities may well have an interest in such a process and can initiate and bring it
to a successful conclusion.

It must be noted, however, that it is not sufficient to merely draft a policy paper on
cooperation; that alone cannot be considered as a “successful conclusion”. Point 15 of
the English Compact calls it “a starting point not a conclusion”. It has also been called “a
process not a paper”, emphasizing the fact that mutual benefits will be available for both
sides even if the negotiation process does not lead to an agreed text. A good relationship
is established through a process of frequent contacts, constructive discussions, active
cooperation, and through concessions, compromises and understanding.

Although a document that legally binds the government and that outlines a precise
schedule for the future implementation of its commitments might be ideal for the
nonprofit sector, the very process of meeting, discussing, negotiating may have more
benefit than expected, if the result is an improvement of communication with the public
authorities. A centralized procedure for discussing a policy paper may not necessarily
result in its adoption (see the Hungarian case below), but the numerous public debates
that accompany the process are already an ex cellent example of public participation in
political decision-making.

As practice in the UK shows, the lack of sufficient knowledge and understanding of the
Compact among the volunteer sector can be one of the barriers to the implementation
process and an obstacle to its effective obser vance by both sides. The process should
involve experts in the preparation of the text and wide public participation in the
discussion and consolidation stage.

I.3. What is the scope of PDC?

The title of such a document usually reflects its character of being unilateral or bilateral
and indicates the level of its legally binding force. The Agreement between the
government and the voluntary sector in Wa les confirms the former’s commitments and
therefore is a legally binding document while the English Compact is only a
“memorandum” concerning relations between the government and the third sector. The
Estonian Concept for the Development of Civil Society was adopted by Parliament and
expresses values, principles and procedures designed to increase citizens’ participation in
state life. The Croatian Program expressly states that it is not a legally binding document
but a framework for future cooperation.

The EU Commission’s White Paper on European Governance, adopted on 25 July 2001 ,

focuses on the reform of “the way in which the Union uses the powers given by its
citizens” and promotes the stronger interaction between civil society and central and
local governments. The White paper is a policy document which sets forth five

5 Danish Charter for interaction between Volunteer Denmark / Associations Denmark and the public sector , https://friv.wizards.dk/Web/Site/Charter+ og+samarbejde/Hvad+er+chartret%3F/Charter+-+engelsk+udgave 6 Supra Note 1

European Comparative Analysis
Report by ECNL

underlying principles (openness, participation, accountability, effectiveness, and
coherence) and the future measures based on them, including dialogue and consultations
and establishment of partnerships which will reflect the Commission’s future
commitments. However, the Commission also commits itself to a series of concrete
measures to improve and clarify European legislation, publish guidelines, develop
standards and criteria, organize public de bates, and develop a code of conduct on
dialogue and consultations that would contribute to greater openness of organized civil

The Danish Charter for in teraction between Volunteer Denmark / Associations
Denmark and the public sector concluded with the Danish government in 2001
emphasizes the importance of partnership between the two sectors for “the development
of Danish democracy and the Danish welfare state”.
7 The Charter is designed to serve as
a “starting point for continuing dialogue on values, parameters and concrete
opportunities for interaction” and is based on the recognition of the volunteer sector, its
role and functions, and its independence. The document envisages future measures to be
taken that would facilitate associations’ activity, including the development of the
respective legislation, that would ensure the continuing support for NGOs’ activity
without affecting their autonomy, and would provide resources “for the promotion and
implementation of common initiatives”. The Charter is a framework agreement
providing the basis for future concrete steps and does not have legal force although its
positive role for the enhancement of the volunteer sector and citizens’ participation in
public life in Denmark has been recognized by both government and the third sector.

In most Western European countries similar policy documents are adopted with regards
to NGOs’ participation in the country’s development aid policy. These concern only a
very specific part of the nonprofit sector and place the emphasis on the role of NGOs in
international development. However, in an indirect way, these documents recognize the
importance and role of civil society in the given country as well.

Thus, the Danish Strategy for Support to Civil Society in Developing Countries
8 adopted
by the Ministry of Foreign Affairs, elaborates the various methods of cooperation with
Danish NGOs and expressly recognizes their contribution to “the promotion of human
rights and democracy.” Similar documents have been adopted by the German
Government as well, based on the notion that the promotion of civil society forms a vital
part of the country’s foreign development policy.
9 In addition to outlining government
policy, these documents also influence the fu nding mechanisms for financing the work of
domestic NGOs in the field of international development aid.

I.4. What do PDC cover?

7 Supra Note 1 8 Strategy for Danish Support to Civil Society in Developing Countries – including cooperation with
Danish NGOs , https://www.una.dk/ffd/Godk_Nord_Regeringer/Strategy_for_Danish_Support.htm 9 The Federal Ministry for Cooperation and Development (BMZ) administers the funding for
international deve lopment through a programme called Development Projects in Developing Countries .
( https://www.globenet.org/preceup/pages/ fr/chapitre/etatlieu/acteurs/f/h.htm
). The Ministry’s close work with German development NGOs resulted in the early 1990s in a first policy paper ” Fighting poverty
by promoting self-help “, which placed special emphasis on the promotion of participation and self-help
as basic principles. ( https://www.euforic.org/projects/povcasde.htm
). Four more policy papers on poverty reduction were elaborated and adopted during the 1990s and a “Conception of development
policy of BMZ” (published in October 1996) confirmed poverty reduction as priority goal.
Field Code Changed
Field Code Changed

European Comparative Analysis
Report by ECNL

There are two main approaches to formulating the content of a cooperation policy
document: first, outlining the general framework for future cooperation and leaving the
details to be worked out in the implemen tation process (as in UK, Denmark), or
adopting a text elaborating a wider range of aspects of the future cooperation and the
details of its implementation (like the Esto nian Civil Society Development Concept).

As experience shows, there is not really a link between the adopted approach and the
chances for the effective implementation of the policy. That rather depends on the good
will of both sides, the legislative and political mechanisms for application of contractual
obligations and political commitments, and the actual state of the relationship between
the governmental and the non-governmental sectors. Since the purpose is to lay down
the grounds for a successful future partners hip, these documents should attempt to
cover, in a general or in a detailed manner, all the essential elements of the relationship.

Almost all agreements, statements, charters , and strategies of this kind contain the
following sections:

ƒ A statement of representation on the bodies representing the two sectors
during the process of adopting and implementing the PDC, the mechanisms for
their nomination, their mandate, responsibilities, and duties.

ƒ A statement of principles of the role and functions of the two parties in the
development of democratic society, including a recognition of each party’s
autonomy (see the Danish Charter), basic rights and obligations, legal and logical
constraints in the observance of these obligations
10, definition and acceptance of
mutually respected values including for ex ample public participation in decision-
making, flexibility in governance tools (EU White Paper on European
11); diversity of the volunteer sector (UK Compact, p.8.2);
accountability, openness, promotion of non-violence and equality of people,
coherence, transparency and liability for ut ilizing public resources (the Croatian
Program for Cooperation).

ƒ A general outline of the areas of cooperation (delivery of services, legislation
and other decision-making processes, environment, international development
aid, access to information, national policy formulation in various areas,
decentralization, development of social enterprise, etc.), and specific
instruments of cooperation , including public disputes, consultations, joint
consultative and decision-making bodies, partnership agreements for the joint
delivery of services, exchange of information, right to initiative, etc.

ƒ Funding related issues : obligations for the development of codes of good
funding practices (UK Compact), descript ion of various funding mechanisms to
support the voluntary sector (long-term, short-term financing schemes),
commitments for the establishment of a supportive tax system ensuring direct
and indirect encouragement third sector activities (Estonian Concept),
undertaking for the development of legislation supporting the self-sustainability

10 Supra Note 1 11 European Union White Paper on European Governance , https://europa.eu.int/eur-lex/en/com/cnc/2001/com2001_0428en01.pdf

European Comparative Analysis
Report by ECNL

of the third sector and the financing of organizations of disadvantages persons
(Croatian Program for Cooperation and Hungarian Government Strategy).
As a principle and following from their general and mostly non-binding nature,
cooperation policy documents do not establish specific funding obligations;
rather, they envisage the development of funding policies, mechanisms,
standards, or models that would ensure public support for the voluntary sector.
Focus should be placed on clear models of funding policies including various
types of funding mechanisms (e.g., not to forget the in-kind support) and on the
third sector’s obligations to elaborate go od standards for accountability for the
use of public money.

ƒ Implementation: this section reflects the timeline and the level of genuine
government commitment to the principles and values as recognized by the policy
document. It includes short- term and long-term objectives
12 and allocates
responsibilities to the public institutions that will be involved in the
implementation process. It may also contain a proposed monitoring and
evaluation tool, review and revi sion, and dispute settlement.
The level of specificity of these provisions is crucial to the successful
implementation of the policy document. The general nature of the document
does not always allow for a specific implementation schedule; however, in order
not to leave it a dead letter, this sectio n should attempt to be as concrete as
possible and to provide for a constructive relation between timetables,
institutional network, responsibilities, and coordination. For example, the
Croatian Program provides for an annual analysis and revision at a meeting of the
Government and the third sector’s representatives and for the publication and a
submission to Parliament of a report of the meeting. The UK Compact
authorizes a special ministerial group to oversee the implementation of the
Compact, to “encourage its adoption by other public agencies (p.2 of the Annex),
and to promote good communication between the two parties.

The specific content of a policy document for cooperation varies depending on the legal
nature of the document, the existing level of cooperation between the two sectors, the
legislative, political and social traditions in the given country, and the public institution
that has adopted it. The separate sections may be more or less detailed or even missing
from a given document, and the success of such a document is not necessarily linked to
its exhaustive content. However, an agreement or declaration of more detailed aspects of
cooperation and particularly on the implementation mechanisms increases the chances
for a meaningful and efficient policy paper.
I.5. How and by whom are PDC “ratified” (adopted, approved)?

EU White Paper on Good Governance
: by the EU Commission 13. Its adoption was
prompted by the upcoming enlargement of the EU, which “put to a test” the current
methods of EU governance. The Commission decided that these methods require
modernization which will help the EU institutions better use their power, and help EU
citizens better monitor these institutions and the way they handle their responsibilities

12 Supra Note 1 13 Supra Note 11

European Comparative Analysis
Report by ECNL

and grant them greater endorsement from the public. The Paper also emphasizes that
civil society has its responsibilities.

The preparatory work was organized in 12 working groups covering six working areas.
Each group carried out external consultations and came up with recommendations as to
the proposals that should be formulated in the Paper. The consultations included public
hearings and on-line public debates. The specific consultations with civil society
organizations reflected the NGOs’ demands for greater participation in the decision-
making process before
the decision is made (rather than just communicating the
decision), better organization of the cons ultation procedures to make them more
effective, better administrative focus of NGOs’ input by targeting all sectors and
institutions concerned, and better recognition of all relevant players instead of a limited
number of organizations, as well as a specific article in the Treaty on civil society
organizations involved in the Commission’s consultative practices.

UK Compacts
14: by the government and the NGOs representatives. The UK Compacts
were built on the basis of two documents: the Deakin Commission Report “The future
of the Voluntary Sector” (July 1996) calling for a formal Government/Voluntary Sector
agreement, and the Labour Party document “Building a Future Together – Labour’s
policies for partnership between Government and the Voluntary Sector” (February
1997). In July 1997, a conference of the biggest NGO umbrella organizations confirmed
the need for such an agreement and set up the Compact working group involving
outstanding NGO experts and academics. The four Compacts with the governments of
England, Wales, Scotland and Northern Irel and were signed in October-November 1998,
after several months’ consultations, becoming the first documents of this type to be
signed. National Compacts were followed by local compacts signed between local
voluntary sectors and local councils or other public bodies.

Estonian Concept (EKAK)
15: adopted by parliament on December 22, 2002. The
process began with the efforts of the Estonian Center for Non-profit Associations and
Foundations through a project financed by UNDP. The meeting between Estonian
umbrella organizations and politicians discussed possible strategies for the launch of the
Concept. Shortly after this meeting, in December 1999, the “Memorandum of
Cooperation Between Estonian Political Parties and Third Sector Umbrella
Organizations” was signed setting up the outline for the development of the Concept.
The drafting involved not only NGO experts and politicians but also academics. The
public discussions that followed the development of the draft were intensive and
extensive. More than 3000 organizations were invited to participate in the preparation of
the final draft.

Croatian Program for Cooperation
: adopted by the government in December 2000, upon
the initiative of the Government Office for Cooperation with NGOs and largely due to
the efforts and personal belief of the officials in the Office in the potential of the
voluntary sector. The Program outlines the principles and models for the cooperation
between the Government and the third sector. It was based on the results of one national
and four regional seminars on the “Development of Civil Society in Croatia – Models of
Cooperation between the State, Local Authorities and NGOs”. Over16000 NGOs were
invited to participate in the preparation process. The working group involved NGO

14 Http://www.thecompact.org.uk/ 15 Estonian Civil Society Development Concept , https://www.emy.ee/alus dokumendid/concept.html

European Comparative Analysis
Report by ECNL

representatives, state officials, and repres entatives of the local government and of
international organizations in Croatia.

Hungarian Government Strategy:
adopted by the government in June 2003. The
elaboration of the strategy started in August 2002, soon after the new government was
elected. This government made the cooperation and communication with civil
organizations a priority objective. The reasons for this were interpreted as genuine good
will by some analysts, and as a mere public relations effort to balance popular support of
the opposition party, by others. Either way, the elaboration of the policy document and
consequent legislation was put on the fast track and by the end of October, the
responsible ministry shared a full-fledged dr aft of the Government Strategy toward the
Civil Sector with NGOs and the public. Comments from the NGOs were considered
and mostly integrated in the final document.

Initially, the government actually envisioned the signing of a “real” compact type
agreement with the representatives of the NGO sector, but as there was strong resistance
among civil society organizations towards the notion of a single representative body of
the NGOs in Hungary, the government had to abandon this idea. However, the adopted
strategy still envisions the possible signature of a bilateral agreement.

The German Policy Papers
on poverty reduction 16 were adopted by the Federal
Ministry for Cooperation and Development after discussions with and upon the initiative
of German NGOs working in the field of international aid.

The Danish Charter for Interaction
was elaborated upon the minister of social affairs and
the minister of culture. It was drafted by a joint working group involving representatives
of the government (five ministers and local authority officers) and the voluntary sector,
and was adopted by the government. after a public debate.
I.6. What are learning points from the implementation of PDC?

Generally, the process of implementation prov ed that there is a need to involve all
players in the implementation of such policy pa pers – all state agencies concerned, a wide
range of civil society organizations, and the public in general; to include experts in the
drafting and discussion points; to focus on review, monitoring and reporting on the
implementation process and results; to set up in the policy document a plan or outline
for future activities with allocated responsibilities; no t to miss the momentum for
implementation; to disseminate information and increase awareness of the policy paper
and its implementation (and its benefits to all parties concerned) among state agencies,
NGOs and the public.

The initial publication of the EC White Paper
was followed by vast public consultations
and the conclusions were summarized in a specific report. 17 The process of preparation,

16 Promotion of Civil Society in Developing Count ries: the Example of European Development
Cooperation , German Development Institute, Briefing Paper 6/1999, available at https://www.die-
gdi.de/DIE_Homepage.nsf/0/79299BBD20A0B94AC12569F60065C013/$File/analy6e_99.pdf?OpenElement ; Eva Weidnitzer, German Aid for Poverty Reduction , Berlin: Deutsches Institut für
Entwicklungspolitik, available at https://www.euforic.org/projects/povcasde.htm ; https://www.bundestag.de/gremien/enga/02Zsf_en.pdf 17 Report from the Commission on European Governance , Luxembourg: Office for Official
Publications of the European Communities, 2003, available at
Field Code Changed

European Comparative Analysis
Report by ECNL

adoption and implementation of the document proved the necessity for meaningful
participation of civil society in each stage of the decision-making process. The fact that
consultations took place before, during, and after the adoption of the Paper, helped
better formulate the weak points in EU governance, particularly with regards to civil
society involvement, and contributed to a more effective pursuit of the proposed
measures. The Commission already had a consultation process in place; however, the
public response to the issues raised by the White Paper revealed the deficiencies of this
process and helped improve it. As a result, the Commission developed new general
principles and standards for consultation of interested parties by the Commission.

In the English Compact
, implementation is dealt with in specific articles providing for
the preparation of codes of good practice on consultation, annual review of Compact
implementation, the rights and status of minority groups, etc. The Codes of Practice
were drafted by the Compact working group after consultations with the voluntary sector
and were published by the Government. The first Codes (on Funding and Consultations)
were published in May 2000 after a meeting between the NGOs and the ministers. Such
annual meetings are usually held in April. They review the process of Compact
implementation, examine the level of Compact awareness in Government and set up the
outline for next year’s progress.

The institution within Government that is responsible for coordination with the
voluntary sector and for Compact implementa tion is the Active Community Unit (ACU)
(within the Home Office), working with the Voluntary Sector Liaison Officers in each
department. David Carrington (ACU)
19 points out that one of the measures of successful
implementation of the Compact is the number of local compacts that have been signed.
Among the key factors affecting implementation, D. Carrington mentions:
ƒ “the gap between Compact’s enthusiasts and skeptics” resulting from the
insufficient dissemination about positive results, success stories, and lessons
ƒ missing the momentum when the principles and values in questions are
ƒ the negative effect of the Government’s acts – for example, a termination or
decrease in funding, refusal to cooperate, or clear breaches of Compact principles
— which undermine its credibility;
ƒ the competence and commitment of the leadership from both sides;
ƒ the time and resources allocated by the Government for the implementation;
ƒ inactivity by the voluntary sector itself;
ƒ lack of collaboration based on old antagonisms.

Carrington advises the creation of a joint implementation strategy that would take
advantage of the strengths of both sides and would lead to the successful
implementation of the Compact.

As for Central and Eastern Europe, the implementation of the Estonian Concept
some learning points already. 20 It has become clear that the implementation process is

https://europa.eu.int/comm/governance/docs/comm_rapport_en.pdf 18 Communication from the Commission of the European Communities , Brussels, 11.12.2002,
available at https://europa.eu.int/comm/governance/docs/comm_standards_en.pdf , p.5 19 David Carrington, The Compact – the Challenge of Implementation , April 2002, available at
https://www.thecompact.org.uk/ PDFs/Carrington%20Report.pdf 20 Based on input from Kristina Mand, Director, Network of Estonian Nonprofit Organizations

European Comparative Analysis
Report by ECNL

slow and difficult to develop. The positive impact is that politicians, ministries and local
governments refer to EKAK as the guidelines for civil society. Both the government and
sector recognize a greater potential role for the non-profit sector than ever before.

Among the most significant lessons is that the creation of a working relationship in the
framework for cooperation takes time, effort, and commitment. The diversity of the
Third sector means that expectations surround ing the Concept also varied greatly and the
practical value of the Concept for each organization is different. In addition, many
smaller NGOs were not fully familiar with the content, objectives and importance of the
Concept – all of which demands much prepar atory, harmonizing and explanatory work.

We may conclude from the first years of implementation experience that the Third sector
in Estonia is not yet completely ready for open consultation on public policy matters and
more capacity-building activities will be needed to achieve sector-wide competence.

I.7. The importance of local policy documents

In the process of drafting and adopting a PDC with an eye toward the future
implementation at the local level, participation of local government officials is essential
from the very beginning. Moreover, it can se rve as a preparatory stage for the initiation
and accomplishment of such a process by local governments and local NGOs.

I.7.1. Adoption of local policy do cuments on the basis of national

The more “traditional” approach envisages th e transfer of the central “compact” to the
local level, as it was provided for by the English Compact. In fact, local implementation
of a central PDC or “the localization of compacts” can serve as a measure for the success
of the national (central) strategy or policy document.
21 The statements, principles, and
objectives of a national PDC are more easily interpreted and applied by the partners at
the local level; they know each other better and as a general rule communicate better,
problems are more evident and easier to solve when seen locally, and local negotiations
and “compacts” have usually a more practical and less political (conceptual) aspect than
national ones.

The benefits of having a local compact for the third sector are summarized in England as
the following: (1) Community benefit (devel oping services based on community needs);
(2) Realizing organizational objectives (further the cause of the organization); (3)
Improving partnership relationships (working closely with local authorities); (4) Using
external funding more effectively; (5) Involving local groups in best value and
community planning.

This was proved in England where many local compacts followed the national
document, and in Estonia where a group of six local councils and local NGOs in the
northeast of the country worked on and prepared their common “compact”
implementing the principles of the national Concept.
22 In England, special Local

21 Supra Note 1. 22 Id.

European Comparative Analysis
Report by ECNL

Compact Guide lines were published in July 2001 to assist local partners in their
negotiations. 23 As of the end of 2002, progress in developing local compacts in England
had been registered in 388 local authority areas. 24

In Estonia we can observe the seeds of a si milar tendency. Local EKAKs have not been
created, but in several counties (there are 15 counties in Estonia), non-profits and local
governments have formed roundtables to bu ild face-to-face working relationships. This
process is feeding well into the European Union accession process as well: namely, for
the use of structural funds, the Estonia Enterprise Fund has created local county
development centers (on the basis of previous business advisory centers), and these work
together with the Network of Estonian Nonprofit Organization (NENO) and its NGO
resource and support centers that provide assistance, counselling and information for the
joint activities of local governments, local non-profits and local businesses. In other
words, there are several initiatives to fost er joint activities and common goal-setting.

I.7.2. Adoption of local policy do cuments as a starting initiative

Another approach toward formalizing local level partnership is demonstrated by the
example of the city of Gdynia in Poland where the whole process started locally without
the preparatory grounds of a specific national partnership policy. The city authorities
initiated the creation of a working group consisting of representatives of the local
government and the NGOs operating in the area. The working group focused on the
mutual exchange of information about each sector’s activity and attempted to answer
questions regarding the “hot” issues in the region and the factors affecting the ways to
address those problems.

Cooperation between local government and NGOs was considered to be one of the
most effective ways to improve the life of the community in Gdynia. As a result of the
discussions, the working group drafted a Cooperation Program, which was approved by
the City Council. The Program established the institutional structure for cooperation and
set up funding forms and mechanisms. Cooperation is financed from the local budget
under competitive procedures and in compliance with requirements as outlined by the

Local PDC generally include similar content to that covered by national documents.
However, local PDC are more likely to be specific and practice-oriented. Therefore, the
opening sections included in national documents may be condensed at the local level and
the focus placed instead on concrete fund ing mechanisms, institutional support for
NGO-local authorities cooperation, and supervision and reporting mechanisms.

23 Local Compact Guidelines: Getting Local Relationships Right Together, Printed and published by
NCVO on behalf of WGGRS and the LGA, July 2000, available at
https://www.thecompact.org.uk/PDFs/LocalCompactGuidelines.pdf 24 H ttp://www.thecompact.org.uk/PDFs/Local%20Compact%20progress%20LATEST%20260104.pdf 25 Miuchal Gu ć , “Egyedül nem megy ” (It is not possible alone) , 1999, CSDF Hungary. Summary in English prepared for ICNL by Istvan Csoka .
Field Code Changed

European Comparative Analysis
Report by ECNL


II. Analysis of the institutional framework regarding
cooperation between NG Os and government

By institutional framework regarding cooperation between NGOs and government we
mean various structures, agencies and mechan isms that are implementing concrete tasks
related to the cooperation centrally and locally. There is no one model of such a
framework and the forms it may take are even more diverse and more country and
context specific than the policy documents analyzed in the previous section.

First of all, the use of the word “framework” may be misleading, as in European
countries there is generally no one single planned and centrally organized scheme that
would neatly accommodate the various inst itutions of cooperation between the two
sectors. Rather, these institutions evolved over time – for decades, sometimes centuries,
in the Western part of Europe and for the past 10-15 years in the Eastern part.

In fact, in Western Europe, the general le vel of “sector consciousness”, i.e. the
identification of the thousands of nonprofit and nongovernmental organizations as one
sector (e.g. the voluntary or the third sector) is a new phenomenon and has still not taken
root in many countries. Rather, the institutions of cooperation have developed in some
specific areas where the need emerged over time (typically, in the social services field, in
the environmental field or in international development aid). Nevertheless, some
principles and practices emerged from the specific fields that have been elevated to a
more general level (e.g. by such policy documents as described above) and extended to
include the whole NGO sector and even the wider civil society. Such overarching basic
principles include, for example, the principle of subsidiarity, access to information or
consultation with interest groups (social dialogue).

In general, the elements of an institutiona l framework will address the following aspects
(functions) of cooperation:

ƒ Registration and oversight of NGOs
ƒ Ensuring NGO participation in decision-making
ƒ Financing NGOs
ƒ Coordination and information between the two sectors

From another perspective, the institutional framework can be analysed based on the
structural location of the actual institutions within the public administration structure:

ƒ Parliament
ƒ Government
ƒ Ministries
ƒ Councils, joint committees
ƒ Agencies
ƒ Quangos
ƒ Specific bodies
ƒ Local government

European Comparative Analysis
Report by ECNL

For the purposes of this report, we propose to analyze the institutional framework from
the structural rather than the functional point of view, as other sections of this report and
other reports of this project will look in more detail into the functional aspects.
II.1. Parliament

In terms of the Parliament, special committees dealing with NGO rela ted issues will be
typical institutional forms of cooperation. In Hungary
, for example, a Parliamentary
Committee for the Support of Civil Organiza tions has existed since the early 1990s,
which used to grant budget subsidies to nati onal associations. More recently it assumed
responsibility for legislative policy concerning the sector (while its grant giving role will
be transferred to the newly established National Civil Fund – see below).

In Germany
, a subcommittee of the Committee for Family Affairs, Senior Citizens,
Women and Youth (Subcommittee of Civil Engagement) was established as recently as
in May 2003. Its task is to help realize the recommendations of a major study concerning
civil society in Germany
26, and to discuss related bills and initiatives.

In addition, in Hungary
there is also a Civil Office of the Parliament that fulfills an
informational role; e.g. maintains a databa se of NGOs to which it sends out the
Parliament’s legislative agenda sorted by area of interest (e.g. if an NGO wants to receive
the legislative plans on environment related laws, they can sign up for such option);
answers NGO inquiries; coordinates and ar ranges NGO participation in the various
Committee meetings etc.
II.2. Government

As for the Government, there may be a central department responsible to liaise with
the NGOs independently from the line ministries. For example in Hungary
, in 1998, a
Department for Civil Relations was establishe d in the Prime Minister’s Office that was
responsible for development and coordination of policies affecting the non-profit sector
as a whole. This department developed the Government Strategy towards the Civil
Sector, a comprehensive strategy for the support and development of the non-profit
sector (see Section I. above). (The Department became part of the newly established
Government Office for Equal Opportunities as of January 1, 2004).

In Croatia
, the Government Office for Cooperation with NGOs is also located at the
governmental level. The Office was originally established in 1998 with the task of
building confidence and developing cooperation with NGOs. It coordinated working
groups on various legislative initiatives affecting CSOs, and provided grant support to
NGOs in all areas of work. More recently, the role of the Office will be modified to
provide assistance to the Council for Civil Society, a governmental advisory body (see

In Slovenia
, a National Coordinator for Cooperation with NGOs was appointed under
the Government Office for European Affairs. This appointment was made as part of an

26 Civic Activities: Towards a Civil Society with a Future , Summary of the Bundestag Study
Commission´s Report, June 2002, available at https://www.bundestag.de/gremien/enga/02Zsf_en.pdf Field Code Changed

European Comparative Analysis
Report by ECNL

effort similar to what Latvia is currently considering, i.e. to develop a more coordinated,
systematic governmental approach to working with NGOs.

We should also note that the tendency to centralize the coordination and policy
development of cooperation with NGOs is strongly linked to the EU accession. In both
Hungary and Slovenia, the reason for such specific departments was to manage the
requirements regarding involvement of NGOs in the National Development Plan, and to
help ensure the ministry level implementation of the principle of consultation. (See
Section IV. below)
II.3. Ministries

The most common form of institutional cooperation with NGOs in both Western and
Central Eastern Europe is through the lin e ministries. Naturally, those NGOs whose
mission area corresponds to the given ministry want to ensure that the policies and
legislation in the given area represent their views and their constituents’ views. They
would also like to receive and lobby for funding from the ministries. The ministries often
find cooperation useful as well –for example when NGOs help them implement national
policies. Thus, inevitably, a whole range of concrete forms of cooperation has evolved
between the ministries and the NGOs working in the same area.

At the ministry level, forms of cooperation reflect the multiple functions of financing
NGOs, ensuring their participation in policy development, and possibly, providing other
type of support or service to NGOs (e.g. the Hungarian Ministry of Children, Youth and
Sports provides an opportunity for NGOs to introduce themselves and communicate on
its website and thus encourages cooperation among NGOs working in the same areas).

Therefore, in many instances, various departments of one ministry will each have a
person dealing with NGOs, with no coordination among the departments. Therefore, the
need for intra-ministerial coordination will emerge and it may be necessary for certain
responsibilities, such as maintaining a databa se of NGOs whose work is relevant to the
ministry, to be addressed at a higher level.

Furthermore, sometimes one of the ministries is actually responsible for
implementing a task or program that affects the whole NGO sector . This is the
case, for example in Slovakia
, where all NGOs are registered at the Ministry of Interior,
or in Poland
, where the Ministry of Labor and Social Affairs is responsible for
implementing the new Law on Public Benefi t Organizations and Volunteerism (adopted
in June 2003).
II.4. Councils, joint committees

To establish a formal advisory body that comprises both governmental and NGO
representatives is also a typical form of cooperation. Usually such councils or joint
committees will be formed at the minist ry level, but there are examples of a
governmental council as well. Such examples include the Czech Republic and Slovakia,
as well as Croatia, from among CEE countries.

A Council has existed in Slovakia
since 1999, called the Council of the Government of
the Slovak Republic for Non-Governmental Non-Profit Organizations. This Council is
an advisory and initiating body of the Government of the Slovak Republic to support the

European Comparative Analysis
Report by ECNL

activities of non-governmental non-profit organizations. It may initiate and advise on
policy and legislation affecting NGOs; it cooperates with the bodies of public
administration at all levels in devising their methods of financing of and cooperation with
NGOs; and it works specifically to maintain a public official database of Slovak NGOs.

In Croatia
, a Council for the Development of Civil Society was established as a
governmental advisory body in 2002. The Council is composed of 10 representatives
from Ministries and 14 representatives of civil society (elected by the CSOs themselves).
The Council focuses its activities on: implem entation of the Program of Cooperation (see
Section I), creation of the Strategy for the Development of Civil Society and
harmonization of financial support from the State budget for financing CSO programs
and projects.

More common are councils working with a line ministry and providing strategic
advice on a specific policy field (such as health or employment). A typical example is the
Danish Committee on Volunteer Effort
, set up by the Minister for Social Affairs in 1983.
This is a political committee made up of re presentatives from public authorities and
voluntary organizations. The aim of the Committee is to bolster the opportunity for
individuals, groups of citizens and private associations and organizations to participate in
the solution of tasks in the social field. In pursuit of this aim, one of the Committee’s
duties is to compile information about the field and to submit proposals to both the
public sector and voluntary social organizations. The Committee’s principal function,
though, is to advise the Minister for Social Affairs.

Contrary to Western European examples of long-standing councils, the relevance and
effectiveness of such committees in CEE often depend on the actual political weight of
the issue they represent. For example, in Hungary
, the Prime Minister became the
honorary chair of the Council of Elderly Issues in the UN Year of the Elderly, when this
Council was able to successfully push for a ch ange in legislation. However, after the issue
of the elderly was taken off the political agenda, the council lost its critical influence.

An interesting example is the Polish Council on Public Benefit Activities
, established by
the PBA law adopted last year. This Council, to be operational in 2004, will provide
opinion and advice to the Minister of Economy, Labor and Social Care, responsible for
the implementation of the PBA law. The Council will be comprised of twenty members.
Half of them will be representatives of the government and local government
administration, while the other half will be representatives of non-governmental
organizations and church charity institutions. In general, the task of the Council is to
monitor the implementation of the law on public benefit activity and volunteerism, by,
for example, commenting on issues that emerge in its application, commenting on
legislative projects that are relevant for public benefit activity and volunteerism, as well as
collecting and analyzing information about the inspections of public benefit
organizations. Moreover, the Council will mediate between organizations and public
administration bodies in the case of conflicts connected with the implementation of
public benefit activities.
II.5. Agencies and authorities

Agencies or authorities working under the aegis of one of the ministries are often
important players in inter-sectoral cooperation. In the UK, the assessment of community
participation in health care following reform in the National Health Service showed that

European Comparative Analysis
Report by ECNL

where suggested reforms regarding communi ty involvement were implemented, the
quality of service and user satisfaction increased. The researchers point out: “It appears
essential to recognize that community, voluntary and patient organizations are
stakeholders in the formulation of community participation strategies, rather than just
passive beneficiaries of statutory sector ‘inclusiveness’.”
27 To realize community and user
involvement in welfare services, it is indispen sable for state agencies to actively cooperate
with NGOs at the local level.

Among the few CEE examples in this field, we can mention the Hungarian Employment
Centers that sometimes (depending on the region) cooperate with NGOs in providing
training to those seeking employment, or in catering to job-seekers with special needs
(e.g. disabled people).

Agencies may of course, also be financing nonprofit organizations through grant
programs. For example in Germany, the Fede ral Bureau of Environment is providing
support to environmental organizations, while the Federal Centre for Political Education
finances youth education programs by NGOs.
II.6. Quangos

Quasi NGO or quango is a term often used to describe nonprofit organizations set up or
funded by the government. A distinct feature of these organizations is that despite the
government ‘ ownership’, they are autonomousl y governed and, at least in principle,
professionally independent from the political establishment. The forms and roles they
take vary widely, from fundraising and grant making foundations (e.g. public foundations
in Hungary or France), to advocacy and service providing organizations (e.g. associations
of municipalities), to project implementing nonprofit companies (e.g. public benefit
companies in Hungary).

Quangos represent the overlapping functions and institutional forms between the state
and organized civil society. A key determinant of their ability to promote social
development and to further the cooperation between the two sectors is the extent to
which they are really independent from political influence.

An example of a quango in Denmark
is the Volunteer Centre, established in 1992. The
Centre was established as a self-governing, independent unit with its own supervisory
board under the Ministry of Social Affairs. The Volunteer Centre provides services to
voluntary social organisations and associations in the form of, for example, advisory and
counselling services, courses, consultancy and method development.. Besides rendering
services to organisations, the Centre is unde r an obligation to disseminate knowledge and
experience to the Ministry of Social Affairs and to other public authorities and co-
operation partners. Finally, the Centre se rves as secretariat to the Committee on
Volunteer Effort (see above).

Examples from CEE include the so-called public foundations, which are usually
foundations set up by law or government order. In Hungary
, it is prescribed in the Civil
Code that Parliament or a state authority may only set up a public foundation, and may

27 Partnerships and Public Accountability in British Health Care , Timothy Milewa, Stephen Harrison
and George Dowswell, available at https://www.cipfa.org.uk/panels/health/download/milewa_article.pdf Field Code Changed

European Comparative Analysis
Report by ECNL

not be the founder of a private foundation. This may sound obvious but during the
period of 1989-1993 many state agencies set up a foundation (the conditions of which
were very liberal at that time) and “donated” the property of a former so-called “social
organization” to it. In this way, public prope rties that belonged to the state but were in
the possession of party-governed social organizations (e.g. the National Women’s
Council, the Pioneers, the National Federa tion of Pensioners) became the private
property of a smart founder.

Public foundations were introduced in 1993 in part to end this abusive practice, and in
part to encourage additional inflow of capital into the public sector. The idea was that
companies and individuals would donate to those public foundations fulfilling important
social roles (e.g. supporting disabled children, disadvantaged women, unemployed or
homeless people through NGOs). A series of re cent studies by the State Audit Office,
however, revealed that this objective has not been achieved and that the public
foundations continue to lack transparency and accountability despite the stricter
regulations imposed on them compared to private foundations.

A hopefully more positive example may be the Croatian National Foundation for the
Development of Civil Society . The Foundation, established in 2003, is a public, not-for-
profit entity whose mission is to serve and strengthen civil society in Croatia. It will
support innovative programs developed by NGOs and informal, community-based
initiatives. Funding for the Foundation will come from the proceeds of lottery games in
Croatia; 50% of the moneys collected through gambling are allocated for this purpose.

The establishment of the National Foundation is seen as a critical step towards
improving the system of public financing for NGOs in Croatia – it marks a shift from a
highly centralised system, in which the Office for NGOs played the critical role, into a
more decentralised system. Through regional offices, it will work to promote the
sustainability of the sector, cross-sectoral cooperation, civic initiatives, philanthropy, and
voluntarism. Core activities will include: (1) education and publications, (2) grantgiving,
(3) public awareness campaigns, (4) evaluation services, (5) research and (6) regional
development. The Foundation will be governed by a Management Board composed of 3
representatives from the Government, 1 from local governments and 5 from CSOs.

II.7. Specific bodies

In addition to institutional forms of cooperation that may fit into a particular category,
there are institutional forms that are distinct in their functions and do not lend
themselves to easy categorization. Such a specific type of body is, for example, the
Charity Commission in the UK. The Charity Commissi on is established by law as the
regulator and registrar for charities in England and Wales.

Charities are an essential part of societal life in the UK but need to be regulated in order
to ensure that they meet the legal requirements for being a charity, and are equipped to
operate properly and within the law; to ensure that charities are run for public benefit,
and not for private advantage; to ensure that charities are independent and that their

28 Állami Számvev őszék: Jelentés a társadalmi szervezet eknek és köztestületeknek juttatott
költségvetési támogatások ellen őrzésér ől (State Audit Bureau, Report on the Control of Budget Support
to Social Organizations and Public Societies ), September 2002.

European Comparative Analysis
Report by ECNL

trustees make their decisions free of contro l or undue influence from outside; and to
detect and remedy serious mismanagement or deliberate abuse by or within charities.

The Commission performs this function by securing compliance with charity law, by
enabling charities to work better within an effective legal, accounting and governance
framework, keeping pace with developments in society, the economy and the law, and by
promoting sound governance and accountability. The Commission provides information
and advice on law and good practice and dealing with abuse and poor practice, assists
charities in registration, investigates evidence for non-compliance with the law,
cooperates with other regulators (prosecution, police), and may intervene to protect
charities’ assets. The CC is accountable and reports annually to parliament and the Home
Secretary and publishes annual reports. However, it remains an independent body acting
in the public interest.

Another “hybrid” category is a newly es tablished Fund in Hungary called the National
Civil Fund Program . It is not really a quango, as it is not registered as a public
foundation. Nevertheless, the law assigns to the Fund an autonomous governing body
that consists of 17 members, the majority of whom (12) are delegated by nonprofit

To finance the Fund, the Hungarian government will provide matching funds based on
the amount of actual taxpayer designations under the 1% tax designation law each year.
The 1% Law permits every Hungarian taxpayer to designate 1% of his or her tax liability
to a qualified NGO of their choice each year. Under the Civil Fund Law, the
government will match the amount of actual tax designations each year, and will in no
case contribute less than the 0.5% of personal income taxes collected. Thus, the more
money that taxpayers designate, the more money will be contributed by the government
to the Fund.

At least sixty (60) percent of the Fund’s reso urces each year will have to be dedicated to
providing institutional support (core costs) to NGOs in Hungary. This is an important
development as most of the available government funds for NGOs have been dedicated
to project financing only. Besides covering the costs of the Fund’s administration, the
remaining funds may be directed towards the support of various programs related to the
development of the NGO sector, including e.g. sector-wide events, festivals,
international representation, research, education or publications.
II.8. Local forms of cooperation

“The Study Commission recommends that pub lic authorities be made more citizen-
oriented and that citizens no longer be look ed upon merely as customers. They are also
co-designers and co-producers of services. At lo cal level, it favors the idea of what is
called the citizen oriented local community, i. e. a community to which local citizens make
committed and active contributions. To this end, it suggests that staff be trained to deal
with citizens, that incentives for user-friendly behavior be created, and that service points
be set up in public authorities to info rm and advise citizens. The Study Commission
further recommends that the organizations of civil society be offered more opportunities
to participate, that decision-making powers be decentralized, and that mediation and

European Comparative Analysis
Report by ECNL

monitoring as new forms of the bargaining process be integrated more closely into
citizen-oriented administrative action.” 29

The above quote could have come from any CEE country but is actually a finding and
recommendation of the special committee of the German Federal Parliament
(Bundestag), issued only a year-and-a-half ago. This report underscores the importance
of active cooperation between the public and nongovernmental sectors at all levels, but –
stemming from the general significance of the subsidiarity principle – especially at the
local level.

Local forms of cooperation generally reflect the forms and practices of cooperation at
the national level. There may be a committee or a subcommittee in the Local Council
dealing with NGO issues locally; there may be a special department in the mayors office
or a single person at the PR department who has the responsibility, among others, of
communicating with NGOs.

For example, the municipality of Szczecin in Poland created in July 1997 an Office for
NGOs, which originally employed only one person (until 1998). Nevertheless, it became
a place providing information about the NGOs, and functioned as an ombudsman for
NGO’s against the City Authorities. Due to the formation of the Office, NGOs, which
did not have any department to turn to in the City Council finally found a partner to
refer to with matters related to their activity . One of the real successes of this institution
was the launch in 1997 of Small Subsidie s, a program supporting NGOs short-term
initiatives. Currently, in addition to supporting cooperation with NGOs, the Office
handles various other tasks, like creating a database of NGOs operating in Szczecin;
collecting publications and other information (about grants and funds) related to NGOs;
representing the City at NGOs meeting; providing opinions on applications submitted by
the organizations, and financial assistance under the Small Subsidy fund, and assisting the
process of registration of NG Os with the District Court.

II.8.1. Innovative examples of local cooperation

The Citizen Advice Bureaus are an interesting model of creative and mutually
beneficial cooperation between local government and NGOs in informing and helping
citizens in their everyday lives in communities in several European countries.
The Citizens Advice Bureau Service provides free, confidential, impartial and
independent advice to citizens through NGOs, on any matter concerning their lives. It
originated in the UK in 1939 and has evolved from an emergency service during World
War II into a professional national agency . There are currently over 2,800 locations
where CAB advice is regularly available in England, Wales and Northern Ireland.
Each Citizens Advice Bureau is an independ ent charity (NGO), relying on funding from
statutory grants, the local government and from local business, as well as charitable trusts
and individual donations. The Bureaus are working mostly with volunteers. Citizens
Advice Bureaus help solve nearly six million ne w problems every year that are central to

29 Supra Note 26, page 9. 30 Material based on Szczecin Local Initiative Program , report prepared by John Driscoll , Unit for Housing and Urbanization Harvard University Graduate School of Design , Pawel Szczyrski , Unit of Cooperation with Non Governmental Organizations City of Szczecin and Janusz Szewczuk, 2001

European Comparative Analysis
Report by ECNL

people’s lives, including debt and consumer issues, benefits, housing, legal matters,
employment, and immigration. Advisers can help fill out forms, write letters, negotiate
with creditors and represent clients at court or tribunal.
Each bureau belongs to Citizens Advice, whic h sets standards for advice, training, equal
opportunities and accessibility. Citizens Advice also co-ordinates national social policy,
media, publicity and parliamentary work. Citizens Advice runs a national Advice Week
campaign each September to promote the work of the Citizens Advice service. As well as
giving advice, the Citizens Advice service uses its databank of client evidence to find out
where local and national services and policie s should change. It has built a strong
reputation for independent analysis.
The model has proven to be adaptable to the Central and Eastern European
countries . Citizen Advice Bureaus are operating in the Czech Republic, Poland and
Lithuania, based on the UK model.
The Czech Association of Citizen Advice Bureaus
is a non-profit organization with
experts who help people learn more about their rights and duties and advise them how to
defend their interests. Like the British example ,
the system relies primarily on volunteer
efforts. The Association has been active for almost seven years and unites more than 20
bureaus. 31
Citizens Advice Bureaus have also been established in Lithuania.
The Lithuanian CAB
Union was formed and established a network of general advice offices – Citizen Advice
Bureaus – in Lithuania by offering training and counselling services, providing
information on legal, social and other relevant issues, and developing social policy
feedback. The Lithuanian Government recognized that in the changing and challenging
economic, social and technological environment, citizens increasingly require quality
services and information, but the state and local authorities are not able to provide all the
necessary services and cope with emerging problems. Therefore the government also
provided support to this initiative.

The telecottage is an “infoteque” that aims to link isolated rural communities with the
rest of the world. It brings IT equipmen t and skills to small communities and thereby
provides a range of engagement and development opportunities to people who are
otherwise isolated in their everyday lives.

The first telecottage opened in 1985 in Sweden
at Vemdalen, a village in the north of the
country not far from the Norwegian border, by Henning Albrechtsen. The aim of setting
up this first telecottage was to make jobs , vocational training and service facilities
available to people in this remote part of Sweden, by providing access to a variety of
computers and modern telecommunications equipment – for anyone willing to invest
time and energy by learning how to use them
32. Less than four years later, about 40
telecottages were being set up in Scandinavia, with approximately half already in
operation. The Association of Nordic Telecottages (FILIN) has been formed to foster
cooperation. Moreover, as many as 75 countries have already joined a world-wide
organization, the International Un ion of Telecottages (TCI).

31 Alena Skodova, Association of Citizen Advice Bureau s celebrates five years of existence, report,
30/05.2001, https://www.radio.c z/en/article/28493 32 Rural Telecottages in Sweden , https://www.globalideasbank.org/BOV/BV-467.HTML

European Comparative Analysis
Report by ECNL


In Sweden and other Nordic and West Europe an countries, the telecottage combines the
functions of a training center, library, post office, telecom shop and communications
center, with courses in the use of computers and telecommunications equipment. As a
service unit, the telecottage is able to assist local firms with letter writing, bookkeeping,
translations, etc, whilst functioning as an office for small businesses, and providing
advice on the purchase of computers and software.

The model was also successfully introduced in a number of CEE countries , such as
Estonia and Hungary. The first telecottage in Estonia
was founded in 1993 by Rapla
County village movement 33. In 1995, the Estonian Association of Rural Telecottages was
formed by the all-Estonian village mo vement KOKUDANT. The association was
established as a non-profit, non-governmental organization for co-operation between
organizers and supporters of rural telecottages. Its mission is to promote economic
development, education and scientific research in rural areas by extending the use of
modern communication and computer technology, and to establish a network of rural
telecottages. The primary role of the association is to develop and support the movement
of telecottages in Estonian villages by offering consultancy, research and exchange of
know-how and information. By the end of 1997, the Estonian Association of Rural
Telecottages had more than 30 members.
The primary successes of telecottages in Estonia have been the following:
• Changes in society toward democracy and participation. Telecottages have been
an important support factor in widening the village movement
• Deeper involvement of local inhabitants
• Improved access to services
• Improved working and living conditions
• Meeting local development needs
• Disseminating information that helps build the community
The Hungarian
telecottage movement grew out of a community development program in
1993 in Csákberény, a small mountain community in mid-western Hungary. Between
1997 and 1998, 31 new telecottages were established in Hungary. The country now has
more than 150 telecottages and there are plans for about another 50 and up to 600
satellite offices.

Although each telecottage is an independent entity, its assets are normally owned by a
local non-governmental organization (NGO) and it is office space, personnel and
financial resources are contributed by the local government (largely through contracting
out public services). In some cases, the telecottage is based in a local library, school or
community center. The telecottage operator can be the NGO, a private company or an
individual taking out a c ontract with the owner.

33 Telecottages in Estonia , Center for Tele-information, Technical University of Denmark, 2001,
https://www.itu.int/ITU-D/univ_access/casestudies/estonia.html 34 Id. 35The Hungarian Telecottage Movement, Bill Murray, Small World Connections, UK, available at

European Comparative Analysis
Report by ECNL

The Hungarian telecottage movement has been funded by the central government, state
and private domestic and foreign companies, embassies, international organizations, and
foundations. The telecottages cover a portion of their operating expenses by contracting
with government agencies and serving as micro-regional program management centers,
initiating development proposals and collecting regional development information. Many
centers also provide support to their local communities by applying for international,
national, regional, county and local grant funding.

Several factors have been critical to the development of Hungarian telecottages. One has
been the special relationship between telecottages and the NGOs forming a core
partnership. Another has been that this was a grass roots movement based on local
community needs and initiative. At the same time, it has become clear that without active
community outreach and strong skills in community development of the local staff, the
telecottages will remain unused and resources will be wasted.

National governments have played an important supporting role in both the Nordic and
the CEE model. While the Swedish telecottages generally are able to cover their running
costs from service fees, the initial finance for the first ones came from the government,
Swedish Telecom and the local council. In Hungary, the government has been providing
on-going support to the HTA. Telecottages have become an integral part of the
Hungarian government’s approach to providing rural communities with access to
government information and services, and with an opportunity to achieve local economic
II.9. The question of NGO representation

When reading in some of the above institut ional mechanisms and forms of cooperation
that NGOs elect their representatives to a certain body, the reader might have asked,
how is it possible? The requirement of establishing bodies with “representatives of the
NGO sector elected by the NGOs themselves” is actually incorporated in laws and legal
or policy documents in at least 4 CEE countries (Hungary, Poland, Slovakia, Croatia),
and is also in draft legislation (for example, in Latvia). However, the actual process of
implementing this requirement has not been legislated, except in the case of Hungary.
The Hungarian National Civil Fund is the fi rst attempt at implementing a legally
prescribed electoral mechanism among NGOs in CEE.

A theoretical problem with NGO representation is that often it is confused with the
representation of the interests of the people. NGOs sometimes claim that due to their
wide membership base (or even due to the fact that they know the problems of
disadvantaged people), they are “representin g the people”, and therefore, their voice
should be heard. However, in reality, NGOs always represent a particular interest in
society (even if that interest is otherwise very important), and many times these interests
are competing. For example, the interest of youth may mean for one NGO that drug use
should be prohibited, and for another, that it should be legalized.

NGOs are not elected bodies and their legitimacy does not stem from the fact that they
represent anybody’s interest. Their legitimacy rather stems from their mission, i.e. from
the fact that there is a real need in the community or society that they are aiming to

European Comparative Analysis
Report by ECNL

fulfill. 36 Therefore, as long as an NGO is really making a difference, achieving real
change in the community, it will be considered (morally) legitimate. Their capacity to
effect social change enables them to be the main vehicles of participatory, not
representative democracy.

Unfortunately though, in some cases, those who are dissatisfied with how the political
establishment works view the realization of the principle of participation as a
replacement of representative democracy. In Hungary, it has been suggested, that there
should be a mechanism that ensures NGO representation in the Parliament (e.g. a
second chamber); while in Macedonia, NGOs are setting up an NGO Parliament and
even a shadow government in an expectation to improve social conditions in the

There are also practical problems that need to be overcome when organizing some
form of NGO representation. Firstly, who should be the subjects of such an election? All
registered NGOs or public benefit organizations only, or also informal networks, non-
registered associations? What about autonomou s branches of a national organization?

In the Slovak Council for Non-Governmental Organizations (see above, section II.4.),
there are 22 members that are representatives of „platforms“ of NGOs. Such
„platforms“ of NGOs are formal or informal groupings of NGOs representing certain
areas of NGO activities. However, in official documents there is no mention of who
decides on whether a grouping constitutes a platform or not, and how will they be
selected from among each other. In practice, platforms are the ones that are considered
as such by the government and the existing group, and they were self-elected once at the
launch of the Council – which shows how difficult it is to be consistent in applying the
democratic procedures of a representative sy stem to the sphere of NGO participation.

Another practical problem is that an elect oral process is all about procedures, not
substance, which may hinder the effectiveness of the elected bodies. For example, the
Hungarian National Civil Fund Law requires th at the majority membership of regional
grant-making bodies of the fund (the so-called colleges) be elected by the NGOs locally.
As it happened in the very recent elections, only a handful of the more than 50 elected
college members have any grant-making experience, while their main responsibility will
be to distribute over 6 billion Hungarian forints in the coming year.

Despite all these problems, NGO representation is a European tendency. Most
governments expect some kind of a representative grouping of NGOs as the “partner”
to talk to. Even though a unified or centralized representation is considered by many to
be against the principle of diversity, inherent to the nature of civil society, NGOs often
find it useful to create networks, coalitions or federations to assert stronger influence on
decisions that affect them and their constitu encies. Mostly, these federations or umbrella

36 See Miklos Marschall: Legitimacy and Effectiveness: NGOs in Comparative Perspective, in: SEAL,
Spring 2001
37 “Civil society is about participation, while pa rliamentary democracy is about representation. The
civic politics of ci tizen participation and the parliamentary “party politics” of representation have a
healthy dynamic of both complementarit y and tension. It is important to understand that civil society is
complementary, not a rival, to representative democracy, and participatory democracy goes hand in
hand with representative democracy.” Id.

European Comparative Analysis
Report by ECNL

groups are organized by the sector area where they work and where they would like to
affect policy change (e.g. women’s issues, environment., human rights etc.).

In case of the European Commission , it is indeed a requirement to be of a
representative character for consultation on policy documents, and often for funding.
The Commission itself has acknowledged the problems with determining which NGOs
will be entitled to funding or policy negotiat ions at the European level, but opted to
regard representation as a decisive factor. “Difficulties begin with the selection of
participants. Given the large number and d iversity of European NGOs in the EU alone,
criteria for selection such as legitimacy or representative character are of vital

In a background paper, the Commission considers a three-prong approach in
determining the level of legitimacy of an NGO partner:
– they encourage NGOs to organize themselves, therefore, umbrella
groups with more members from severa l countries, with more democratic
structures and mechanisms, will be favored;
– they acknowledge the importance of “”verifiable criteria” regarding
management, especially resource management of the NGO; these criteria
are usually outlined in concrete documents, such as co-financing
– and finally, they recognized that even the above criteria will not be
satisfactory and that they could be complemented by “pursuing a
pragmatic approach based on the EU’s existing relationships with, and
knowledge of, ENGOs.”.

III. Analysis of government le vel funding policies and
mechanisms for NGOs and public initiatives

Government funding provided under various forms and through different mechanisms
represents a considerable portion of NGO revenue in almost all countries in Europe.
Recent data (2003) shows that the percentage of public funds available to NGOs in WE
varies between lower figures in Sweden and Norway (about 20%), on the one hand, and
higher amounts in the Netherlands, Belgium and Ireland (almost 70%), while in the
countries of CEE, the amount of government funding as a percentage of NGO revenue
ranges between 20 and 30% on average..
40 For the period 1990-1995 this share remained
more or less unchanged in almost all countries. 41

Furthermore, at present is it estimated that over Euro 1.000 million a year is allocated to
NGO projects directly by the Commission, the major portion of this funding devoted to
the field of external relations for development co-operation, human rights, democracy
programmes, and, in particular, humanitari an aid (on average Euro 400 million). Other

38 Background paper, EU Development Ministers Seminar, 1999
https://www.dse.de/ef/eu/bac110e.htm 39 Id. 40 The difference is even more impressive when expressed in absolute figures. See data from the Comparative Nonprofit Sector Project the Center for Civil Society at the John Hopkins University, https://www.jhu.edu/~cnp/pdf/comptable4.pdf 41 Idem , https://www.jhu.edu/~cnp/pdf/ct11.pdf
Field Code Changed
Field Code Changed

European Comparative Analysis
Report by ECNL

important allocations target the social (a pproximately Euro 70 million), educational
(approximately Euro 50 million), and environmental sectors within the EU. Several
hundred NGOs in Europe and world-wide are receiving funds from the EU. The
Commission has therefore contributed substantially to matching the support of the
members of the European public given to NGOs and thus highlighting the continued
importance of high levels of public support for the role of NGOs.

Government policies and attitudes toward fi nancial relationships with NGOs are mainly
determined by the role in the development of society and the implementation of
government objectives that is attributed to the third sector. Financial support to NGOs
may be a part of governmental policy reflecting the government’s position that NGOs
are partners in achieving important political and social tasks. Normally, this policy is
accompanied by a well-developed system for providing public support to the third sector
determined either at a central political level by legislation, by a government policy
document or a compact-type bilateral document (UK), or by acts of other public
authorities (government (Croatia), minist ry (Germany) or other institution) .

Public funding support may be in the form of payment for goods and services that fall
within the competence of the public sector or in the form of programmatic support for
NGOs’ activities. It may also be delegated to local authorities (Hungary). The financial
relationships with NGOs may be controlled di rectly by the government (Germany) or its
agencies (like the Swedish International Cooperation Agency which administers bilateral
development assistance programs and the country’s support to NGOs
43) or through a
specific institution (the newly established Croatian Foundation for Civil Society
Development) established to coordinate the various aspects of the relations between
organized civil society and the state.
III.1. General policy considerations in support to NGOs

There are two main types of go vernment funding for NGOs:

Direct funding – Financial support assigned from the public budget at the central or
local level to an NGO directly, i.e. it will represent a budget expense in the given
financial year. This does not mean that the funding will go directly from the State
Treasury bank account to the NGO’s bank a ccount; usually the funds go through various
governmental agencies (ministries, public foundations, funds etc.).

Indirect support – Indirect financial support does not include the direct transfer of
money or property; rather, it represents a benefit granted to NGOs which allows them to
use assets to accomplish statutory goals rather than cover other financial obligations.
Such support will not appear in the public budget as a direct expense; rather it represents
revenue foregone (e.g. in the case of providing tax benefits, the tax revenue that is not
going to be collected is considered indirect support).

The key criterion that governments use in orde r to determine whether and to what extent
any NGO is qualified to receive public support is the “public good” served by the

42 The Commission and Non-Governmental Organi sations: Building s Stronger Partnership,
Commission Discussion Paper, presented by President Prodi and Vice-President Kinnock, Brussels,
18.1.2000, https://europa.eu.int/eur-lex/en/co m/wdc/2000/com2000_0011en01.pdf
43 See more on the website of the Swedish International Development Cooperation Agency https://www.sida.se/Sida/jsp/polopoly.jsp?d=107

European Comparative Analysis
Report by ECNL

activity of these organizations (rather than the type of activity they conduct, e.g. service
or advocacy activities). The degree to which NGOs support the public good, as reflected
in “public benefit” legislation (or its functional equivalent in, for example, tax law),
may entitle both service and advocacy organizations to direct and indirect public
financing. Both service and advocacy NGOs can engage in public benefit activities that
deserve government support, but in general, service-delivery is more likely to qualify as
“public benefit activity” and to make the provider-NGO eligible for financial support.

According to the public benefit criteria, there are generally two main types of NGOs:

ƒ Public benefit organizations (PBOs), and
ƒ Mutual benefit organizations (MBOs).

The PBO/MBO distinction is generally the basis for determining the appropriate level
of indirect support (e.g. tax benefits). In the case of direct support, the primary question
is whether there is a legal basis prescribing what type of NGOs should receive what
type of direct support. Lacking legal prescription, the state may decide on its own and
will often determine direct support based not on the NGO’s function (e.g. service,
advocacy or self-help), but rather based on whether the NGO activities are helping to
implement a state policy. With a view to such policy, the state may decide that an
NGO is providing some activity that is considered worthy of support – for example,
even self-help organizations, such as Alcoholics Anonymous receive public funding in
Hungary because through its self-help activitie s, the organization is accomplishing results
that contribute to a more healthy society.

III.2. Policy considerations in providing direct support to NGOs
III.2.1. Service provision

From the funding policy point of view, there is a principle difference between public
service functions for which the state has a legal obligation to ensure , and those for
which the state has no such legal obligation. For example, in every European country, the
state has to ensure the primary education of children; in other words, the state has the
responsibility to provide the opportunity for every child to learn so they can fulfill their
right to education. At the same time, the state will generally not have an obligation to
ensure that every child with a spine disease has access to horse therapy, one of the most
effective ways to treat spine diseases.

In many countries, however, the difference is not so clear. For example, home-care for
the elderly may be a legal obligation for local governments in one country, while it may
not be included among their tasks in another. The determination of what is and what is
not a state obligation evolves over time and in most CEE countries it changes even from
year to year, as society develops.

For example, in Hungary, at the change of the system (1989), thousands of people
suddenly became homeless, as companies closed their state-run workers’ hostels. As the
state was not prepared to deal with so many homeless, hundreds froze to death during
the first winter of the new democracy and several NGOs were set up to shelter and help
people on the streets. Because the problem was so visible and received media attention,
Parliament reacted by making it obligatory for the local governments to provide shelters
Deleted: their

European Comparative Analysis
Report by ECNL

for the homeless. Since many NGOs, however, already ran such shelters, the local
governments simply gave the budget money to the NGOs. Even today, practically all the
homeless shelters in Hungary are run by NGOs and financed by the local governments.

Often a certain task becomes a state obligation because NGOs lobby successfully for the
inclusion of a certain type of service in th e state legislation. For example, the social
service NGOs that introduced meals-on-wheels se rvice to the elderly in several districts
of Budapest argued successfully that by pr oviding lunch only to the elderly in day-care
centers, the local government was discriminating against those elderly who cannot go to
day-care centers. As a result, local legisl ation included the meals-on-wheels among the
services that are entitled to state support.

Other services, such as the hospice (care for the terminally ill, especially last-stage cancer
patients) are still not part of the state-financed services in Hungary despite repeated
efforts by NGOs to prove that this service he lps fulfill the constitutional right of the ill
person to human dignity. Therefore, if a hospital maintains a hospice department, it is
usually run by a foundation that raises funds from elsewhere (e.g. from church or private

The importance of the distinction between lega lly prescribed government tasks and those
for which the government has no obligation is reflected in the direct financing policies
for NGOs.

The fact that an NGO provides a state service in itself does not entitle it to receive state
support for this service. However, most European states have accepted legislative
policies that assume the obligation of the state to finance this service whether it is
provided by a government institution or a private provider. It is also becoming more
common for governments in CEE to provide funding to private providers for those
services that are considered obligatory and for which governments would have to pay
anyway. There are various mechanisms for providing direct financing, described below.

On the other hand, financing for the kinds of services that are not included among the
legal obligations depend entirely on the policies of the central or local government. In
most European countries, there are certain policies related to social and economic
development that are determined as a priority for each ministry for a given year (e.g. for a
ministry of labor these may include the reduction of unemployed Roma in a certain
region; the increase of companies employing disabled persons; or the increase in part-
time employment of women). Among other measures, like legislation and supported
employment, the ministry may decide to have a grant program for those NGOs that run
programs addressing these state policies.

It is generally difficult in a European system to find funding for services that are not
considered a priority by the government on a central or local level. For example, until the
late 1990s, if an NGO operating in a small town in Hungary identified a pressing need to
address domestic violence issues, the NGO would not have been able to obtain
government funding for such a program. Dome stic violence was simply not a priority at
the national or local level. But the world is changing. Due in part to the advocacy efforts
of women’s organizations and – mainly – to the pressures of European Union policies on
gender equality, as of 2004, the Hungarian Ministry of Interior is headed by a woman and
has launched a nation-wide domestic violence training program for police forces. Today
the same NGO in the same small town will have a range of government grant

European Comparative Analysis
Report by ECNL

opportunities to finance its outreach to abused women. But NGOs providing shelters for
stray dogs that lacked grant opportunities in 1996, continue to struggle for financing.

In summary, the legal obligation for the state to ensure the provision of certain services
is the main criterion for receiving direct state support in service provision. Beyond legally
required services, government policies on the national and local levels determine grant-
making priorities. The ability of NGOs to lobby for the inclusion of their service in the
relevant laws and the government budget, or to prioritize an issues on the government’s
agenda, will likely have direct influence on the level of state funding available for them.

III.2.2. Principles and mechanisms for direct financing of services that the state should ensure

Governments have a range of principles and mechanisms available to determine how
exactly NGOs should be financed for providing state services.

ƒ An important question to address is whether the government would like to
provide a preference to service-providing NGOs that compete with other
entities. NGOs have access to tenders for the delivery of social and/or other
services assigned to governments; howeve r, in most European countries they do
not enjoy exclusivity of such access. They are eligible for funding on equal terms
and conditions as the rest of the bidders. The government’s position in these
cases does not express a preference for the third sector in the service-providing
area. (See UK, Poland and Hungary examples below).

• Subsidiarity principle (typical of Germany): According to the subsidiarity
principle, a need that emerges in a co mmunity has to be catered for by those
closest to the need.
44 As a basis for the German social policy, this principle has
determined the system of financing social welfare services in Germany for the
last century.
45 According to this system, the need should be firstly addressed by
the (informal) community of those affected (e.g. family, neighbors); if that is not
possible, then by the formal organizati ons of the same community (NGOs). The
local government may only set up a service for a need if there is no organized
community effort addressing it already. Finally for those needs that are not
catered to at the local level, a regional and, ultimately, a federal system has to be
established. In this case, the government usually chooses to finance all of the
service and budgets are negotiated on an annual basis.

• Normative system (introduced in Hungary): anyone providing a service that
would be the government’s task (including education, health, social and other
welfare services) and who meets certain criteria (standards determined by the
government) will receive government support based on the number of clients it
serves. Because this government support is provided on a per capita basis it is

44 The subsidiarity principle is also a generally adopted principle of the European Union, intended to
ensure that decisions are taken as closely as possibl e to the citizen. It means that the Union does not
take action (except in the areas which fall within its exclusive competence) unless it is more effective
than action taken at national, regional or local level. https://europa.eu.int/scadplus/leg/en/cig/g4000s.htm
45 The principle, as understood in th e social policy context, originates in the Encyclicas of Pope Leo
XIII (1891) and Pope Pius XI (1931) , who first explained and elaborated upon the division of tasks
between state and church, as well as communities, in improving social conditions.
socialpolicy.ucc.ie/Government%20Say.htm – 19k

European Comparative Analysis
Report by ECNL

called “normative support”. The service provider will receive the support
regardless of whether it is a local gove rnment institution, an NGO or a private
company. (Private companies will not make profit based on this support as it
covers only a portion of the service-related expenses and any fees received from
clients need to be reinvested in the service.) Local governments usually cover
only operational costs, meaning that NGOs must fundraise in order to remain
competitive. This system may accompany the subsidiarity principle as well.

• Competitive system (typical of UK, introduced also in Poland): under this
system, there is a list of public benefit activities and any time the government
authority or local government wants to provide a service within a specified area
of public benefit activity, it needs to issue a tender. NGOs and local government
institutions (as well as private companies in case of the UK) compete to win the
tender by offering the best value service. In this case, the types of costs the
government covers may vary – more ofte n than not, there is a requirement to
raise additional funds to win the bid.

In CEE a general problem is that traditionally the government provides all public
services. Existing government institutions want to ensure a stable income for their
employees and it is threatening for them to think of NGOs “coming from nowhere” and
suddenly taking over “government” roles. Therefore local governments often view
NGOs more as competitors than partners in achieving their own goals (i.e. improving
quality of life in the community).

III.2.3. Advocacy organizations

In the case of advocacy organizations, the central question from the point of view of
their effectiveness is whether they can remain independent from state influence if they
receive state funding. We ma y make two basic assumptions:
– In contrast to service provision, the state usually has no legal obligation to
finance advocacy organizations because of what they do
– there is nothing to prohibit the state from providing financing to advocacy
organizations and it is ultimately up to the organization itself to decide if it wants
to accept state funding and be associated with the government.

The core of the mission of advocacy organizations is usually to protect or further the
interests of a certain societal group. In order to achieve that, advocacy organizations
often challenge state policies, oppose planned legislation or mobilize against a
government action. What could then be the reasons for the government to support “its
own enemies”, or in a more positive light, “its own challengers”?

The most important reason is the “enlightened self-interest” of the state to ensure that
the electorate will be satisfied with the policies that affect them. By ensuring means for
participation and an opportunity to influen ce the decision-making process, the state can
preempt potential dissatisfaction and unrest in society. In the case of the EU,
“consultation with the interest groups” is considered an integral part of good

46 With the exception that such organizations are sometimes included in the state budget on an annual
basis, see Subsidies, Section III.3.1.

European Comparative Analysis
Report by ECNL

governance, and legislative efforts by member states to implement the acquis communitaire
have to be based on “social dialogue”.

Furthermore, governments gain access to inexpensive but high quality policy expertise by
ensuring avenues for participation. Often advocacy NGOs who consider it their mission
to achieve progressive change in legislation and state policy have extensive experience in
the field and are sometimes more knowledgeable than public sector or for-profit experts.
(For example, NGOs often have access to cutting edge expertise through their
international networks.) By supporting them, governments can ensure that the
professional quality of a policy action remains high and compatible with international
standards or best practices.

A constructive relationship between government and advocacy NGOs presupposes
mutual respect and some degree of trust from both parties, which is often still lacking in
CEE countries. Unfortunately, there have been cases where a government has supported
advocacy NGOs in order to gain control over a policy area or to create its own clientele.
In such cases, political considerations override professional ones.

In the case of advocacy organizations, a helpfu l criterion that is used by governments to
determine their entitlement to public support is whether they pursue public benefit or
mutual benefit interests . This may relate to the kind of activity they are engaged in (e.g.
sports or environmental protection), or the target group they are serving. For example,

ƒ professional interest groups – the prim ary purpose of which is lobbying – may
not be entitled to government support (a nd usually rely on membership fees);
ƒ federations of disabled people – which pursue, in essence, the same goal may still
be receiving government support as their efforts contribute to the public good.

Once the government decides to support such organizations, it may be considered good
practice to make the decision-making mechanism independent from the political
establishment. How to achieve this? One solution is to create a semi-autonomous
decision-making body. This body may be set up within the central administration system
(e.g., a ministry establishes a grant-making advisory body), or in the form of a quango.
Such bodies will usually consist of independent experts and representatives of all the
parliamentary parties. (These kind of independent, multi-party bodies are also common
in ministries giving grants to service-providing NGOs.)

As in the case of service provision, government policy development and implementation
are a sound basis for supporting advocacy organizations, which can usually benefit from
(programmatic) public support of their activities mainly through subsidies and grants
mechanisms (see below). However, certain limi tations are possible – activities which are
considered to be obstructing governmental policies may not be considered as
contributing to the public good and therefore, eligible for state financing.

European Comparative Analysis
Report by ECNL


III.3. Forms of direct government support

III.3.1. Subsidies

Subsidies are government funding providing ge neral support to NGOs’ activities and not
linked to a specific project
47. They can be used to cover general operating expenses as
well as specific project implementation and therefore serve as a general support for the
activities of NGOs whose contribution to governmental policy implementation is
considerable. It may also serve as a general indicator of the public sector’s recognition of
civil society and its merits.

This form of financial support is most ty pical in the CEE countries and its use is
currently declining. Direct budget subsidies are considered a remainder of the communist
period, i.e. those organizations that lobbied successfully during the change of the system
received a special position in the budget and became entitled to subsidies, such as the
Red Cross (in almost every country), the National Federation of Pensioners, the
Pioneers, the Blind etc. In Hungary, the Annu al Budget Act allocates central subsidies to
about 25 organizations listed in the annex to the Act but only a few of them are involved
in actual service-providing or other form of activities to the benefit of the public.

However, it can still be a good solution for organizations that have not yet achieved
financial sustainability, especially as foreign aid support is declining. Funding through
subsidies is not open to all NGOs; usually potential beneficiaries include interest
representation groups (see the examples a bove), service-providing organizations, and
very few, if any, advocacy organizations. Subsidies distributed through ministries or other
governmental institutions normally go to NG Os working in the area of activity of the
line ministry (e.g. the Ministry of Youth and Sports in Romania is authorized to allocate
funds to organizations engaged in the area of sports and youth), which could include
advocacy organizations as well.

Subsidies are a form of budgetary support and can be provided from the central and local
budgets, usually on the basis of a law. They can also be set by an administrative decision
of a public authority. For example, in Hungary, the Parliament used to determine, upon
the recommendations of the Parliamentary Commission on Civic Organizations, which
NGO-applicants would receive a subsidy. The Slovak Parliament has adopted a special
law setting guidelines for subsidizing NGOs
48; the allocation of funds is executed
through the separate ministries. Subsidies may also be directly distributed by parliament
in the Annual Budget Act (Bulgaria, Hungary).

Funds distributed as subsidies may also orig inate from other sources than the budget,
such as privatization funds (Czech Republic – but this is a source of limited duration), or
lottery proceeds (Croatia).

47 Preliminary study of the legal frameworks for pu blic financing of NGO activities in Bulgaria,
Croatia, Hungary, Romania and Slovakia , ICNL, 2001, p.1, also available at
48 Id. , p.9

European Comparative Analysis
Report by ECNL

Subsidies are usually determined through a cen tralized process but can be allocated and
distributed by the separate ministries (R omania, Bulgaria, Croatia, Hungary). The
subsidies-distributing body is usually the supervisory body as well.


According to the USAID Glossary of ADS Terms, grants are legal instruments used
where the principle purpose is the transfer of money, property, services or anything of
value to the recipient in order to accomplish a public purpose of support or stimulation
authorized by statute and where substantial involvement by the state is not anticipated.

Grants are generally not used to cover opera ting expenses, but they are designed to pay
for the implementation of a given project which falls within the government’s
programmatic objectives and is therefore cons idered to be of public value. However,
core costs may also be supported via grants – as in the case of Hungary, where the new
National Civil Fund gives grants for operational costs, with the explicit aim of
strengthening the NGO sector.

In Denmark, volunteer organizations may receive so-called “basic grants” which are not
destined to fund a specific project but are distributed on the basis of objective criteria
such as purpose, turnover and self-generated funds. The intention is to stimulate the
voluntary organisation’s autonomy and freedom to determine its own activities and to be
capable of promoting the interests of others.
50 The other type of grants available to
Danish NGOs active in the social field – the “project grant” – is awarded directly to
specific projects or activities.

Grants, unlike subsidies, are awarded through an open tender-type grant application
process and not by an individual administrative decision of a central or local government
officer or by Parliament. They may provide funding for the delivery of social services
(Germany, Croatia, UK) or the implementation of programs from the country’s
international development aid obligations (Sweden, Denmark, Germany). Funding to
NGOs provided in the form of grants is al so evidence of the government’s recognition
of the third sector’s public role; often it is essentially compensation for their performance
of tasks or enhancement of objectives that would otherwise have to be addressed by
public authorities.

Grants may originate from the budget (centr al or local) but also from special funds
formed by income from alternative revenue sources: lottery proceeds, taxes, etc. For
example, the “basic grants” in Denmark is also formed from the so-called “Danish
Football Pools and Lotto” funds in addition to the budget sources. The “project grants”
are distributed from the Grant Programme for Development of Voluntary Social Work,
which is a central government budget source.

In Hungary, there are a range of central fund s supporting NGOs financed by some sort
of tax mechanism, e.g. the Cu ltural Fund from the tax on kitsch and pornography; the
Employment Fund from contributions paid by employers and employees; the

49 Glossary of ADS Terms , United States Agency for Internat ional Development, Washihgton, DC:
USAID, 2001, p.81, also available at https://www.usaid.gov 50 The Voluntary Social Sector in Denmark , Ministry of Social Affairs, Denmark, 2001, https://www.sm.dk/eng/dansk_socialpolitik/index.html

European Comparative Analysis
Report by ECNL

Environmental Fund from tax on gas, fines paid by polluters, and the Civil Fund
(newest), which is based on the amount of 1% contributions (See Section III.5.4.). (These
funds usually provide grants and loans not only to NGOs, but also to local governments
as well as entrepreneurs in the given field.)

Grants are often distributed either directly by the government or by a governmental
agency. In the UK this function is assigned to the local offices of various government
authorities (e.g. for health, employment, education). This role can also be assigned to a
special entity, like the public foundations in Hungary, or the single public foundation
created for that purpose in Croatia. In Germany, the government provides support to
the national umbrella organizations of NGOs who will in turn distribute the funds to
their membership. In Poland, the local government is envisione d as the main body
responsible for the tendering and contracting out of the local services. The Danish
Ministry of Social Affairs is responsible for distributing the “basic grants” to voluntary
organizations working in the social field
51. Grant-making in the EU can also be
channelled through the national or local authorities of the individual Member States or
be provided by the Commission or by special funds. The projects funded through this
form should always be directed at the achi evement of a precise objective and in pursuit
of a common EU policy.

Certain limitations on the eligibility of NGOs for access to grant competition procedures
are possible – for example, only NGOs with pu blic benefit status may be admitted to
apply for funding. The organization’s area of activity may also impose a limitation on its
access to tenders: for example, only NGOs operating in the area of health–services may
be admitted to bid for a grant fo r the delivery of such services. NGOs are mostly eligible
for grants for social (human) services provis ion (health, social care, education, culture
etc.) or development aid. However, grant-making is in principle possible in all areas of
government operation – e.g. the Ministry of Interior in Hungary provides grants to
volunteer civic police forces, and the Minist ry of Justice provides grants to NGOs
educating judges on domestic violence issues.

Grants are usually distributed on a competitive basis and after a selection process.
Among the selection criteria are typically included: past activity of the organization,
history of partnership, references, political and other activity unrelated to the competition
but troubling the funder, technical quality of the proposal, professionalism of the staff,
“package projects” (related projects some of which have already been won by an
applicant), reliability, managerial and financial competence, possibility of receiving cost-
share funding, possibilities for establishing a mutually beneficial future partnership, time
limits for implementation if they are not strict ly determined in the announcement, etc.

The selection process involves – or should involve — several crucial safeguards to ensure
that appropriate levels of transparency and openness. Thus, there should be appropriate
procedures to announce and advertize the available grants and specific criteria for
awarding them. For example, all EU grants are posted on the Internet and categorized
according to the area of activity and eligible recipients. The requirements for a fair and
open selection process also include publicizing the award, the possibility for review of
the decision, and the remedies available after a challenge of the award decision.

51 Id.

European Comparative Analysis
Report by ECNL

Funding through grants may be occasional, short-term, or long-term. Preference is
usually placed on occasional or short-term funding, in part because the state
administration may not commit itself to mu lti-year funding without knowing budget
objectives for subsequent years, and also to prevent NGOs from becoming dependent
on the grants. However, this short-term view often limits a developmental approach in
public grantmaking.

Funding through grants is effectuated by signing a contract between the grant-making
authority and the NGO-recipient. Part of th e content of the contract may be mandatory
as provided for by legislation or by the competition announcement. The legal nature,
content and consequences of this contract should not be confused with the procurement
contract on the basis of which the funded NGO provides works or services falling within
the domain of the public authorities. The fo rmer provides for the terms and conditions
for the use of the public funds, reporting and supervision, while the latter also regulates
specific terms and conditions regarding the process of service-delivery.

III.3.3. Procurement

Procurement is the purchase of goods and services delivered by NGOs by the public
authorities. Usually the legislative mechanism for procurement is established for all
potential participants including business enti ties and NGOs. The latter are most likely to
be funded by the government for the delivery of social services. In Germany, NGOs are
the default providers of social services. In the UK, the second stage of the process of
restructuring the welfare state (1980s-1990s) ha s resulted in the break-up of the previous
public administration system, the introduction of management of social welfare, and
“quasi-markets”. Under the new system, public services have to act like economic
markets and therefore NGOs, as possible providers, have to compete on equal footing
with for-profit institutions and public sector institutions
52. In Croatia, local authorities are
specifically empowered to assign “public uti lity” services to natural and legal persons
based on a written agreement.
53 In Poland, NGOs have been given a chance to compete
with the public providers in the newly adopted Law on Public Benefit Activities.

In Sweden, volunteer organizations have access to competitive tendering for the delivery
of social services (childcare, education, home-help). The municipality of Täby has
introduced innovative flexible models of contracting out services by taking into account
various aspects of this “privatization” of public services. For example, they provide an
employment guarantee when it comes to a competitive tender. When a private provider
is awarded the contract, the employee has the right to choose if he or she wants to
remain employed by the municipality or join the entrepreneur. But he or she also has a
one-year option to return to the municipality.

The main problems that NGOs encounter in a ccessing this form of government funding
is that the majority of the projects open to procurement are high-value projects and it is
often very difficult for NGOs to comply with the requirements placed on bidders. In

52 Social Policy in the UK, https://www2.rgu.ac.uk/publicpolicy/introduction/uk.htm 53 Supra Note 47. 54 Arne Svensson , Redefining Public Services Through Mar ket-oriented Mechanisms: Scandinavian Experiences & Best Practice, Professional Management AB Presentation at the International Workshop on Guarantor Government in Täby , Sweden, 31 May-1 June 2001, arranged by Bertelsmann Foundation/ Cities of Tomorrow, available on https://www.cities-of-tomorrow.net/Svensson.doc
Field Code Changed

European Comparative Analysis
Report by ECNL

addition, procurement is often considered inc onsistent with the not-for-profit nature of
NGOs. Indeed, very few procurement procedures allow for access and successful bids by
non-profits (essentially only smaller projects in the area of social services or local public
benefit services). The Slovak Public Procurement Act of 1999 expressly excludes NGOs
from the tenders for public services.

A potential solution is the Hungarian example, that is, a special form of contract called
“ public benefit contract ”. This may be executed with “outstandingly public benefit
organizations” for the provision of state services. In Hungary, there are two categories,
or two levels, of public benefit status: the “normal” public benefit organization and the
outstandingly public benefit organization. This second category describes organizations
that have a special contract with a state agency commissioning them to provide public
services. Such a contract entitles them to the special public benefit status and the
additional tax and other benefits that accomp any it. While only 6% of NGOs have such
status, it represents an important element in the development of the state/civil society
relationship, because it provides a transparent legal form for NGOs to provide state
services (when otherwise NGOs would have di fficulties obtaining contracts under the
procurement laws).

III.3.4. Normative support

The normative financial support to NGOs ha s certain similarities to the system of
procurement of social services. It is a reimbursement to NGOs that deliver services in
areas such as healthcare or education and th e funding is determined on the basis of the
services actually provided. Under this system, physical persons have the right to choose
their service-provider, possibly an NGO, wh ich then seeks reimbursement from the

Normally, the normative funding is preceded by a contract with and/or a permission to
operate issued by a public authority which thus authorizes an NGO’s access to the
funding mechanism. Such a system is esta blished in Hungary whereby an NGO may set
up a social service institution on the basis of a contract with the respective ministry. The
funding to which such an NGO may be entitled for the services it has provided is limited
to the amount of support granted to a state-run institution operating in the same area of
activity and is determined in the Annual Stat e Budget Act. A similar system functions in

III.3.5. Vouchers

The use of vouchers reflects the tendency towards modernization and market-oriented
mechanisms in public services delivery and has been particularly successful in the
Scandinavian countries. Under this system , municipalities provide vouchers for the
services that fall within their obligation to deliver, to all citizens, who then choose their
provider. The use of vouchers provided by municipalities eliminates the theoretical
dispute of who is the best service-provider by strengthening the role of citizens and by
giving them the responsibility to select the service-provider.

55 Supra Note 47. Deleted: Idem.

European Comparative Analysis
Report by ECNL

Therefore, the process has a twofold purpose: expanding the freedom of choice of the
service-user and raising the quality of the service by maintaining competition. Vouchers
are an instrument to develop a demand-driven service provision, whereby the market
rather than the state is expected to develop and to offer services. The individual citizen,
given the entitlement by the state or the municipality to a subsidized service, is able to
make use of this subsidy by means of a service voucher, which is valid as mean of
payment. Recipients of service vouchers can be an individual, or a group of individuals
with particular needs.

In some municipalities the predominant service-providers are private contractors, and in
other – voluntary organizations. Remuneration to the provider can be regulated by
agreement between the provider and the public authority responsible for the operation,
or directly between the customer and the provider. The system needs a certain degree of
control by fixing or limiting the fees for the provided services.

Voucher systems are relevant – and have been introduced – in education, social welfare
and other individual services in Sweden. An example of good practice is foundin the
municipality of Täby in the Stockholm area, where a successful combination of
competitive tendering and a voucher system under the motto “The best service is the
one, one gets to choose by oneself” seems to be producing excellent results. Vouchers
are introduced in childcare, education, and home services for the elderly. This means, for
example, that a day-care center or a school receives a fixed sum for every child that is
enrolled (similar to the normative system).

Service-providers that have succeeded in attr acting customers are thus primarily funded
by revenues through the voucher system. The municipality exercises control on the
providers by, among other means, setting up quality standards for the service delivery,
requiring various proofs for the quality of the service, admission rules, taxes charged, and
other forms of control.

For example, a person that needs nursing and service in his own home first applies to the
social board, which decides how much help the person should have. A home-help service
secretary helps assess this judgment. It can be a matter of, for example, personal nursing,
purchasing, cleaning and care of clothing. The person in need receives a voucher, which
is equivalent to a month’s worth of nursing. The voucher describes which services are
supposed to be included in the service and the nursing. Along with the voucher the
customer receives a list of different nursing companies to choose from. Thereafter the
customer decides who shall perform the service – the municipality’s home help services
or a private nursing company.

III.4. Policy considerations in indirect support

III.4.1. Public benefit activities

The conceptual difference between the “public benefit” versus “mutual benefit” nature
of NGOs exists across Europe. The legal and financial consequences of engaging in
public benefit activities and eventually being granted a public benefit status have
proved to be considerable and justified the recent enactment of the so-called public

56 Supra Note 54.

European Comparative Analysis
Report by ECNL

benefit laws in a number of CEE countries (H ungary, Bulgaria – as part of the NGO law
-, and Poland, among others). These are laws that prescribe and determine when an
NGO can be recognized as public benefit and thereby gain access to a wider range of tax
benefits than nonprofits in general.

Public benefit recognition usually indicates (1) that an NGO provides services and
activities that benefit the public at large or a special group in need; and (2) that the state
provides special recognition for these activities through direct or indirect support.

What activities qualify as public benefit is defined differently in every country where such
legislation exists; usually there is a list of act ivities (e.g. in Hungary, a list of 22 types of
activities including, among others, education, social services provision, preservation of
cultural heritage or protection of the environment). The type of government support
available to NGOs with public benefit status also varies. In Hungary, for example only
PBOs may receive tax deductible donations; Poland is contemplating limitingthe
corporate income tax exemption to PBOs only. The entitlement to the 1% support (see
below under Indirect funding ) is another benefit that can be made available to PBOs only
or to a wider circle of NGOs, depending on the government policy.

NGOs that aspire to obtain public benefit st atus and the resulting tax advantages must
satisfy additional criteria. Most significantly, they have to comply with higher levels of
transparency and accountability so as to ensure proper spending of public money. For
example, they may have to prepare a yearly report or establish a supervisory board.

III.4.2. Tax benefits

Governments can provide indirect financial support to civic organizations in the form of
tax benefits or exemptions thus encouraging and supporting their general activities.

Most legal systems acknowledge the contribution of nonprofit organizations to the
public good and recognize this contribution by providing a range of tax benefits related
to their activities.
58 The main examples of such benefits include:

ƒ Tax exemption or benefit for the income of the organization (related to income
from its statutory or economic activity); for example, when an NGO does not
have to pay property or corporate income tax on all or a portion of its income.
ƒ Tax benefit provided for the donor on donations made to the recognized
organizations; for example, if an indivi dual gives money to an NGO, s/he may
deduct all or part of this money from his/her tax base.
ƒ Tax exemption or benefit of the income provided by the nonprofit organization
to others; for example, if an NGO provides a scholarship to a person, the person
will not have to pay an income tax on the scholarship.

Traditionally, because of the loss of tax reve nue that could be collected, these forms of
tax benefits are viewed as indirect government subsidies to the organizations and their

57 See more on this in the Handbook on Good Practices for Laws Relating to Non-governmental
Organizations , prepared for the World Bank by the International Center for Not-for-Profit Law
(ICNL), Discussion Draft , 2000; pages 24-25.
58 Tax benefits, or tax incentives are means provided by the state to ease the tax burden on the taxpayer
and/or possibly to create an incentive to achieve a state goal by encouraging the taxpayer to use the
funds in a certain way.

European Comparative Analysis
Report by ECNL

donors. 59 Tax revenue foregone constitutes an indirect means of support from the state,
and can be contrasted with direct government support to NGOs involving transfer of
funds from the state to an NGO.

The level of indirect support through tax benefits might vary depending on the public
benefit status of the organization or whether its activities are considered beneficial to the
public. Public benefit NGOs naturally en joy a wider range of exemptions and tax
benefits. They are granted
ƒ exemption from profit tax (Estonia, Slovenia, Hungary, Slovakia);
ƒ exemptions or benefits on VAT (Czech Republic for certain public benefit
activities, Estonia for some activities and reduced rate for other, Hungary for
some activities and zero-rate for others, Slovakia);
ƒ tax benefits regarding the income from business activities (Slovakia up to a
certain amount, Poland if such income is used for public benefit activities,
Hungary as long as the activity is in pursuit of the organization’s statutory
ƒ exemptions from taxes on grants and membership dues, on investments, real
estate, customs, court fees and others.

NGOs that engage in public benefit activities may also be granted additional exemptions,
including, for example, tax exemptions on the support provided by NGOs to individuals
(e.g. scholarships) and benefits on the donations made to such organizations, which
encourages private and corporate donorship to public benefit organizations. Such
benefits are provided for in Estonia, Hungary (at a higher level for “prominent” public
benefit NGOs), Poland, and Slovakia.

For mutual benefit organizations, usually limited tax benefits are available. As a general
encouragement to the development of democracy, governments may provide some
minimum level of support to mutual be nefit organizations (MBOs) as well.

III.5. Forms of indirect support

III.5.1. Use of public property at no cost or at reduced rates

Use of public property
as a form of indirect support is widely used in CEE countries.
Governments allow NGOs to use state or, mo re often, municipal property, for their
statutory activities, including, for example, as office space, meeting halls, or sports
facilities. Usually this is done on the basis of a law and upon certain conditions.

For example, the Hungarian Act CXLII of 1997 authorizes the free use of state-owned
property by civil society organizations, which may also acquire the right to own this
property, with some restrictions, after a period of fifteen years. To receive this form of
support, an NGO cannot have outstanding public debts and cannot sell the property or
establish a mortgage on it during the 15-year period. The law or the contract may impose
certain limitations on the activities that can be conducted in the leased property, e.g., the
organization can only engage in its statutor y activities, or cannot use the property for
political activities. In Croatia, the Social Care Act provides for the free use of state or

59 Fishman and Schwarz: Nonprofit Organizations: Cases and Materials , Second Edition 2000. page

European Comparative Analysis
Report by ECNL

municipal property only if the organization will use it to provide social welfare services.
The lease on the public property is concluded either by the public institution that
exercises the ownership rights (e.g., the municipality), or by a special body, like the State
Property Administrator in Slovakia.

III.5.2. Tax exemptions on income

In considering the tax treatment of NGOs in the CEE region, we find two approaches
taken in most tax legislation: determining taxation and exemption based on (1) types of
organizations and (2) categories of income. We consider each below.
Types of Organizations. Some countries permit tax exemptions to be claimed by virtually all
legal forms of organizations (i.e., foundations, associations, and other types of not-for-
profit legal entities), provided that they are duly registered and that they adhere to the
non-distribution constraint. Other countries limit the availability of exemptions to
organizations that serve the public benefit. Several do not make exemptions available to
any type of NGO, and allow only very limited exemptions to legal entities pursuing
activities on behalf of the disabled.

Tax exemption on income is granted to NGOs in general and not exclusively to public
benefit organizations in a number of countr ies, for example, Czech Republic, Hungary,
Latvia, Lithuania, Slovakia. In some of them, like in Slovakia, this approach reflects the
concept that NGOs are not public business entities, and therefore are not proper
subjects of taxation, at least with respect to certain types of income. More frequently, the
laws treat NGOs as taxable legal entities, bu t permit them to claim exemption from the
corporate income or profits tax (Czech Republic).

Elsewhere, like in Bulgaria and Slovenia, only public benefit organizations are exempt,
and the laws list the activities that benefit the public and entitle the organization to claim
the exemption.

Sources of tax exempt income. Most countries treat income from grants, donations, fees and
dues as tax exempt. The income from economic activities (sales of goods or services) is
treated differently. Economic activities are defined as “regularly pursued trade or
business involving the sale of goods or se rvices and not involving activities excluded
under some distinct tradition.”
61 Generally, this definition is understood to exclude the
receipt of gifts and donations, certain passive investment income, occasional activities
such as fundraising events, activities carried out using volunteer labor, and fees that are
“intrinsically connected to the public benefit purposes of the organization” (i.e., tuition
for an educational organization.)

Provided that NGOs are permitted to engage in economic activities (which is not always
the case, e.g., for certain types of NGOs in Lithuania), the following approaches are
• all income is taxed (Slovenia);

60 Survey on Tax Laws Affecting NGOs in Central and Eastern Europe , Second edition, ICNL, 2003,
p.12, available on https://www.icnl.org/programs/cee/pubs/taxsurvey/TaxSurvey2nded-1.pdf 61 Economic Activities of Not-for-Profit Organizations , in Regulating Civil Society, conference report,
ICNL, (Budapest: May 1996), pp. 6-7 [reprinted at www.icnl.org] Field Code Changed
Deleted: ¶

European Comparative Analysis
Report by ECNL

• only income from activities related to the organization’s public benefit purpose
are exempt (Estonia, Latvia);
• only income that serves to further the organization’s public benefit purpose is
exempt (Germany, Poland);
• income above a certain threshold is taxed;
• exemptions granted under a mixed (hybrid) tax system (Czech Republic,

Lithuania exempts all non-profit entities from profit tax; however, not all such entities
may engage in economic activities.

Income from investment provides an es sential source of revenue for NGOs. Many
countries impose additional requirements and limitations on the distribution of income
and the accumulation of capital by NGOs to ensure that such income is spent in
pursuance of their public benefit objectives. The tax treatment of passive investment
income varies according to the type of income and the type of NGO. Slovakia and
Slovenia treat almost all investment income as taxable although there are special reduced
rates for taxes on certain investments.
63 Hungary generally taxes all income but provides
exemptions for public benefit organizations as long as they do not engage in business
activities. In Poland, all investment income used for public benefit purposes is tax

III.5.3.Tax incentives for philanthropy

Indirect support provided through tax advantages to donors is frequently seen as an
incentive to encourage NGO activity and pr ivate philanthropy. Traditionally, two main
forms of tax benefits are seen as incentives for philanthropic behavior:
– tax deductions; and
– tax credits.

Tax deductions on charitable donations mean that the donor can deduct all or part of the
money s/he contributed to an NGO from her or his taxable income, thus diminishing
the tax base upon which tax will be calculat ed. Tax credits for charitable donations, on
the other hand, mean that the donor will be able to deduct part of the donated amount
from his/her tax liability (i.e. the tax to be paid). In other words, a tax credit reduces the
amount of tax owed, whereas a deduction reduces the amount of income that is subject
to tax.

Tax deductions may be claimed by business and individual donors (in some countries,
the maximum deductible amount differs for the two categories of donors (e.g., in Estonia
it is 5% for individual donors and 3% for business donors). The limitation is usually a
percentage of the taxable income. Hungary grants a tax credit and not a tax deduction on
individual donations.

62 Supra Note 60 , pp.18-22 63 Id ., p.23 64 Section 9.2: Income tax deductions or credits for donations, In: OSI Guidelines for Laws Affecting
Civic Organizations , ICNL 1997. Pages 78-79
. 65 Supra Note 60 , p.36

European Comparative Analysis
Report by ECNL

However, the recipients of tax-benefite d contributions are usually limited to
organizations engaged in public benefit activitie s. For example, in Hungary, as well as in
Estonia, charitable contributions entitle the donor to a tax deduction (up to a certain
limit) only if it is made to a public benefit NGO on the list published by the

III.5.4. The so-called “1%” tax designation mechanism

The central idea of percentage mechanism is that taxpayers may decide to designate a
certain percentage of their income tax paid to a specific nonprofit, non-governmental
organization (NGO), and in some cases, other organizations, mainly churches.

The “percentage mechanism” was introduced in Central Europe, primarily with the
purpose of supporting civil society, i.e., nonprofit organizations.
67 The first law that
established such mechanism was adopted in Hungary in 1996 and allowed taxpayers to
designate 1% of their due tax to a civil society organization of their choice. Slovakia
(2001), Lithuania (2002) and most recently, Poland and Romania (2003) followed the
Hungarian example and adopted similar legislat ion. “Taxpayers” includes natural persons
in all four countries and also corporate taxpayers in Slovakia. Possible beneficiaries are
nonprofit organizations that engage in public benefit activities but also trade unions
(Lithuania), public institutions (Hungary and Lithuania), and churches (Hungary –
designations for churches form another 1% of the tax). Certain additional conditions,
including, for example, the existence of the organization for a given period of time
(Hungary), may also be imposed, as well as reporting requirements.

The percentage legislation is based on the concept of “ advancement of civil society through
support of its organizations” as a part of the governments’ policy.
68 Other rationales that
justified and led to this policy include the st rengthening of civil society through financial
support and capacity-building, awareness-raising, development of philanthropic culture,
and the provision of decentralized and depoliticized government support to civil

Despite the existing disputes over the precise legal nature of the “percentage
philanthropy”, its real impact has been indisputable. Apart from its contribution to the
increased citizen participation and taxpayer cont rol over public funds, it has significantly
augmented the financial resources made avai lable to NGOs. In 2003, the Hungarian “1%
law” resulted in 6.1 billion HUF (approximately 23.5 million EUR) worth of 1%
designations by 1.4 million taxpayers.
70 By comparison, in 1999 the amount was 3 billion
HUF. Unfortunately, there has been a negative impact of the “percentage legislation” as
well. Governments have wrongly perceived that percentage laws satisfy the needs for
both public and private support of the third sector and have undertaken to eliminate
other tax benefits for NGOs. Thus, tax-deductible donations have been abolished in
Lithuania and in Slovakia, and similar measures are under consideration in Poland.
71 Such

66 Supra Note 60 , p.35 67 Nilda Bullain , Percentage philanthropy and law , NIOK and ECNL, 2004, p.3-4, available on https://www.onepercent.hu/Dokumentumok/Chapter_2_ECNL.doc 68 Id ., p.6 69 Id ., p.14. 70 https://www.onepercent.hu/news.htm#10bill 71 Supra Note 67.
Field Code Changed
Field Code Changed

European Comparative Analysis
Report by ECNL

tax reform have proved (and will prove) to be quite detrimental to NGOs and are highly
undesirable from a financial and moral point of view.

III.6. Summary recommendations on an “NGO funding guide”: What
shall we consider in setting up a system for government financing of

When thinking of a system for NGO financing, it is necessary to think through what are
the underlying rationale and principles, or assumptions on the part of the government.
What is the role of NGOs in society? How is this role envisaged from the point of view
of government? What roles and functions should government support and why?

Below is a chart reflecting one potential classification, based on the principles and
approaches generally described in Section III. It needs to be understood that:
(a) this is a generalized model and should be applied to fit the specifics of the
(b) this is an idealized model and roles of NGOs and types of support can in reality
never be so clear.
Nonetheless, developing such a chart is a helpful tool to think through the foundations
and the framework of the financing system.

• NGOs undertaking governmental
tasks (e.g. those that are explicitly
assigned to central or local
government in laws)

Government should provide direct
support to finance the service
through the NGO (as well as
ensure indirect support generally
available for NGOs)
• NGOs complementing
governmental tasks (e.g. tasks not
explicitly assigned to government
but considered being of public
benefit by law or otherwise
answering community needs)

Government should consider
financing the service itself or
provide indirect support
• NGO advocating for certain issues
and interests (e.g. through
influencing policy making and

Government may choose to offer
direct financing to some activities;
should however ensure for
independence of such NGOs;
government should provide
indirect support
• NGOs enhancing citizen
participation and social
responsibility (e.g. any mutual
benefit society, club etc. as well as
NGOs advocating with businesses,
schools and other instituions) •
Government should encourage
flourishing of such NGOs through
indirect support

European Comparative Analysis
Report by ECNL

• NGOs raising/generating resources
and contributing to the
redistribution of private wealth

Government may consider
supporting the creation of
independent grantmakers in order
to help the sector become more

What principles will the government apply?

Let’s take the first box: NGOs undertaking governmental tasks (e.g. those that are
explicitly assigned to central or local government in laws). Let’s say the government
believes that if an NGO undertakes this task, it should be supported from the public
budget as it is helping the government to do its job. How will it provide the support?

The government may here choose from a range of principle-based mechansims described
above, such as the subsidiarity principle (preferring NGOs) or the competitive principle
(looking for best value), as well as the normative or the voucher system.

The question of what types of costs and to what extent will be covered is important because if the
government actually pays the whole cost to the NGO, it may not be worth to privatizing
the service in the first place. Experience in the UK and Germany shows that NGOs that
had been fully subsidized by the government for a longer period (5-10 years) essentially
became like government agencies and became too expensive.

Similarly, principles for each box should be well thought-through. For NGOs in the
second and third boxes, for example, the general principle may be that they will only
have the opportunity to receive direct government funding if their current activities are in
line with some specific government objective and therefore supporting them will
contribute to achieve a government program.

However, indirect support can be envisaged for all categories of NGOs at varying levels.
Usually, those which are mutual benefit may enjoy only minimal support in recognition
of their contribution to a democratic social model. This minimum could be the
exemption on the corporate income tax for their statutory activities; it could, however (as
in Hungary) also include exemptions on duties and fees, on property and other taxes.

NGOs that are considered public benefit would then enjoy a wider scale of benefits, such
as the ability to receive tax deductible dona tions, tax benefits regarding the income from
economic activities, customs exemptions, ability to provide tax exempt scholarships/aid
to individuals etc.

In Hungary, there are even two levels of PBOs with the benefits being higher for the
“outstanding” PBOs; but then in Bulgaria, MBOs don’t even receive full exemption on
the basic income tax (however, they do receive some tax exemptions – on grants and
membership dues, for example).

Another issue is the 1% type tax allocation which could be a benefit for all NGOs or just

The issue of
encouraging independent grantmaking has also proved to be an
important one in CEE countries, because as foreign donors withdraw and the culture of

European Comparative Analysis
Report by ECNL

philanthropic giving has not yet developed, NGOs are left in a funding vacuum, where
the only major source of support becomes the government. In light of this threat to
financial sustainability, the establishment of local grantmakers is one potential solution.
In the Czech Republic, the state actually supported the endowing of such grantmakers,
but if such direct support is not an option, there are still instruments to help develop this
potential. (E.g. through regulating endowments and investments.)

IV. Analysis of Eastern European government policies and
practices to assist NGOs in the accession process

Eastern European nonprofits have demonstrat ed extraordinary achievements during the
past 10-15 years. Starting “from scratch” – a legal framework that either prohibited their
existence or turned them into government satellites – they have played a remarkable role
in the democratic processes that followed th e fall of communism in this part of the
world. Moreover, their participation in civil society development was a major
contribution to the achievements in the economic, political, social and cultural changes
that brought about the accession of the new Eastern-European members to the
European Union.

This, on the one hand, justified a “reward” on behalf of governments. It called for
governmental support to NGOs in each coun try for a better participation in the Union
civil societal life, in political decision-making, and in the access to new financial sources.
NGO expectations were naturally directed towards their more active role in the
formulation of national positions on EU matters. For that, NGOs needed to develop
additional capacity and to acquire new skills demanded by the new political
circumstances, new funding requirements, and new partnership opportunities.

On the other hand, a continued and intensified involvement of the Third sector in the
various aspects of the accession process seemed only logical, since governments could
benefit even further from civil society participation input. In addition to governments’
interest in such involvement, such an approach would be fully in line with the most
recent European tendencies for expanding the mechanisms for social dialogue and public
participation in EU decision-making.

NGOs had much to offer during the access ion process; however, they had much to ask
for as well, and their cooperation with national governments was challenged in new ways.
These challenges did not always lead to impr oved cooperation. Certain positive actions
were taken — for example, NGO representatives were invited to participate in
consultative meetings with EU institutions (Estonia), or received training on EU funding
access (Czech Republic). But not all availa ble means were used in order to prepare
national NGOs for EU public life and to support them in the new aspects of their
struggle for a more active role or, in some cases, for existence and sustainability.

This section outlines the vari ous possible aspects of Accessi on countries’ governmental
positions regarding NGO participation in the accession process. It examines government
policies and practices to support NGOs duri ng the accession process in three ways:
involving NGOs in EU decision-making, assi sting NGOs in accessing EU funds (and
co-financing), and providing direct (financial and institutional) help to NGOs to increase
their viability and wider participation in EU life.

European Comparative Analysis
Report by ECNL


IV.1. Was NGO empowerment part of policy development during the

The general attitude taken by the governme nt towards the importance of NGOs in the
accession process varies greatly from country to country.

Estonia offers a good example of a government’s awareness of the need to enhance civil
society development. The Estonian Joint Consultative Committee
72 was established in
April 2002 to assist the accession process. It included representatives of trade and
industry, employers, trade unions, farmers, and the NGO sector. The cooperation is also
designed to strengthen the preparations of ci vil society organizations for accession to the
European Union. The dialogue and cooperation encompass all economic and social
aspects related to the implementation of th e European Agreement. The following bodies
are represented on the Estonian delegation to the JCC: the Estonian Chamber of
Commerce and Industry, the Network of Esto nian Non-profit Organizations (NENO),
the Estonian Confederation of Employers (ETTK), the Estonian Farmers Federation,
the Estonian Employees’ Unions’ Association (TALO) and the Confederation of
Estonian Trade Unions (EAKL).

Significantly less governmental assistance was extended to Polish
nonprofits. Polish
NGOs were disappointed to witness the Government’s passive attitude in accessing
funds that could later be distributed to organized civil society. It is the government’s
responsibility to negotiate, apply for and ma nage such funds, although the total amount
will also depend on the third sector’s capacity as estimated by the EU fund-allocation
institutions. Polish NGOs need to learn how to access these funds and how to identify
partners for participation in big projects. This is even more urgent given the fact that EU
funds will be less available for Polish NGOs after the accession. While NGOs did
receive substantial help from EU institutions and from European nonprofit networks,
they did not benefit significantly from their government’s support in capacity-building,
learning, partner-search, and in terms of available funds.

It was only in a few countries that the government actually documented its commitment
to involve NGOs in the preparation of the country for accession in any substantial way.
The Czech
Republic offers a concrete and outstanding example. 73 The accession process
has given the Czech government an opportunity to develop a specific form of
partnership as one of its policies. It is part of the national development program and
sectoral operational programs for using the Structural Funds
74. Although the government
does not co-finance the projects submitted under these funds and does not give

72 Estonia on the road to acce ssion: challenges and opportunities fo r civil society, speech by Liina
Carr, EU Coordinator, at the seminar on Organized Civil Society in the Candidate Countries and the
Future of Europe, Brussells, 30-31 January, 2003, available at
candidats/docs/intervention_Carr_seminar_en.pdf 73 Information regarding the possibility of non-state non-profit organisations’ participation in the
process of integration of the Czech Republic into the European Union
74 Prepared on the basis of underlying documents provided by the Ministry of the Environment, the
Ministry of Agriculture, the Ministry of Labour and Social Affairs, the Ministry for Regional
Development, and representatives of NGOs on the wo rking bodies related to the sectoral operational
programmes being drafted by these Ministries.


European Comparative Analysis
Report by ECNL

advance grants, it has established an efficient political and institutional system which
assists NGOs as beneficiaries of EU funds..

The National Development Plan is the fundamental document for all operational programs
and is being drafted under the auspices of the Ministry for Regional Development. The
basic coordinating body in the field of econo mic and social cohesion is the Steering and
Coordinating Committee. One of its member s is an NGO representative appointed on
the basis of nomination by the Governmental Council for Non-governmental Nonprofit
Organisations. The individual chapters of the National Development Plan have been
discussed at public workshops with the active involvement of NGO representatives.

On that basis, several operational programs have been drafted and implemented under
the competence of the separate ministries . They permitted NGOs operating in a given
area to participate in the preparation of the ministry’s “action plans” for the development
of that area and to have an improved access to EU funding provided for the same

For example , the Joint Regional Operational Programme (“JROP”) was drafted as a multi-fund
programme for the European Regional Development Fund and for the European Social
Fund within the remit of the Ministry fo r Regional Development. The Commission for
Regional Development was constituted as a basic coordinating body responsible for the
preparation of measures concerning regional policies. The non-profit sector has been
represented in the Commission as well as in six of the eight working groups established
by the Ministry that drafted the Programme. The current version of JROP refers to
NGOs as the final beneficiaries of support in respect to the following priorities: Local
development of human resources; Improving the environment in municipalities and
regions; Revival of rural areas; and Development of tourism in municipalities and

Another operational Programme, Objective 2 for the Prague Cohesion Region, was drafted
under the competence of the Ministry for Regional Development for purposes of
utilization of the European Regional Development Fund by the City of Prague; the non-
profit sector is represented in the Commission of the Prague Cohesion Region Council
on a principle similar to that applied under JROP. This programming document
envisions NGOs as the final beneficiaries of support from the European Regional
Development Fund.

Following a similar pattern, NGOs have also been involved in the preparation of several
other programs, which allow them to benefi t from EU funds. Among these programs
• The Human Resources Development Operatio nal Programme and Single Programming
Document for Objective 3 of the Prague cohesion region drafted within the Ministry of
Labour and Social Affairs and offering NGOs an access to the European Social
• The Development of Rural Areas and multifunctional agriculture prepared and
implemented by the Ministry of Agriculture and assisting NGOs to utilize the
financial resources of the European Agriculture Guidance and Guarantee Fund.
The fundamental element of this program includes the establishment of a local
action group, which must be capable of, and responsible for, drafting a
of local development and its implementation. Local action groups must therefore
serve as a well-balanced representation of partners at the location in question,

European Comparative Analysis
Report by ECNL

who will be realistically able to enforce such a strategy – the role of NGOs within
such groups is unquestionable.
• The Operational Programme Environment prepared by the Ministry of Environment
and including NGOs as beneficiaries of the financing from the European
Regional Development Fund. The partnership principle for this program is being
pursued by having representatives of NGOs included in the implementation
structure, in particular as members of the monitoring committee. NGOs also
participate in the work on preparing the strategic environmental assessment.

During the preparation of the programmatic documents concerning the access to the
Structural Fund, representatives of Czech NGOs drafted and submitted their comments
on them. Fourteen regional roundtables we re organized and NGOs working in the
respective regions had the opportunity to comment on the documents. A number of
remarks and comments originated from thes e roundtables and have been delivered, via
several routes, to the drafters of the programming documents. However, a barrier that
prevented the proper delivery and use of the comments is that the country lacks a
uniform system of submitting comments an d remarks agreed upon and approved in
advance. If such a system ha d been applied at the national level, it would have ensured
that the necessary space for participation and consultation was provided to
representatives of NGOs.

IV.2. Government Support to NGOs

IV.2.1. Capacity building

It was widely recognized in accession countr ies that NGOs needed to strengthen their
organizational capacities in order to be able to access pre-accession, but especially, post-
accession financing sources. Strengthening organizational capacity may include training
sessions on project planning and proposal writing as well as educating NGOs on how the
EU works and how they can participate in EU-wide networks for policy advocacy.
Moreover, government support for general organizational development, e.g. helping to
introduce quality assurance systems fo r service-providing NGOs, was also a
demonstrated need.

However, apart from the inclusion of such activities in the PHARE and other pre-
accession grant mechanisms, governments have do ne little to increase the capacity of the
NGO sector in comparison to the investment made in developing the capacity of
enterprises. In the case where there have been such examples, they occurred as a result of
the initiative of the individual government agencies or public officials and not a
consequence of a coordinated public policy. For example, NGOs in the Czech Republic
have been trained on the procedures for application for EU funding; however, this effort
was not part of the government’s global policy on EU accession or on civil society
support and was realized throug h separate state agencies.

75 Similar systems are in place in EU member states (e.g. in Finland) and recently also in Slovakia
(pursuant to a governmental resolution). www.rokovania.sk
It is worth mentioning among the specific
problems the issue of a more precise definition of ap plicants for a grant, final beneficiaries and target
groups (in the programming documents for the Structural Funds).

European Comparative Analysis
Report by ECNL

A more positive example could be cited from Hungary , where the government launched
a so-called Proposal Preparation Fund , which provides technical assistance specifically to
local governments, small-region associations and nonprofit organizations. Those
organizations that aim to apply to the EU Structural Funds were given the opportunity to
send an idea to the Fund. The Fund then provided the necessary means to develop the
awarded ideas into full-fledged project proposals, which stood greater chances of
securing EU funding. In 2003, the Proposal Preparation Fund awarded close to 500
applicants, including local governments and civil organizations, with technical assistance
worth a total value of 27 million Euros. For the 2003 round, the government and the
PHARE program both contributed 50% to the Fund; based on the success of this
initiative (they received altogether more than 2,800 ideas) the government decided to
launch the program again in 2004 at the same level of support, even without the PHARE

IV.2.2. Financial means

National financing and co-financing mech anisms are essential not only for NGOs’
sustainability in general but they may also be a requirement for access to EU funds. The
structure of these mechanisms has been used for the distribution of external funding. For
example, in the Czech Republic
, the pre-accession assistance provided by the EU under
the Accession Partnerships and pre-accessi on financial mechanisms was administered
under a separate Program of Civil Society Development and through the Foundation for
Development of Civil Society. The Foundation was based in Prague and was established
for this purpose on the initiative of the Czechoslovak Federal Government in 1992. A
total of EUR 16,770,000 was distributed under the Program by the end of 2001.

The Estonian Joint Consultative Committee created in 2002 (see above) had concluded
that Estonia
needed to develop such financing mechanisms. They were necessary not
only to improve the level of information re garding pre-accession issues and access to
Structural Funds but also to establish a national co-financing system and to ensure NGO
involvement in the discussion and adoption of funding solutions.

The Hungarian
government chose another way of addressing the need to strengthen
NGOs financially at the doorstep of the EU. While the role or importance of NGOs was
not explicitly mentioned in the National Development Plan and the consequent policy
papers, the Hungarian government emphasized the importance of supporting NGOs in
the accession process in its Governmental St rategy Towards the Civil Sector (see Section
I). The National Civil Fund, set up to strengthen the NGO sector (see Section II.7) has
established a special college (grant-giving body) to support efforts of NGOs in
positioning themselves and the sector in the accession process.

In addition, national efforts should be backed up by EU preparatory work. The
European Commission should help not only civil servants but also civil society
organizations to acquire knowledge of the Stru ctural Funds. Civil society organizations
should, on their side, make efficient use of Structural Funds resources in the future and
carry out effective preparatory work so as to be ready for the co-financing and
management of the projects concerned. The Commission provides support to a number
of European-wide NGO networks
in order to promote this function, which in turn reach
out and educate NGOs in accession countries in European matters. Among these
organizations are the European Citizen Action Service (ECAS,
www.ecas.org ), the
European Council for Voluntary Organisations (CEDAG,
www.cedag.net ) or the

European Comparative Analysis
Report by ECNL

TRIALOG project ( www.trialog.or.at , which facilitates the inclusion of development
NGOs from accession countries into CONC ORD, the European NGO confederation
for relief and development).

IV.3. Government efforts to apply EU principles on consultation and social

An important area of government action and an indication of meaningful recognition of
the NGO sector is the extent to which governments apply the principles of public
participation, consultation and social dialogue in their legislation.

IV.3.1. Involving NGOs in the decision-making processes

In that regard, there have been good initiatives in several accession countries. For
example, the Hungarian
government introduced the Open Legislation Program to
improve the quality of legislation through increa sing public participation. In the draft of a
new Law on Legislation, several elements are reflected that represent cutting-edge
practices in European legislative procedures, and which often concern NGO
participation as well (for example, prio r and a post-enactment impact assessment,
publication of draft legislation etc.). Recen t legal initiatives affecting the NGO sector,
such as the Law on the National Civil Fund Program and the Draft Law on Volunteering
have been widely circulated and discussed among the NGOs in Hungary, and, perhaps
more importantly, reflect the comments and considerations NGOs raised in the

In Poland
, the government adopted a Regulation on Social Dialogue in October 2002.
The preamble of this document acknowledg es and emphasizes the importance of civil
society and the organizations that are formed within civil society. The document defines
three main categories social partners: collect ive labor representatives, i.e. trade unions
and employers’ organizations; organized citizens initiatives, i.e. public benefit associations
and foundations; and self-interest representation groups, i.e. professional and commercial
associations, local government federations.

The regulation outlines the basic rules for cooperation between government and the
named social partners, and it also prescribes rules for the conduct of government and
public administration in their relationship with social partners. The regulation contains
important and innovative procedures; for example, it obliges the ministries responsible
for submitting a legal draft to Parliament not only to consult social partners on the draft,
but also to summarize their comments and provide justification if they were rejected,
when submitting the draf t to the Parliament.

IV.3.2. Assisting NGO representation in EU bodies

The efforts of NGOs have been directed at partnership on two levels: one, with EU
institutions, and two, with EU nonprofit networks. Both have provided invaluable
assistance in the preparation of the Accession countries’ third sectors for joining the
Union. As the Polish NGOs declared at the conference on Building Partnerships
between the Polish and the EU NGOs, “Polish non-governmental organizations are
involved only partially in the activities at the EU level. They do not have the influence on
the Community law regulations, which already a ffects their activities in different fields…
The Polish non-governmental sector is not visible among the NGOs in the EU… The

European Comparative Analysis
Report by ECNL

crucial barrier is the lack of funds as well as the lack of the Polish NGOs
representation…” 76

The importance of representation is not only in being “close to the source”, i.e., having a
more complete access to funding and other relevant information, but also in the
possibilities for participation in decision-making, discussion and consultation.

The Polish
NGO Office in Brussels was founded with these considerations in mind. It is
an initiative of over a dozen major Polish nongovernmental organizations, foundations
and NGO networks working in a variety of s ectors. Its aim is to prepare Polish NGOs
for Poland’s membership of the EU. Part of the Office’s work consists in easing the
entry of Polish NGOs into the various Eur opean networks of NGOs. The NGO Office
in Brussels and Warsaw spends much of it s time providing information on EU policies
to Polish NGOs. The work of the Convention on the Future of Europe is one of the
areas covered by the Office in its various news items and bulletins. The Polish NGO
Office is currently the only NGO representati on from a candidate country in Brussels.

Czech NGOs
get involved in the European Union’s concrete policies (structural,
regional, agricultural) by participating in formulating the policies (by making comments)
based on the partnership policies elaborated above, and also by being the final
beneficiaries or partners of grants and projects under these policies (mostly delivery of
social services). Examples of such active NGOs include CpKP (Centre for
Communitarian Work), Omega Liberec, SKOK (Standing Commission of the Sectoral
Conference), Hnutí Duha (Rainbow Movement). Czech NGOs
are also active in local
branches of EU networks of NGOs and some address issues linked to EU integration –
however, they do so with their own financial resources.

Czech NGOs also monitor compliance by the Czech Republic with its obligations based
on the introduction of the acquis communitaire into the Czech law. They do that primarily
by monitoring the current status, issuing reports, engaging in advocacy campaigns and
awareness raising, and co-operating in the drafting of implementing regulations. At
present, several organizations engaged in such activities (like the Czech Consumer
Protection Association, the Rainbow Movement, Earth’s Children) are relatively weak
and are often refused by state and public institutions. From the perspective of
incorporation of the applicable acquis communitaire and further monitoring, however, their
role of a “watch-dog” is irreplaceable.

76 See materials of the Conference on Building Partnerships between the Polish and the EU NGOs, 5-6 April, 2001, https://www.fip.ngo.pl/fipeng/html/partnership.html Field Code Changed

European Comparative Analysis
Report by ECNL


Anheier, H.: Third Sector in Europe: Five Theses Civil Society Working Paper #12, London School of
Economics Centre for Civil Society, February 2002

Anheier, H.: Foundations in Europe: A Comparative Perspective . Civil Society Working Paper #18,
London School of Economics Centre for Civil Society, August 2001

Bíró, E. : Nonprofit Sector Analysis – Legal Environment of Civi l Organizations in Hungary (Nonprofit
szektor analízis – civil szervezetek jogi körn yezete Magyarországon), Environmental Management
and Law Association (EMLA) Hungary, Budapest 2002.

Bulgarian Center for Not-for-Profit Law: Legal framework for social services delivery in the United
Kingdom, Germany, France, and Belgium European Standards Comparative Analysis , October 2002

Bullain, N.: Mechanisms of NGO-Government Cooperation. In: Social Economy and Law (SEAL)
Journal, European Foundation Center, Vol.6, Issue 3, Winter 2003 – Spring 2004

Bullain, N.: Percentage philanthropy and law , In: Török, M. and Moss, D., eds.: Percentage
Philanthropy, Nonprofit Information and Training Center and European Center for Not-for-
Profit Law, Hungary 2004

Bundestag: Civic Activities: Towards a Civil Society with a Future , Summary of the Bundestag Study
Commission´s Report, June 2002

Carrington, David : The Compact – the Challenge of Implementation , The Active Community Unit,
Home Office Voluntary and Community Research Section, April 2002

Center for Tele-information: Telecottages in Estonia, Technical University of Denmark, 2001

Civil Office Foundation: Analysis of the Implementation and Effects of Public Benefit and Registration
Regulations on Associations and Foundations in Hungary (Az egyesületekre, alapítványokra vonatkozó
közhasznúsági szabályok érvényesülésének, hatályos ulásának elemzése). Prime Minister’s Office
Civil Relations Department, Budapest, August 2003

Compact on Relations Between the Government and the Voluntary and Community Sector in England, 1998

Demes, P. and Forbig, J.: In trusts we trust? In: @lliance Magazine, Allavida, Volume 8, Issue 2

Estonian Civil Society Development Concept, 2002

European Commission: The Commission and Non-Governmental Organisations: Building s Stronger
Partnership , Discussion Paper, presented by President Prodi and Vice-President Kinnock,
Brussels, 18.1.2000

European Union White Paper on European Governance , 2001

Enabling Corporate Citizenship. Social Economy and Law (SEAL) Journal, European Foundation
Center, Vol.6, Issue 2, Autumn 2003

Endowments: A Magic Solution? Social Economy and Law (SEAL) Journal, European Foundation
Center, Vol.5, Issue 3, Winter 2002-2003

Fishman and Schwarz: Nonprofit Organizations: Cases and Materials , Second Edition 2000 (USA)

European Comparative Analysis
Report by ECNL

Fridli, J. and Paskó I., eds.: Social Organizations in the Legislative Process , Hungarian Civil Liberties
Union (HCLU), Budapest 2000

German Development Institute: Promotion of Civil Society in Developing Countries: the Example of
European Development Cooperation , Briefing Paper 6/1999

Gustafík, P.: Endowments in Central and Eastern Europe: Approach with Caution . In: Social Economy
and Law (SEAL) Journal, European Foundation Center, Vol.5 Issue 3, Winter 2002-2003

Guc, M.: Not Possible Alone. A Guide to Develop a Program of Cooperation at the Local Level . (Egyedül
nem megy. Útmutató helyi együttm űködési programok kialakításához). Civil Society
Development Foundation Hungary, Budapest, 1999

Government and Civil Society: Mechanisms of Cooperation. Social Economy and Law (SEAL) Journal,
European Foundation Center, Vol.6, Issue 3, Winter 2003 – Spring 2004

Handbook on Good Practices for Laws Rela ting to Non-governmental Organizations, prepared for the World
Bank by the International Center for Not-for-Profit Law (ICNL), Discussion Draft , 2000

Harsanyi, L., ed: 1%. “Forint votes” for civil organizations – studies. Nonprofit Research Group,
Budapest, 2000

International Center for Not-for-Profit Law (ICNL): Model Provisions for Laws Affecting Public Benefit
Organizations, 2002

ICNL: Regulating Civil Society , conference report and materials, Budapest, May 1996

ICNL: Survey on Tax Laws Affecting NG Os in Central and Eastern Europe, Second edition 2003

ICNL: Survey on Tax Laws Affecting NGOs in the Newly Independent States, 2004

ICNL : Preliminary study of the legal frameworks for public financing of NGO activities in Bulgaria, Croatia,
Hungary, Romania and Slovakia , IJNL, Volume 3 – Issue 4, June 2001

Irish, L.E., Kushen, R. and Simon, K.: Guidelines for Laws Affecting Civic Organisations , Open Society
Institute and ICNL, Second edition, OSI, New York 2004

Kuti, É.: Let’s Call it Non-Profit (Hívjuk talan nonprofitnak), Nonpr ofit Research Group, Budapest

Kuti, É.: Whose Money? Whose Decision? Income sources and de cision makers in the financing of the nonprofit
sector (Kinek a pénze? Kinek a döntése? Bevételi fo rrások és döntéshozók a nonprofit szektor
finanszírozásában). Nonprofit Re search Group, Budapest 2003

Krzeczunowicz, P.: Europe Starts at Home: Enlargement and Cooperation. In: Social Economy and
Law (SEAL) Journal, European Foundation Center , Vol.6, Issue 3, Winter 2003 – Spring 2004

Liiv, D.: Guidelines for the Preparation of Compacts, International Journal for Not-for-Profit Law
(IJNL), Materials from the Symposium on NGO/Gov ernment Parterships, Volume 3, Issue 4 –
June 2001

Marschall, M.: Legitimacy and Effectiveness: NGOs in Comparative Perspective, in: Social Economy and
Law (SEAL) Journal, European Foundati on Center, Vol.4, Issue 1, Spring 2001

Materials of the Conference on Building Partnerships between the Polish and the EU NGOs , 5-6 April,

European Comparative Analysis
Report by ECNL


Milewa, T., Harrison, S., and Dowswell, G.: Partnerships and Public Accountability in British Health
Care . The Chartered Institute for Public Finance an d Philanthropy (CIPFA), Review #22, August

Murray, B.: The Hungarian Telecottage Movement , Small World Connections, 2000, UK

Nizák, P. and Pálvölgyi, P., eds.: Telecottages in Yugoslavia. Foundation for Development of
Democratic Rights, Hungary, 2002

Nonprofit Organizations in Hungary Statistical Yearbook 2000 (Nonprofit Szervezetek Magyarorszagon
2000), Central Statistical Office of Hungary, Budapest 2002

Program of Cooperation Between the Government of th e Republic of Croatia and the Non-Governmental Non-
profit Sector in then Republic of Croatia , 2000

Rutzen, D. and Durham, M.: Overview of NGO Framework Legislation in Central and East Europe ,
ICNL 2001

Plavsa-Matic, C. and Hadzi-Miceva, K.: From Vision to Change: A New Model for Civil Society
Development. In: Social Economy and Law (SEAL) Journal, European Foundation Center, Vol.6,
Issue 3, Winter 2003 – Spring 2004

Salamon, Lester M., Sokolowski Wojciech S. and List, R. : Global Civil Society: An Overview . Johns
Hopkins Center for Civil Society Studies, Baltimore, 2003

Schlüter, A., Then, V. & Walkenhorst, P., eds.: Foundations in Europe, Directory of Social Change,
London 2001

Strachwitz, R.G.: Philanthropy and Civil Society , Maecenata Verlag, Berlin 2003

Svensson, Arne: Redefining Public Services Through Market-oriented Mechanisms: Scandinavian Experiences
& Best Practice , Professional Management AB Presentation at the International Workshop on
Guarantor Government in Täby, Sweden, 31 May-1 June 2001, arranged by Bertelsmann
Foundation/ Cities of Tomorrow

State Audit Bureau of Hungary, Report on the Control of Budget Support to Social Organizations and
Public Societies (Állami Számvev őszék: Jelentés a társadalmi szervezeteknek és köztestületeknek
juttatott költségvetési támogatások ellen őrzésér ől), Budapest, September 2002

Strategy of the Hungarian Government Towards the Nonprofit Sector , June 2003

Tóbiás, L.: Opportunities for Cooperation Among Civi l Organizations and Local Governments
(Együttm űködési lehet őségek civil szervezetek és a helyi önkormányzatok között). Democracy
Network Hungary, Budapest 1999

Vajda, Á. and Kuti, É.: Citizens’ Votes for Nonprofit Activities in Hungary . In: 1%, Nonprofit
Research Group, Budapest 2000

Weidnitzer, E: German Aid for Poverty Reduction . Deutsches Institut für Entwicklungspolitik, Berlin

Working Group on Government Relations Secr etariat and Local Government Association: Local
Compact Guidelines: Getting Local Relationships Right Together , National Council on Voluntary
Organizations, July 2000

European Comparative Analysis
Report by ECNL

Zhetcheva, M., Kaloianchev, P., Todorov, T.: E conomic impact of the activity of NGOs in Bulgaria for
the period 1991-2001, Bulgarian Center for Not-for-Profit Law, November 2002