NATIONAL FUNDS
TO SUPPORT CIVIL
SOCIETY
ORGANIZATIONS

The International Center for Not -for- Profit Law (ICNL)
July 2010

i
ACKNOWLEDGMENTS
An earlier version of this paper was developed for use by the Ministry of Social Development of the
Hashemite Kingdom of Jordan through a grant from the Academy of Educational Development
(AED) with funding from the United States Agency for International Development (USAID). The
International Center for Not -for -Profit Law gratefully acknowledges the support of both AED and
USAID.
The lead authors of this paper are Catherine Shea of ICNL and Nilda Bullain and Katerina Hadzi –
Miceva Evans of the European Center for Not -for -Profit Law. We thank ICNL intern Joanna Wasik
for her research and drafting support and Dima Jweihan, Executive Director of the Middle East /
North Africa Regional Office of ICNL LLC for assistance with the field research.

ii
TABLE OF CONTENTS
I. Introduction ………………………….. …………………………………………………………………………………………………………………………. 1
II. National Funds in the Overall Scheme of CSO Support ………………………….. ………………………………………………. 2
III. Goals of a Fund / Foundation ……………………………………………………………………………………………………………………… 6
A. What Does the Fund Support? ………………………….. …………………………………………………………………………………….. 6
B. Institutional Support, Project -Based Support, or Both? ………………………….. ………………………………………… 7
C. One -Year or Multi -Year Support? ………………………….. ……………………………………………………………………………… 12
D. Types of Support Provided …………………………………………………………………………………………………………………….. 13
IV. Sources of Funding ………………………….. …………………………………………………………………………………………………………. 14
A. Budgetary Commitment ………………………………………………………………………………………………………………………….. 14
B. Privatization Proceeds …………………………………………………………………………………………………………………………….. 15
C. Proceeds from Lottery and Other Games of Chance ………………………….. ……………………………………………… 15
D. Other Funding Sources ………………………….. ……………………………………………………………………………………………….. 17
V. Legal Form and Governance ………………………….. ………………………………………………………………………………………….. 19
A. The Role of the Government and Possibly CSOs in the Governing Bodies of the Fund ……………… 19
B. Transparency and Accountability Requirements ………………………….. ………………………………………………….. 22
VI. Management an d Other Operational Issues …………………………………………………………………………………………… 23
A. The Fund Manager ………………………….. ………………………………………………………………………………………………………. 23
B. Internal Rules and Regulations ………………………….. …………………………………………………………………………………. 25
C. Structure and Staffing of the Fund ………………………….. ……………………………………………………………………………. 26
D. Day to Day Operations ………………………….. ………………………………………………………………………………………………… 27
VII. Criteria for Funding CSOs …………………………………………………………………………………………………………………………. 29
A. Eligibility Criteria v. Selection Criteria ………………………….. ……………………………………………………………………. 29
B. Advancing Government Policies or Priorities ………………………….. ………………………………………………………… 31
C. Systems for Evaluating / Rating Proposals ………………………….. …………………………………………………………….. 32
D. How to Ensure Geographic Diversity? ………………………….. …………………………………………………………………….. 34
VIII. Funding Procedures …………………………………………………………………………………………………………………………………. 36
A. Ensuring Accountability and Transparency in the Funding Process ………………………….. ………………… 36
B. Publication of Information ………………………….. …………………………………………………………………………………………. 37
C. Preventing Conflicts of Interest ………………………….. ………………………………………………………………………………… 37
D. Appeal of Decision on Grant Allocation ……………………………………………………………………………………………….. 38
E. Rules that Go vern Contracting and Payments ……………………………………………………………………………………. 39
IX. Reporting and Evaluation ………………………………………………………………………………………………………………………….. 40
A. Evaluating Grant Programs ……………………………………………………………………………………………………………………. 40

iii
B. Reporting Requirements ………………………………………………………………………………………………………………………… 41
C. Evaluating Institutional Strategy ………………………….. ………………………………………………………………………………. 41
X. Conclusions and Recommendations …………………………………………………………………………………………………………. 44

1
I. INTRODUCTION
This paper explores the key strategic and operational questions that arise during the development
of funds and foundations that support civil society organizations (CSOs). It provides examples
demonstrating how these issues have been addressed by governmen ts around the world, and
analysis of the choices that are made at each step in the process, from establishment of the Fund, to
funding procedures, to evaluation of its overall institutional strategy.
Specifically, the paper addresses the following topics:
• National Funds in the Overall Scheme for CSO Sustainability
• Goals of a Fund/ Foundation
• Sources of Funding
• Legal Form and Governance
• Management and Other Operational Issues
• Criteria for Funding CSOs
• Funding Procedures
• Reporting and Evaluation
The information in this paper is based on the study of funds from thirteen countries. The countries
are Albania, Azerbaijan, Croatia, Hungary, Kazakhstan, Jordan, Poland, South Africa, Turkey, the
United Arab Emirates and the United Kingdom. These models provi de examples of different aspects
of national funds, with due analysis given to the strengths and weaknesses of their different
approaches.

2
II. NATIONAL FUNDS IN THE OVERALL SCHEME OF CSO SUPPORT
Government funding is one part of an effort to establish a well -functioning and mutually beneficial
relationship between government and CSOs . Governments primarily support the civil society sector
by enacting a favorable legal environment for the establishment, operation, and sustainability of
CSOs.
1 Institutionally this encompasses an effective registration body and supervisory authority.
In order to build a larger infrastructure to support civil society, governments may establish
separate units, offices or departments which also help institutionali ze the cooperation between
CSOs and the government (often called “liaison offices”). These departments may be involved with
the establishment of a national fund or foundation, but may also expand their activities to the
creation of strategies and initiativ es that affect the sector as a whole. Governments may also write
policy documents, such as programs for cooperation or targeted strategies that outline the core
principles of good partnership between the state and CSOs and include commitments related to
go vernment funding. Such policy documents were developed, e.g. in the UK or in Hungary by the
Government, in Estonia by the Parliament, in Sweden by the Ministry of International Cooperation.
2
As part of such a strategy, the government may invest in capacity building for CSOs, e.g., by
supporting the provision of training on organizational management or communication; by
supporting the creation of networks and experience sharing, or the building of coalitions to
promote joint interests of the sector. Furtherm ore, governments may invest in obtaining and
generating more knowledge about the sector, including quantitative and qualitative research, or
inclusion of CSO law or CSO management courses in institutions of higher education systems, etc. It
is especially i mportant to have an in -depth understanding of the sector for the development of
effective, evidence -based policies for its long -term development.
In many countries mechanisms for the participation of CSOs in government and Parliament
decision -making are an important part of the infrastructure for civil society. These may include:
• advisory councils assigned to work with Ministries,
• consultative special interest representation bodies (e.g. a panel of CSOs representing
pensioners who have the right to be cons ulted on all legislation affecting their target
group);
• public hearings and other methods of consultation; or
• means of ensuring access to information, including internet -based mechanisms, e.g.,
publishing draft laws on the webpage of the ministries.
In so me countries, the government also establishes or provides resources for CSO support centers.
These centers provide assistance to CSOs in the form of maintenance of CSO databases, training
support, legal aid, publications for CSOs, office infrastructure (e. g. copying and printing) and
internet access; as well as mediation between donors and CSOs (e.g., receiving computer or
software donations from a company and distributing in among CSOs).
1 Katerina Hadzi -Miceva and Fabrice Suplisson, “Overview of State Funding Schemes for Civil Society Organizations,
European Center for Not -for -Profit Law (ECNL) and COWI A/S (2007), p. 2.
2 In the UK this is called “The Compact.” See https://www.thecompact.org.uk/ . I n Estonia it is called “EKAK” (Estonian Civ il
Society Development Concept). See https://www.ngo.ee/1030 . To provide an illustration, we have attached as Appendix A ,
Exhibit 1, a portion of the EKAK.

3
Establishment of funds or foundations is therefore only one part of a comprehensive infrastructure
for the support of civil society. It provides an important source of financing to CSOs, which also rely
on their own income, philanthropic initiatives by businesses and individuals, and funding from
other donors. Government funding is more likely to achieve its goal of strengthening civil society
when it is complemented in the long -term by other means of support and partnership development
for CSOs.

In the examples below, governments already had in place initial funding mechanisms, and then
built a supportive infrastructure for civil society that included a national fund. The examples are
meant to illustra te the importance of a larger supporting infrastructure, whether or not it is
developed before or after the establishment of a national fund.
CROATIA’S NATIONAL F OUNDATION FOR CIVIL SOCIETY DEVELOPMENT
In Croatia, the National Foundation for Civil Society Development was established in order to
promote and develop the civil society sector.
3 Before its establishment in 2003, the Government
Office for Associations was charged with distributing funds to CSOs. The establishment of the
Foundation marked a shif t from a highly centralized system of government financing to CSOs to a
more de -centralized one in which multiple stakeholders played a part. While different Ministries
remained responsible for funding CSOs in their areas, the Foundation supported grass- roots
initiatives that did not fall within the specific area of any particular ministry.
3 Katerina Hadzi -Miceva and Fabrice Suplisson, supra note 1, p. 5.
An Infrastructure for Civil Society
•Enabling laws and regulations affecting CSOs
• Effective registration and supervision
• Point of contact in the government (liaison office)
• Policy development on civil society and CSOs (government strategy towards
civil society)
• Funding support through ministries, government agencies and local
governments
•Funding support through a dedicated Fund
•CSO participation in decision – making (advisory and consultative bodies,
public hearings)
•Capacity building for the sector (training, networking, coalition building)
• Knowledge generation about the sector (res earch, higher education)
• CSO support centers

4
The National Foundation is one piece in the larger framework connecting civil society and the
Croatian government. It fits into a tripartite system of Croatia’s “new model,”
4 which includes the
Government Office for Associations, a 2006 Strategy for Development of Civil Society , and the Council
for the Development of Civil Society, which is a specialized advisory body of the Croatian
government. The Council is charged wi th monitoring, analyzing, and evaluating the financing
granted from the state budget, and ensuring compliance with the Code. In addition, the Croatian
Parliament adopted a Code of Good Practice, Standards and Criteria for Providing Financial
Assistance to Programs and Projects of Associations to establish basic standards and principles for
granting financial assistance from the state budget to associations.
HUNGARY’S NATIONAL CIVIL FUND
Similarly to the Croatian government, the Hungarian government was alr eady providing funding to
CSOs before the establishment of a foundation. It distributed money to CSOs from a “percentage
mechanism,” by which taxpayer funds were allocated to support CSOs. CSOs could also obtain
funding from centralized channels such as in dividual ministry budgets, grant programs run by
ministries, subsidies allocated to social organizations in the state budget, or public foundations,
(quasi -governmental grant -making foundations established by Parliament, the national
government, or local g overnments).
5 The National Civil Fund, supervised by the Department of
Social Dialogue in the Ministry of Social Affairs and Labor, was established in 2003 in order to
supplement the state support to CSOs that they already received from the existing percen tage
mechanism.
6 For the first time, it allowed CSO representatives to become involved in the
distribution of the funds.
Prior to the creation of the Fund, the Hungarian government institutionalized its relations with
CSOs with the creation of a Departmen t for Civil Relations in 1998. The department develops and
coordinates policies affecting the nonprofit sector as a whole. For example, it developed a
comprehensive strategy for the support and development of the nonprofit sector adopted by the
government in 2003, which was evaluated and renewed in 2007.
THE PROCESS OF ESTABLISHING A FUND/FOUND ATION
Good practice entails participation of and consultation with the beneficiaries in the process of
establishment of the Fund. For example the Hungarian Government shared already the draft
concept of the National Civil Fund with CSOs; it personally consulted a group of CSO leaders and
experts to finalize the draft; and subsequently it held country -wide consultations on the draft law
establishing the Fund. Many of th e comments and considerations submitted by the CSOs were taken
into account in the final draft that was adopted by the Parliament. Another way of consulting future
beneficiaries is to conduct a needs assessment among them in the development of the grant
pr ograms which helps in matching their needs with government priorities. For example, as the
Croatian National Foundation was established, it held several CSO forums and cross -sector working
group meetings to discuss the idea for establishment of the Foundat ion and address CSO funding
needs. Such processes are likely to help create support for the Fund among CSOs. CSOs would then
4 For more information about the model see Katerina Hadzi -Miceva, “Legal and Institutional Mechanisms for Government –
NGO Cooperation in Hungary, Estoni a and Croatia,” in Organizacje pozarządowe, Dialog obywatelski, Polityka państwa,
edited by Marek Rymsza, (Institute for Public Affairs, Poland).
5 Katerina Hadzi -Miceva and Fabrice Suplisson, supra note 1, pp. 19 -21. 6 Katerina Hadzi -Miceva, supra note 3, pp. 17 -19.

5
look at the Fund not only as a source of money from the government but as an institution with
which they can partner to achieve common goals for the betterment of their country.

6
III. GOALS OF A FUND / FOUNDATION
The general aim of supporting CSOs can be accomplished in various ways. It is important at the
outset to articulate what exactly the fund is intended to accomplish – this will assist in determining
strategy and priorities for funding, and will also equip the fund to evaluate its own success in the
future.
A. WHAT DOES THE FUN D SUPPORT?
A national fund may be established to strengthen the CSO sector as a whole, or support certain
projects of CSOs that contribute to priority areas of government policy.
The Fund can serve as an effective instrument to provide support to the infrastructure and
development of the CSO sector as a whole. In such cases, the fund would develop grant programs
that address lack of capacity in the sector or it may support grant programs that will increase the
knowledge base about the sector. For example, these initi atives might include:
• Supporting favorable CSO legislation;
• CSO networks;
• Research on CSOs;
• Projects to increase the level of volunteering;
• Projects supporting IT development among CSOs;
• Support for organizational development across the CSO sector, in e.g., good governance and
other accountability and transparency issues;
• Projects supporting cooperation among CSOs, authorities and business companies etc.
In these cases it will not matter whether the grantee CSO works in the area of environment, youth
o r poverty reduction – what matters is that its work will directly or indirectly contribute to the
strengthening of all CSOs. In Hungary, according to the Law on the NCF, 30% of the budget of the
Fund is to be dedicated to such grant projects.
If the fund a ims primarily to provide support in certain priority areas of government policy, then it
will need to focus its grant -making on those priority areas – e.g. women, education, or employment.
It may then choose to support institutional development or project work only for those CSOs that
work in the priority areas.
The two areas of support are of course not mutually exclusive. Indeed the fund may decide to
support priority government areas and in addition, a part of its money will go towards overall CSO
secto r development (e.g. if it runs a grant program to support women’s CSOs, it may support
network building and coalition building efforts among these CSOs, or fundraising and
communication training for them). Or vice -versa, the main goal of the fund may be to support CSO
sector development but each year it will prioritize some areas to be supported depending on the
government’s annual strategy. It is important to clearly determine the proportion of funding
dedicated to each goal and key priority area.

7

B. INSTITUTIONAL SUPPORT, PROJECT-BASED SUPPORT, OR BO TH?
The fund may either provide institutional support to CSOs, meaning that CSOs receive funding for
needs that are not tied to a specific program (usually related to running and developing the
organization), or project -based support, in which CSOs receive funding for a specific project, or
both. The majority of funds have chosen to support the specific projects of CSOs, and do not fund
their general institutional costs, but examples of both types of funding do exist.
The key reason to provide institutional support is to “invest” in the development of CSOs that can
become effective partners to the government in implementing its policies. In many countries the
CSO sector is still underdeveloped in t erms of its institutional capacity. While some CSOs funded by
international organizations may have a good office infrastructure and professional management,
Croa tia: Mission, Vision and Objectives of the National Foundation for Civil
Society Development
The Mission of the National Foundation is to promote and support civil society
development in the Republic of Croatia.
The Vision of the National Foundation is to create, through its activities, an
active citizenship in the development of a modern, democratic and inclusive
society in the Republic of Croatia.
Objectives that the National Foundation wishes to achieve through its activities
are as follows:
•Promoting a ctive citizenship, engagement, and participation in the
development of the local community
•Strengthening capacities of the civil society
• Developing cross -sector cooperation and cooperation among civil society
organizations
• Increasing public influence and visibility of the activities of civil society
organizations
• Developing social entrepreneurship and employment in the non -profit
sector
• Increasing the influence of civil society in the processes of creating public
policy.

National Foundation Annual Report 2009

8
the majority of local CSOs have the ambitions and commitment, but lack the organizational capacity
to carry out their missions.
Providing institutional support is also important in an environment where other government and
private donors provide mainly project funding. It is very difficult for CSOs – especially smaller ones
– to build and maintain effec tive organizations without some level of “unrestricted” institutional
support. This is because most project funding does not take into consideration the institutional
needs of CSOs: it does not allow for a sufficient percentage of overhead costs; it does n ot allow the
CSO to build reserves, or to fund organizational activities that are not directly related to the project
(e.g. project development and other fundraising expenses, board and management development,
strategic planning, or improvement of financial management systems).
Providing project -based support has advantages as well. Project based support can yield specific
results in areas in which the government wants to achieve impact, at the same time strengthening
CSO experience and ability to deliver s ervices in that area. By supporting multiple projects carried
out by CSOs, the Fund can achieve measurable objectives, e.g., in improving living standards or poor
communities or increasing employment of disadvantaged groups.
A combination of the two differ ent kinds of support is also possible. For example, a government
may set aside a certain amount of funding for a project -proposal process, while allocating the
remaining funds to support CSOs through institutional support.
1. INSTITUTIONAL SUP PORT
Institu tional support can take three different forms: normative, need -based, and in -kind. In
normative support, a norm, or formula is used to determine how much support each applicant will
receive, as in the case of the Hungarian National Civil Fund (see below). In need -based support,
amounts of money are given to cover specific institutional capacity needs. For example, a grant may
give to a CSO the specific funds needed to upgrade its information technology system. The last kind
of institutional support, in -kind support, may be given to the CSO in the form of goods or services.
In case of services, the Fund will need to create a mechanism for choosing how to provide them.
7
They may be provided in- house, drawing on government expertise, or they may be contracted out
to a service provider. For example, the Fund may commission training to support the development
of the institutional capacity of its grantees in, among other things, good governance.
At the same time, institutional support can also be used to invest in particular organizations over
time. This practice is followed by the Croatian National Foundation for Civil Society Development.
The Foundation asks CSOs to develop organizational development plans (“business plans”) for
three years, and submit those wit h their applications. The plans will include the core activities of
the CSO (e.g. in delivering social services) as well as ways in which the CSO would like to improve
its services and various aspects of the organization itself (e.g., improve its governance structure, its
accountability mechanisms, generate new sources of income, increase its visibility with the public
etc.). The application is assessed by professional evaluators and the awards are given for three
7 In Jordan, the Vocational Educational Fund exists to develop and fund training programs needed for vocational and
technical education and training institutions to improve facilities, provide raw materials, teaching materials and wages for
training staff. We have attached, as Appendix B , Exhibit 1, a portion of Jordan’s Regulations for Vocational and Technical
Education Support Fund of 2002.

9
years, thus ensuring that a CSO can really develop a basis for its future sustainability. (See example
below.)
CROATIA: NATIONAL FO UNDATION (INSTITUTIO NAL SUPPORT AS AN “INVESTMENT”)
8

HUNGARY: NATIONAL CI VIL FUND (NORMATIVE SUPPORT)
Hungary’s National Civil Fund (NCF) is one of the few National Funds that chose as its main goal to
provide institutional support to CSOs. According to the law on the NCF, 60% of the Fund’s financial
resources must go toward institutional support of CSOs, while 30% will support projects and 10%
serves the administration of NCF itself. Th e institutional support provided to CSOs is largely
normative; each applicant may receive up to 30% of its operational expenses, including the salaries
of its staff members, calculated on the basis of the previous year.
9 The Fund also supports research
reg arding CSOs, training and human resources development in the CSO sector, publications on the
sector, and support to promote CSOs.

8Annual Report of the National Foundation for Civil Society Development (2009),
https://zaklada.civilnodrustvo.hr/upload/File/eng/o_nama/godisnji_izvjestaj_o_radu/godisnji_izvjestaj_09.pdf
. 9 Nilda Bullain, “Learning Points from the National Civil Fund in Hungary,” ECNL (2008).
The purpose of institutional support is to increase the level of sustainability of
CSOs which contribute to the democratization and development of civil society in
Croatia through financial and professional support to their stabilization and
further organizational and program development. Institutional support
represents a specific part of the Grant Giving Program by the National Foundation
with the purpose to invest, over a three –
year period, into organizational
development or stabilization of the work of CSOs registered in the Republic of
Croatia.
The tender for awarding institutional support for the stabiliza tion and/or
development of an association is the only tender by the National Foundation
implemented in two parts. The first part includes the submission of applications by
all associations interested in receiving institutional support. The second part of t he
tender begins with the selection of the highest -ranking associations resulting from
the evaluation performed by the Council for Strategic Investment into Civil Society
Development. This is followed by an evaluation of program related activities and
fina
ncial operations in the aforementioned associations, after which the final
evaluation and ranking of applications is made.

10
This is the table that NCF uses for determining the level of institutional support available for the
CSOs.
10
Annual operatio nal expenditure
(thousands HUF)
Maximum amount that can be applied for
0 – 500,000 500,000
500,000 – 3,000,000 500,000 + 28% of the amount above 500,000
3,000,000 – 10,000,000 1,200,000 + 25% of the amount above 3,000,000
10,000,000 + 3,000,000 + 20% of the amount above 10,000,000
(but max. 7,000,000)

JORDAN: QUODORAT PROGRAM (IN KIND SUP PORT)
Jordan’s Ministry of Planning and International Cooperation (MOPIC) administers the Quodorat
Program, which provides approximately 2 million JD in funding to h elp improve economic
conditions in the poorest areas of Jordan. One component of the project provides in kind
institutional support to community based organizations (CBOs) in the form of training that aims to
build their capacity to engage in local develop ment activities in their geographic areas. CBOs that
participate in the trainings may thereafter be eligible to receive grants that are intended to assist
them in developing income generating activities to sustain their local development work.
MOPIC outso urces the capacity building and grant making program to two large Jordanian CSOs, the
Jordan River Foundation and the Noor Hussein Foundation. These foundations were selected by
means of a tender, in which MOPIC issued an RFA seeking implementers who could design and
carry out the capacity building and grant making programs. The Ministry oversees the work of
these partners to ensure that the project is carried out according to its design and is fulfilling its
stated objectives.
2. PROJECT SUPPORT
As mentioned above, project support may be granted to support the development of the sector as
such or for specific projects within certain government priority areas. In both cases, the fund will
need a mechanism for determining what types of projects or activitie s will be encouraged.
Most commonly, the funds and foundations themselves determine the priorities for funding. So, for
example, if the goal of the Fund is to support development of the sector as a whole, it might fund
work on reform of tax laws affecting CSOs so as to create more enabling conditions for their
sustainability. If the goal is to advance particular government policies, the Fund might determine
the priority areas it wants to support, e.g., youth or education. Subsequently, CSOs will be invited to
submit specific projects that fit within these areas.

10 This table is only a technical tool considered in evaluating support; it does not lead to “automatic” support. Other
criteria, including transparent reporting on activities and finances, other support available for the CSO, the organizational
goals and objectives set by the CSO, and the relevance of the activities of the CSO to the objectives set for the given regio n
(among others) are also considered when making a funding decision.

11
POLAND: CSO-DRIVEN PROJECT PROPO SALS
The National Fund in Poland gives significant room for CSOs to develop their own proposals. The
Polish Civic Initiatives Fund Program supports individual activities “carried out by CSOs.”
11 These
are defined by the Act on Public Benefit and Volunteer Work, and encompass a wide range of
activities; e.g., preserving national traditions and Polish values, promoting and protecting women’s
rights, science, educat ion, ecology, animal protection, and public order and safety, among many
others. By defining the list of activities so broadly, the Civic Initiatives Fund Program ensures that
CSOs are given wide latitude to take initiative and propose projects from which they believe Polish
society would benefit.
KAZAKHSTAN: FUNDING SPECIFIC PROJECT ARE AS
Kazakhstan’s project -funding model lays out specific areas in which CSOs may submit project
proposals. It gives out grants in four areas: social service, scaling up / replication, CSO capacity –
building (which gives grants to CSOs to build the capacity of other CSOs), and children and youth
welfare system improvement.
12 By defining the area of tasks in which CSOs may propose projects
narrowly Kazakhstan’s BOTA Social Servic es Program controls the sorts of projects that will be
awarded in any given funding cycle.
SOUTH AFRICA: FLEXIB LE, MULTI-GRANT PROCESSES
South Africa’s two Funds to support civil society, the National Development Agency (a national fund
affiliated with the South African government) and the Southern African Trust (an independent CSO
that also provides funding to CSOs) both have flexible approaches to funding programs, and
encourage projects in targeted areas, but also leave room for CSO innovation.
The Nat ional Development Agency has two procedures for soliciting proposals.
13 First, it can issue a
request for proposals, and the Board of the NDA selects the grantees whose projects will receive
funding. Second, it has a Program Formulation procedure, in which the NDA approaches local
communities with weak CSO sectors, organizes them, and funds projects within certain core areas.
These core areas are food security, local economic development / social entrepreneurship, CSO
consortia and networks for policy and ad vocacy for the poor, and capacity building for CSOs. The
second procedure is thus an NDA -driven approach to grant funding, which targets specific
communities and advances certain government priorities for the sector; the first procedure is a
more tradition al form of soliciting project proposals, and allows for more CSO input into the type of
projects they wish to pursue.
The Southern African Trust, an independent CSO that funds specific projects of other CSOs, also has
a multi -track grant -giving process.
14 It has three processes by which it gives grants: first, through
solicited proposals, which consists of both an open call for proposals to all CSOs, and a closed call
for proposals exclusively from certain organizations. 85% of the Trust’s budget is allocat ed to
funding these solicited proposals. Second, the Trust sets aside 10% of its budget for unsolicited
proposals that it receives from CSOs throughout the year. Lastly, the Trust reserves 5% or more of
11 https://www.pozytek.gov.pl/Public,Benefit,and,Volunteer,Work,Act,567.htm . 12 https://botafoundation.org.kz/?en=1 . 13 1998 S A Welfare and Pensions 108, https://www.nda.org.za/ . 14 https://www.southernafricantrust.org/grants_policy.html .

12
its overall budget for unexpected situations, if, for example, a project needs more funding than
anticipated.
JORDAN: MINISTRIES O F ENVIRONMENT AND PO LITICAL DEVELOPMENT
Two funds administered by Jordanian government ministries also provide examples of project
based support. The Ministry of the Environment is in the early stages of developing a fund for the
environment. This fund will provide 50% of its support to the National Program’s priorities in the
area of the environment (both those carried out directly by the Ministry and through its
implementing par tners); while the remaining 50% will provide grants and loans for projects
proposed by applicants. The Fund will also provide institutional support to applicants for their
expenses in, e.g., fundraising or administration.
The Ministry of Political Develop ment administers a fund financed by the European Union through
which it aims to advance a strategic partnership with CSOs to increase citizen participation in
sustainable development. One component of the fund provides grants to youth organizations to
buil d networks between European and Jordanian youth. Beginning in June 2009, the program also
provides support through an EU grant for projects to improve public participation in government
decision making. This fund is disbursed through a competitive tender in which CSOs apply for
project funding.
In sum, a successful mechanism for project support may include one or more of the following:
• Pre -determined areas (e.g., to complement government policy initiatives) in which the Fund
will support CSOs, which are e ither:
o Narrowly defined or few in number to focus the Fund’s support to certain areas and
thus achieve greater impact in those areas;
o Broadly defined, to allow for CSO initiative and innovation in project proposals;
• Clearly outlined criteria and procedures for selection and evaluation of the projects; and
• A procedure for the Fund to specifically target weak CSOs.
C. ONE-YEAR OR MULTI -YEAR SUPPORT?
The Fund may provide institutional or project -based grants for one year, for multiple years, or both.
The advan tage of providing one year grants is that is allows many CSOs to compete for grants in
each annual funding cycle, keeping the process open for new proposals. It also allows the Fund to
free up funds for a series of new proposals each year.
Multi -year gran ts may, on the other hand, allow for longer projects that may promote more long –
lasting results and development of the sector. Most often, social problems have deeply rooted
causes that can only be addressed in the long -term. To achieve real and lasting im pact, a multi-year
approach is required on part of the government. In the same way that government programs are
designed for several years, grant funding programs are best planned for a longer cycle (e.g. 3 -5
years).
CSOs that receive multi -year grants wi ll benefit from reduced costs, because they will only have to
pay the startup costs of their project one time, and may thereafter focus on its implementation over
a period of year. Moreover, multi -year funding is helpful to CSOs because it allows them to f ocus on

13
their work and programs and spend less energy fundraising. One disadvantage of multi-year
funding is that it may commit the Fund to supporting a project for a longer period even if the results
are not as expected. In the case of multi -year grants e specially, the Fund should implement clear
procedures for suspending payment if a CSO fails to perform.
If the treasury regulations allow, the Fund may also choose to dedicate a portion of its funding to
support short -term projects, while another portion could be directed towards funding a few
targeted multi -year projects in key areas for change.
D. TYPES OF SUPPORT PROVIDED
The Fund may offer CSOs either financial support or in -kind support. Most national funds elect to
give financial support to CSOs, usually in the form of grants. A grant is a type of financial assistance
awarded for the activities of the CSO as specified in an approved grant proposal. For instance, a
national fund may award a $2000 grant to an organization for its development of an educational
summer program for children of disadvantaged backgrounds.
In -kind support is given to the CSO in the form of goods or services, such as computers, software or
training in a certain capacity. As explained in the section above on Institutional Support, if services
are to be provided, the Fund will need to determine a mechanism for providing them.
One type of in- kind support is the provision of awards and acknowledgements. For example, the
Croatia National Foundation gives awards every year for the development of volunteering,
acknowledging schools that excel in organizing volunteer programs. It also provides an award
called “Better together” to local governments that develop good cooperation with civil society.
15
An additional question to be considered is whether the Fund will require CSOs to raise a portion of
the project costs (called “cost share” or “matching funds.” I t is not uncommon for a donor (whether
government or a private funder) to require that CSOs raise cost share, usually between 10% and
20% of the total funds required. CSOs receiving support from the Fund are galvanized to raise
money or act on their own be half, and this assures that there is support for the activity beyond the
resources of the Fund. The interest of more than one donor may contribute to longer term
sustainability of the project activity. It is important for the matching formula to be realist ic and set
out attainable goals for CSOs.

15 Annual report of the National Fo undation for Civil Society Development, 2009,
https://zaklada.civilnodrustvo.hr/upload/File/eng/o_nama/godisnji_izvjestaj_o_radu/godi snji_izvjestaj_09.pdf
.

14
IV. SOURCES OF FUNDING
A stable source of funding is essential to the sustainability of a fund or foundation. Depending on
the objectives of a government and the amount of money it is willing to commit to the Fu nd, the
Fund may receive money from one or multiple sources. Key sources of funding that have been used
by other countries include a budgetary commitment from the national government’s budget,
privatization proceeds in which a portion of income is dedicate d to the fund from privatization
projects, proceeds from the lottery or other games of chance, and private funding that is either used
to complement government funding, or distributed through a quasi -governmental organization that
receives funding from pri vate sources.
A. BUDGETARY COMMITM ENT
Many countries have allotted a predetermined amount of the state budget to their Fund to support
CSOs. The advantages of a commitment of this type is that the national government may determine
in each budgetary cycle how much funding it is willing to commit in its support to civil society. On
the other hand, without proper safeguards, changing political priorities may put the Fund at risk of
a fluctuating amount of funding, which can undermine the sustainability and lo ng-term success of
the Fund.
ALBANIA: CIVIL SOCIE TY SUPPORT AGENCY
In Albania, the funding of the Civil Society Support Agency is approved by the Council of Ministers,
according to the Law of State Budget. The Council of Ministers approves the number of em ployees
of the Fund, their level of pay, and the amount of expenditure for the administration of the Fund.
16
In its first year, 1 million USD was committed to the Fund. In order to ensure the longevity and
growth of the Fund over time, the amount given to t he Fund must be the same or greater than the
amount given in the previous year.
17
AZERBAIJAN: COUNCIL ON STATE SUPPORT TO NON -GOVERNMENTAL ORGANIZ ATIONS
Similarly, in Azerbaijan, the Council on State Support to Non -Governmental Organizations is funded
with a line item entitled “other expenses” in the national government’s budget.
18 The amount of
funding increased from year to year, with the government allocating a larger sum to the Fund in the
second and third years of its life than at its inception. Moreover , negotiations are currently under
way to possibly include more civil society involvement by empowering the Council, which is the
managing board of the Fund, to make the initial proposal on the amount of funding that is needed in
the coming year.
Overall, allocating funding from the state budget can be a stable, government – controlled way to
generate income for the Fund. Additionally, certain measures can be taken to ensure its success:
• A mechanism for increasing, or at least not decreasing, the amount of funding given to the
Fund each year to allow for its continued development.
16 Law on the Organization and Functioning of the Civil Society Support Agency, Article 15. 17 Id., Article 16. 18 Email conversation with Mahammad Guluzade (June 9, 2010).

15
• Exploring the possibility of allowing CSO demand to inform, at least in part, the amount of
funding that should be provided to the Fund.
B. PRIVATIZATION PROCEEDS 19
The distribution of privatization proceeds to foundations was introduced in the Czech Republic as a
result of the privatization of state- run enterprises. The Czech Government allocated 1% of these
privatization proceeds to a Foundation Investment Fund, whi ch then re-distributed the funds to
local foundations in the forms of endowments. The purpose of this mechanism was to enhance
building of endowments as a secure resource base for CSOs. Foundations must keep the
endowment within a certain legally prescribed minimum, but may use the amount above that
minimum to pursue investment opportunities to achieve their statutory goals. In 2002, 27 million
EUR were distributed to 64 foundations, which at that time represented one- third of all foundations
in the country. Following the introduction of this mechanism, the government introduced changes
in the legal and tax system to create rules for good management of the endowments and to enhance
the ability of foundations to maximize their potential. The amendments introd uced a wide range of
investment instruments for foundations, they introduced rules for safe investing, the possibility for
professional management of endowments by financial institutions, tax -free capital gains, and an
easier registration procedure, all allowing them to build capital that can be distributed to CSOs.
C. PROCEEDS FROM LOTTERY AND OTHER GAMES OF CHANCE
Many countries use an alternate source of direct government funding for their national fund:
proceeds from the lottery and other games of chan ce. The funds from lotteries can be distributed
directly by the government or its ministries, by other entities (e.g., a board, fund, or trust), by the
operators of the lotteries, or lottery proceeds can be distributed to a specific list of beneficiaries
p rescribed by law.
20
The main advantage of channeling proceeds from the lottery to a fund is that it can substantially
increase the amount of funding that is available to CSOs.
21 The lottery is also an advantageous
source of funding because it may already exist, and a portion of the funds simply needs to be re-
directed to the national fund. At the outset, it is important to make an appropriate assessment of
the investment costs versus the amount of money that can be raised for CSOs or good causes.

19 Katerina Hadzi -Miceva and Nilda Bullain, “A Supportive Fina ncing Framework for Social Economy Organizations,” in
The Social Economy – Building Exclusive Economies (OECD Local Economic and Employment Development (LEED)
Programme, 2007).
20 Katerina Hadzi -Miceva -Evans, “Lottery Proceeds as a Tool for Support of Good Causes and Civil Society Organizations –
A Fate or a Planned Concept?” ECNL and IPA (draft awaiting publication).
21 In Jordan, 10% of the net profits of the Jordanian Benevolent Lottery are allocated to the National Fund for Supporting
Disabled People. See Jordan’s Disabled Welfare Law, Article 15. To provide an illustration, we have attached as Appendix
C , Exhibit 1 a portion of Jordan’s Disabled Welfare Law.

16
UNITED KINGDOM: THE NATIONA L LOTTERY DISTRIBUTION FUND AND BIG LOTT ERY
In the United Kingdom, the National Lottery Act and the Gambling Act regulate games of chance. 22
Of every £1 of revenue that the National Lottery gains, 28p are given to good causes. 50% of th ese
28p are then allocated for charities, health, education, and environment.
The National Lottery is supervised by the National Lottery Commission, and operated by Camelot
PLC, an independent company. Camelot PLC passes the proceeds from the sale of lott ery tickets to
the National Lottery Distribution Fund (NLDF), which then splits the money between 14
distributors. Each distributor is an organization with specialized knowledge about a certain sector,
which conducts its own grant -giving process to eligibl e CSOs. The distributors may also enter into
jointly funded schemes with one another.
In 2006, the Big Lottery Fund
23 was given the power to manage 50% (14p out of every £1) to
benefit charities, health, education, and environment. It is a distributor independent of the
government, and must give at least 60 -70% of the money it receives to the voluntary and
community sectors. Additionally, through its own separate BIG fund, it distributes non -lottery
money. The BIG Lottery Fund offers multiple grant programs , including large and small grants for
organizations and communities that are part of the voluntary and civil sector (VCS) in England,
Scotland, and Wales.
24
SOUTH AFRICA: NATION AL LOTTERY DISTRIBUTION FUND
The South African model of a national lottery is similar to the English one: an independent
contractor operates the lottery, while a government organization, the National Lotteries Board,
manages it.
25 30% of the lottery’s revenue is allocated to 5 broad causes through distribution
agencies, which are app ointed by ministries but independent of the government. One of these
agencies is the Charitable Distribution Agency, which is appointed by the Minister of Trade and
Industry. The formula for allocating the percentage of funding that will go to each cause i s agreed
upon by Parliament.
The National Lottery Distribution Fund has faced some criticism for its mechanisms of distributing
funding. Among other things, there have been complaints that it lacked transparency in the
application process and its processi ng of applications is inefficient. The Fund distributed only a
small portion of the money that it received from Lottery proceeds; as a result, new procedures for
the distribution of funds are being formulated. The lessons from South Africa’s lottery show t he
necessity of transparency, accountability, and efficient and effective mechanisms for disbursing the
funds.
CROATIA: NATIONAL FO UNDATION FOR CIVIL SOCIETY DEVELOPMENT
Lottery proceeds in Croatia were used as a base to set up the National Foundation for Civil Society
Development. The National Foundation was established in 2003 with founding assets of HRK 2
million (approx. 275, 000 EUR) and with a constant inflow of funds from the games of chance and
from the State Budget. By 2008 the assets of the Natio nal Foundation increased to HRK 46 million
22 Id. See also www.lotterygoodcauses.org.uk . 23 https://www.biglotteryfund.org.uk . 24 BIG Lottery Fund 2009 Annual Report, available at: https://www.biglotteryfund.org.uk/annual_report_09.pdf . 25 https://www.nlb.org.za/nldtf.asp ; see also Dr. Stephen Louw, “Smoke and Mirrors,” University of Witwatersrand
Departme nt of Political Science, https://www.sarpn.org.za/documents/d0000032

17
(approx. 6.3 million EUR), out of which HRK 43 million (approx. 5.9 million EUR) are allocated from
the games of chance.
26
D. OTHER FUNDING SOU RCES
A fund can also receive money from sources other than government, including private or
multilateral donors, fees collected by the government, or even entitlement of a court judgment as
shown below.
27 In a few countries, quasi -governmental or independent organizations serve the
same function as a national fund, in that th ey are overseen or chaired by members of the
government and carry out the disbursement of money to CSOs. Often, they receive funding from
places other the typical sources of government revenue discussed above. Instead, they may solicit
donations from bilat eral or multilateral donors, corporations and other private entities, or receive
money from foundations, or their own earnings.
The advantage of using private sources to complement government funding is that they can
increase the level of funding available for CSOs. However, there are also challenges. The interests of
government and private sponsors may not be the same. Moreover, in some instances, private
donors wish to retain control over the funds that they donate.
KAZAKHSTAN: SOCIAL SERVICES PROGRAM OF THE BOTA FOUNDATIO N
In Kazakhstan, the Social Services Program of the BOTA Foundation financially supports CSOs in
Kazakhstan. Set up by an agreement between the US, the Kazakhstani government, and the Swiss
government, the BOTA Foundation receives its f unding from an 84 million USD court judgment
regarding a Swiss bank account. Overseen by the World Bank, Save the Children, and IREX, the
BOTA Foundation oversees the repatriation and ensures the proper use of the funds. Though BOTA
Foundation’s creation w as initially set up through a Decree of the Prime Minister on June 11, 2009,
the BOTA Foundation currently functions as a CSO independent of the government.
Though the BOTA Foundation is not a government -operated Fund, and receives its money from an
unusual source, it demonstrates that it can be appropriate and useful to channel resources to CSOs
from diverse or creative sources.
UNITED ARAB EMIRATES: DUBAI CARES
The leaders of the Gulf States in the Middle East occasionally set up quasi -governmental
foundations that aid CSOs or support certain social causes through partnership with international
organizations. For example, Dubai Cares was established in 2007 by Sheikh Mohammad Bin Rashid
Al Maktoum, the Vice President and Prime Minister of the United Arab Emirates. Its goal is to
improve access to primary education for children of developing countries. Dubai Cares receives
donations from corporations, social clubs, and individuals; additionally, at the outset, the Sheikh
matched other donations with money from his own private funds. Dubai Cares reportedly has 1
billion USD.
28 Unlike a National Fund, Dubai Cares does not provide direct funding to CSOs in the
26 Annual Report of the National Foundation for Civil Society Development, 2008
https://zaklada.civilnodrustvo.hr/upload/File/eng/o_nama/godisnji_izvjestaj_o_radu/annual_report_2008.pdf
27 Under Article 9 of Jordan’s Environmental Support Fund, organizations can re ceive money from public, national, and
private institutions, as well as Arab, regional and international organizations. We have attached the relevant portion of
the Regulation on Environment Protection Fund 2009 as Appendix C Exhibit 2.
28 https://www.dubaicares.ae/Introduction

18
UAE, choosing instead to partner with international organizations such as Care International,
Doctors Without Borders, UNICEF, and others.

19
V. LEGAL FORM AND GOVERNANCE
Jordan’s Law on Societies establishes the legal framework for the Fund for the Support of Societies.
It is important, in addition, to consider how the Fund’s governing bodies will exerci se their
responsibilities. This entail consideration of the role and involvement of the government in the
work of the fund, the functions of the governing bodies of the Fund, possible selection and
involvement of CSOs in the governance of the Fund, and rep orting, transparency and accountability.
The role and involvement of the government in the work of the fund may include decision- making,
composition of governing bodies, and/ or supervision. In most cases, the government chooses to
appoint a mixed group o f civil society representatives or leaders and public officials to the
managing board or council of the Fund.
29 However, the degree of control which the government
chooses to retain over the management and governance of the Fund as well as the appointment or
election of civil society members to its composition differs in each country.
A. THE ROLE OF THE G OVERNMENT AND POSSIB LY CSOS IN THE GOVERNING
BODIES OF THE FUND
The government must define the division of responsibilities between the Board and staff of the
Fund, and determine what role, if any, it will play in either or both of these groups.
30 Generally, the
Board provides long -term strategic planning for an organization, or in this case, the National Fund.
It approves long -range goals and annual objecti ves, oversees evaluation of the Fund’s services and
programs, and is charged with assessing the organization’s performance. The staff, on the other
hand, is responsible for the everyday operations of the Fund. They run programs and direct their
own work, s ee that expenses stay within the Fund’s budget, ensure implementation of Board
decisions, prepare performance reports and maintain records, and may prepare a preliminary
budget for Board approval.
While the ultimate decision on funding applications lies with the Board, the practice of who in effect
conducts the evaluation of CSOs’ proposals to the Funds varies. This task can be given to:
• Governing board itself;
• Advisory body;
• Staff; or
• Paid expert evaluators.
The determination of who will evaluate proposals depends on several factors, including, inter alia,
the number of proposals or the volume of material to be assessed, the level of expert professional
knowledge needed to evaluate effectively the technical aspects of the proposals; the capacity of staff
and board; and the image and positioning of the Fund. (If for example the Fund aims to advance an
29 Under Article III of the Albanian Civil Society Support Agency (CSSA), the Council of Ministers chooses five candidates
out of the application pool of civil society representati ves and nominates them for membership of the Supervisory Board,
making sure no two are from the same field and organization. In Hungary, 12 members of the 17 member National Civil
Fund Council must be representatives of civil society organizations. See Art icle 4(2). We have attached the portions of the
CSSA Act and Act of National Civil Fund of 2003 as Appendix E Exhibit 1 and 2 respectively.
30 As an example, we have attached as Appendix D , Exhibit 1, the Albanian Law of Civil Society Support Agency (CSSA) ,
which delineates the various organs of the CSSA and sets guidelines for the composition of the Supervisory Board.

20
image of being a politically neutral, expert-led body then an external advisory board or paid experts
may be preferable to the governing board or the staff it self).
One of the questions related to the evaluation or selection committee is whether it should include
CSO representatives, and if so, how to appoint or elect them? Participation of CSOs means that there
is a representation of people on the committee wh o know the field, understand the issues and
ideally possess political independence. However, participation of CSOs can raise conflict of interest
issues, and those have proven hard to avoid; in order to avoid conflict of interest situations some
countries, such as Croatia, have adopted specific rules on this matter.
31 In addition, it is hard to
establish criteria for selection of CSO members, as generally the mere fact that the representative
works for a CSO does not mean that he or she possess the knowledge required for the particular
program. Finally, CSO representatives may lack grant -making experience. Depending on the local
context, however, transparent methods to choose the members can be established. For example, in
Estonia, an open competition was con ducted among the CSOs to apply for board membership, and
the decision on the candidates was made by the joint government -CSO committee for the
implementation of EKAK, the Estonian Civil Society Development Concept.
Ideally CSO representatives could lend t heir knowledge of the needs and existing programs in the
field to programming and monitoring, but would not be directly involved in grant decision- making
(especially those who are otherwise eligible to receive the grants). This is not to say that someone
w ho is a member, leader or board member of a CSO should not sit on any governmental decision –
making body; however, as a good practice it is recommended that the organization from which this
person hails would be excluded from applying for a grant.
32
For exam ple, the Articles of Association of the Estonian National Foundation state (Art. 3.10.2):
“A member of the supervisory board cannot have personal interest in obtaining the
benefits to be distributed by the Foundation. In case of conflict of interests, and also
when the question of doing a transaction between a member of the supervisory board
and the Foundation or a court dispute against him is discussed, a member of the
supervisory board shall not participate in deciding the question and he shall not vote
in that question.”
HUNGARY: NATIONAL CI VIL FUND
The National Civil Fund in Hungary is governed by a mix of government and civil society
representatives.
33 The Council is entrusted with the general administrative functions of the Fund: it
sets priorities for the Fund, allocates its resources, and develops general rules to govern the
support of CSOs. Its members consist of two representatives of the Parliamentary Committee on
Civil Society, three representatives from the Ministry, and twelve representatives of civil society. Of
the twelve civil society representatives, five are elected from national organizations, and the
remaining seven are elected on a regional basis.
31 In order to avoid conflict of interest issues, in Albania, members of the Supervisory Board or any other organ of the
CSSA cannot vote or take part in a decision- making where he, his spouse, adoptee or adopted parent has a financial
interest in the matter . See Article 14. We have attached the Albanian Law of Civil Society Support Agency as Appendix D ,
Exhibit 1.
32 European Center for Not -for -Profit Law (ECNL) , “State Funding for NGOs: Principles and Practices in Tendering”
(awaiting publication, paper on file with ECNL).
33 ECNL, “National Civil Fund in Hungary,” 2 008.

21
The Fund’s operational decisions regarding concrete grant proposals are made by eleven “colleges.”
Each college contains between five and eleven members, the majority of whom are civil society
representatives elected by CSOs in an electoral system. In the system, CSOs delegate electors to
electoral assemblies, with each elector representing one organization. At the assemblies, candidates
are nominated by the electors, who may also be candidates themselves. Candidates receiving a
majority of votes become members of the colleges and serve a term of three years.
Thus, though the Hungarian governmen t retains decision-making and supervisory powers over the
Fund by including its representatives on both the Council and in the Colleges, it has allowed much
of the responsibility to pass to representatives of civil society themselves.
34
SOUTH AFRICA: NATION AL DEVELOPMENT AGENC Y
The governance of South Africa’s Fund is similar to Hungary’s, in that it includes a significant role
for representatives of CSOs. However, the government has retained a higher degree of oversight of
the Fund by increasing the ratio o f government representatives to civil society representatives, and
giving the Ministry of Social Development the power to appoint the representatives of CSOs.
35
The National Development Agency, South Africa’s fund to support civil society, is chaired by a Chief
Executive Officer. The CEO is appointed by the Minister of Social Development and serves a five-
year term. In order to choose the Board to govern the NDA, the Minister establishes a panel
consisting of an equal number of State Department representati ves and non-governmental experts
in the development field. This panel then creates a short list of candidates from CSOs and presents
it to the Minister, who also invites nominations for the list in the media and newspapers. Once the
panel develops a short list of candidates, the Minister chooses six people. These six civil society
representatives chosen by the Minister, in addition to five members of the government who are
appointed by the Minister, form the Board of the NDA. Their names must be published w ithin thirty
days of their appointment. They serve three- year terms.
The Minister must follow certain guidelines when appointing the Board members: first, the
member must represent a broad cross section of South African society, and second, he is advised to
pay special attention to the race, gender, disabilities, and geographical spread of the candidates. The
law establishing and governing the NDA spells out the procedures for the Board, once it is chosen,
to appoint a chairperson of the Board, establish a management committee, and deal with situation
of vacancy or resignation if they arise.
TURKEY: SOCIAL ASSISTANCE AND SOLIDARITY INCENTIVE FUND
In Turkey, the National Fund to support CSOs is called the Social Assistance and Solidarity Incentive
Fund.
36 Mo re decentralized than the Hungarian or South African models, it works through 931
regional affiliates. Each of these affiliates is headed by its own Board of Trustees. In comparison to
the governments of South Africa and Hungary, the government of Turkey exerts a relatively high
degree of control over these regional Boards.
34 Article 7 of Hungary’s Act on National Civil Fund, provided as Appendix E , Exhibit 3, sets numerous guidelines to
prevent conflicts of interest. For example, the law prohibits a member of the Council from being a member of the College.
Also, the law states that a member of the College cannot participate in decision -making if he/she or his/her close relative
is an official or was within three years in the civil organization supported or if t he member or close relative would
materially benefit from the decisions. See “National Civil Fund in Hungary,” ECNL (2008).
35 SA Welfare and Pensions, supra at note 14. 36 ECNL, “Assessment of the Legal Framework for Cooperation between the CSOs and the Government in Turkey,” (2006).

22
Each affiliate of the Social Assistance and Solidarity Incentive Fund is headed by the highest official
in the province, either a governor or a sub-governor. The Board of Trustees consi sts mainly of
government representatives: the mayor, the municipal accountant, the provincial education
manager, the health manager, the agriculture manager, the social services and child welfare
manager, and a religious authority affiliated with the gover nment. In addition, neighborhood
representatives or CSOs select two to three representatives of CSOs to serve as Trustees. Lastly,
CSOs are invited to general assembly meetings of the Fund.
B. TRANSPARENCY AND ACCOUNTABILITY REQUI REMENTS
Certain reporting , transparency, and accountability requirements regarding the overall operations
of the Fund need to be ensured to maintain the legitimacy of the Fund. The following issues are
addressed when designing requirements to ensure that the fund is run accountabl y:
• participation of the beneficiaries in programming (needs assessment) and evaluation of the
Fund’s activity;
• availability of and access to governing regulations and documents (most of the funds
publish on their web sites their strategy, bylaws, policies);
• availability of the board meeting dates and minutes of the meetings (the Hungarian NCF
always announce when the next meetings will be of its council and colleges, and they make
minutes available via internet);
• clear conflict of interest rules;
• to whom does the fund report and availability of the annual report on the Fund’s operation;
• availability of contact of key staff (director, possibly program officers) and information on
Board members.
It is good practice to determine a term -.limit for the Board members. For example, the Hungarian
National Civil Fund elects its Council and College representatives for two (2) years; in the Estonian
National Foundation for Civil Society board members serve for three (3) years; while board
members in the Croatia National Foundation are appointed for four (4) years.
HUNGARY: NATIONAL CIVIL FUND
Hungary’s National Civil Fund faced criticism for its lack of protections against conflicts of interest.
The National Civil Fund’s Board was composed of both civil society and government
representatives, and the civil society representatives were also considered eligible to receive
funding from the Civil Fund.
37 Moreover, no guidelines were developed to prevent these
representatives from voting on matters that related to the ir own self-interest. As a result, CSOs
affiliated with the decision -making civil society leaders tended to receive all the funding they
applied for, while other CSOs did not. In the end, criticism from society and the Minister prompted
the adoption of an internal regulation addressing conflict of interest issues.

37 ECNL, supra at note 33 .

23
VI. MANAGEMENT AND OTHER OPERATIONAL ISSUES
The Fund implements its daily operations through a team directed by one or more persons. The
Fund operates based on statutes, articles of association and/or internal rules which prescribe the
organizational structure and staffing, the duties and responsibilities of those in key positions,
assets, reporting and other aspects of day to day operations.
38 Clearly prescribed rules of operation
and managemen t will help strengthen and professionalize the work of the Fund.
A. THE FUND MANAGER
The countries examined will usually have one person with the main responsibility for the
operations of the Fund, with the title of “Director” or “Manager.” This person us ually has a set
mandate and can be an ex -officio member of the Governing Board (i.e. he or she may participate in
the work of the Board without voting rights). The Manager will usually be hired from the outside
through a competition. The Director may have a right to propose items for the agenda of the Board;
he or she may also be excluded from participating in the discussions of the Board when these
discussions concern his or her own employment.
The key responsibilities of a Director or Manager relate to th e following main areas:
• preparing and implementing the decisions of the Board (i.e., developing and ensuring the
realization of the grant programs and disbursements);
• devising internal organization policies (usually for approval by the Board, e.g., human
resources policies, communication policies);
• representation of the fund (acting on behalf of the Fund, signing contracts and grant
agreements);
• public communications (e.g. being available for the media, issuing official communications
of the Fund);
• hiring a nd firing staff of the fund; and
• reporting to the Board (financial reports, results of monitoring and evaluation activities).

38 We have attached, as examples of statutes outlining fund management, portions of Jordan’s Acts on the Regulation on
Environment Protection Fund 2009 and the Regulation of Student Support Fund in Official Jordanian Universities of 2004
as Appendix D , Exhibits 2 and 3, respectively.
Albania Civil Society Support Agency: Executive Director
The Executive Director is appointed with a decision of the Supervisory Board taken
with a simple majority of all Board members. Current members of the Supervisory
Board and/or debtors of the CSSA, as well as their relatives up to the second level,
cannot be appointed as Executive Director.
The selection of the Exe cutive Director can be from among no less than three
competitors.

24

In Estonia, the Articles of Association of the fund stipulate a management body rather than a single
manager. The fund’s Management Board may have up to three (3 ) members and is appointed by the
Supervisory Board (the ultimate governing body). The Management Board is required to elect from
among its members a Chairman or Manager, who is the key person responsible for the everyday
operations of the Foundation.
39

39 We have attached the remainder of the provisions of the Articles of Association of the National Foundation of Civil
Society relating to the duties of the chairman of the management board and the competence of the management board as
Appendix F , Exhibit 1. See https://www.kysk.ee/?s=21
.
The Executive Director administers, oversees and directs the activity of the CSSA
and its administration, including the employment and administration of the
personnel, in conformity wit h the law, the statute of the CSSA and the decisions
of the Supervisory Board;
The Executive Director can be released from duty when:
a) he/she violates the law or the acts of the CSSA
b) he/she has conflicting interests with the CSSA
c) he/she infringes t he reputation of the CSSA
d) he/she is incapable, and has in sequences two negative evaluations of his/her
work
All decisions related to discharge of the Director are taken by the Supervisory
Board with a simple majority of all Board members.
The new Dire ctor should be appointed within 30 days when the position is
vacant.
CSSA Statute, Article 16
The Chairman of the management board of the Foundation (Manager) shall:
1.1.1 Organize management board’s activity;
1.1.2 Be responsible for organization of accountancy of the Foundation;
1.1.3 Decide on making expenses necessary for Foundation’s activity within the

25

B. INTERNAL RULES AND REGULATIONS
As an independent legal person, the Fund has the obligation to develop its internal governance
structure. The internal rules and regulations are often approved by the Board as the highest
governing body, but may also be issued in the form of a Ministerial Decree (as in the case of the
Albanian CSSA).
These rules spell out in detail the organizational structure, including various organs and
dep artments of the Fund, as well as the duties and responsibilities of those in key positions and
their relationships. In addition, the rules may address meetings of the board, the use and
management of the assets of the Fund, auditing and financial reporting , conflict of interest policies,
appeal mechanisms against disputed funding decisions, and procedures and use of assets in case of
termination of the Fund.

scope and subject to budget approved by the supervisory board;
1.1.4 Work out and present to the supervisory board for approval the structure of
the Foundation, the procedure of electing and employment of salaried
workers and concept of sa lary schedule and remuneration of workers;
1.1.5 Take on job and dismiss the workers of the Foundation by making, changing
and terminating employment contracts with them;
1.1.6 Grant powers of attorney for representation of the Foundation;
1.1.7 Attend the supervisory board meetings, unless otherwise d ecided by the
supervisory board.
Albania CSSA Statute Article 20
Conflict of Interest
A member of the Supervisory Board or any oth er organ of the CSSA, including the
personals may not vote or take part in a decision –
making, takes part in its
administration or has a financial interest in it according to law.
A member of the Supervisory Board or any other organ of the CSSA, are obliged to
declare the conflict of interest to Chairperson before the decision -making or voting

26

C. STRUCTURE AND STAFFING OF THE FUND
The organizational structure of the Fund will largely depend on the size of the Fund, the volume of
its operations (i.e. how many projects it administers or intends to administer ), and its needs.
Usually there are two main divisions within the Fund: the programs sections and the finances
section. If the Fund is very large, there can be additional departments relating to major programs,
as in the case of the Croatian Foundation, wh ich administers so-called “cooperation programs” (co –
funding programs run in cooperation with other entities) under a separate department. The
Hungarian Civil Fund is organized according to regions and thematic areas and has eleven (11)
“colleges” (decentr alized grant-making bodies).
To illustrate the differences in size and staffing needs, consider the differences between the
Hungarian, Croatian and Estonian Funds.
In Hungary, the National Civil Fund is responsible for distributing 7 billion Hungarian Fo rints,
equivalent to $32 million USD per year, and it supports between 9,000 and 10,000 CSOs every year.
To run an operation of this size, the Fund established eleven decentralized Colleges (regional and
thematic grant -making bodies), whose work is support ed by a Ministry Secretariat and a
designated Implementing Agency. The Council and the Colleges together have 131 members, and
each College works out its own funding priorities and guidelines, publishes calls for proposals, and
evaluates project proposals. Apart from these bodies, at the Ministerial Secretariat three persons
assist the Minister in his work with respect to the activities of the NCF. Furthermore, the
Implementing Agency employs nine program officers who are responsible for NCF -related program
implementation issues. Apart from the program personnel, administrative staff members also help
with the operation of the Fund.
The Croatian National Foundation disbursed 34 million Croatian Kuna (equivalent of $6.1 million
USD in 2009), which supported 3 54 approved grants including several multi -year commitments.
The National Foundation has a Secretary assisting the Director and three managers leading
period . The Executive Director makes a declaration to the supervisory board.
Personnel of CSSA are obliged to provide signed declaration as to the private
interests them and their closest relatives. This declaration is submitted to Executive
Director, who take care t o
prevent this issue. If there is any change or new
information they should provide information within 15 calendar days after the
change takes place
The Supervisory Board members are obliged to make notice regarding the conflict
of interest in the first meeting. Board members cannot take part in discussions and
decisions related to persons or entities with which there might be a conflict of
intere st according the legislation in force.

27
separate grant-giving, cooperation and communication, and finance departments. This organization
chart il lustrates:

The Estonian Civil Society Foundation is a younger organization and has a more limited budget. In
its first year of operations, 2008, it supported 85 projects with a total of 23 million Estonian kroons,
equivalent to $1.9 million USD. As a smaller organization, it has only five staff members: an
Executive Director, Program Manager, Program Coordinator, Chief Accountant and IT Manager.
In the case of the Hungarian and Croatian Foundations, there is a need for at least 15 -20 paid staff
to support the work of the grant -making body. Although the Hungarian fund supports several
thousand CSOs and its budget is about five times that of the Croatian Fund, the number of staff is
almost the same.
40 However, in the Hungarian case there are over 130 people involved in the grant –
making and evaluation process, whereas in the case of Croatia, these functions are limited to the
Board, which consists of nine members. The staff members of the Estonian Found ation are also not
involved in evaluating the proposals themselves.
D. DAY TO DAY OPERATIONS
Finally, the Fund will need to plan for day -to -day operations. Fund managers should consider the
following questions:
40 The Fund was criticized, however, for understaffing and failing to devote enough attention to individual grant projects.

28
• How big is the budget of the Fund and how man y projects or CSOs does it plan to support?
• Who will evaluate the projects? (i.e., staff, board, paid evaluators?)
• How many program and financial staff will be needed considering the above two questions?
• Is there a need for staff in addition to the program and financial staff (e.g., communication
and IT officers)?
• Is there a limit on the administrative costs of the Fund? (e.g. in the case of Hungary, the limit
is 10% of the total budget, but the Fund spends only 7% on administration)
• Who will handle the fin ancial transactions? (e.g. in the case of Hungary, the national
treasury, not the fund, makes payments and conducts financial audits, so the fund does not
need as much capacity in terms of financial management.)
These issues will also help guide the decisions about staffing and management, as well as
organizational structure and program support.

29
VII. CRITERIA FOR FUNDING CSOS
The criteria for funding CSOs are closely related to the goals for which the fund is established. Clear
criteria must be developed to govern different stages of the funding process. A determination of
eligibility criteria (enabling all or only certain CSOs to apply for funding) is necessary, followed by
selection criteria (determining which CSOs from the pool of applicants will be aw arded funding).
Both eligibility and selection criteria can be used to advance government policies.
Subsequently, systems for rating or evaluating the proposals must be established. At each stage,
attention must be given to substantive criteria (having to do with the objectives of the call) as well
as procedural criteria (compliance with proper attachmen t of all relevant documents, etc.) that
organizations must meet to receive funding. All these decisions must be made before a call for
proposals is issued.
Additionally, in the interest of ensuring transparency, it is important that both the eligibility a nd
selection criteria be easily available to CSOs and the general public at the time of publishing the call
for proposals.
A. ELIGIBILITY CRITE RIA V. SELECTION CRI TERIA
Eligibility criteria determine which CSOs will be allowed to apply for funding from a national fund.
They may consist of substantive components, meaning those guided by the topic or objectives of the
grant process, and also procedural components, which have to do with meeting technical
requirements such as submission of all necessary papers in a timely fashion.
41
Selection criteria, on the other hand, give guidelines to the people charged with deciding which
CSOs out of the pool of eligible applicants will be awarded funding. Clarity and precision in the
selection criteria will ensure that t he members of the committee charged with awarding the grants
will make decisions based on objective, previously -decided guidelines. The guidelines may leave
some room for discretion, but not so much as to allow the selection process to become infused with
personal preference. Different national funds deal with the eligibility and selection criteria in
different ways.
42
AZERBAIJAN: COUNCIL ON STATE SUPPORT TO CSOS
In Azerbaijan, only registered Azerbaijani organizations may apply to receive funding from the
Council on State Support to CSOs.
43 This substantive criterion narrows the pool of applicants by
requiring the organizations to meet certain requirements before they are allowed to submit a
proposal. Moreover, the Azerbaijani Council on State Support to CSO s requires organizations to
submit a tax form, a certificate of registration, project plans, and biographies of the staff to be
involved in the project with each proposal. This is an example of procedural eligibility criteria: if the
41 We have attached portions of the 2003 Act on the National Civil Fund in Hungary (see National Civil Fund in Hungary,”
ECNL 2008) and the Albanian Law on Civil Society Support as examples of eligibility criteria, as Appendix G , Exhibits 1
and 2 respectively.
42 We have attached portions of the Albanian Law on Civil Society Support Agency as an example of selection principles, as
Appendix G , Exhibit 3.
43“Regulations on the CSSN under the President of the Republ ic of Azerbaijan,” available at
https://www.cssn.gov/az/en/index.php?option=com_content&task=blogcategory&id=25&Itemid=123

30
organization does not comply with certain procedures of the application process, it will not be
eligible for funding.
POLAND: CIVIC INITIATIVES FUND PROGRAM
The Polish Civic Initiatives Fund Program, 44 for example, outlines certain substantive criteria that
will be considered w hen judging proposals. The Fund will favor those proposals that are, among
other things, innovative and guarantee equal opportunity, promote cooperation between sectors, or
require collaboration or partnerships with other CSOs. The Fund will also privilege CSOs that were
founded in an impoverished area.
CROATIA: NATIONAL FOUNDATION

JORDAN: MINISTRY OF POLITICAL DEVELOPMEN T
One component of the fund administered by Jordan’s Ministry of Political Development targets the
building of networks of youth organizations. To be eligible to receive funding from this program, an
organization must be a registered youth organization. (By way of contrast, the MOPIC’s Quodorat
program targets CBOs, and organizations need not be registered societies in order to be eligible for
funding.)
The Ministry of Political Development also develops selection criteria by which it evaluates the
proposals it receives in response to its tend ers. It uses a point system and assigns points to the
concept paper submitted by the applicant, as well as its financial management capabilities,
evaluation criteria proposed for the project, and the budget. The more total points a proposal
receives, the b etter. If a proposal receives zero weight on the financial management section, the
proposal is removed from consideration, as it is if it fails to meet the eligibility criteria.
44 https://www.pozytek.gov.pl/What,is,FIO,581.htm
Croat ia’s National Foundation, 2006
Sample selec tion criteria: Our Contribution to the Community, Better
Together and Democratization and Civil Society Development
•The qualit y of the initiative / project
• Direct or indirect benefit for the community and its contribution to the
development of civil society
• Organizational and human resources for the implementation of the
initiative / project
• National / regional representation
• Rea l balance between the costs and expected results
• Cooperation with other associations/organizations/sectors
• Innovation and sustainability of the initiative / project

31
B. ADVANCING GOVERNMENT POLICIES OR PRIORITIES
Government policies or priorities may be advanced by narrowing the substantive eligibility or
selection criteria to include CSOs that conduct work or propose projects in areas of government
interest.
These programmatic criteria for eligibility are essentially tied to the purpose of the grant and may
be defined broadly or narrowly. Usually, the more specific these are, the higher the rate of
supported projects will be as only those CSOs that fit the specifics of the program will apply. For
example, for the purpose “to promote gender equality,” specific programmatic objectives can be
formulated at various levels, for example:
• Version A. “Eligible projects are those that address the problems of women in the workplace”
– a general goal that may include anything from sexual harassment to lower pay to
discriminatory employment practices.
• Version B. “Eligible projects are those that aim to reintegrate women into the labor market
after maternity leave” – a specific goal that defines the outcome of the project, leavi ng room
for various initiatives; e.g. training on job -seeking and interviewing, learning of new skills
such as IT or marketing, providing a job -exchange service, providing alternative child -care
services etc.
• Version C. “Eligible projects are those that provide IT training to women who are seeking to
re -enter the labor market” – a very specific objective that defines not only the subject matter
and outcome but even the methodology for achieving the outcome.
Experience suggests that government funding may ac hieve best results if the project eligibility
criteria are defined at the mid -level (as in Version B); i.e. defining the expected outcome but leaving
it to the applicants how best this can be achieved. Version A is quite broad so it is likely that there
wi ll be more proposals than what the budget can support; in addition since there is no focus
provided, it will be more difficult to ensure that projects contribute to the intended overall impact.
Version C is, on the other hand too specific and may not effec tively address the bigger problem of
re -integration of women into the workforce by itself.
45 Version B is appropriate for the purpose of a
grant program in that it focuses on concrete outcomes (related to a government policy) that it
wishes to achieve by su pporting a number of projects that all aim to accomplish the goal with
different methods (often reinforcing each other).
46
Typical project related criteria, depending on the objectives of the call for proposals may include:
• Target groups (i.e. specific tar get beneficiaries define eligibility, i.e. when the project is to
support poor families, disabled people, children or unemployed women);
• Geographic scope (e.g. a municipality or region);
• Innovation (e.g. it has to be a project that has not yet been conduct ed in the
country/region/municipality);
• Replication (e.g. it has to be a project that was already once successfully replicated, or that
can be replicated or scaled up);
45 In cases when the government (e.g. labor authority) sees a clear need for a specific service (in this case, IT training for
job -seeking women) it m ay be more efficient to publish a tender for service contract (as opposed to a grant competition).
46 The above description has been taken from ECNL, “State Funding for NGOs: Principles and Practices in Tendering”
(awaiting publication, paper on file with ECNL) .

32
• Methodology (e.g. it should be a conference or it cannot be a conference; it should be
participatory; it should include an evaluation component etc.); and
Focus theme or cross -cutting approach (e.g. the project has to demonstrate diversity, sustainable
development etc.).
47
AZERBAIJAN: THE COUN CIL ON STATE SUPPORT TO CSOS
In Azerbaijan, the Council on State Support to CSOs 48 gives an advantage in the selection process to
projects in 15 areas of work, including but not limited to human rights and democracy, support to
regional CSO initiatives, and support to refugees and internationally displac ed persons. By
narrowing the selection criteria, but not the eligibility criteria, the Council is able to receive
proposals for projects from many different CSOs that work both within and outside of the
government’s preferred areas, and may choose to fund noteworthy projects outside of its 15 chosen
realms. At the same time, the Council retains the power to favor those projects that are in line with
preferred government objectives.
KAZAKHSTAN: SOCIAL SERVICES PROGRAM OF T HE BOTA FOUNDATION
The BOTA Foundation in Kazakhstan, on the other hand, advances its goal of improving the lives of
children and families by narrowing the eligibility criteria of organizations.
49 It calls for applications
that assist poor children and youth in four areas: improving access t o pre-school development,
promoting youth opportunities and prevention of risk behaviors, and assisting children and youth
that are in difficult life situations. By constricting the eligibility criteria, the BOTA Foundation
narrows from the outset what typ e of proposals it will read.
C. SYSTEMS FOR EVALUATING / RATING PROPO SALS
A clear, step -by- step system for evaluating and rating proposals is crucial to an unbiased,
legitimate, and successful selection process.
CROATIA: NATIONAL FOUNDATION
For example, t he National Foundation in Croatia uses the following 3 -step decision -making
process:
50
1. Verification that the formal requirements set in the tender have been met.
2. Quality assessment of the application by the Program Committee, which is a collegial body
of 5 experts.
3. Decision -making on grant approval taken by the Management Board of the Foundation. If
the Board does not agree with a grant approval made by the Program Committee, the latter
is asked to reconsider the proposal. In this case, the procedure for allocating the grant is
repeated.
47 Id. 48 “Regulations on the CSSN under the President of the Republi c of Azerbaijan,” available at
https://www.cssn.gov/az/en/index.php?option=co m_content&task=blogcategory&id=25&Itemid=123
49 https://botafoundation.org.kz/?en=1 . 50 Katerina Ha dzi-Miceva, supra at note 3, p. 10.

33
The verification process can be achieved through a checklist to make sure that the application
meets the eligibility criteria. The Program Committee of the National Foundation proceeds with the
quality assessment process by using evaluation grids that guide the CSOs and the evaluators in the
process of evaluating the grants. Importantly, the rating system must be matched with the selection
criteria. Usually the points (e.g. on a scale 1 -10) are given for each criteria and either averaged or
aggregated for each proposal. This process leads to a numerical order of the proposals, which then
can be discussed and finalized at the evaluation committee meet ing.
On the other hand, sometimes an “analytical” approach can also be used, whereby there are only a
set of more general criteria (e.g. do the activities of the project correspond to the objectives of the
call?) and evaluators submit a written assessment of the proposal together with their
recommendation whether to support the project or not. This method might be used when it would
be hard to establish more formal criteria, when funding, e.g., innovative new projects, where the
idea is the most important element; or small rural organizations that may not have the capacity to
fill out an application form full of “jargon” (e.g. objectives, target groups, outcomes…). As the below
example from Estonia illustrates, the Fund may use both types of evaluation mech anisms. In the
example, the standard “open calls” are evaluated based on a set of criteria previously approved by
the Director, while the “Good Idea” projects are evaluated “analytically” based on general guidance
provided in the regulation.

Estonia Nat ional Foundation: Evaluation by Experts
Excerpt from the document: Procedures for announcing open calls, proceeding
applications and „Good Idea” projects, disclosing and monitoring the
implementation of the grant
Article 4.3. Content evaluation
4.3.1. The application will be eliminated from the contest during the
content evaluation in case at least two experts find the application not to
be in conformity with the goals of the open call (evalua tion table will
include rating “ 0”).
4.3.2. The experts will evaluate the applications:
o In case of open calls the NFCS’ open call evaluation criteria
approved by the Executive Director of NFCS;
oIn case of “Good Idea” projects analytic approach will be applied;
project analysis will be formalized and recommendations to the
implementer of the project and
NFCS’ Supervisory Board for
financing the project will be provided.

34

D. HOW TO ENSURE GEOGRAPHIC DIVERSITY?
The Hungarian NCF has a decentralized system that allocates a certain portion of the funds to each
college; 6 colleges represent 6 regions of the country and on e represents national level (country-
wide) organizations. In other words, the NCF determines how much of its funding should go
towards supporting CSOs in each of the 6 regions of the country as well as those CSOs that work at a
Previous activities of the applicant and project implementation capacity,
application’s conformity with the open call’s terms and conditions,
c ontent, correspondence of the activities and budget with the goals of the
open call, goal orientation and thoroughness and clear connection to the
budget, clear definition of results in the application, result -oriented
approach and sustainability of projec
t, openness to partnership and
cooperation with public authorities, business organizations or other non –
profit organizations or foundations will be assessed.
4.3.3. Experts use evaluation tables to assess the projects and present them to
the NFCS bureau. E valuation tables, summaries of them and protocols of
the working meetings of experts are in -house documents and are not for
disclosure.
4.3.4. Experts reserve the right to make proposals for financing a project on
certain conditions (reducing or leaving out activities and/or expenses
etc.). A proposal for financing project on certain conditions will be
submitted by the NFCS bureau to the a pplicant and in case the applicant
accepts these terms improved application form and budget is to be
submitted by the applicant. The financing decision will be made on the
basis of updated application and budget. Should the applicant not accept
the proposa
ls of the experts the primary project together with a
justification of disagreement and proposals from the experts will be
submitted to the Supervisory board for a decision.
4.3.5. The work of NFCS’ experts is organized, coordinated and minutes are kept
b
y the Program Manager of NFCS together with the Program
Coordinator.
4.3.6. Ranking evaluation results of the applications which are signed by the
experts and justifications are presented to NFCS Supervisory Board who
will make the final decision concerni ng projects to be supported and
grants to be allocated.

35
national level. The calculation was initially made based on the number of CSOs registered in each
region and nationally, since the aim of the support was to strengthen already existing CSOs around
the country. Over the years, the method of allocation has become more sophisticated, e.g. it
considers also the level of income of CSOs or the ratio of CSOs to the total population in a given
region.
The principles of this system can also be applied to a Fund which does not have a decentralized
system of colleges. The key principles are:
• det ermining the need for geographic diversity based on clear criteria
• determining the proportion of resources allocated to each region (as well as to the national
level, if applicable) based on the criteria.
For example, if diversity is needed because in so me regions there are fewer CSOs operating and
there is a need to encourage heir formation, more resources may be allocated to regions with fewer
CSOs. A simplified method could be to simply say there should be at least one proposal supported
from each regi on.
Importantly, when such determination is made, the Fund needs to ensure proper outreach to the
regions so that eligible CSOs learn about the possibility to apply. Funds in different countries often
hold an introductory “roadshow” where Fund representati ves go to the regions and hold a standard
half -day event everywhere to explain to CSOs in person all the requirements for applying.

36
VIII. FUNDING PROCEDURES
Clear and transparent funding procedures ensure the fair and orderly tender, funding, and
completion of a funding program. CSOs in a number of countries complain that they often have
difficulties accessing government funding because implementation of the funding mechanisms is
not transparent, there are no clear criteria, and the decisions as to who can receive grants are
politicized. In addition, the funds lack an effective evaluation and monitoring mechanism to oversee
the use of funds and ensure accountability by the CSOs that have received them.
51
In order to ensure that good funding procedure s and principles are respected by all of the
government bodies which distribute funding (including the national funds), countries have adopted
documents that set up a framework for public funding procedures. These documents define and
elaborate the princip les of funding and detail the specific procedural requirements that must be
observed. These documents aim to ensure that the principle requirements are applied across all
bodies and agencies of the government which distribute such funds. In addition, they also aim to
ensure that the organizations that are applying for funding are informed and understand the
framework that guides the funding process.
52 They can be adopted in different forms and result
from different processes. For example, Croatia adopted a “ Code of Good Practice, Standards and
Criteria for Providing Financial Assistance to Programs and Projects of Associations,” England
adopted a “Funding and Procurement: Compact Code of Good Practice,”
53 while Hungary adopted
the “Law on Use of Public Funds, Transparency and Control of Use of Public Property.”
A. ENSURING ACCOUNTABILITY AND TRANSPARENCY IN THE FUNDING
PROCESS
Because many CSOs gain their legitimacy from work that is independent from the government, the
process of receiving funding from the government must be done in a transparent and accountable
fashion in order to prevent the appearance of collusion between CSOs and the government.
Moreover, an open and fair funding process will legitimize the national fund in the eyes of the CSOs
and the gen eral public. In turn, this legitimacy will have positive effects on the civil society sector’s
work as a whole.
The following features are part of a transparent funding process:
• A process to publicize all relevant information
o Public calls for proposals;
o Public notice for evaluation criteria;
o Clear and sufficient timelines and guidelines for proposal preparation;
o Public notice of awards.
• Clear rules preventing conflict of interest.
51Katerina Hadzi-Miceva and Nilda Bullain, “A Supportive Financing Frame work for Social Economy Organizations,” in The
Social Economy – Building Exclusive Economies ” (OECD Local Economic and Employment Development (LEED)
Programme 2007).
52 ECNL, supra at note 45 . 53 We have attached portions of England’s Compact Code of Good Practice as Appendix H Exhibit 1. The portions outline
the vision, structure and goals of the Code, as well as the duties of the Government and voluntary and community sector,
and the application process,

37
B. PUBLICATION OF INFORMATION
Calls for proposals, eligibility and selection criteria, timelines and guidelines for proposal
preparation, and notice of awards should all be made openly available to both CSOs and the public.
National Funds across countries have ensured publication in different ways; currently, the trend is
toward utilizing the Fund’s website and national newspapers to give the public access to all
relevant materials.
AZERBAIJAN: COUNCIL ON STATE SUPPORT TO CSOS
Azerbaijan’s Council on State Support to CSOs (CSSN) attemp ts to ensure transparency by
announcing on its website its competition criteria, selection process, and rules of the competition.
In order to make it easy for CSOs to apply for grants, the application forms are also available on the
website. Moreover, the website also contains the laws governing the CSSN itself.
UK: BIG LOTTERY FUND
The UK’s BIG Lottery publishes information on its website, including the following information:
• Publications, such as reports
• Corporate documents
o Annual Reports of the organiza tion as a whole, as well as for each grant program
o Mission and Values statements
o Corporate Plan
• Descriptions of board and staff members
o Board Member biographies
o Senior Management Team biographies
• Events
• Procedures for customer complaints
• Contact Information
The website of the BIG Lottery Fund is intended to be a useful resource in promoting knowledge
about and interest in the fund that contributes to the Fund’s image as an open, reliable
organization.
C. PREVENTING CONFLI CTS OF INTEREST
Rules codifying the prevention of the conflict of interest are necessary to maintain legitimacy and a
good public image for the Fund. Conflicts of interest that should be considered include a decision –
maker’s familial relation to or involvement, financial interest, or a political or other significant
personal interest in a particular outcome or decision.
ALBANIA: CIVIL SOCIE TY SUPPORT AGENCY
For example, the law governing the Albanian Civil Society Support Agency clearly prevents conflicts
of interest. The law states that members of the supervisory board or other organs involved in the

38
supervision or management of the Agency may not vote on a matter in which he or she has a
financial interest, or in a case concerning one of his or her relatives.
54
CROATIA: NATIONAL FOUNDATION FOR CIVIL SOCIETY DE VELOPMENT
Croatia’s experience with the funding procedures of the National Foundation for Civil Society
Development shows how important rules preventing conflict of interest can be. In its first year, the
National Foundation faced criticism about its funding procedures.
55 Initially, the body that selected
the grant recipients was composed of CSO representatives, which raised questions of their
impartiality. As a response to the criticism, the National Foundation adopt ed clearer conflict of
interest regulations. Additionally, the National Foundation introduced a register of potential
conflict of interest situations. Although it is not a public document, the register may be inspected by
authorized bodies upon request.

D. APPEAL OF DECISION ON GRANT ALLOCATIO N
Additionally, a mechanism allowing for appeals of decisions should be put into place. Procedures
for appeal should include a way for CSOs that have filed a grant application to contest decisions
made in an orderly, efficient, and institutionalized way. For example, in Croatia’s National
Foundation, each organization that has filed an application for a grant may file an appeal within 8
days of being notified of the grant results if it has noticed an omission or procedural deficiency in
the way that its application was assessed.
56

54 Law on the Organization and Functioning of the Civ il Society Support Agency, Article 14. 55 Katerina Hadzi -Miceva, supra at note 3, p. 21. 56 Katerina Hadzi -Miceva and Fabrice Suplisson, supra at note 2, p. 10.
Croatia National Foundation Statute, Article 19
(1) A member of the Management Board or other body of the Foundation may not
vote, or decide on issues in which he/she, his/her marriage partner, his/her
adopted parent or child, his/her direct blood relativ e or indirect relative to the
fourth degree, or one related by marriage to the second degree, has material
interest, nor on issues related to a legal entity of which he/she is a member, in
whose management he/she is involved, or in which he/she has any mat erial
interest.
(2) Members of the Management Board or other bodies of the Foundation are
obliged to report to the chair of that body of which he/she is a member the conflict
of interest in Paragraph 1 of this Article of which he/she is aware or he/she sh ould
be aware, at the latest before the vote on the issue in Paragraph 1 of this Article.

39
E. RULES THAT GOVERN CONTRACTING AND PAYM ENTS
The rules that cover the contracting and payments must be developed ahead of time by the fund,
and agreed upon by the organizations that have been selected to receive funding. Often, countries
will codify these rules in a Compact or other document.
57 If any changes to the procedures need to
be made, they should be discussed at the time of contracting between the members of the National
Fund and the CSO before payment is made and before the project has begun.
The United Kingdom has developed a Compact Code of Good Practice, which generally outlines the
responsibilities of the government and CSOs to each other before, during, and after the funding
process.

57 Estonia has codified its rules governing contracting and payments in the Articles of Association of the National
Foundation of Civil Society; see https://www.kysk.ee/?s=21
. We have attached the relevant provisions as Appendix I ,
Exhibit 1.
Selected information from the UK’s Funding and Procurement: Compact
Code of Good Practice
•Payments are made by the government in advance of expenditure “where
there is a clear need and where this represents value for money.” (Article
11)
• Before signing a financial agreement, the government will discuss the risks
of the project, agree to a process managing performance, and agree how
unspent grant money will be handled (Article 10)
• The CSOs undertake to understand the financial procedures and
demonstrate why advance funding is needed, if necessary (Article 16)
• Processes for monitoring are established before the contract is signed
(Article 12)
• CSOs must negotiate monitoring and reporting requirements, and ensure
that systems are in place to deliver the reporting required (Article 17)
• If funding is to be withdrawn, 3 months minimum notice mus t be given
(Article 13)

40
IX. REPORTING AND EVALUATION
Mechanisms for reporting and evaluation are crucial to a fund’s long -term success in achieving its
goal of supporting civil society. Procedures should be put into place to ensure that the Fund is
havi ng its intended impact, and if not, to help determine if changes should be made. Evaluation can
happen on two levels: (a) at the grant program level, i.e., are projects having the intended impact;
and (b) at the level of institutional strategy, i.e., the s trategy that determines what grant programs
will be conducted over a certain period of time (planning cycle, usually 1 -3 years).
A. EVALUATING GRANT PROGRAMS
The purpose of evaluating grant programs is to determine the progress made towards their funding
objectives and to improve funding practices in the future. The evaluation of grant programs can be
achieved in multiple ways: through evaluation by members of the National Fund, by independent
outside experts, or through self -evaluation by the CSOs that hav e implemented projects or received
operational support. When evaluating a grant program it is worth assessing the effects that
supported projects had on the beneficiaries. Some funds, like the United Kingdom’s Big Lottery
Fund, have effectively used a comb ination of methods for a more accurate and holistic evaluation.

The United Kingdom: Big Lottery Fund, National Well -Being
The evaluation process for the National Well- Being grant program includes the
following components:
• Self-evaluations of the project by the CSOs implementing it, done both
during the project and after its completion
• Questionnaires: sent to the beneficiaries of the CSOs’ projects to assess the
impact of the projects. Since the projects were designed to promote healthy
eating, physical activity and mental health, questions concerned the eating
and activity habits of beneficiaries.
• Evaluations done by outside national evaluators
o 7 workshops held to inform the CSOs about the evaluation prior to
its being conducted
o Ethics Committee establ ished to oversee the research
o Large -scale event was held to launch the evaluation
o2 policy papers were written and 3 newsletters were published with
the results (the newsletters target potential grant -applicants,
explaining to them how to construct a suc cessful, outcome-oriented
project)

41
B. REPORTING REQUIREMENTS 58
Reporting requirements depend on the purpose of the evaluation and vary depending on the grant
program. The following minimum requirements are most commonly prescribed:
• in case of longer projects there is usually one or more interim reports and a final report;
• grantees need to submit a narrative and a financial report on each occasion;
• outstanding payments may not be made until such reports are approved;
• (detailed) reporting requirements m ust be known to the grantee by the time of signing the
contract and should be part of the contract.
When drafting the reporting requirements the following issues should be considered in order to
ensure effective reporting which delivers the information whi ch is needed to make appropriate
evaluation:
• Reporting should focus on outcomes (e.g. asking for targets, achievements, beneficiary
evaluation and feedback, learning points etc.) and allow for some flexibility in activities and
budget allocations (i.e. th rough which methods and activities have the targets been met).
• Documentation of outputs and outcomes should not be unnecessarily burdensome.
• It should be clear in which cases the grantee must provide a justification for changes, and in
which cases prior ap proval is needed.
• The level of detail and volume of the report should be proportionate to the funds spent on
the project.
C. EVALUATING INSTITUTIONAL STRATEGY
An evaluation of institutional strategy is intended to monitor whether the Fund itself (through i ts
various grant programs and over time) is achieving its desired impact on civil society. For example,
if the goal has been to encourage creation and strengthening of CSOs in a certain region, have there
been new CSOs formed and are they stronger institut ionally? If the goal has been to contribute to
resolving a social problem at the country level, how has the Fund contributed to resolving it
through its grant programs? If the National Fund is not achieving its intended result, the evaluation
strategy sh ould also help to indicate which areas of the National Fund need improvement.
59
The institutional strategy evaluation would happen along with the planning cycle of the
organization, usually every 1 -3 years. Methods may include:
• gathering and evaluating st atistical data (e.g. how much money was distributed to how
many CSOs, how many beneficiaries received services from grantee CSOs etc.);
• assessing outstanding model projects that have a real impact (as well as perhaps less
successful projects) and identifying learning points to improve the effectiveness of support;
58 ECNL, supra at note 45. 59 In Estonia, the National Foundation of Civil Society set out principles for evaluating institutional strategy through
assessment activities, random monitoring of funded organizations, and a yearly assessment to be conducted by the Board
of NFCS; see https://www.kysk.ee/?s=21
. We have attached portions of the Articles of Association of the National
Foundation of Civil Society Act for Estonia as Appendix J , Exhibit 1.

42
• surveying past and current grantees on how they see the role of the Fund and its
achievements; how has the Fund helped them and what do they expect from it in the future;
• talking to CSOs that were not supported or who were critical of the Fund; and
• commissioning independent research to evaluate the impact of the Fund.
Such evaluation can be conducted as part of, or in addition to, the official reporting that the Fund is
obliged to undertake on an a nnual basis (i.e. reporting to the Minister or Cabinet of Ministers).
It may be important to hold an initial discussion on the evaluation of the strategy of the Fund before
starting a program cycle in order to make sure that the needed data would be collec ted throughout
the way. For example, if required, grantees should be asked to report on the number of
beneficiaries they reached through the projects, so that the data can be aggregated over the years.
Hungary’s experience with the National Civil Fund show s why an effective evaluation of
institutional strategy is necessary. After the first three years of its operation, the State Audit Agency
conducted a thorough evaluation of the effectiveness of the Fund as part of its mandate to supervise
effective and ef ficient use of public money. It noted that “The use of the operational support provided
to CSOs was overall in accordance with the law but did not result in the expansion of the role of civil
organizations as drivers of social change.”

“…The minimum amount determined by the Principles of Support did not ensure
the strengthening of the organizations; the logic of the system did not allow
smaller organizations to break out of their current situation and undergo
qualitative development.
The Council determined only formal requirements for the decisions on the
applications…. The definition of ‘operational costs’ was not clear and was
interpreted differently by the various bodies of the Council as well as the Treasury
and the CSOs.
The minister did not ensure compliance with the Law on use of public funds,
transparency and control of use of public property and the related governmental
decree, which made it difficult to assess the social benefits of the support provided
through the NCF. Durin
g the two years of operation the minister did not
elaborate performance indicators and normative standards as required by these
regulations; therefore the experience and learning points upon which future
decisions could be based have been lost.
The use of the operational support provided to CSOs was overall in accordance
with the law but did not result in the expansion of the role of civil organizations as

43

Following the report by the State Audit Agency, the NCF considered several of the points that were
raised (e.g. defined the operational costs more clearly) and implemented new practices in its
methodology. Most importantly, it introduced a self -evaluation mechanism that it conducts on a
yearly basis to monitor its own effectiveness. In 2009 -2010 it also developed a new strategy based
on the results of the evaluations. (However, it did not change everything, e.g. the Council still
believed that the normative way to determine the rate of support is the fairest methodology to
implement institutional support.)

drivers of social change.”
Excerpts from the Report of the State Audit Office on the first two y ears of operation
of the National Civil Fund (September, 2006)
unofficial translation

44
X. CONCLUSIONS AND RECOMMENDATIONS
Government funding of CSOs through a national fund is an important way for the government to
support the developmen t of civil society and to strengthen the relationship between the
government and CSOs. Ideally, a national fund is part of a larger legal and regulatory framework to
support civil society. In addition to enacting favorable legislation to govern the establi shment,
activities, and sustainability of CSOs, the government may create an office or department to
institutionalize cooperation with CSOs, invest in building the capacity of CSOs, create CSO support
centers, invest resources in generating knowledge about the public sector, and create mechanisms
for the participation of CSOs in government decision -making. As such, the establishment of a
national fund is an important step along the path of developing a larger, more comprehensive
structure of support from the government to civil society organizations.
Since a national fund frequently aims to strengthen government/CSO relations and address societal
needs, an important part of the process of establishing a fund will be to consult its future
beneficiaries. Some funds mentioned in this paper have invited CSO input and participation in the
creation of the fund; others have consulted them in the development of its grant programs.
Government regulators in charge of establishing a national fund should therefore consi der formal
mechanisms for CSO input at both stages as appropriate.
Funds can be established for many different purposes. It is therefore important to articulate what
exactly the fund is intended to accomplish at the outset. Such an approach has been proven to assist
existing funds in determining the best operational strategy and priorities for funding as well as
evaluating the degree to which they are accomplishing their goals. As part of this process, decisions
should be made to determine which organizati ons will receive support, what kind of support will be
given, and to what end. A fund may aim to strengthen the infrastructure and development of the
CSO sector as a whole, or it may provide support in certain priority areas that complement
government poli cy. A fund may support institutional capacities (as when CSOs receive funding for
needs that are not tied to a project) and/or may provide support to specific projects. Institutional
support can be normative (funds allocated for each applicant), need -based (funds given to cover an
institutional capacity need), or in -kind (goods or services). In addition, funds for projects or
institutional support can be allocated for one or several years. The duration of support provided
should be considered as part of the process of conceptualizing the program of the Fund in order to
address the implications which arise (e.g., availability of funds, evaluation and monitoring of
implementation of longer terms projects).
Reliable and significant sources of funding will cont ribute to a fund’s long-term success. A
budgetary commitment in which a predetermined amount of the state budget is set aside for a fund
is a stable source that allows the government to plan how much funding it can commit in each
budget cycle. Proceeds fro m the privatization of state -run enterprises may supplement a fund’s
income, as can proceeds from the lottery and other games of chance. Lastly, alternative sources of
funding may also be available to add to a fund which can help achieve the fund’s aims an d provide
support to more programs (e.g., funding from private donors in the country who wish to partner
with the fund and support particular programs).
Establishing a clear and strong internal form of governance for a fund will help ensure that the fund
functions based on responsible management with good oversight and that decisions of the fund are

45
made in an apolitical manner in conformity with the Fund’s aims and strategy. The governing
structure of a fund will delineate the roles of the government, outside experts, and possibly civil
society representatives in both the short and long -terms. The government may choose to be
involved in the decision -making of a fund, establish the Fund’s governing bodies, or serve in a
supervisory role. Generally, the Boar d of a fund provides long-term strategic planning and makes
the ultimate decisions regarding funding applications, while the management and staff are
responsible for the fund’s daily operations.
While the ultimate decision on funding applications lies wit h the Board, who in conducts the
preliminary selection and evaluation of proposals may vary. Most commonly, a preliminary
selection committee is composed of the governing board of a fund, the staff of the fund, or paid
expert staff evaluators. The selectio n committee may also include civil society representatives. If
the selection committee does include civil society representatives, there should be clear rules about
conflicts of interest. Moreover, the relevant expertise of the representatives should be taken into
account, to ensure professionalism and accountability in the process. Other measures to provide
transparency and accountability in the process should also be adopted to preserve the legitimacy of
the process and help ensure more effective and effi cient implementation of the funding schemes.
Such measures may include: participation of the beneficiaries in programming (needs assessments)
and evaluations of the fund’s activity; public access to governing regulations and documents,
availability of the Board meeting dates and minutes of the meetings, and reporting rules for the
fund.
In addition, as an independent entity, the fund should develop internal rules which spell out in
detail its organizational structure, including the organs and departments o f the fund as well as the
duties and responsibilities of those in key positions and their relationships with each other. This
will strengthen the everyday operations and management of the fund.
Another important issue is the criteria for deciding which or ganizations are eligible to apply and
which ones will be selected. These criteria should be closely related to the goals for which a fund is
established and should consider the different stages of the funding process (e.g., selection of eligible
applicants , selection of projects).
Once organizations have applied for grants, certain proposals will be selected to receive funding. An
unbiased, step -by- step system for evaluating the proposals will include some level of verification
that the proposal meets the requirements, assessment of the proposal’s quality, and a mechanism
for making decisions about which organizations receive funding.
After grants have been awarded, the funding procedures should ensure the fair tender, funding, and
completion of the fundin g program. To this end, many countries have developed a regulation or a
code of good practice to provide a framework. Moreover, publication of all relevant information
ensures transparency. In case a decision regarding one or more grants is disputed, there should be
a mechanism for organizations to appeal the decision to a different body.
Lastly, mechanisms for reporting and evaluation are crucial to determine the progress that the
Fund is making toward achieving its intended objectives and whether or not improvement is
necessary in any areas. Reporting and evaluation occurs on two levels: evaluation of the individual
programs that a fund has supported, and evaluation of the fund’s overall institutional strategy.
Evaluation of programs can be conducted by m embers of the fund, through self-evaluation by CSOs,

46
or by outside consultants. Different methods exist for evaluation of the institutional strategy; for
example, gathering and evaluating statistical data, assessing model projects, surveying grantees,
surveying CSOs that were not grantees or are critical of the fund, or assigning evaluation to a
different state agency.

© 2012 International Center for Not -for -Profit Law (ICNL)