Symposium: NGO-Government Partnerships in Central and Eastern Europe and the former Soviet Union

Cooperation in the Area of Social Services Delivery and Mechanisms of State Financing of NGOs (Sample Models)

The International Journal
of Not-for-Profit Law

Volume 3, Issue 4, March 2001

By Radost Toftisova
Legal Advisor, ICNL – Budapest

Table of Contents

I. Introduction

II. Model Rules for Social Contracting Procedures (Competition, Selection, Concluding of the Contract, Control over Contract Implementation, Reporting)

   II.1 Subject of Social Contracting
II.2 Competition Procedure
II.3 Content of the Competition Announcement
II.4. Selection Procedure
II.5. Contract Conclusion
II.5.1 Rights and Obligations of the Beneficiary – NGO
II.5.2 Rights and Obligations of the State Body-Partner
II.5.3 Sanctions for Breach of Contract
II.6. Conclusion

III. National Models

III.1. Hungary
III.1.1 State Financial Support to the Nonprofit Sector
III.1.2. Civil Society Participation in the Decision-Making Process
III.1.3 NGOs and the Local Governments
III.1.4 Local Governments as Members of NGOs
III.1.5 Conclusion
III.1.6 Specific Examples of Cooperation

     III.2.1 Government Office for Cooperation with Associations
III.2.2.Direct State Financing
III.2.3.Contract for Public Benefit Services
III.2.4.Cooperation at Local Level
III.2.5. Problems of Cooperation at Local Level: Establishing of the Regional                    Center

   III.3.1.Legal Framework
III.3.2. Contracts for Cooperation
III.3.3. Specific Example

  III.4.1.Legal Framework
III.4.2.Possibilities for Funding
III.4.3.Social Fund


I. Introduction
It is a widely shared opinion that the various public sectors such as the state (central and local authorities), non-governmental organizations (NGOs) and the economic sector should operate as partners. Partnership is necessary and it is of great importance to each of the partners as well as to society as a whole. However, there is no unanimity concerning the contents of the partnership relationship. Concepts vary from a restricted interpretation of the notion of contacts between two or more parties[1] aiming at the establishment of any form of cooperation up to the setting up of contractual relationship involving strictly specified rights and obligations. Partnership is available when the contacts between two or more parties are directed towards constructive cooperation rather than towards confrontation.

Partnership can be accomplished at a central or at a local level. Specific examples from the practice prove that local partnership has greater capacity for success and is easier to realize. Local NGOs possess better information about the nature of local problems, they are closer to people and their needs and can be more flexible in their reaction to problems where necessary.

The importance of all forms of partnership even at the most elementary level should not be underestimated. Consultations between NGOs, and local and central public authority, even when it does not lead to direct financing of NGOs is significant because it strengthens the awareness of the interrelated functions the two parties have in social life. The state comes to know the non-governmental sector and the trust developed between them turns into a crucial factor for the future contracting of out social services to NGOs. Consultations comprise both informal talks and active participation of the public in the local decision-making process examples of which can be found in the experience of some Latin American countries.

A more elaborate form of partnership is a contracting between the state and NGOs pursuant to which the NGO gets the right (and the obligation) to perform activities (tasks and services) which traditionally fall within the competence of the state. The assignor – a central or a local authority – provides financial support to the assignee – an NGO – as a subsidy or as a consideration under the contract. As an alternative, the state can provide premises, in-kind assistance or other support in its capacity of a contracting party.

Cooperation in providing social services is of particular importance and plays a particular role in public life. On the one hand, social services involve specific sensitivity as they are related to special tense aspects of the condition of a given society. We shall not comment in greater details on the specific content of the notion of “social services” but it should be mentioned that the Bulgarian legislator is using the term in its narrow sense. Under the Social Assistance Law, social services are the delivery of social assistance to persons who need it with the purpose of assuring their basic living needs. The right of citizens to social assistance is constitutionally enshrined, therefore, it is correlative to the obligation of the state to guarantee its realization. When other persons or organizations (including NGOs) provide social services, the state represented by the central or local authorities, must compensate the providers through financial or other types of support.

Bulgarian legislation recognizes the role and the capacity of the NGO sector to provide various services of high quality. But this recognition is still a mere declaration for cooperation between local authorities and NGOs and is not accompanied by a beneficial legal framework and specific provisions. Social contracting is still anticipating its endorsement and real opportunities for realization.

Social contracting already has developed history in a number of countries. It has been successful where the state administration has become aware of three factors. First, that providing funding to the NGOs is not a unilateral charity action in support of the non-governmental sector but rather a payment in return for a job or a service and the approach applied to that relationship should be business oriented. Secondly, partnership with NGOs in providing social services is beneficial to both sides and to society. And thirdly, partnership offers adequate and diverse forms both for the realization and for the control of the spending of state support by the NGOs, taking into account the public interest. The state must efficiently apply a set of rules aiming at the prevention of abuse and of improper distribution of assets.

The present publication pursues two main goals:

  1. To suggest sample rules for the establishment of a partnership between the state, the local authorities and     NGOs for the joint provision of social services or for the direct state financing of NGO providing such services. More specifically, the emphasis will be placed upon the rules for selection of the NGO-partner and on controlling, monitoring and reporting mechanisms for the implementation of the contract.
  2. To propose sample models for successful partnerships in the area of social services (in the narrow and in the broad meaning of the term) by examining briefly the legal framework for partnerships and some specific social contracts in different countries.

The authors are conscious of the fact that not all of the ideas raised are applicable in Bulgaria and not all of the examples used can be mechanically transplanted to Bulgarian environment. Nevertheless, this paper has been prepared with the presumption that all potential partners in the field cherish the desire for partnership and the state and the municipalities are ready to work for the abolishment of obstacles on the way to the complete achievement of cooperation. These obstacles can be of various natures and their removal requires time and efforts at different levels. These may include: legislative amendments, more thorough knowledge of the legal provisions and the opportunities they provide; exploration of international experience and the ground for the successful implementation of the models in Bulgaria; training to work in a team even when the partners seemingly stick to different positions but still pursue a common objective.

We hope that the paper will encourage the interested parties to increase their efforts to eliminate all enumerated obstacles to success.

II. Model Rules for Social Contracting Procedures (Competition, Selection, Concluding of the Contract, Control over Contract Implementation, Reporting)

II.1 Subject of Social Contracting

As has already been stated in an earlier publication[2] the subject of social contracting is the carrying out of specific activities or the realization of long-term projects which normally fall within the competence of the state. As an assignor, the state either provides certain funding to the assignee or undertakes other obligations as a party of the social contract. The distinguishing feature of social contracting is reflected by the fact that the state keeps the right to monitor and supervise directly the spending of the provided funds and the implementation of the contract. The rules suggested here can be applied to the selection of a beneficiary of a grant where the state subsidizes NGOs for their activity of mutual interest. [3]

The subject of social contracting is the delivery of social services and the contents of this concept varies in the separate countries. In Bulgaria, for instance, it refers to social assistance only. Thus, activities in the area of education, healthcare, culture and environmental programs are not covered by the concept, although they are considered to be an “ideal” or “non-profit” purpose.[4] In Hungary, however, NGOs have the opportunity to conclude contracts with municipalities for carrying out activities in all these fields and receive funding for that. Established mechanisms for cooperation and financing in the sphere of social assistance might be implemented in the contracting in other non-profit areas of activity. Thus, the successfully operating models of partnership in one social field can be transferred to another, and take advantage of the positive applicable features.

II.2 Competition Procedure

State financing of NGOs, even when the funds will be used for the implementation of a government social contract for the benefit of the public, requires strict rules to guarantee the objectivity of the selection procedure. The procedure begins with an announcement of the competition with time frame to allow interested NGOs to prepare and take part in it. The period between the announcement of the competition and the deadline for submitting applications should not be less than 30 days. The announcement must be published in a manner which guarantees that all potential candidates will receive information about the competition and its conditions in time to prepare their proposals.

II.3 Content of the Competition Announcement

The competition announcement must contain:

  • Participation requirements. In most countries only organizations which have acquired “public benefit” status are allowed to take part in the competition. Another condition applicable when the subject of social contracting includes specific activities requiring a license is that the candidates must have been awarded such a license. A permit from the competent ministry or a similar state institution is required for some organizations.When financing is granted from a special fund or a specific budget item, only NGOs of a given type can be admitted to take part in the competition. For instance, only NGOs that function at the level of partnership involving at least four Member-States can apply for funding from the European Union sources. In Romania, the right to get financing from the Social Fund belongs only to organizations from poor rural regions, farmers’ organizations, minorities representatives or municipalities, which have concluded cooperation contracts with such organizations.Some types of NGOs can explicitly be designated as not qualified to participate in the competition, for example, political parties and movements, trade unions, religious organizations, etc.
  • The technical characteristics of the project which will be contracted, including tasks, description and maximum amount of the funding expected.
  • Deadline and place for the submission of the documents for participation.
  • Description of the package of documents which the candidates must submit. The package must include the application, project proposal, evidence that the candidate meets the requirements for participation, etc.
  • Approximate deadline for the announcement of the results.

II.4 Selection Procedure

The procedure for considering the applications and documents and for the selection of the NGO partner must be objective and transparent and should be based upon clear criteria announced in advance. Thus, the risk of giving subsidies based on political or personal criteria will be reduced. The composition of the commission which will examine and assess the applications and the qualities of the candidates according to precise technical requirements, is one of the guarantees of the objectivity of the selection.[5] It is recommended that the members of such a commission (or another body possessing the same functions) should represent all future partners. The representation of the state authority which will grant financing and will take part as a partner (in case they are different bodies), and of the NGO sector is mandatory. The commission must evaluate: the capabilities of the candidate to fulfill the tasks for which the competition has been announced; the availability of additional funding from other sources; the experience of the candidate in the realization of similar projects; the opportunities for partnership in the implementation of the project, for instance, an NGO and a municipality or several NGOs submit a common application; the staff which will carry out the project; the time limits for the implementation if they are not strictly determined in the announcement.

The results of the competition, i.e., the decision of the commission, must be appropriately announced. For instance, according to the Brazilian law the commission announces its decision in the presence of all candidates. A municipal regulation in Perm, Russia makes it mandatory for the commission to publicize the competition results in the local media.

II.5 Contract Conclusion

The contract is concluded between the respective central or local public authority and the NGO selected by competition. The terms of the contract must be discussed by the parties and not unilaterally imposed on the NGO in order to eliminate any risk of inequality among the partners. The contracting of the conditions will contribute to the establishment (or preservation) of the relationships of trust and respect among the to be partners. The discussion of the contract terms must be focused on the protection of public interest which has triggered the contracting and of the interests of the parties as long as these interests are not in contradiction with each other and with the public interest. In relation to this a reservation should be made that some of the terms of the contract will be determined in advance and therefore will not be subject to a subsequent discussion. These conditions must be included in the competition announcement and the participation of the NGO itself will be a sign that it has agreed то them.[6]

The contents of the contract should encompass all rights and obligations of the parties as well as the sanctions which can be imposed for their violation.

II.5.1 Rights and Obligations of the Beneficiary — NGO

The NGO is entitled to receive a certain sum necessary for the financing of the social contract implementation either as a lump sum or in portions. In the case where financing is provided in portions the schedule should be adjusted to the activity conducted in order to ensure the smooth implementation of the contract. The funding must be used only for the purpose of the implementation of the contract. The NGO-beneficiary is responsible for appropriate accounting of the use of funds. In some cases, it may be desirable to open a separate bank account in order to distinguish the financial implementation of the contract from other transactions of the NGO.

The NGO-partner has the right to organize the implementation of the contract on his own and independently (including sub-contracting with other partners) except when the contract itself envisages joint implementation with the state body. The contract frequently includes a clause concerning the right of the NGO to conclude contracts with other central or local public bodies and even with the same body for the implementation of another social contract. The state body-partner may keep the right to approve the sub-contracts especially when the sub-assignee will perform activities for which a license is necessary.

There should be a clause in the contract related to the funds left unused after the contract has been implemented. It is usual practice for such funds to be sent back to the state (local) budget.

II.5.2 Rights and Obligations of the State Body-Partner

Naturally, the basic obligation of the state body is to secure financing to the NGO according to the payment schedule fixed by the contract.

The basic right of this partner is to require and obtain regular information (reports) regarding the contract implementation. The reports are either submitted to the state body or (and this is recommended) to an especially created controlling institution (commission).[7] The representative composition of the commission will serve as a guarantee for objectivity in the evaluation of information and in taking measures in case of allegded violations.

This right of the state body-partner should not grow into a right to interfere in the activity of the NGO but must be confined to monitoring and control strictly within the framework of the contract and the assigned task.

The parties could also include a clause to give the opportunity to the state as a party to alter the contractual terms under certain conditions (for example, change of licensing regulations, or increase of rental rates or other prices set up by the government). Such clauses must be carefully considered before being included and even before being proposed for discussion. Apart from possibly provoking the natural negative reaction on behalf of the NGO, they can also generate risks for the normal accomplishment of the contractual and out-of-contract relationships between the parties.

II.5.3 Sanctions for Breach of Contract

The contract should envisage sanctions in case of breach by the parties. Contract law in all countries usually provide for such sanctions but there is no obstacle to additional provisions. For instance, the Brazilian law provides sanctions directed against the property of the NGO as well as against its officials including confiscation of their assets in case of fraudulent use of state funds.

The Romanian Law on Social Fund allows the state to annul the contract concluded and entitles the NGO-beneficiary to appeal this action in court. The sanctioning of the NGO cannot lead to the deprivation of its legal personality.

It is important that sanctions should be envisaged also in cases of breach of contract by the state authority.

II.6 Conclusion

The smooth functioning of the partnership between the state and the nonprofit sector is frequently hampered by the lack of trust and doubts expressed by NGOs fearing an infringement of their independence. Such concerns would be abolished if NGOs possess the opportunity to assure their financial stability by carrying out economic activity. This problem is settled through the laws regulating NGOs, their status and rights.

The establishment of relationships on the basis of cooperation and equality particularly at a local level is of specific importance for the countries which are still in the period of transition to stable economic, political and social conditions. Such relationships are flexible enough and can respond appropriately to the changing local needs and problems. On the other hand, it is known that local NGOs quite often are pretty small and unstable and the administration does not consider them as equal partners. The successful settlement of this conflict will be a demonstration of maturity and competency both by the NGO and by the local authority. The search for the most adequate forms of cooperation in the absence of good practice and encouraging legislation is the testing of the success of the future partnership.

III. National Models

III.1 Hungary

III.1.1 State Financial Support to the Nonprofit Sector

The change in the political system of Hungary in 1989-1990 was followed by an alteration not only in the scope of the state support but in the types of support as well. During the period 1990-1997, the total amount of state subsidies increased from 5 to 50 bln forints. While in the past the dominant form of financial support was the budget subsidy for operational expenses, in the nineties new forms emerged and acquired priority. These were principally: program subsidies and normative budget support for education and social services.

In addition, the number of the state institutions which were authorized to decide on the specific designation of the state subsidies for the third sector increased (after 1997 the number of taxpayers who can make such decision rose, too).

The forms of funding for the sector comprise:

  1. Budget subsidies for operational expenses
  2. Normative[8] subsidies from the state budget
  3. Financing through ministries and public funds
  4. Public foundations
  5. 1% from the income tax paid

III.1.1.1 Budget Subsidies for Operational Expenses

The Law on State Budget determines annually the amount of the funds to be designated for certain civic and charity organizations with the purpose of covering their expenses. Upon the motion of the Parliamentary Commission on Civic Organizations the parliament decides how these funds will be allocated among the mid-size organizations and organizations of national importance which apply for financing.

The parliament also determines the way funds are provided and used. Subsidies over 500 000 forints are transferred in two installments.

These means can be used only for covering the expenses of nonprofit activities and cannot be transferred to another organization except to a member organization which has been in operation at the time of applying for a subsidy.

The subsidized organization submits a detailed report in writing to the parliamentary Commission on Civil Organizations on how the funds are spent. The report is submitted with a new application for funding, or no later than March 1 the following year.

III.1.1.2 Normative Subsidies from the Central Budget

Religious organizations, civic organizations, foundations, public foundations, public benefit companies, etc., which have opened and run social services, public health or educational institutions have the right to get normative subsidy granted on the basis of a contract. Although most of the social and educational services are provided by nonprofit organizations on a regional rather than on a national scale subsidizing contracts are concluded at the level of ministries as well. Normative subsidies are provided according to the number of beneficiaries of the given service (sick persons, students). Nonprofit organizations which manage social, health and educational services institutions get sums equal to the amount given to the state institutions performing the same activity. The State Budget Law determines the amount of the per capita subsidy.

The normative subsidy is provided pursuant to a contract. The State Budget Law provides the basic rules regulating the funding and reporting on the funds spent. For instance, in the area of public education NGOs may apply for subsidies through the administrative offices in the region where they are registered. Subsidies are given on a monthly basis. The report for the funds spent is due before January 31 of the subsequent year. For subsidies over 30 mln forints a certification by an independent auditor is necessary. Administrative offices (they operate in the capital and in all administrative regions) are authorized to control the legality of the application for subsidizing and of the spending of the subsidy.

III.1.1.3 Funding through Ministries and Public Funds

NGOs may receive funding from the budget of the ministries as well. Similar to the budget subsidies granted by parliament the biggest (the most outstanding) foundations, public foundations and civic organizations may also get financial support for their expenses from the relevant ministry. These NGO are named in the annual budget of the ministry responsible for that area of activity and they receive the designated subsidy. For example, the funding of the World Federation of Hungarians is part of the budget of the Foreign Ministry while the Ministry of Health subsidizes the Hungarian Red Cross.

NGOs may receive financial support from special public funds or within the framework of programs carried out under the umbrella of the competent ministry.

Public funds exist thanks to the state budget but they finance specific governmental (public) projects partly from sources from outside (non-budgetary) sources. The Funds are established by law which provides for their activity (purpose), sources of funding, types of expenses which they can subsidize, and the minister who is authorized to manage the fund’s property. An essential condition for the creation of such a fund is that the activity/the project should be partially funded from non-budgetary sources, for instance, tax contributions, donations, or fines. Currently, two public funds are in operation: the Labour Market Fund and the Central Nuclear Financial Fund.

The Labour Market Fund conducts activities aiming at the provision of services for the unemployed, vocational training, and creation of jobs for persons with reduced working capacity. The revenues of the fund comprise contributions from employers and employees, rehabilitation payments, annual subsidy from the state budget, etc. The Minister of Social and Family Policy together with a collective body consisting of representatives of the government, employees and employers and with the Minister of Education has the right to manage the fund. A part of the fund (“decentralized”) is at the disposal of the regional labour centres.

Another channel for supporting NGOs through ministries is financing within the frameworks of basic programs. For instance, the national cultural program is within the area of competence of the Minister of Cultural Heritage and it raises its budget from contributions from cultural organizations (for example, publishers), fines for violation of copyright, donations, etc. The tasks of the program includes the creation and the protection of national and universal cultural values, their distribution in the country and abroad, cultural anniversaries and festivals, national participation in world cultural exhibitions and fairs.

A Board of Directors manages the basic programs. The competent Minister can decide on the spending of up to 50 % of the program funds. The rest 50% is allocated by a competition. One half of the participants in the competition are “invited” by the Minister and the other half are nominated by civil society organizations. The state will always prevail in the decision of the board because the approval of the Minister or of his authorized agent is mandatory.

III.1.1.4 Public Foundations

Public foundations established by an amendment to the Civil Code which has been in force since 1994 are hybrid organizations. As a financial unit they belong to the state and as a legal entity they are a part of the nonprofit sector. One of the aims pursued by the act was to legalize the transfer of public obligations from the state to the civil sector. As was outlined in the explanatory report to the amendment, “these organizations create institutional opportunities for effective cooperation based on the interdependence between the state and the private sector”.

Public foundations are established by parliament, government or by a representative local government body (municipality) with the objective to guarantee the continuous performance of public obligations. Other physical and legal persons can be co-founders or can join an already established foundation if this act is not contrary to law. Public obligations are the obligations which the law imposes on central and local public authorities. The task of public foundations is not to perform these obligations but rather to organize the continuous provision of public services, the conclusion of the necessary contracts, or to arrange for the funding of these activities.

Public foundations do not replace the state. They assure the realization of public obligations on their own behalf but for the benefit of the public. Their creation and functioning are subject to certain special rules (for instance, they are obliged to promulgate their statutes and to ensure auditing supervision over the management.)

Public foundations receive annual budget subsidies. The authorized ministry supports the foundations within its area of competence from its own budget.

By their nature, public foundations are legal means for the transfer of public funds to the civil sector and for the redistribution of funds among NGOs.

III.1.1.5 1% From the Paid Income Tax

Under a special law from 1996, Hungarian taxpayers have the right to designate a nonprofit organization selected by them as a beneficiary of 1% of the income tax paid by them. Since 1998, an additional 1% from the tax paid can be placed at the disposal of a religious organization. The redistribution of the income tax is done on the basis of a declaration submitted by the taxpayer at the tax office.

The system of the “1%” (or more precisely, of the 2%) tax for NGOs contributed to the improvement of the relationship between the nonprofit sector and the public and created incentives for NGOs to strive to secure their own sources of financing. Statistics show that after the introduction of this scheme the process of state subsidizing of NGOs has become more democratic because of the increase in the number of small and provincial organizations – beneficiaries.

III.1.2 Civil Society Participation in the Decision-Making Process

The legislation in force entitles civil society organizations to express their opinion on draft laws before their submission to the government. Each ministry must, before adopting a decree, to send its draft to the organizations holding a legal interest. Practice shows that ministries keep lists of the biggest and most popular NGOs in their area of competence and send legislative proposals to them. This obligation is waived if the decree is urgent (as most of the ministerial decrees are). In this case, NGOs have the right to express an opinion but it is not mandatory for the ministry to consider it.

Recently two members of parliament proposed a new form of civil society participation in the legislative process. According to the proposal, the body which proposes draft legislation must publish an official announcement for the legislation. National civil society organizations which are registered and hold an interest in the field have the right to express an opinion in writing within a certain period (not less than 15 days). Unfortunately the parliament declined the opportunity to consider the proposal.

III.1.3 NGOs and the Local Governments

The Local Government Law of 1990 declares in general that local governments should support the activity of self-organized public groups and should cooperate with local NGOs. In practice, the greatest amount of examples of successful cooperation are realized on a local scale and on the basis of individual contacts.

The forms of financial support for the civil society sector by the local authorities are similar to the channels of central subsidies to NGOs described above.

III.1.3.1 Subsidizing from the Local Budget

Local authorities have the right to apportion a definite part of their budget to the support of local nonprofit organizations.

Financing can be provided also through a separate fund created for that purpose. In these cases, representatives of local NGOs are invited to take part in the distribution of the support.

Some cities in Western Hungary grant part of their revenues from local taxes and fees to organizations from the region.

III.1.3.2 Normative Subsidies from the Local Budget

When local NGOs take on the performance of public tasks in the social, healthcare or educational sphere pursuant to a contract they have the right to apply to the local authorities for a normative subsidy. Contracting is done in two ways: a/ the local government gets the service provided by the NGO and secures regular funding to the organization; b/ the NGO takes on some tasks falling within the competence of the local government which in exchange assures financial and infrastructural support.

Unfortunately, this form of cooperation is still rarely used despite the opportunity of creating relationships of mutual advantage that it offers to both sides. In 1996, hardly 11% of the local governments decided to conclude such contracts with NGOs though a slight growth of the activity in the field is discerned. This form of financing could guarantee safe and long-term cooperation between the two parties, nevertheless, local authorities definitely prefer subsidizing to contracting. (Two thirds of local authorities are ready to grant financial subsidies ad hoc). The lack of a written contract makes the position of the NGO uncertain because in such cases the local government’s support is based on personal contacts and a change of personalities leads to breaking off relationships.

III.1.3.3 Public Foundations

According to the Law on Local Government the representative body of the municipality may found local institutions or other organizations aiming at the provision of public services within their competence. The representative bodies and some local governmental bodies may contract for the joint maintenance and management of such an institution (nonprofit organization). Local authorities can conduct activities which are mandatory for them as well as voluntary activities.

Between 1990-1996, one third of the local governments have founded or have been co-founders of a public foundation directly or indirectly solving of problems. These foundations often collect donations for local schools, libraries, museums, theatres, hospitals, or for police. Some of them, however, provide direct social or educational services or organize cultural programs, exhibitions, festivals or summer camps. Others present environmental protection programs as well as programs focused on increased employment opportunities or on the improvement of the work of municipalities.

III.1.3.4 Non-Financial Support to NGOs

Local governments can support the nonprofit sector by creating good conditions for the operation of the sector as a whole without directing the support to particularly selected organizations. For instance, they can provide premises for the establishment of civil society centres free of charge (like the House of the Civil Societies in Pecs). The local government in Tatabania has created a database of local NGOs aiming at improving of coordination among them. Some local authorities (or districts in Budapest) publish newspapers and brochures free of charge containing reports of local NGOs’ activities. In smaller towns or villages the local government provides legal and professional aid for the establishment of NGOs which have as their purpose to contribute to the solution of local problems. Similar forms of non-financial local support to NGOs are a common practice.

III.1.3.5 Civil Participation in the Decision-Making Process at Local Level

The local governmental representative body is obliged to determine in its statute (regulations) which civil society organizations may send their representative to take part as consultants in its sessions or in the meetings of its committees. There is no obstacle to other representatives of the third sector which do have not been granted such a status to be invited ad hoc.

At the end of the nineties, about 20% of the local governments have created the possibility for nonprofit organizations to participate in the decision-making process in the following forms: NGO representatives have become members in local permanent or temporary committees; NGO experts take part in the preparation of decisions affecting their area of activity; local governments hire a reporter, a councilor or other official who would be in charge of the relationships with the third sector; local governments organized institutionalized or ad hoc civil fora and round table discussions.

III.1.4 Local Governments as Members of NGOs

Local governments not only support nonprofit organizations but they are also their members. 61% of local governments are members of an association or a union. These organizations represent a forum for the exchange of information and experience; others perform representative functions through their contacts with the parliament and the government; a third group deals with solving regional problems such as crime, environmental pollution or unemployment.

III.1.5 Conclusion

State support for the nonprofit sector (including central and local subsidies and financing through ministries and funds) in Hungary is considerably lower than in Western European countries. NGOs should rely on higher revenues from private donations and from economic activity. The centralized system of state funding has been transformed recently towards increasing the number of participants in decision-making process and bringing them closer to the beneficiaries. Many new forms of support have also sprung up.

The relationships with NGOs at the local level are usually closer, based on more frequent contacts, and they are more intensive. The feeling of mutual dependence between the two parties is stronger than at the central level and this realization gives impetus to a search for new models for cooperation.

The NGO participation in social services delivery resulted in the improvement of the quality of the services due to the lower degree of bureaucracy of NGOs as compared to public authorities and thanks to the innovative approaches used by NGOs.

III.1.6 Specific Examples of Cooperation

III.1.6.1 Social Activity

In the Municipality of Debrecen, the mayor’s office has established a special social office. The office is active in persuading civil society organizations to join its work. Three ways of support of the organizations operating in cooperation with the local government have been established:

  • cooperation contract ( financing contract)
  • support contract ( crisis aid)
  • supporting aid

Cooperation contract. The social office announced for the first time its call for project proposals in 1994. Two years later such calls were sent to organizations which the department had already cooperated with. In 1997, contracts with 17 nonprofit organizations were concluded and the value of the financial aid was 43 mln forints (215 000 USD). The procedure was the following: the local government invited NGOs to draft project proposals. Then the negotiations between the social office and the NGO started and lead to the conclusion of a draft contract. The Social Commission approved the final version of the contract. The term of the contract was one year and there is a possibility of prolongation 60 days before the end of the one-year term. The organizations were obliged to submit a quarterly financial report and to prepare a detailed report on their activities before the end of the project and to send it to the social office and the Social Commission. The social office, the Social Commission and other experts supervised the professional level of operation. The local government secured the financial control. The Social Commission invited the organizations to their annual meetings and to discussions of various issues and problems.

Support contract (crisis support aid). The practice of concluding such contracts began after 1991. Civil society organizations provide crisis support aid in two ways: delivering food once daily, and providing small amount of cash for persons in need. The contract between the organization and the social department not only regulates the amount of cash that can be delivered but also the requirements for offering food and the numbers of supported persons per month. Homeless people can benefit from these services for a period of up to six months, and other persons in need – up to three months. The time limit can be prolonged. This form of support is very flexible because the organizations are in constant touch with the beneficiaries and can adjust their services to the changes in their needs.

Support aid. In 1991 the National Assembly set up the Support Fund. The fund grants financial support to small projects in the social sphere. The amount of aid cannot exceed 50% of the total project budget. The funding procedure is an alternative form of cooperation existing between civil society organizations and local governments.

III.1.6.2 Public Education

Local governments are obliged to ensure the proper functioning of educational and social institutions. NGOs may assist them in the implementation of this obligation. NGOs are hampered in fundraising for their office space. Pursuant to the provisions of Act CXLII from 1997, a special procedure for the provision of rooms and premises – state property for the needs of civil society organizations was established. The law governs contracting between NGOs and local governments, the NGOs being obliged to manage educational institutions and in exchange being entitled to get financial support for their activity. For instance, they can maintain of exhibition halls. NGOs and local governments conclude the so-called public education contract. The mandatory content of the contract comprises the following terms:

  • the type of service related to public education and the fee paid for it;
  • the persons who will benefit from the service;
  • list of the services which will be provided free of charge and those for which a fee will be collected;
  • the minimum period of time during which the services can be used and the minimum working time of the institution;
  • staff, material and financial conditions of the contract;
  • the required level of professional qualification of specialists who will carry out the activities for the delivery of the service;
  • publishing the contract in the local press or in another usual way in the region.

NGOs may take on the operation of public education institutions in the following ways:

  1. Existing institutions supported by local government may be maintained by public benefit companies (one of the types of organizations functioning for the public benefit).
  2. New educational institutions can be opened by NGOs.
  3. NGOs can sell their services to the local government.

According to the law, local governments have the right to grant financial support to the organizations which carry on activities falling within their area of responsibility.

A number of educational institutions also exist which are not supported by local governments but by churches or other organizations. If the institution – for example a kindergarten, a primary school, a school for handicapped or ethnic minority children – is financed from another source but not through the local government support, cooperation may be realized on the basis of a contract concluded between the local government and the organization-sponsor. This contract is a specific form of an agency contract.

Some contract conditions are regulated by the Law on Public Education. The Civil Code is applied to the unregulated matters. The contract must include:

  • the educational purposes of the contract. It is important that the purposes are described in details (for instance, what kind of and how many classes will be provided to the students);
  • the number of students, pupils or children, who will be covered by the educational program;
  • which obligations of local governments are taken or shared by the organization;
  • local governments retain the right to take part in the approval of the educational principles of the program;
  • duration of the program;
  • what resources the organization is going to use and what support the local government is going to provide;
  • types of services which will be provided free of charge and services for which a fee will be charged pursuant to the law; the contract must take into account nonprofit organizations which can get subsidies under the law;
  • details concerning the educational program – number of pupils/students, duration of classes, number of teachers, etc.
  • the contract can be based on any type of support and not only financial support. Local government may provide in-kind and other assistance, for instance, it may provide a building for education or pay the electricity bill. The contract must establish guarantees that the pupils or the parents who use the service will do this under the same conditions as if they would use a school or another institution managed by the local government.

III.1.6.3 Environmental Protection

Environmental protection is another sphere of activity which is open for cooperation. The law requires civil society organizations and local authorities to cooperate in the performance of environmental protection tasks. The forms of cooperation may encompass:

  • consultations for studying and consolidating of the citizens’ standpoint related to an ecological issue;
  • organization of environmental protection camps;
  • litter processing, recycling;
  • collection of information;
  • regional development.

At a local governmental level tenders for programs regarding implementation of environmental projects have already been developed and announced. Unfortunately, a considerable number of problems concerning project financing and organization funding in general have not been solved yet.

Sample Cooperation Contract (from 1994):

Contract for Cooperation Between the Local Government in the Town of Balassagyarmat and the Environmental and Cultural Association “Ipoly Unio”

  1. The Balassagyarmat local government and the “Ipoly Unio” Association (which unites a number of active and renowned civil society organizations in the region) realize that the ecological, social and cultural development in the Ipoly region requires regular contacts among the citizens in the region.
  2. The Balassagyarmat local government takes on the obligation to provide the following facilities to the “Ipoly Unio” Association:
    • permanent office;
    • the local government official for environmental protection will work 2 hours a day on projects of the association;
    • the local government will provide communication equipment for the Association’s office (telephone, fax-machine, copying machine, etc.)
  3. The Association takes on the obligation to carry on the following activities:
    • to assure opportunities for the participation of citizens in the decision-making process in the region where it functions;
    • to lead the activities for the rehabilitation of the Ipoly river and to contribute to the support of the traditional, environmentally friendly forms of economic management in the region;
    • to gather information about the natural values in the town and to contribute to their preservation;
    • to initiate the renovation and the development of traditional and ecologically safe traffic pattern in the region;
    • to help litter cleaning and processing;
    • to promote the discovery of the cultural heritage of the Ipoly region.

    Balassagyarmat, 20 June, 1994.

III.1.6.4 Activities in the Area of Unemployment

The new Hungarian Law on Public Benefit Organizations qualifies the activities for the benefit of unemployed and handicapped as activities of public benefit (Chapter 5, 26, par. C: [public benefit activities are:]…11. Promoting equal opportunities for groups in an unequal social position; 12. Employment rehabilitation; 13. Vocational training of persons in an unequal position in the labour market, and other similar activities”.)

The Ministry of Labor’s regulations enacted in 1998 provided for the method of granting support to the public benefit organizations which provide services to the unemployed and carry out training for persons in an unequal position at the labour market. The local labour centres may ask for proposals from public benefit organizations primarily in two areas:

  • the centres can fund the organizations which help the unemployed find the best possible employment;
  • another area of support is possible when the organizations effectively assist young people and people without qualification to choose a profession which best matches their personality and skills according to their individual preferences.

According to the regulations, the call for project proposals must have the following contents:

  • purpose of the call for proposals;
  • conditions for participation in the tender;
  • project deadline;
  • description of the support that will be granted by the centre;
  • requirements for the content and form of proposals;
  • legal consequences from breach of contract;
  • place and time for submission of proposals;
  • state body authorized to make the decision;
  • deadline for decision-making.

The law (LXV from 1990) provides that local authorities are empowered to choose whether to cooperate with nonprofit organizations. Local governments may actively support the training of the unemployed as well as other forms of services provided to this group of citizens in addition to passive support in the form of financial aid.

The social act (Act III from 1993) provides that NGOs can take on some activities and responsibilities of local authorities on the basis of a contract. Chapter VI of the law regulates the social services which are delivered under such an agreement. Paragraph121 defines six elements which must be included or attached to the contract:

  • a copy of the registration certificate;
  • the type of service/activity, number and group of beneficiaries;
  • a declaration of persons who are going to implement the program that they know the legal and professional requirements;
  • the conditions concerning the fees that will be charged for the services provided and money transfer;
  • in case of breach of contract, guarantees for the continuation of the activity and the amount of compensation;
  • duration and termination.

If any of the conditions stated is missing the contract is invalid.

III.2 Croatia

III.2.1 Government Office for Cooperation with Associations

The office for cooperation with associations was established by a government decree in the Republic of Croatia in October 1998[9] and began its activity in November of that year. The main purpose of the office is to establish a relationship of credibility and to develop the cooperation between the state and NGOs carrying out their activities in Croatia as two important conditions for modernization and development of the civil society in Croatia. The functions of the office are connected with the activities and the financing of associations excluding those under a special legal framework (for example, association of war veterans). The office exercises supervision over the work of associations entitled to state subsidies, and over the use of funds given to the associations from the state budget. During the short period of its existence the office demonstrated efficiency, alertness and straightforwardness in its cooperation with the partners from the third sector. It organized seminars on cooperation possibilities between the state and the associations, as well as seminars on regional cooperation and on NGO tax legislation. The office is also working on a draft law for the amendment of the Law on Associations currently in force.

III.2.2 Direct State Financing

III.2.2.1 General Conditions for Financing

In 1998, the conditions which associations have to meet when they are applying for state budget subsidies through an open competition were established. In 1999, a special item in the annual budget was established for that purpose. Based on the Law on Associations, Parliament adopted a Decision on the basis for determining which associations are in the interest of state and the state budget subsidies for such associations. Pursuant to this decision, such associations are those functioning through an organized network of members in Croatia; associations whose programs help the realization of high constitutional values such as liberty, equality, national equality, pacifism, social justice, human rights, protection of the environment; and members of international organizations.

The supported associations do not include professional organizations (which can apply for financing to the competent administrative bodies), students’ associations (which can approach the Ministry of Science and Technologies for financing of their programs), or sports and other associations (which can apply for financing pursuant to special laws). When such a possibility exists the provision of budget subsidies to the association is not allowed.

The public procedure for applying is opened with an announcement from the Government office for cooperation with associations published in the media at the end of the previous year. The governmental decision about the approved programs and the given subsidies must be announced. In 1999, of 667 programs, 267 were accepted, with the amount of subsidies about 3.331.000 USD. For the year 2000, about 3.060.000 USD have been set apart in the budget.[10]

III.2.2.2 Financing under Special Regulations

The activities of particular associations can be financed through a concrete state institution, for example, a Ministry. In the decision-making process for financing a special ministry department estimates whether the particular association meets the parameters set up by the decision of Parliament. This is the way resources are given, for example, to the associations of war veterans through the Ministry of war veterans.

Croatian government is the founder of the state lottery, a great percentage of the income of which is contributed for humanitarian assistance purposes, sports and technical culture. The criteria for contribution are, again, the parameters accepted by Parliament.

Under special legislation funding is also provided to support the activity of sports associations, associations for technical culture, students’ organizations, minority associations, associations for environmental protection, volunteer fireman teams, and other professional associations.

III.2.3 Contract for Public Benefit Services

III.2.3.1 Health Care

Pursuant to the law, private local and foreign persons can deliver healthcare services to the benefit of society. The application of these rules is limited and covers only health services in homes, polyclinics, hospitals, pharmacies and sanatoriums. Health centers, institutions for urgent medical help, institutes for a pubic health and transfusion centers can not be an object of private or of mixed ownership.

Health institutions are established with the consent of the health protection minister and the approval of the Croatian institute for public health (“Institute”), on the basis of a competition. The winner has the right to enter into a contract with the Institute for the delivery of health services. The health institutions – of private or of mixed ownership – are financed under: a contract with the Institute; a contract with the Ministry of Health Protection subsidized by the state budget pursuant to the law; a contract with volunteer insurers; founders’ funds; municipal budgets; social security contributions by the beneficiaries of the services; and other sources specified in the law, the statutes and founding documents of the health institution[11].

III.2.3.2 Social Assistance

The services in this category include activities for satisfying basic living needs of people and providing assistance to socially week persons or persons in unfavorable personal, social, economical or other situations[12].

In order to open a social services institution, it is necessary to receive the consent of the appropriate ministry. The ministry has the right, on the basis of a public competition, to give a concession for delivering social services out of the home, in a state-owned building.

Sending persons to social institutions (hospices) can be done through the centers for social assistance, which are exclusive state property, pursuant to law or on the basis of a contract. Representatives of the social center must visit the hospice at least once in six months and check the quality of the services in it. The founders determine the fees in the private hospices, but when the person is moved there from a social center, these fees can not exceed those specified by the social ministry. In these cases, social centers have to be informed at least six months before the termination of the activity of the hospice, in order to find another suitable place for the person.

Social services in home conditions involve home delivery of food, personal hygiene assistance and home visits. The ministry determines the standards for these services and municipal social centers are supervising compliance with them. The performer can be a private person doing this in his professional capacity after obtaining permission from the social ministry and informing of the municipal center for social help.

The funding for social services is ensured from several sources. The law provides for allocation of resources from the central and local budget for realization of the right of citizens to social help. The municipality is obliged to give no less than 5% of its budget for “social expenses” which usually covers the cost of accommodation in social hospices. Resources above this amount can be set aside for other forms of assistance, for example, for subsidizing NGOs delivering such services. The law does not contain provisions for state subsidies for NGOs working in the area of social assistance.

Social legislation provides for possibilities for cooperation between the state and municipalities, on the one hand, and NGOs. At the same time, it contains serious drawbacks. For instance, the mechanisms for state financing are not precise enough and there are no clearly defined criteria for municipal funding to NGOs. Social hospices are treated as a part of the state network of social institutions according to the internal regulations governing them.

III.2.3.3 Other Services

The legal framework for state support to educational institutions is not complete and clear.

Partial funding can be received for the implementation of scientific projects within the budget of the National scientific research program as well as through particular ministries (for projects for the development of libraries and museums.)

Other possibilities for cooperation between the state and municipalities and the nonprofit sector involve the presentation of ecological programs for opinions and proposals, meetings between the government committee for handicapped and representatives of the handicapped organizations, and other forms of NGO advisory participation in the process of decision-making in the particular sphere.

III.2.4 Cooperation at Local Level

Most NGOs conduct their activities on a local (regional) basis; thus, their financing depends on the decisions of local authorities. The municipalities manage their budget independently. Funding to NGOs is provided through the competent administrative departments.

The Law on local government and administration of 1992 (amended in 1999) does not regulate explicitly the possibilities for cooperation between NGOs and municipalities. It only mentions the establishment of local committees upon the proposal of citizens and their organizations and associations. The local committees are a form of citizens’ participation in the decisions-making process related to activities which affect their life. The municipality can assign to these committees the exercise of functions which are within the municipality’s competence, and subsidize them from a special municipal budget.

The citizens and their organizations have the right to participate in public discussions of the proposed regional plan for development and to give suggestions and opinions on it.

III.2.5 Problems of Cooperation at Local Level: Establishing of the Regional Center

In the autumn of 1999, the Government office for cooperation with associations organized a series of seminars on the topic “Models of cooperation between local government and administration and the associations” in the four biggest towns in Croatia. The results indicated that in reality this cooperation and its financing face a number of difficulties. Very few of the municipalities provided funding to NGOs on the basis of a competition and clearly fixed criteria. The lack of transparency creates an obstacle to the establishment of criteria for the evaluation of NGOs’ work.

Another problem is the lack of mutual trust and the existence of prejudices. NGOs are referred to as “not serious business partners”, and the municipality managements are treated as “bureaucratic entities which do not accept arguments and disputes”. The need for better communication and a higher degree of familiarization between the two parties was underlined at the seminars.

Some NGOs demonstrate outspoken aggressiveness in the relationship with the local authorities, which leads to the lack of mutual tolerance. Others, the so-called “well known” organizations, regularly receive financing regardless of the quality of their programs. Both sides show a shortage of professionalism in establishing a relationship of cooperation and selection of a partner.

The absence of representatives of the nonprofit sector in the municipality management body is an obstacle to the direct participation of the sector in the administrative process at the local level.

In the autumn of the 1999, the association CERANEO began the implementation of a pilot project for the creation of a regional center for cooperation between NGOs and local authorities, with the purpose of establishing a relationship of permanent cooperation between municipalities, local citizens’ associations, the media, the business sector and citizens. The district of Rijeka was selected to host the head office of the Regional center, due to the traditionally good relationship of NGOs with the local government. The head office was established in March 2000 and the plan is to use this idea in other towns as well. The planned activities include: seminars on project design and fundraising, as well as on approach to and relationship with the media; development and approval of a program for cooperation between the Municipal (City) council and associations; research in the area of social services aimed at the solution of the most serious problems of the local community.

III.2.6 Conclusion

During the past decade, the Croatian third sector won a good reputation and grew stronger due to its activity in the area of humanitarian services, the work with refugees and war victims. Despite the significant number of organizations registered there still exist many obstacles and restrictions to their work which threaten even their existence. Some of the major problems are:

  • Unfavorable legal framework and a patronizing attitude by the state towards NGOs, interference and unjustified control over their activity;
  • Lack of sufficient financial resources and appropriate state policy encouraging grants; unfavorable legal framework for taxation;
  • Lack of transparency and professionalism on both sides, centralized and bureaucratic approach by the municipal authorities which favors some and limits the activities of other organizations.

Nevertheless, the ineffectiveness of the activity of some NGOs is due mainly to problems of an internal nature and to insufficiently clearly defined goals which change as new people or fund resources appear. Many NGOs are not able to prepare good quality projects or to use the available limited resources rationally.

The establishment of the Government office for cooperation with associations in Croatia is an attempt to solve at least some of the accumulated problems and to establish a permanent and high-level government cooperation with the nonprofit sector.

III.3 Brazil

III.3.1 Legal Framework

The main legislative act governing the legal possibilities for cooperation between the state and the nonprofit sector is the new Law on Civil organizations in public interest (OSCPI) adopted in March 23,1999[13]. The law implemented with a government decree in June of the same year. The law established a new legal framework for partnership and broadened the competitive abilities of NGOs in the field of social contracting.

Pursuant to the new law, OSCPI are legal persons of private law whose social goals and statutes meet the requirements of the law. In order to be qualified as such, the organizations have to be engaged in some of the activities listed in art.3, among which are: social assistance, free education, free healthcare, environmental protection, economic and social development assistance and fight against poverty, and protection of human rights.

The status of OSCPI is awarded by the Ministry of Justice on the basis of a written request, with registration documents and evidence that all taxes have been paid. The Ministry may reject the request only when the organization does not meet the legal requirements (for example, if it is a commercial association), if its purpose is not among those listed as “public benefit”, or if the submitted documents are not complete.

OSCPI cannot engage in political, partisan or election activity.

The law sets up the procedure for entering into cooperation contracts with the qualified organizations and defines the purpose of these contracts: cooperation in delivering social services as defined in art.3 for public the benefit. The minimum mandatory content of contracts includes: purpose; means and schedule for achieving the purpose; allocation of income and expenses; clearly separated obligations of both parties; criteria for performance evaluation; statement for publishing part of the contract, according to the requirements of the law, and explanation on the operational and financial execution of the contract.

III.3.2 Contracts for Cooperation

The procedure for cooperation begins with an announcement of the competition by publishing the competition conditions. The announced conditions can not be changed after their publication. The announcement has to contain the minimum information about: deadline for the submission of documents and application, format and content of the application, technical characteristics of the expected results – project description, services or activity, criteria for evaluation, date and place for the submission of documents, deadline for evaluation and decision-making of the evaluating committee, and maximum amount of the requested funding. The main criteria for evaluation of the proposals listed by the law are: the value of the project; technical and working capacity of the candidate; and the adequacy of the proposal to the project. Criteria not listed in the competition announcement must not be taken into consideration later.

The NGO-partner is selected by a committee appointed by the state body – partner. Its members must include at least one representative of the executive power who is an expert in the sphere of the future cooperation, and a member of the Public Policy Council[14] when such a body exists. The state body gives instructions to the committee about the evaluation criteria and the project but it has no right to ignore the committee’s decision or to appeal it.

NGOs have the right to enter into several contracts with different or even with one and the same state body.

The process of execution of the contract for cooperation is subject to public control. The Public Policy Council, if one exists in the particular sphere of activity, is the state body which is authorized to supervise the execution. The evaluation committee also controls the process. The committee consists of representatives of both contractual parties (two from the particular branch of the executive, one representative of the civic organization, and one member of the Public Policy Council if one exists.) Pursuant to law, specific documents about the manner of spending financial resources must be submitted to the committee. When the quantity of the provided state subsidies exceeds the amount of 600,000 reals, the beneficiary is obliged to submit a financial report certified by an independent auditor. Sanctions are foreseen for abuse of resources, including confiscation of property.

III.3.2 Specfic Example

The town of Porto Alegre has achieved significant success in the partnership process between the municipality and the local community and in the participation of citizens in the work of local administration. The Budget Council is elected annually, and out of 46 members:

  • 42 are elected by the local community
  • 2 represent and are appointed respectively by the Federation of local associations and by the syndicate of municipality employees
  • 2 represent and are elected by the executive power. These two members of the Council do not have a right to vote.

The Council gives opinions and can amend decisions related to municipality finances, including the proposed municipal budget, investment plans, tax policy, and the use of out-of-budget resources. The decisions of the Council are transmitted to the executive power which can veto their realization. With the votes of more than two-thirds of the Council members the veto can be overruled.

III.4 Romania

III.4.1 Legal Framework

In the 1990’s several laws were enacted in Romania which reflect the new approach of the State towards the third sector and towards the position of NGOs in the society. This process is connected with the appearance of a new concept for Romanian legislation: that of public benefit organizations. Thus, for example, under the Law of sponsorship and donations No.32/1994, a potential beneficiary of sponsorship can only be those legal persons of public interest which have a head office on Romanian territory and which have a purpose and activity among those expressly listed in the law.

III.4.2 Possibilities for Funding

The legislation in force provides for the possibility of direct funding of NGOs by the state. Such possibility exists, for example, in the field of sports pursuant to Government decision No.405/1997. The Ministry of sports and NGOs can cooperate in this sphere, and youth organizations can receive financial support. The regional departments of the ministry are also authorized “to give support and cooperate with youth associations”.

The direct funding and realization of cooperation with handicapped organizations is regulated by Government decision No.939/1997 about the reorganization of the state service for the handicapped.

The central and local governments can grant subsidies from the central and local budgets to NGOs –Romanian legal persons “which create and manage social assistance entities”. The social assistance activities are carried out on the basis of a contract concluded with the Ministry of Labor and Social Protection or with the municipal bodies.

Legal possibilities for social contracting (partnership) between NGOs and the state authorities are also established for particular sectors of nonprofit activity.

The Law for Development of Economic ones of 1998 introduced a new organizational structure of the country composed of eight zones for development. It opens a possibility for realization of projects of specific regional interest for each zone and for the provision of financial support through the local budgets. It is implicitly provided that NGOs have the right to participate in such projects and to cooperate with the central and local offices for development.

The cooperation between local administration and NGOs is expressly stated in the Law of Local Administration No.69/1991. It allows the assignment of some particular activities and services of public interest by municipalities to NGOs. Local municipal bodies have also the right to give free temporary use of immovable property to “charity and public benefit organization” – legal persons engaged in activities for the satisfaction of citizens’ needs.

III.4.3 Social Fund

NGOs created with the purpose of solving economic and social problems have the right to be funded by the Social fund established by a special law of 1998. The law was developed jointly by the Romanian government and the World Bank with the purposel of placing a fund created by donations at the disposal of the poor and of communities in an unfavorable situation. The Fund’s resources are designed to assist economic initiatives to settle the problems of underdeveloped communities, to improve or to create mechanisms of social services, and to start infrastructure projects in the rural regions.

Groups of at least ten persons or NGOs organized with this purpose can apply for a subsidy with which to begin activities for realization of the purposes listed in the law. The importance which the state attaches to the nonprofit sector is underlined by the role of the NGO – managing and monitoring the project and its execution. According to the World Bank’s new program broad possibilities are foreseen for easy access to information and financing for poor regions and municipalities.

The working methodology of the Social Fund requires the group or the NGO to work in cooperation with the local administration and with the direct users of the available resources. In order to guarantee the neutrality of decision-making, the Board of Directors (the managing body of the fund) includes representatives of Prime-Minister, the Ministry of Labor and Social Protection, the Ministry of Public Activity and Territorial Development, the Finance Ministry, the local administration and four well known and popular representatives of civil society.

The law also provides for possibilities for state support for scientific research projects, child protection activities, programs for minority protection, and cultural projects.

The central and local administration is obliged to conduct consultations with NGOs in relation to draft legislation which will govern their activity; as well it to cooperate with Romanian and foreign NGOs working for reforms in the local government sphere.

The new attitude of the state towards the nonprofit sector is marked with a positive approach and good intention which plays a significant role for the recognition of NGOs’ place in public life. The government creates a special body –Office for relations between Government and NGOs. The Office coordinates and assists the development of various forms of cooperation between NGOs and the public authorities by establishing consultation groups at central and local levels, consulting NGOs, and preparing an annual report on the results of its activities.

III.5 Bolivia

In 1994, Bolivia enacted the Public Participation Law for the purpose of decentralizing state power. Municipalities were granted wider responsibilities in the area of education, health protection, sports and local roads. The law recognizes the importance of and supports the process of public participation, which involves the community in rural and town regions (municipalities) in the legal, political and economic life of the country.

In order to achieve these purposes, a new type of a legal entity is established: local grassroots organization (LGO) which represents the people of a particular territorial unit. Only one LGO can be registered in each territorial unit. LGOs are established in order to propose, request, control and supervise public services delivered in a given region in the sphere of health protection, education, sports, basic sanitary systems, micro-watersupply, local roads and development of town and rural regions. LGOs define the priority activities for each particular region and these priorities are mandatory for the municipality, the executive bodies, or regional corporations which deliver public services.

Each LGO send its representative in the supervising town committee. The function of this supervising committee is to assure the proper use of municipality resources, to control municipal expenditures and to make the municipality reports known to the public. All mistreatments are reported to the local executive power which issues instructions for correcting the mistakes or forwards the issue to the Senate for sanctions. LGOs can consult and coordinate their work with other civil society institutions.

This paper has been prepared by Radost Toftisova, International Center for Not-for-Profit Law, CEE office in Budapest. The following bibliography has been used:

  1. Legal Framework for Social Contracting between Non-governmental Organizations and Local Governments, by Desislava Bijeva, © 1998 by ICNL.
  2. Survey of the Current Legislative Framework for NGOs to Perform Social Services in Bulgaria, by Marieta Dimitrova, © by ICNL, 2000.
  3. Comparative study of NGO/Government partnerships, by Caroline L. Newman, © 1999 by ICNL.
  4. Comparative аssessment of NGO/Government рartnership in Romania, ICNL – Budapest, © 1999 by ICNL.
  5. NGOs and public administration, Romanian legislation. By Mihai Gheorghiu, © 1999 by ICNL.
  6. Current legislative framework in Croatia relating to possibilities for cooperation between NGOs and state and local administration, by Sanja Baric, © 2000 by ICNL.
  7. Relationship between the governmental and the civil sector in Hungary, by Istvan Csoka, © 2000 by ICNL.
  8. Introduction: “Codes of Conduct for Partnership in Governance: Texts and Commentaries”, by Tatsuro Kunugi and Martha Schweitz, The International Journal of Not-for-Profit Law, volume 2, Issue 3, copyright © 2000 by ICNL.


[1]Taking into account the purposes of this paper we shall not touch upon the role of the economic sector as a partner of the state and of NGOs without underrating its role and potential.

[2] Social Services and NGOs: 40 questions and answers to help NGOs in Bulgaria to deliver social services, Resource Centre for NGOs in Bulgaria, Sofia, © ICNL, 2000.

[3] Ibid. On the difference between grant and social contracting.

[4] Activities in the health service sphere fall under special legal regulations which have common features with the legal framework for economic activity.

[5] See below the Brazilian model, section III.3.

[6] The construction is similar to that of a general terms contract.

[7] See the Brazilian model, section III.3.

[8] The term “normative” is used in a different sense than its meaning in English, to define this specific form of budget support for NGOs in Hungary (the Hungarian term is “normative”).

[9] OG 132/98

[10] At the time this material was prepared, the decision had not been published yet.

[11] In Croatia, about 20 institutions for home health services and approximately 70 private health institutions have been opened.

[12] Here called “social services” in the narrow sense of the term.

[13] Law 9790b/1999.

[14] A Public Policy Council is a government institution with competence in a specific sphere. The particular Council must be involved for consultations in the negotiation process with the public benefit organization. When in a particular sphere there is no public council, an opinion is received by the state body which wants to enter into a partnership.