The Trust-program

1. Civil-Partner Program Enhancing the sustainable fiscal, legal and political environment for civil society

2. The Trust-program With support from Trust for Civil Society in Central and Eastern Europe, a program to enhance the sustainability of the civil sectors was started in 2003. In Hungary, Environmental Partnership Foundation contributes to building a supportive legal, fiscal and political environment in which civil society can flourish, through providing grants, carrying out research and expertise.

3. Goals Through formulating recommendations and proposals to reform Hungarian nonprofit legislation we aim at developing laws and regulations adapted to the specific needs of NGOs and contributing to threir sustainabillity. The approach should represent the real interest of the civil nonprofit sector Instead of continuously increasing governmental role, the development of the Hungarian civil sector must be based on strengthening its own sustainability The sector as a whole must be strengthened in order to fulfill its real tasks!

4. Jogismeret Alapítvány Partners ! Civil Partner program coordinates with its principal partners civic initiatives to help develop nonprofit legislation, the work of experts and undertook to prepare a comprehensive and strategic nonprofit legal reform concept.

5. Overture: activities between 2003-2006 Continuous monitoring of the operation, cooperation with the NCF Council, amendment proposals National Civil Fund Cooperation with the Volunteer Center Foundation, expert and advocacy support to their work Volunteer act Contribution to the draft law on legislation Freedom of electronic information, lobby act Public Participation Initiative to access to European convention on NGO registration abroad CE 124

6. Nonprofit legal reform concept The Civil Vision concept looks at Hungarian nonprofit legislation: with a comprehensive and strategic approach. It goal is to provide a theoretic and practical overview of the present legal environment of NGOs, to raise the most important questions and point out major obstacles and to provide alternative solutions to these, as problems related to the creation and operation of NGOs as well as the murky relations between the state administration and civil society can only be resolved through complex thinking.

7. Civic Vision Preliminary conceptual planning Collection of comments Final version Small-group consultations based on interviews with NGO leaders, civil servants, lawyers Processing the comments, finalization of the concept Road show: series of county NGO roundtables

8. Civic Vision ! 17 roundtables in 1,5 months, all round the country More then 350 NGOs represented by participants Hundreds of comments and proposals Media appearance (both printed and electronic) practically everywhere Road show: great success

9. Civic Vision – issues mentioned

10. Civil Vision The concept analyses Hungarian nonprofit legislation along three main, interlinked dimensions. Autonomy of the civil nonprofit sector 1.) Increasing the diversity of civil organizational forms 2.) Structural reform of foundations 3.) Simplifying the operation of civil organizations Relationship between the civil nonprofit sector and the state 4.) Redefining the relationship between civil organizations and government 5.) Broadening the institutions of participatory democracy 6.) Making the public benefit status more functional Relationship between the civil nonprofit sector and theprivate sector 7.) Strengthening the participation of civil organizations in economic activities 8.) Encouraging public support for civil organizations 9.) Enhancing the transparency and accountability of civil organizations

11. Civil Vision – issues 1. Autonomy of the civil nonprofit sector 1.) Increasing the diversity of civil organizational forms • „simple/small association” • civil societies without legal entity 2.) Structural reform of foundations • redefining leadership roles: the relationship of the founders(s) and the board • new types: community foundations, endowed foundations 3.) Simplifying the operation of civil organizations • simplified (electronic, one-window) registration, consistent implenentation • adapting accounting rules to reflect the needs of civil organizations

12. Civil Vision – issues 2. Relationship between the nonprofit sector and the state 4.) Redefining the relationship between civil organizations and government • enhancing civil participation in the provision of public services • redefining contractual relations, simplification of funding rules and procedures • National Civil Fund 5.) Broadening the institutions of participatory democracy • law on public participation and the development of related legislation • enhancing the use of non-legal instruments and institutions 6.) Making the public benefit status more functional (see next presentation)

13. Civil Vision – issues 3. Relationship between the nonprofit sector and the private sector 7.) Strengthening the participation of civil organizations in economic activities • enhancing private giving – tax benefits 8.) Encouraging public support for civil organizations • volunteering law 9.) Enhancing the transparency and accountability of civil organizations • regulating the termination organizations (bankruptcy)

14. Since 2005: further elaboration of specific issues Primarily, but not exclusively in the following fields: • court registration of associations; • redifining foundation regulation (leadership, endowment); • obstacles to civil participation in the provision of public services; • rules and procedures of state/EU funding and contrctual relations; • reform of the public benefit system • municipal relations of and cooperation with civil organizations • public participation • re-introducing tax benefits on charitable donations; • amendment of the Act on Volunteering.

15. Court practices of association registration 1. • With HEPF support, Environmental Management and Law Association launched a program in summer 2005, to carry out a comperhensive study of the court practices of association registration. • During the survey, the founders aimed to establish Nonprofit Sector Analysis (NOSZA) public benefit associations in each of the 19 counties megyében and in the capital. • Identical statutes were submitted to county administrative courts, thus expert could carry out a comparative analysis and study of the courts’ practice.

16. Court practices of association registration 2. Number of comments/amendment requests made by the various county courts

17. Court practices of association registration 3. Typical symptoms of the lack of consistent implementation • The demand to repeat the text of legal provisions in the statutes leads to complicated and uncomprehensibe status documents in practice. • The formalities of official documentation proofs should be limited to the request for registration itself and not its annexes . • Registering courts shouldn’t prescribe a multitude of purely formal requirements towards the founders, which have no consequences, ugarantees or impact on the actual, democratic operation on the association. • Court practice should accept and support the electronic forms of communication in the operation of foundations on condition that their use doesn’t limit the transparency of decisions made this way. • Registering courts should’t prescribe the use of internal and external communication modes causing unnecessary burden and the increase of costs (e.g. the use of mass media). Courts should return statues for completion only once!

18. Foundation regulation 1. - problems De jure: Designated asset, independent from its founder, endowment building and grantmaking are the primary tasks De facto in Hungary: 95% of the app. 22,500 foundations don’t fit this defintion • the income earned from the endowmend does not cover operational costs („begging” foundation) • - the foundation is established to carry our projects and not for re-distribution of funds • - „spiritual” and „legal” founders are different from one another

19. Foundation regulation 2. - directions Two avenues • Change the relationship between the founder and the board • - Cancel the prohibition of the founder’s dominant inflluence • Founder’s rights may be transferred to the board Rules to be created to establish a special sub-type: the endowed foundation Introduction of the redistributing, grantmaking type of foundation to Hungarian law (nearest example: Czech Republic) Regulation more appropriate to and reflecting upon the real needs of „project managing” foundations

20. Endowed foundations • Main substantial elements: • Endowed foundation may only be created for a permanent task. • The founder of an endowed foundation provides an initial asset, including the endowment capital. • The endowment should be provided simultanously to registration or within the deadline – maximum 5 years – prescribed in the statutes. • Main elements of regulation: • Types of endowed foundations (2x2) • Investment activities (prudence) • The use of the proceeds of the endowment • Conservation of the endowment • Tax benefits on establishing foundation • Transformation; rules of naming

21. Types of endowed foundations • Institution management • Mainly (but not exclusively) in the areas of health, social, education, culture and childcare services • Detail rules to be laid down in specific sectoral regulations • Private (= family foundations) • May be established exclusively to benefit the founder and his/her close relatives (e.g. management of private collections, support the education of children) • Not entitled to to tax benefits • Through amending the statutes transformation to public benefit status may be initiated • Public benefit • According to public benefit legislation • Its activities benefit the larger public • Its operation is transparent Grantmaking The majority of endowed foundations Contribute to the sustainability of civil sector Complement state and local government financing schemes Help decrease dependence on state and local goverments Political parties cannot be beneficiaries of grants

22. Endowment and economic activities Endowment Minimum 5 million HUF (25,000 USD) or higher as prescribed in detailed sectoral Assets: money, real estate, tangible assests The annual income of grantmaking foundations must be used at least in 70% for providing grants, maximum 30% for operational costs Economic activities Involving only the asset elements outside the endowment Exclusively along the foundation’s goals Normative rules of investment activities: prudence, security, obligatory regulation of investment, risk analysis and management, supervisory board, auditing

23. Conservation of the endowment, liability, benefits • In case of public benefit endowed foundation • At least 3-member Board of Trustees • Supervisory Board (at least one person with financial expertise) • Auditor • Obligation to conserve the endowment, with strict liability rules • Significant tax (base) benefit to the founders and donors of public benefit endowed foundations • Significant tax benefit on the incomes from the economic activities of public benefit endowed foundations • Tax exceptions on the real estates owned by public benefit endowed foundations

24. Legal obstacles to civil participation in the provision of public services An analysis by dr. Endre Bíró Through the involvement of civil society organizations, public monies can be utilized more efficiently and economically in the provision of public services, while keeping or even improving their quality. Professional civil society organizations can moblize additional, social resources to provide the services and public functions thus improving their effectiveness.

25. Series of talks with the National Development Agency November 2009 – April 2010, 8 occasions Along the stages of a grant cycle Set of recommendations – to be used during ongoing review processes Process-based programming and support schemes,consecutive financing constructions should build on earlier lessons. Longer termplanning. Training of competent social servants, change their attitude to realize: successful projects are in common interest (Awareness raising: don’t only look for mistakes, but help solve them.) One financing construction to be launched along the new principles and approach as an experiment and monitor its success anf impacts. Reform of state financing procedures

26. Preparation and announcing calls for proposals • The system of preparing calls should be reformed: information should be published at the start and the main milestones of the process, so that stakeholders can participate at early stages, not only once the documents are finalized; • periods for public commeting should be longer with involvement encouraged; • revision of confidentiality and conflict of interest rules (CSO representatives cannot collect feedback from their constituents, while in case of special projects the future beneficiary is part of the process). • Application procedures should be adapted to the needs and circumstances of the target group – the most appropriate one to be selected, e.g. global grant mechanisms in case of CSOs • check the appropriateness of documents: do they have all the information and only the information necessary to evaluate the proposals (now, fearing audits, much superfluous information in reqiured); • the call may be reviewed by future evaluators and/or in focus groups compesed from potential applicants (from the point of view of information content, clarity etc.).

27. Support to project development • Helping applicants, communication: : • the personality, the ‘face’ of the system should strenghtened, instead of general call centers; all calls for proposals should have manager (not only in the administrative sense), who know the goals, understands the target groups and can communicate with them; • procedure to address and make decisions regarding individual problems/requests of applicants (at present it is unclear who is competent to decide and when); • the capacity building aspect of information days should be strenghtened (instead of simply repeating the call text) Pre-monitoring, personal site visits are crucial. More detailed feedback to rejected applicants, maybe to-way communication with them about justification

28. Contracting • Review of laws and regulations concerning grant contracts: • the amendment of the Public Finance Act and its implementation decreee (definition of support, grant and grant contract, precise, exhaustive list of cases of breach of contracts, limit inproportional obligations on the beneficiary) • coherence between higher and lower level regulations, eliminate present inconsistencies. • Real project managers should be appointed to each grant – able to follow the complete cycle, have contact to the beneficiary, help it with problems (portfolio system). • Contracting should be an interative negotiation process to clarify e.g conditions, indicators (the contracts should prescribe realistic, accountable expectations). • More specific and clear formulation of conditions of support (not only generlized lists). • Limits on the number of obligatory supporting documents.

29. Irregularities • It should be communicated towards beneficiaries that contract amendments are part of the normal procedure (now they are often afraid to initiatve it). • Iregularities: • its cases and consequences should be specified in the grant contract (without the ‘other’ category); • classes of irrgularities should be defined according to their graveness, with consequences balanced accordingly; • an irregularities procedure should start with negotiations to seek solutions or consolidate the project (similar to a bankruptcy process), instead of having to bear all negative consequences right away – to this end deadlines need to be amended as well; • appeal rights should be provided and implemented. • Suspension due to public debts should have a minimum limit (a small delay in dues shouldn’t hider project implementation.

30. Local Interest – Local Values 1. Guide to the cooperation of local governments/municipalitites and civil organizations Participation principles (by the NGOs for the Openness of National Development Planning) Structure Participation Continuity Openness, publicity Transparency Evaluation, feedback

31. Local Interest – Local Values 2. Modes of cooperation Participation in decisionmaking (preparation, decision, implementation, monitoring, evaluation) Financial relations (funding: support and outsourcing) Implementation (public services, projects, tasks etc.)

32. Local Interest – Local Values 3. Ideas Recommendations • Communication and contacting: CSO liaison or other designated person • Use of local media • Use of electronic communication • Local CSO databases • Facilitated meetings, reversed order, changing places, „red wallpaper” etc. • Involvement of the local public: participatory budgeting, hearings, focus groups, surveys etc. • Clarify terms: joint interpretation of partnership • Develop informal relations: building human capacities, training of staff • Develop formal relations: set regulatory frameworks, procedures • Spread best practices (e.g. Real Civic Partnership Award, publications)

33. Jogalkotás.hu I. With HEPF support, NOSZA Association Egyesület established a webpage to monitor the implementation of the Act on the Freedom of Electronic Information. Project managers regularly publish reports about practices of the public consultation of draft legislation.

34. Jogalkotas.hu II. Analysis first half of 2007

35. Jogalkotas.hu III. Analysis first half 2009

36. Thank you!Veronika Móra www.okotars.hu/civil_partnerwww.civiljogok.hu