Friday, November 27, 2009
The Executive Council of the European Centre for Global Interdependence and Solidarity [North-South Centre] recently approved a draft cooperation agreement with the Conference of INGOs. Both groups are part of the Council of Europe. The agreement reinforces the existing close cooperation between theConference of INGOs [through its Transversal Group on Europe and Global Challenges] and the North-South Centre.
The general aim of the agreement is the cooperation between the two bodies within the Council of Europe. Additionally, the agreement speaks to civil society cooperation within the framework of the North-South Centre and information sharing between the two groups. The agreement will be signed January 27, 2010.
The C.D. Howe Institute recently released a new paper by Adam Aptowitzer, Bringing the Provinces Back In: Creating a Federated Canadian Charities Council. The paper proposes replacing the Canadian Revenue Agency [CRA] with a “Charities Council” as the primary regulator of charitable organizations in Canada. The proposed structure of the Charity Council borrows certain aspects of the Charity Commission of England and Wales, but the paper acknowledges the impossibility of wholesale adoption in Canada due to constitutional difficulties.
The paper offers two primary arguments against the CRA’s continued role as the national regulator of Canadian charities; one based on organizational mandate, the other based on history. It asserts that the regulation of charities is directly at odds with the CRA’s mandate to protect the tax base because the nature of charities is to reduce the tax base through donation tax credits. Additionally, the CRA is the current regulator as an accident of history. The CRA’s role was a response to a failure of the provinces to provide regulation that was their Constitutional responsibility. The result has been a rigid regulatory system that impedes the formation of new charities and that favors the principles of tax law over those of the charitable sector.
The Washington Post reports that the Catholic Church is threatening to end a wide range of service programs in the District of Columbia pending the passage of a same-sex marriage bill by the DC Council next month. The bill has language that requires, among other things, prohibiting discrimination against gay men and women by religious organizations.
A spokeswoman for the church stated that "the city is saying in order to provide social services, you need to be secular. For us, that's really a problem." The church says that it will be forced to abandon its contracts with the city including those that provide social services to the community. Specifically, the church points to the $10 million it contributes to city social services to illustrate the impact of the bill. The DC government has responded that the church is not “an indispensable component of [the city’s] social services infrastructure.” Peter Rosenstein of the Campaign for All D.C. Families states that “the issue here is that they are using public funds, and to allow people to discriminate with public money is unacceptable.”
The DC Council is expected to pass the bill next month. Council members state that they are baffled
by the church’s position, but that they are willing to find another partner to provide
social services who will be able to make use of the $8.2 million in city
contracts that currently goes to the church.
On November 5, 2009, the Canada Revenue Agency (CRA) released a technical interpretation (which is not publicly available) clarifying its position on various issues involving non-profit organizations (NPOs) defined under paragraph 149(1)(l) of the Income Tax Act, including whether NPOs can earn a profit or engage in commercial activities. This is discussed in a short article by Theresa L. M. Mann in the Carters.ca Charity Law Update. On the question of whether an NPO can compete against taxable entities, CRA responded, after referring to the BBM case (BBM Canada v. Canada (Minister of National Revenue), 2008 TCC 341), that the Income Tax Act does not prohibit an NPO from engaging in certain types of activities, including commercial activities, and therefore it is permissible for NPOs to compete against taxable entities. In relation to the question of whether an NPO can earn a profit, CRA’s view is that an NPO can earn a profit, provided that it is unanticipated and incidental to carrying out the NPO’s exclusively not-for-profit purposes. CRA is of the view that an NPO cannot intentionally earn a profit, even though the profits are used to fund the activities of the organization, because it does not matter what the profit is used for.
On Wednesday, October 27, 2009, the Attorney General for Ontario introduced Bill 212, the Good Government Act, 2009, (“Bill 212”) in the Ontario Legislature, which passed second reading on November 18, 2009. Bill 212 is currently before the Standing Committee on Finance and Economic Affairs, and it is expected to return before the House by November 30, 2009. If Bill 212 passes, it will mean significant reform to the regulation of charities in Ontario by overcoming limitations that have for decade’s plagued charities operating in Ontario. Most of these changes are a direct result of an initiative by the Ontario Bar Association’s Charity and Not-for-profit Section in calling for reform in this area. An article by Terrance S. Carter in the recent Charity Law Bulletin from Carters.ca reviews the many changes to be implemented by this Bill.
Thursday, November 26, 2009
The CEV [European Volunteer Centre] recently held a conference in Malmö, Sweden on “An Enabling Volunteering Infrastructure in Europe.” The purpose of the conference was to discuss the development of a stronger volunteering infrastructure, allowing more individuals to take part in the political, social and economic environment of Europe. The key roles of such an infrastructure are “raising public awareness about volunteering; developing volunteering opportunities and brokering between (potential) volunteers and placements; developing good practice; working on policy response and the strategic development of volunteering in our societies.”
The conference provided a number of workshops such as “Volunteering
in Southern and Eastern Europe (SEE) - from underground to mainstream” and
infrastructure in Italy: framework law on volunteering and the system of
volunteer support centres (CSV).
Third Sector reports that the Charity Commission of England and Wales has given charities a five year deadline to improve performance under the Commission’s public benefit assessment structure. The Charity Commission’s website states that “the Charities Act 2006 requires all charities to have aims which are, demonstrably, for the public benefit” and provides two core principles and a host of sub-principles that must be met in order for a charity to pass a public benefit assessment. The overarching principles require “identifiable benefit or benefits” provided to “the public or a section of the public.” The Commission provides greater detail of what is required in its general guidance publication.
In recent months, the Charity Commission, has called for a demonstrable commitment from certain fee-charging schools. Two of the five schools assessed earlier this year by the Commission were found to not be providing sufficient public benefit and were given three months to respond. The schools were then given an additional nine months to create plans to address the assessment results.
The Charity Commission of England and Wales performs assessments of the public benefit provided by charitable organizations. Where the Commission finds the benefit provided wanting it may require further action by the charity to increase or diversify the public benefits provided. Third Sector reports that “Charities are being put off from engaging with the Charity Commission because they fear becoming embroiled in lengthy assessments of their public benefit, according to some charity lawyers.”
Lawyers have raised a number of concerns about the assessment process. Lawyers complain that the assessments cause charities a lot of anxiety and frustration. The Commission has not been able to provide a definitive answer to the question of what triggers a public benefit assessment stating only that each case is taken on its merits. Public benefit assessments have been launched against charities for a variety of activities such as incorporation, altering their objective, selling land or revising their trustee benefit provisions. Further, lawyers claim that they do not see the assessment results as having any real consistency. This lack of certainty regarding both the triggering and the results of assessments creates a serious hurdle for lawyers trying to counsel their charitable clients.
The Decree Law for not-for-profit associations and foundations in Timor-Leste has been added to the ICCSL Documentation Center and is available at http://www.iccsl.org/pubs/Timor-Leste_Decree_Law.pdf.
Wednesday, November 25, 2009
Asia Catalyst has released a reportdetailing restrictions on NGO registration, censorship, harassment and imprisonment of AIDS activists in Cambodia, China, Myanmar and Vietnam. In its press release accompanying the report, Asia Catalyst said that despite pledges by world leaders and the UN to support civil society, AIDS NGOs face heavy restrictions in those countries; the report was released for World AIDS Day. Asia Catalyst also noted that three AIDS activists – Hu Jia (China), Than Naing (Myanmar) and Wengdue (China/Tibet) -- are in prison, and called for their immediate release.
Third Sector reports that the Charity Commission of England and Wales recently published a model constitution for small charities. The Commission created the constitution as boilerplate for charities that are so small that they are not required to register with the government. This includes charities that do not own property, employ a staff or expect their annual income to exceed £5,000.
The purpose of the model constitution is both guidance and governance. In only 750 words the document explains membership criteria, trustees' powers and regulations governing trustee and members' meetings. The document has the potential to standardize practices among small charities because it provides a set governance structure and framework for the concepts that it explains. The model constitution leaves only a few details, such as the name of the charity and its purposes, to be filled in by the charity. All other matters such as member voting regime, frequency and format of trustee meetings, and procedures for winding up the charity are predetermined. The document provides a simple and efficient way for small charities to ensure legal compliance and to implement best practices for governance.
The Scottish Charitable Incorporated Organization [SCIO] is a new legal form aimed at charities with incomes between £25,000 and £1m that want to acquire a legal personality and relieve their trustees of personal liability, but do not want to become charitable companies subject to the full range of company law. The SCIO is a product of the Charities and Trustee Investment (Scotland) Act 2005.
Third Sector reports that the Scottish government launched a consultation to determine the details of implementation and regulation regarding SCIOs. A committee of experts is trying to determine the best possible middle ground for the creation and regulation of SCIOs. They feel that the existing Scottish company law is too burdensome, but that unincorporated organizations must submit to some sort of heightened regulation upon becoming an SCIO in order to bolster investor confidence.
The Scottish government seeks to promote uniformity between
its SCIO laws and law governing English CIOs.
However, the Scottish
consultation document recognizes that “the ultimate design of each regime
must be tailored to the specific context within which it will operate.” The law governing English CIOs is undergoing
revision because it is based too heavily on English company law.
While the Scottish government is hopeful that the SCIO will provide a viable option for unincorporated organizations that do not want to become companies, experts have raised a number of concerns. There is concern that becoming an SCIO may not be any simpler than becoming a company because at present there is no clear mechanism for converting from an unincorporated organization into an SCIO. Further, the SCIO form is designed for charities with incomes between £25,000 and £1m, but there is no clear path to convert from an SCIO to a company once a charity outgrows the SCIO form. Finally, there is a concern that relieving trustees from liability, one of the SCIO’s key features, may result in weak and unaccountable governance. The consultation is scheduled to run through February 26, but the new form is not likely to be available until late 2010 or early 2011.
Tuesday, November 24, 2009
ICNL announced the release of an informative study authored by a USAID-sponsored ICNL senior research fellow from Mexico, Ireri Ablanedo Terrazas. The paper was written during this past summer and provides an in-depth overview of the legal framework impacting CSOs in Mexico. To view the paper in Spanish, please click here.
The New York Times reports that President Dmitri A. Medvedev has called for tax incentives and other measures to assist Russia’s beleaguered nonprofit groups, which have come under government pressure in recent years. Mr. Medvedev, promoting policies that he hopes will modernize the country, said in a meeting with human rights advocates that new laws would not alleviate all the problems the groups faced, but that they would certainly help. “Our main goal is the support of the authority of nonprofit groups in society, and the attraction to this sector of more talented people and philanthropic resources,” Mr. Medvedev said. “We need to stimulate philanthropy and create a stimulus or a motivation for volunteers who toil for such organizations.” The government has sought in recent years to establish more control over nonprofit groups, especially those that receive foreign assistance. Mr. Medvedev’s mentor, Prime Minister Vladimir V. Putin, the former president, has at times portrayed the groups as little more than tools that the West uses to meddle in Russia’s affairs. Under Mr. Putin, the groups were subjected to new regulations, as well as increased scrutiny that they have sometimes characterized as harassment. Charities and other nonprofit groups have also not prospered in Russia because there is less of a tradition of giving here. In Soviet times, the Communist Party was supposed to take care of societal needs, so a philanthropic sector barely existed. And current tax regulations do not encourage charitable donations or charitable activity, as they do in many countries, including the United States.
Vertical and cross sector cooperation are constant themes in the promotion of non-profit initiatives. To that end, national and local Scottish authorities issued a detailed statement for future interaction with the third sector under the government’s revised administrative arrangements. The 41-point statement, issued in late September, focused on funding, management of shared services, grant funding, procurement, and creating successful relationships various levels of government and the public sector.
To promote stable and long-term change, funders
will aim to take a “three-year approach” for both grant funding and contract funding
as a general rule.
The Ministers’ Deputies of the Council of Europe recently adopted a Code of Good Practice for Civil Participation in the Decision-Making Process. The Conference of INGOs [International Non-Governmental Organizations] of the Council of Europe created the Code pursuant to a request by participants of the June 2007 Council of Europe Forum for the Future of Democracy held in Sweden.
As stated in its introduction, the “Code offers a repertoire of good practices. It does not have a mandatory character, does not prescribe rules, or require enforcement mechanisms.” The purpose of the Code is to provide guidelines for civil participation in decision making processes at the European level. The Code targets public authorities across all levels of public administration.
Monday, November 23, 2009
Helge: Policing the Good Guys: Regulation of the Charitable Sector Through a Federal Charity Oversight Board
Terri Lynn Helge (Texas Wesleyan) has posted Policing the Good Guys: Regulation of the Charitable Sector Through a Federal Charity Oversight Board (Cornell Journal of Law & Public Policy, forthcoming) on SSRN. Here is the abstract:
Recently, public confidence in the charitable sector has eroded due to a barrage of media reports on scandals and abuses. The principal parties charged with regulation of the charitable sector, the Internal Revenue Service and state attorneys general, are saddled with bureaucratic constraints that make it difficult to enforce the laws governing the fiduciary responsibilities of charity managers. Substantial reform in the regulation of charitable organizations is necessary to curb the reported abuses that have undermined confidence in the charitable sector.
Some advocate expanding private regulation of the charitable sector to improve enforcement of the fiduciary responsibilities of charitable managers. While some of these private regulatory alternatives have had success in isolated situations, none are satisfactory in providing comprehensive and effective oversight of the charitable sector. Overall, the policies underlying oversight of charitable organizations support maintaining primary responsibility for their regulation in a centralized authority. However, the financial, political, institutional, and agency constraints imposed on the Internal Revenue Service and state attorneys general make them unlikely to implement enough internal reform to be an ongoing, effective enforcement presence in the charitable sector.
This Article advocates the creation of a new, federal, quasi-public agency that would be the principal regulator of the charitable sector. The new agency would be a self-funded, independent, and proactive regulator that would serve the dual purposes of curbing the abuses that have eroded public confidence in the sector and educating charity managers of their obligation to be responsible stewards of charitable resources. The proposed agency would be primarily responsible for enforcing federal tax laws aimed at influencing fiduciary behavior of charity managers and preserving charitable assets for public benefit. Its formation, therefore, would separate oversight of charity governance from the tax collection function, thus harmonizing the United States with other countries that have established independent charity oversight agencies.
According to a recent World Bank Press Release, the Bank is shifting its policies regarding access to information. The Bank’s current rules for document disclosure permitdisclosure only of specific documents. The new model provides for disclosure of all World Bank documents not specifically restricted. Further, the policy allows for declassification and disclosure of documents containing sensitive information over set periods of time depending on the nature and sensitivity of the information.
The new policy implements clear procedures regarding external requests for information and even provides an appeals mechanism to deal with controversial denials. Review in the appeals mechanism will be performed in part by an independent body of international experts.
The Bank will issue the final policy statement with comments from the Board in December. The changes become effective on July 1, 2010 and the Board will review a progress report on the new policies by the end of 2011.
The European Commission last month published a new study on "Recent Public and Self-Regulatory Initiatives Improving Transparency and Accountability of Non-profit Organizations (NPOs) in the European Union.” The study is the workof the European Center for Non-Profit Law.
The study analyzed nineteen different initiatives to illustrate best practice solutions in certain areas of both public and self-regulation. Among the initiatives analyzed were an initiative to reform the legal structure for NPOs in Malta, the Charity Commission for England and Wales, and the Counter Terrorism Strategy of the Charity Commission for England and Wales.
Among the study’s recommendations is a call for the creation of a “Centre of Excellence” at the EU level to promote facilitation and information sharing.