ECNL Response to the Public Consultation on the Review of the Financial Regulation

The European Center for Not-For-Profit Law (ECNL) has published a 39 page response to proposed new EU financial regulations that would apply to nonprofit organizations (NPOs).  ECNL raises concerns about our key issues: (i) a cap on indirect expenses; (ii) treatment of in-kind contributions; (iii) treatment of exchange rate changes; and (iv) information about upcoming and awarded grants and paperwork for applicants.  ECNL’s report indicates that the proposed regulations on these issues  may  deter NPOs from engaging with the EC on important matters.

First, ECNL’s report states that the EC’s 7% cap on indirect (administrative) expenses is in direct conflict with the EC’s goal of increased transparency and accountability because it constrains the resources that NPOs can devote to professional financial management, accounting and reporting.  The report suggests that the EC raise the flat rate and introduce new methods of calculating NPO direct costs to allow for full reimbursement of legitimate direct costs.

Second, the report suggests that the EC provide appropriate guidance and criteria on how NPOs should record and report in-kind contributions.

Third, the report lays out several difficulties regarding exchange rate changes.  ECNL suggests that the regulations classify exchange rate losses as project expenses and exchange rate gains as project income.  Such classification would permit recovery of losses and offsetting of gains (either through reduced EC funding or payments to the EC).

Finally, the report identifies major inefficiencies in the dissemination of information regarding available grant funding.  The inefficiency is caused by late reporting by the various EC Directorates-General and a failure to categorize and organize grant data.  The ECNL proposes aggregating all of the grant award information in one well-structured portal with information from all Directorates-General and financial instruments.  Specifically, ECNL suggests that the portal should contain information on (1) annual work programs of departments and financial mechanisms; (2) calls for proposals and tender opportunities; and (3) awarded grants and contracts.

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