March 13, 2012
Moreno: Governance of Microcredit Article
Frede Moreno (Western Midanao State University, Philippines and Alliance for International Education, Germany) has posted a short paper on Governance of Microcredit as a Strategy for Poverty Reduction in the Philippines on SSRN. Here is the abstract:
Microcredit can be an effective tool for tackling the global poverty problem. Making microcredit work better for the poor necessitates a framework that integrates the principles of good governance in the design and implementation of a microcredit program. The integration of good governance principles in microfinance is argued to have positive consequences in improving financial viability and increasing social outreach of microcredit programs as well as in widening the livelihood and economic options of Agrarian Reform Beneficiaries within Third World economic and poverty conditions. Governance principles can be applied as implementation strategies of Official Development Assistance (ODA)-assisted microfinance program as a tool for poverty reduction and development. In view of the Philippine government’s limitations, economic and fiscal challenges, the financial and technical support programs of the international donor community provide a big boost to the effectiveness and impact of microfinance in reducing the incidents of poverty in Third World countries such as the Philippines. As a tool for poverty reduction, microcredit is applicable only to the enterprising poor. The use of microcredit to assist poverty groups is recommended to be based on existing livelihood activities and micro-entrepreneurial skills and capabilities. Furthermore, the program design of the Bangladesh Rural Advancement Committee (BRAC) is found to be appropriate for the agrarian reform beneficiaries in Zamboanga Peninsula (Region IX), Philippines. Joe Remenyi’s (1999) Poverty Pyramid reinforces BRAC’s graduated strategy for helping the poor when they are grouped into: (1) micro-enterprise operators or the less poor, (2) enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most vulnerable or the ultra-poor.
February 07, 2012
Egypt—Restrictive Law on Associations and Foundations Proposed by Government; Less Restrictive Draft Submitted to Parliament by Civil Society
The raids on Egyptian and foreign CSOs in December 2011 (and reported on in the February IJCSL Newsletter) were followed on January 17, 2012 by an announcement from the Egyptian Ministry of Social Justice and Solidarity that it had completed a draft Law on Associations and Foundations to amend Egypt’s existing Law 84 of 2002. The proposed law is nearly identical to a draft prepared in March 2010 by a committee composed of members of the now-disbanded former ruling party and chaired by ex-Prime Minister Abdelaziz Hegazy. It places extreme burdens on CSOs. The Ministry announced a fifteen-day public comment period, after which the draft Law on Associations and Foundations is expected to be taken up by Egypt’s newly elected People’s Assembly as one of its first orders of legislative business. More than 55 Egyptian CSOs have refused to submit comments and are instead calling on the Ministry and the People’s Assembly to replace the draft with one endorsed and authored by Egyptian human rights organizations. On January 31, the Egyptian Organization for Human Rights submitted the draft developed by CSOs to the Parliament. For what the civil society draft contains, see http://en.eohr.org/2012/01/31/eohr-submits-the-ngos-draft-law-to-the-parliament/. More information about this will be availabl ein the March 2012 issue of the IJCSL Newsletter.
January 14, 2012
India—Troubling Developments Regarding Taxation of Commercial Income
A number of leading public charitable trusts and institutions that for years enjoyed tax exemption have lost their 12Aa registration and their total income has been made taxable. Virtually all of them are well established, credible, well governed and contributing to the commonweal of society - be it empowering women and creating self-sufficiency or promoting art and culture, according to an update by Noshir Dadrawla, Chief Executive of the Centre for Advancement of Philanthropy (CAP) (www.capindia.in). He notes that the Finance Act 2008 changed the definition of “charitable purpose” under Section 2(15) of the Income Tax Act so that “advancement of any other object of general public utility” would not be considered as a “charitable purpose” if it involves carrying on any activity in the nature of trade, commerce, or business or any activity of rendering any service in relation to any trade, commerce, or business for any fee, assessment, or other consideration. Later, the Finance Act 2010 attempted to provide some relief by exempting the aggregate value of the receipts from such activities up to Rs. 10 Lakhs and finally under the Finance Act 2011 to Rs. 25 Lakhs from taxation. Nonetheless, some NPOs that engage in consultancies, etc. are now subjected to tax on all their income. Noshir has urged all affected trusts and institutions to write to him at email@example.com.
January 11, 2012
China—112 Charities to Join Online Disclosure Platform
To restore public trust in charities, 112 Chinese organizations are on track to participate in a government-sponsored information disclosure platform, according to Caixin Online. In the wake of immense public backlash against China's charities over millions in misused funds, these organizations have pledged to promote information transparency through a new government disclosure platform. Through the China Charity & Donation Information Center’s (CCDIC) forthcoming online platform, the 112 charities said they will publish their accounting records according to a new set of information disclosure guidelines. The announcement at an annual philanthropy conference sponsored by the Ministry of Civil Affairs—which oversees the CCDIC—comes just three weeks after 24 foundations publicly pledged to ensure the integrity of philanthropy in China. The new standards will also clarify how and when third parties should audit charities, the charities said, although they did not clarify what the exact requirements will look like. The joint effort includes China Charity Federation, as well as the China Youth Development Federation and the Red Cross Society of China. For more see http://english.caixin.com/2012-01-09/100347049.html.
January 05, 2012
China--New Audit Requirement for Chinese NPOs Effective January 1, 2012
The new Audit Guidelines, available in Chinese at http://www.mca.gov.cn/article/zwgk/fvfg/mjzzgl/201112/20111200248698.shtml, for the first time require that financials of foundations be reviewed by certified public accountants. This guidance comes in response to a series of scandals in “public foundations” (those with close ties to the government such as the Chinese Red Cross Society and the China Charity Federation) that occurred over the course of the summer and fall 2011. An in depth analysis of the issues and how the government is responding to them can be found in the English language service of China’s Xinhua news agency at http://news.xinhuanet.com/english/indepth/2012-01/02/c_131338859.htm (this story only refers to the November announcement that the audit guidelines would be promulgated, not to the policy itself). Prior to the new requirement, financials only had to adhere to the Chinese Accounting System for NPOs, available at http://www.iccsl.org/pubs/ChinaAccountingSystemofNPOs.pdf.
Australia--Auditing Standards for NFPs Discussed as part of Major Reforms
As part of the projected 2012 reforms of the regulation of the not-for-profit sector in Australia, the Treasury has issued the third NFP Newsletter, which discusses accounting guidelines, among other issues. It is available at http://www.treasury.gov.au/documents/2285/PDF/NFP_Newletters_Issue_3.pdf. Other important documents and discussion drafts are available on the Treasury website at http://www.treasury.gov.au/content/not_for_profit.asp?ContentID=2188.
England & Wales--Charity Commission Issues Guidance on Industrial and Provident Societies
The Charity Commission issued its opinion in January in relation to Industrial and Provident Societies (IPs) and the payment of interest on share capital. The Commission stated “some IPSs are set up as co-operatives, which cannot be charities, but others are set up as community benefit societies, which can be charities in certain circumstances. The activities of charitable IPSs include such things as redevelopment, regeneration and housing projects. Some IPSs for the benefit of the community receive tax benefits as charities but have the power to pay interest on share capital. While the rules of industrial and provident societies often make a distinction between interest and dividends, they also indicate in many cases that the payment of interest is out of profits and so is clearly a distribution of profits. The Commission considers that a power to distribute profits is fundamentally incompatible with charitable status. This is because a power of a corporate body to apply its property and assets for the purpose of making profits and devoting the resulting profit to the distribution of dividends among the members is considered by the courts to be incompatible with charitable status.” For more see http://www.charitycommission.gov.uk/Start_up_a_charity/Do_I_need_to_register/industrial_provident_societies.aspx?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CharityCommissionUpdates+%28Charity+Commission+updates%29
January 04, 2012
Israel--Second Draft of Anti-Foreign Funding Bill Tables after AG Calls it "Unconstitutional"
Skirmishing over the second draft of bills introduced in both houses of the Knesset to limit foreign funding to Israeli NGOs continues, with Prime Minister Netanyahu once again reversing course on the bills and tabling them. After negotiating with the drafters of the bills to find a solution, Netanyahu decided to freeze discussions of the bills. The decision, which marks Netanyahu’s second reversal on the same issue in less than a week, came after Attorney General Yehuda Weinstein informed Netanyahu he would not defend the bill should it be challenged in court. Weinstein claims the so-called Law of Associations is “unconstitutional.” For a story from Israel National News, see http://www.israelnationalnews.com/News/News.aspx/150507#.TuzF7SNWpmK. For a discussion of Weinstein’s conclusions about the bills, see http://www.haaretz.com/print-edition/news/ag-to-netanyahu-bills-targeting-israeli-rights-groups-funds-are-unconstitutional-1.400002.
Egypt--Crackdown on Foreign-Funded NGOs Continues into January
According to the New York Times, Egypt’s military-led government on January 1, 2012 justified its recent crackdown on human rights and democracy-building organizations as a defense against foreign interference in its politics, defying international pressure and contradicting reports from senior officials in Washington that Egypt’s military rulers had pledged to soften their stance. Egypt’s defense of the raids escalates a diplomatic feud with Washington that began last Thursday with raids by armed police officers on the offices of 10 nonprofit groups, including 3 supported mainly by the United States government: the National Democratic Institute, the International Republican Institute and Freedom House. Egypt’s continued support of the raids is also the latest indication that the military rulers who took over after the ouster of former President Hosni Mubarak share his government’s dim view of the international norms of democracy and human rights. Facing escalating domestic and international pressure to turn over power, the ruling military council has appeared increasingly willing to use force without apology to intimidate its critics, including directing assaults on demonstrators that have left more than 80 people dead and hundreds wounded over the last three months. The raids on the nonprofit groups have sent a tremor of fear through the network of human rights watchdogs that have documented and strongly criticized abuses by the military. For more on this story and the background to it, see http://www.nytimes.com/2012/01/02/world/middleeast/backing-off-vow-of-softer-stance-egypt-backs-office-raids.html?ref=world.
In a related story, El Ahram reports that a protest has been held and a complaint has been filed to stop the actions by the government against the NGOs. Prominent human rights lawyer Nasser Amin filed a complaint with Egypt’s prosecutor-general on January 2, 2012 against the security agencies responsible for conducting raids on 17 NGO offices in Cairo at the end of December. Amin, head of the Cairo-based Centre for the Independence of the Judiciary, lodged the complaint following a demonstration outside the prosecutor-general’s office to protest the raids. The protest, which was organized by several political forces and NGOs, also included prominent human rights activists Gamal Eid, head of the Arabic Network for Human Rights Information, and George Ishak, member of the National Human Rights Council. For more see http://english.ahram.org.eg/~/NewsContent/1/64/30769/Egypt/Politics-/Lawyer-files-complaint-with-Egypt-prosecutorgenera.aspx.
Cambodia -- Recent Developments on the Proposed NGO Law
The highly anticipated fourth draft of the controversial Draft Law on NGOs and Associations circulated at a meeting of the Cooperation Committee for Cambodia “is still unacceptable to civil society,” attendees told the Phnom Penh Post. Fundamental problems remain with the fourth generation of the NGO Law, “which continues to be a restrictive piece of legislation,” civil society organizations said in a media release on December 15, 2011, as reported in the Phnom Penh Post. According to Voice of America, the Cambodian government on December 28, 2011 appeared to bow to pressure and took a step back on the law, with Prime Minister Hun Sen saying in a public speech he wanted the Ministry of Interior and local NGOs to continue discussions that would make the law “acceptable” to all. http://www.voanews.com/khmer-english/news/Hun-Sen-Calls-for-More-Talks-on-NGO-Law-136319558.html. Different NGOs have different had had on the new draft. Rights group Licadho has called the fourth draft another failure that is “now more confusing than ever”, while the Cambodian Center for Human Rights welcomed the positive improvements in the latest revision, “especially in terms of clarity.” Licadho and CCHR are the only civil society organizations to publish analyses of the draft law since its circulation last week. For more see http://www.phnompenhpost.com/index.php/2011121653458/National-news/ngo-draft-worries.html. The draft is available on the ICCSL website at http://www.iccsl.org/pubs/Cambodia_4th_draft_law.pdf.
In a related development, the draft Civil Code was introduced in Cambodia, also in December. See http://www.phnompenhpost.com/index.php/2011122253567/National-news/long-road-to-launch-for-civil-code.html. Many civil society organizations oppose the draft Law on Associations and NGOs because they believe the law is unnecessary in that the Civil Code provides for the formation of “non-profit” associations and foundations.
December 31, 2011
Egypt to Back Off on Nonprofit Crackdown
The New York Times reports that just two days after raids on as many as ten human rights organizations, the Egyptian government has signaled that it will back off and return confiscated property. The groups raided included several American-financed organizations and a German organization. The government said it was investigating illegal foreign financing of NGOs, but Egyptian activists argue that the government is trying to block criticsm because groups have called for the military leaders to cede power to civilian leaders.
The story notes that the future of human rights groups in Egypt remains uncertain, because nearly all are technically illegal. Under Mubarak era law, the groups must get licenses that are almost never issued and most groups depend on foreign financing, which is tightly regulated. A U.S. state department spokesperson said that the military council had issued assurances that the organizations would be able to resume work. The groups said they had been told they would soon be able to work on getting legal status.
October 26, 2011
Medical-Legal Partnership in Kenya
I spent part of my summer in Kenya looking into the possibility of establishing a medial-legal partnership (MLP) in Kibera, a sprawling slum on the outskirts of Nairobi. The project, if it goes forward, will be in collaboration with an NGO called Carolina for Kibera (CFK), which I have mentioned in previous posts. It would involve placing a Kenyan lawyer on staff at CFK's highly successful Tabitha Medical Clinic and asking that lawyer to address the "upstream social determinants" of the patients' health problems. More on that below.
The MLP movement has been building in the U.S. since the early 1990s. By many accounts, it started when Barry Zuckerman, a medical doctor at a pediatric health clinic in Boston, realized that he repeatedly treated children with asthma and other respiratory ailments, but that they repeatedly returned to his clinic in crisis because their poor housing conditions, including infestation by mold, roaches, and rodents, were exacerbating their medical conditions. He hit on the idea of putting a lawyer on staff in the medical clinic to deal with the upstream social determinants. In the case of the asthmatic child, the staff lawyer compelled the landlord to improve the child's housing conditions, and the medical problem improved. This early success has now been duplicated across the U.S., and there is a budding literature describing the concept and a national organization dedicated to spreading the idea.
In Kibera, the legal issues affecting patients' health are different. The paramount legal/health issue is gender based sexual violence, which is perpetrated with virtual impunity. Another legal issue is the absence of wills. Men who provide resources for their families die without wills, and collateral male relatives often claim the resources of the deceased, sometimes citing customary law. This leaves the widow and children economically vulnerable, leading in turn to a panoply of negative health consequences including exposure to HIV/AIDS.
The question is whether the MLP model developed in the U.S. will be efficacious in Africa and other parts of the developing world. One group in Kenya, Legal Aid of Eldoret (LACE), has launched what appears to be a successful MLP in a regional city. That project was founded with the assistance of our law colleague, Fran Quigley, from the University of Indiana.
The project I have in mind would attempt to implement such an MLP in Kibera and would from the start include a research component that would carefully measure the outcomes. If the MLP works, and if its success can be measured, more programs and more funding will follow.
October 15, 2011
Canada's New Not-for-Profit Corporations Act In Force October 17, 2011
As reported by Miller Thompson and other Canadian law firms and charity advisers (see, e.g., McMillan's report on the same topic) all federally incorporated non-share capital corporations in Canada will be required to transition into compliance with the new Not-for-Profit Corporations Act over the next three years or face dissolution. Miller Thompson previously summarized the major changes under the new Act, including stricter governance requirements for "soliciting corporations" and the elimination of the requirement that a corporation limit its activities to those specific objects provided in its Letters Patent. It is estimated that nearly 19,000 organizations will be covered by the new Act.
Breen: "European Pespectives on Non-Profit Vulnerability, Legitimacy and Regulation"
Oonagh B. Breen (Dublin) has posted on SSRN Through the Looking Glass: European Perspectives on Non-Profit Vulnerability, Legitimacy and Regulation (36 Brooklyn Journal of International Law 948). Here is the abstract:
"To what extent is it acceptable in the interests of the greater public good for national or international regulatory regimes to affect the manner in which international charities achieve their missions?" Policymakers may argue that competing public interests demand regulatory oversight of charities. Nonprofits may concede the argument in favour of regulation if two conditions are met – first, that the reality of the supposed threat is supported by empirical evidence; second, that the measures are proportional to the likelihood of the alleged threat occurring.
This paper explores these issues in the context of EU regulation of nonprofits, outlining the still-evolving European policy on non-profit regulation and tracing the emergence of the European response in the aftermath of 9/11 and the issuance of FATF Special Recommendation VIII. The paper reviews recent moves by the European Commission away from initiatives linked to the war on terror towards a policy grounded in broader accountability and transparency goals inspired by financial propriety, and considers the impact of these developments from the perspective of affected NGOs and national regulatory authorities.
DiRusso: "American Nonprofit Law in Comparative Perspective"
The purpose of this Article is to examine nonprofit organizations from such an international perspective, and to cross-pollinate the fields of third-sector research and international law. A law review article can provide only a broad introduction to this genre, but is an important step in the integration of these fields. My hope is that this Article will provide a glimpse for these groups into each others‘ worlds such that (1) scholars and students of international law might recognize the important role of the third sector, and (2) scholars and students of nonprofit studies might recognize the contribution of a comparative legal approach.
This Article is novel in its breadth, and intentionally so. Most comparative law articles choose depth over breadth, focusing on the details of how one or two countries‘ approaches to a legal issue are distinguishable from the American system.18 Although this technique is useful, it is only through the cumulative impact of many different approaches that true idiosyncrasies become obvious. This Article therefore provides a window into not one, but nine alternative international approaches to nonprofit law. It is against this relief that American distinctiveness glares.
This Article begins with an introduction to the colorful variety of approaches to nonprofit regulation that the international community affords, analyzing the nonprofit sector in several countries in Europe (France, Germany, Italy, and Sweden) and in Asia (India, Bangladesh, Pakistan, Nepal, and Sri Lanka). The Article next explains the basics of American nonprofit law, first discussing state regulation, and then federal regulation. The American approach is then contrasted with the systems of nonprofit regulation in other countries, and two distinctive themes of American law emerge. First, American nonprofit law has a different primary relational focus: it regulates the relationship between the nonprofit and its donors and leaders, rather than the relationship between the nonprofit and the government. Second, American nonprofit law is unusually tax-centric in its regulatory scheme: the Treasury is a questionable locus of regulation for nonprofits, and most other countries use tax only as a supplemental, rather than central, regulatory force. The Article concludes with a call for greater attention to international and interdisciplinary approaches to the third sector.
October 14, 2011
UK Upper Tribunal Rejects Part of Charity Commission's Guidance on Fee-Charging Schools
ThirdSector reports that the United Kingdom's Upper Tribunal has rejected in part an attempt by the Charity Commission for England and Wales to require schools seeking classification as a charity to admit students who are unable to pay the schools' fees. While the Upper Tribunal accepted that given the public benefit requirement for charities "it is necessary that there must be more than a de minimis or token benefit for the poor," it rejected any brightline fee reduction or scholarship requirement, instead concluding that "once that low threshold is reached, what the trustees decide to do in the running of the school is a matter for them, subject to acting within the range within which trustees can properly act" (para. 229 of the opinion). At the same time, it noted that the more than de minimis benefit for the poor is not by itself sufficient to demonstrate public benefit; rather, the test "is to look at what a trustee, acting in the interests of the community as a whole, would do in all the circumstance of the particular school under consideration and to ask what provision should be made once the threshold of benefit going beyond the de minimis or token level had been met" (para. 215 b; see also para. 216). The Upper Tribunal acknowledged that its decision "will not, we know, give the parties the clarity for which they were hoping" but left it to Parliament to adopt more brightline standards, if it so chose (para. 260). While the Charity Commission is attempting to paint the decision as a victory, it appears its attempt to focus primarily if not exclusively on requiring fee-charging schools to provide significant access on a reduced or zero fee basis to those of lesser economic means when determining whether such schools provide sufficient public benefit has been dealt a major setback.
October 13, 2011
NYT: "A Quest for Hybrid Companies That Profit, but Can Tap Charity"
The NY Times reports on the current state of "hybrid" legal forms that combine investor ownership with pursing the public good. Such entities include the recently adopted flexible-purpose corporation in California, the low-profit limited liability company or L3C, and the British community interest company or CIC. The article also describes various active entities that have chosen these new forms, including MOO Milk of Vermont (a L3C) and Frontline SMS (a CIC that facilitates text messaging by NGOs).
October 11, 2011
Ninth Circuit: Freezing of Islamic Charity's Assets Unconstitutional
In the continuing legal sage of the now defunct Al Haramain Islamic Foundation (AHIF-Oregon), the U.S. Court of Appeals for the Ninth Circuit issued a decision upholding the federal government's redesignation of the group as a specially designated global terrorist but concluding that the government's warrantless freezing of the nonprofit's assets violated the Fourth Amendment. It remanded the case to determine what judicial relief, if any, is available. The court also found the government violated the First Amendment rights of another nonprofit, the Multicultural Association of Southern Oregon or MCASO, when it effectively barred MCASO from coordinating its advocacy with AHIF-Oregon. As previously blogged, a federal district also ordered the government late last year to pay $2.5 million, mostly consisting of legal fees, because of illegal wiretapping of the group's officials.
One important take-away from the decision is that the court upheld the designation in significant part because an individual who had been designated a global terrorist was a member of the nonprofit's board of directors. That connection alone was sufficient to essentially end the nonprofit's existence, even if it now has a pyrrrhic victory with respect to the government's freezing of its assets.
October 06, 2011
International Red Cross Begins Aid Push in Somalia
According to the BBC, a continuous operation will transport the food in trucks from the coast deep into areas controlled by the Islamist militant group, al-Shabab. The operation began following what the Red Cross terms difficult negotiations with al-Shabab, which banned many Western aid agencies from its territory two years ago.
Red Cross spokesman, Geoff Loane, told the BBC its operation was a three-month distribution, targeting vulnerable people like farmers and pastoralists.
The organisation will also provide seed to nearly a quarter of a million farmers so that they can begin to recover from the region's worse drought in 60 years. According to Mr. Loane, "If all goes well, hopefully these farmers will be able to harvest some crops by the end of the year."
Meanwhile, the BBC states that its Africa analyst, Martin Plaut, says that if the transportation operation is successful it could "break the back of the famine."
Let's hope so...
September 17, 2011
CAMBODIA—NGO LAW SENT BACK TO MINISTRY OF INTERIOR FOR RECONSIDERATION
A contentious law aimed at regulating Cambodia’s non-governmental sector has been sent back to the Ministry of Interior, following international concern that the draft as it stood could damage the country’s development, according to reports by Voice of America’s Khmer service. The NGO law was approved in August by the Council of Ministers (reported in IJCSL-N for August), despite widespread disapproval from local and international organizations, who said provisions in the draft would make it hard for them to operate and could leave them vulnerable to arbitrary punitive action by government officials. Nouth Sa An, secretary of state for the Ministry of Interior, said the law would not go to the National Assembly as planned but has instead been sent back to the ministry for reconsideration, following international “reaction.” Ministry officials will now “review and reconsider” the draft before sending it back a second time to the Council of Ministers for approval. Lam Chea, a legal counselor for the Council of Ministers, confirmed the decision. The move was widely welcomed by members of Cambodian civil society, who had worried the law would stifle organizations critical of the government through excessive red tape or court action. Many also worried it would stymie the growth of small-scale associations at the grassroots. For more information, see http://www.voanews.com/khmer-english/news/Controversial-NGO-Law-Sent-Back-for-Re-Draft-129446918.html.