Public Funding

1
Public Funding

• Douglas Rutzen
• International Center for Not-for-Profit Law

2
Context Magnitude of Funding

• France
• 4 billion
• England
• Lottery proceeds 2 million per day for good
  causes
• Hungary
• 750 million
• 4.85 of state budget channeled to NGOs in 2004
• 36.4 of total income of the sector
• Macedonia
• 4 million in 2007 alone

3
Illustrative Challenges

• Hungary State Audit Office Report 2001 and 2002
• 80 of funding by the government allocated on the
  basis of individual decisions
• 50 of public foundation support provided without
  a grant announcement
• Slovakia 1998-2002 65 of public funding
  awarded non-competitively
• No central data source/lack of info on funding
• Lack of uniformity every announcement had
  different rules
• Ministries failed to hold grantees accountable

4
Strategic Vision

• Because of time and information constraints,
  programs are often developed on an ad hoc basis
• Need for Strategic Planning (Hungary)
• EuropeAid Project Cycle Management
• Identify problems, constraints and
  opportunities which development cooperation could
  address.
• The purpose is to identify the main objectives
  and sector priorities for co-operation
• - Goal of Tender (Service Delivery, Research,
  Advocacy, New Capacity, etc.)
• For each of these priorities, strategies that
  take account of the lessons of past experience
  are formulated.

5
Strategic Vision

• Ministries, Academics, Members of Parliament, NGO
  representatives (but remember limitations of
  elite structures)
• Dont forget beneficiaries
• Competitive Review
• Assess potential competition for sector estimate
  costs determine the most appropriate method for
  procurement

6
Illustrative Forms of Support

• Contracts
• Principal purpose is the acquisition of property
  or services for the direct benefit or use of the
  government
• Grants
• Principal purpose is the transfer of money,
  property, or services to accomplish a public
  purpose,
• and the recipient has substantial freedom to
  pursue its stated program

7
Illustrative Forms of Support

• Vouchers
• Per Capita Fees
• Loans and Loan Guarantees
• Access to State Property (offices,
  videoconference facilities, etc.)

8
Eligible Bidders

• Positive Rules
• Should certain tenders be reserved exclusively
  for NGOs?
• Should NGOs be required to be in existence for a
  certain number of years?
• ?Look to goal of tender (project funding,
  development funding, strategic funding)
• Negative Rules Should there be blacklisting
  of organizations engaged in fraud, misconduct,
  false or misleading statements in bids, etc.

9
Decision-Maker

• Entity May Drive Nature of Support
• Parliaments Cant Easily Contract with
  organizations rather give budgetary support.
• Centralized/Decentralized
• Homogenization of Themes
• Accessibility and Accountability
• Role of Outside Experts
• Not necessarily representatives/different roles
  (priorities, strategies, evaluation, etc.)
• Croatia
• Vouchers (beneficiaries decide)

10
Selection Criteria and Process

• Options
• Qualifications
• Current and Past Experience with Similar Projects
• References
• Professional, Managerial, and Financial
  Competence of the Organization and Personnel
• Innovation and Replicability
• Price
• Factors that cannot be considered (advocacy or
  political activities?)
• Hungarian National Civil Fund Generally open to
  public unless closed to protect personal rights
  or competitive information.

11
Mechanics

• One or Two Stage Process
• Written Responses to Bidders, including those not
  successful.
• What documents should unsuccessful bidders have
  access to (other bids, rating sheets, etc.)
• Access by members of public/media?
• Ability to declare information confidential?
• Review and Challenge

12
Duration of Agreement

• Much statutory funding of groups has
  heretofore been provided on an ad hoc annual
  basis. This does not allow groups to plan ahead.
  It also means that considerable time and energy
  is spent on a constant and debilitating pursuit
  of funding. This is detrimental to the service
  being delivered.
• Multi-annual funding benefits the funding
  Department or agency as well, in that it allows
  for a more rational approach to planning service
  delivery and to processing of funding
  applications.
• Ireland White Paper on Framework for Supporting
  Voluntary Activity

13
Duration of Agreement

• Generally longer if
• Continuity of personal, supportive, or
  therapeutic relations between caregiver and
  client is integral part of service (crime
  victims, juvenile delinquents, battered women)
• Required to meet goals (proportionality)
• Competitive Issues
• Will prospective bidders be less likely to
  compete because of high proposal writing costs,
  start-up costs, or capital investments if a
  short-term agreement?

14
Multi-Annual Grants

• Canada chronic or systemic social issues are
  not likely to be solved through short-term
  project funding
• English Funding and Procurement Compact Code
• Roll-forward multi-year agreements (often 3
  years) for grants
• 2006 Improving financial relationships with the
  third sector Guidance to funders and
  purchasers
• Length of funding should be tied to length of the
  objective
• Croatian National Foundation
• Institutional Support Grants 3 years
• Democratization and Civil Society Development
  Grants
• US approach

15
Monitoring and Evaluation

• EU Sound Financial Management
• Principles of economy, efficiency, and
  effectiveness, and compliance with those
  principles checked by means of performance
  indicators established per activity and
  measurable in such a way that results can be
  assessed.
• Regulation 1605/2002 on the Financial Regulation
  Applicable to the General Budget of the European
  Communities

16
Monitoring and Evaluation

• Distinguish between evaluation of awarded project
  and of tender itself
• Financial and Programmatic Reports
• England
• Focus on outcomes, proportionate to size of
  funding, the size of the provider, and the
  perceived risk.
• Challenge Coordinating among Government
  Agencies
• Evaluation
• Quality of Performance
• Timeliness of Performance
• Fiscal Administration and Accountability
• Role of NGO Sector in Entire Cycle, Including the
  Evaluation Process

17
Cost-Recovery

• Administrative Expenses Attached to Program Costs
• Rent, board meetings, project development, etc.
• Canada it is recognized that overhead costs
  are necessary part of an organizations
  operations and that the organization has a
  right to be compensated.
• US NICRA
• Creating a Level Playing Field with Businesses
• No profit is allowed
• Incremental/Marginal Costs

18
Sectoral Support

• Distinguish between activities, organizations and
  sector
• 1993-2003 Hungarian Parliament challenges
• Hungary National Civil Fund
• Operational expenses of civil organizations
• 60 of the resources are used to cover
  operational costs.
• First year, 28 million euros distributed to cover
  operational costs of 3500 organizations.
• Research, educational activities, statistics.
• ?Need for Strategy based on Participatory Needs
  Assessment (CSI)

19
Sectoral Support

• Canada Strategic Investment Approach
• Croatia National Foundation for Civil Society
  Development
• Democratization and Civil Society Development
• Institutional Support
• 692,000 out of 1.56 million
• ?Need for Strategy based on Participatory Needs
  Assessment (CSI)
• Tax/Fiscal Support

20
Thank you!

• Doug Rutzen
• International Center for Not-for-Profit Law