Friday, December 25, 2009

Merry Christmas and Happy New Year

International Committee on Fundraising Organizations
ICFO - association of national monitoring agencies

Dear colleagues and friends of ICFO,

Now on this Christmas Day of 2009, we have had the opportunity to reflect back on this past year. It has been a good year with some expansion of our membership and with new opportunities to participate more broadly on the international stage.

In February we visited Madrid and met with the leadership of
Fundación Lealtad, which we later accepted as a new member. While in Brussels, we met with the leadership of Donorinfo, which we subsequently accepted as a new supporting member of ICFO. While in Brussels we participated in meetings on nonprofit transparency in the context of the fight against terrorism, hosted by the European Commission, Directorate-General, Justice, Security, and Freedom for the Finance Ministers of the European Union countries and a number of invited guests from the third sector and from the European Centre for Non-Profit Law.

In May, we represented ICFO in London, UK at a meeting hosted by the New Philanthropy Capital on measuring impact effectiveness, and in December, we were in Taipei, Taiwan at the International Conference on NPO Accountability 2009: NPO Public Trust, sponsored by our ICFO member, Taiwan NPO Self-Regulatory Alliance and the National Taiwan University.

We have also initiated this blog as a means of interacting on the broader international stage addressing issues that are of interest to the third sector. We have found that the readership of this blog comes from at least 42 different countries, and that the blog is being read in 18 different languages through Google searches and through translation services of blogspot. The blog has generated discussion, primarily through email communications, and we have tried to be responsive to this online discussion in the subjects we have discussed and the treatment of those subjects. Clearly, the European Court of Justice January 2009 decision in the Hein Persche tax case from Germany generated considerable interest, primarily in Europe among members of the EU, lawyers practicing nonprofit law and philanthropy internationally, and academics in universities following the third sector.

Now we face another challenging year. We will continue to follow up on new contacts for potential membership, and the planning for and conduct of our Annual General Membership Meeting on 13 and 14 May 2010 in Toronto, Canada. Again, with security issues and financing of charity activity in the context of globalization and the fight against terrorism, this meeting promises to be an important meeting. As ICFO grows in membership and experiences greater involvement in the civil society movement, and as we consider how we should or will be involved in conducting international assessments of the major international NPOs and NGOs, this new year shapes up to be a busy year for us and for the third sector. All of this occurs as we face natural transitions required by our strategic planning and succession planning.

With such a large and internationally populated organization as ICFO with its constituent membership from around the world, not all, but many of us are religious people who are celebrating Christmas as the birth of Jesus. For all of us, I think, we celebrate Christmas as the symbol of hope, love, and solidarity. After all, those of us in leadership of ICFO are committed to these very ideals.

On behalf of ICFO membership, we wish each of you a Merry Christmas and Happy New Year in 2010

Rollin van Broekhoven (ECFA,
President, ICFO

Martina Ziegerer (ZEWO,
Vice President, ICFO

Burkhard Wilke (DZI,
Secretary General, ICFO

Adri Kemps (CBF.
Treasurer, ICFO

Eva Birath (SFI, www.insamlingskontroll,se

Sunday, December 6, 2009

Why Accountability?

The Taiwan NPO Self-Regulation Alliance (, a member of ICFO ( is sponsoring a conference in Taipei, Taiwan in mid-December 2009 to address the issue of NPO accountability and why we need it. The title is International Conference on NPO Accountability 2009 – NPO Public Trust. I was reminded of a similar conference in Milan, Italy in November 2008 held by ICFO member Istituto Italiano della Donazione (IID)( that addressed the subject of donor loyalty. This all started me thinking once again about the relationship between accountability and trust and donor loyalty in the nonprofit sector, especially during this time of year.

In the United States, we are told that most charities raise approximately 30 percent of their annual budgets during November and December of each year. A reasonable assumption is that the solicitation of funds and the giving during this period is related to holiday appeals, and maybe some end of year tax considerations, notwithstanding that much of the funding goes to year-long operating and mission expenditures.

Thanksgiving holidays in the United States, and I suspect Christmas season celebrations and recognition in much of the Western world at least, have something to do with motivations to give to charitable causes. This brings to mind the question as to whether accountability, whatever that is, plays an important part in most giving decisions during this time of year.

I have previously argued that there is a distinction in normal charitable giving and philanthropic giving and efforts. While this picture may be uniquely American, I think the point probably exists more broadly, certainly in the Northern hemisphere and particularly in the developed Western World. Whereas charitable giving tends to be individual giving and emphasizes the efforts to help the poor and needy and work toward alleviating the present situation, supporters of philanthropy see their efforts directed toward society and the future, and in addressing long-term solutions. Thus, philanthropic giving tends toward institutional and foundational giving to narrowly defined causes that address recognizable changes in social conditions. The recipients of philanthropy tend to be educational and arts institutions and organizations, medical research, and organizations that direct their activities toward promoting and improving the quality of human life.

There are different motivations in these two categories of public benefit activity. Whereas philanthropic organizations generally draw resources from wealthy donors and organizational foundations, the charitable organizations and religiously based organizations and churches draw their resources, both financial and volunteer labor, from individuals or small groups of individuals.

What the statistics show is that giving to charity in America during the most recent year for which we have statistics, totaled $306 billion. The largest percentage of giving reflected in these statistics was from individuals, with 85 percent of all households in the United States giving to charity, of which the total number of givers in the United States with annual incomes lower than $100,000 was 65 percent of the entire U.S. population. Moreover, 44 percent of all adult Americans provided volunteer services to charities. That is, 83.9 million American adults volunteered, thus representing 9 million full time workers at a value of $239 billion. Additionally, there are 12 million workers employed by nonprofit organizations. This represents a significant part of American economic life.

Moreover, if the published statistics are accurate, giving by individuals comprised 75 percent of all charitable giving in the United States, totaling more than $222.89 billion. Independent Sector recently reported that 85 percent of all religious households that gave to the church and religious charities also supported secular organizations. Those households accounted for 81 percent of all donations to charities. Similarly, patterns of volunteering between both religiously-based organizations and secular charitable organization are much the same. What this tells the researchers is that the connection of the donor with a church tends to define the donor’s heart and character. The conclusion of this study was that faith-based generosity, whether measured in terms of dollars or time, is real, measurable, and carries considerable impact.

I cannot help but wonder how much of this level of giving, particularly during the end of the year holiday seasons, and more specifically, individual giving, is based on some level of accountability practiced by charities, and specifically, to whom the charity is accountable. Of course there is some minimal level of accountability to governments in the form of the necessary requests for authority to engage in the solicitation of funds and the informational tax returns required for most charitable organizations.

But, how many of us seek specific information, such as, financial statements, reports on projects, reports on the effectiveness of public benefit activities undertaken by the charity, information about the board and its governance policies and style before we give to charities? My guess is that few of us as individuals engage in much due diligence in this respect before we respond to requests for charitable donations. If I were to examine my own giving patterns over the past 40 plus years, I cannot remember ever asking for financial statements and annual reports from the charity before making a donation, nor can I remember asking for detailed copies of the corporate minutes of the nonprofit organization or information about the members of the board of the organization.

My guess is that the due diligence practiced by major givers, such as wealthy philanthropists, foundations, or corporate givers, is much different. In most, if not all cases, these major philanthropic givers and foundations require detailed applications and information. Basically, it seems to me that these major givers do their own due diligence and do not rely heavily on what a charity monitoring organization may determine concerning the charity, other than that the charity is accredited.

What all this suggests to me is the importance of trust between the donor and the charity or nonprofit organization. I will expand on this in future posts, but will address the general definition and nature of trust here. Without trust, there is no loyalty by donors, and as I have said before, the goal of the charity should be donor loyalty and retention. It is well-known that far more expense is required to generate new donors than to keep those donors that have been cultivated and encouraged to be loyal givers. Fundraising or solicitation costs and administrative costs increase in the process of donor acquisition and the ratios of administrative costs are unfavorable to the balance sheets which are disclosed publicly.

But, what is trust? And what does accountability have to do with trust?

The Hebrew word for trust most often used in ancient texts is bāțaḩ, which with its derivatives connote a feeling of security, which often comes through reliance on someone or something. Another Hebrew word for trust is ̓̓̓̓̓̓̓̓̓̓̓̓̓̓'āman which means to have faith in something or someone because one is convinced of its, or his, or her reliability. It regularly denotes faithfulness in the sense of trustworthiness. Faith in this context often included the idea of the body of truths believed. Beliefs, as such, are convictions held on grounds, not on self-evident, but on evidence that is trustworthy.

In the social sciences, the subtleties of trust are a subject of ongoing research. In sociology (and psychology) the degree to which one party trusts another is a measure of belief in the honesty, benevolence, and competence of the other party. Based on the most recent research, a failure in trust may be forgiven more easily if it is interpreted as a failure of competence rather than a lack of benevolence or honesty.

From this perspective, trust is a mental state, which cannot be measured directly. Confidence in the results of trusting may be measured through behavior, or alternatively, one may measure self-reported trust (with all the caveats surrounding that method). Trust may be considered a moral choice, or at least a heuristic, allowing the human to deal with complexities that outgo rationalistic reasoning. In this case, machine-human trust is meaningless, because computers have no moral sense and rely on rationalistic computations. Any trust in a device under this characterization is computer-mediated trust of the user of the machine in the designer and the creator of the device, who has implemented the rational rules into the device.

Trust, therefore, involves the idea that something is committed or entrusted to one’s care for use or safekeeping, as an office, duty, or the like, and where the obligation or responsibility is imposed on a person in whom confidence or authority is placed. In law, what this defines is that there is a fiduciary relationship created in which one person, the trustee, holds the title or property, for the benefit of another, the beneficiary. This latter sense of trust is not unlike our understanding of stewardship that is relevant to our thinking about the relationship between the nonprofit organization and donor, and indeed, perhaps, theologically, the obligation of the donor with respect to the property or funds contributed to the nonprofit organization.

Of particular interest to me is the role in which computers play in the accountability and monitoring process in a modern setting. Information is submitted by nonprofit organizations to the monitoring organizations online, often in a format that is initially evaluated automatically on a specially designed software program. Indeed the mechanization of information on the informational tax returns required of exempt nonprofit organizations results in the computerized screening and data evaluation of information submitted on the informational tax return. Similarly, non-governmental monitoring organizations, such as those which are members of ICFO, may have the mechanized means of screening and analyzing the data submitted to determine if submitting charity is in compliance with certain standards promulgated by the monitoring organization. Do these capabilities enhance trust between the charity and the public, including donor and potential donor?

If trust is important for moral reasons, for developing donor loyalty, for donor retention, and indeed, for the success of the public benefit goals of at least the charitable sector, what kind of accountability advances that trust, and how? If it does not, what other purposes does accountability serve?

Sunday, November 22, 2009

Government, Civil Society, Charity, and Public Benefit

Have you ever wondered why you give to charity? If so, have you ever wondered why you give to certain causes, but not to others? Have you ever wondered about what kind of things are important to you when you give? What kinds of things do you wish you could know about a charity to which you want to give? What factors motivate you, or contribute to your motivation to donate to a charity or cause?

In my last post, Alexis de Tocqueville and Civil Society, I discussed the definitional problem with respect to civil society and suggested that the most common understanding of civil society is that it reflects the complex set of a dense network of civil associations that is said to promote the stability and effectiveness of the democratic polity through the association of citizens’ “habits of the heart.” In our post-modern context, as I wrote in my last post, we think of civil society as that part of the public sphere set apart from the State and the market, that is, apart from the political sector and the commercial and business sector, replacing the State’s service provision and social care.

But, I am not sure that this is a completely accurate description to how most people think of civil society. It is not simply the case in countries in which the polity tends toward a form of socialism. It is not the purpose of this post to provide an argument for or against socialism, no matter how it is defined and understood. Assuming, however, that socialism, and specifically democratic socialism, refers to a strong welfare state, fiscal redistribution or some form of redistribution of income through effective management of the economy, and some nationalism, could there be an understandable conflict between the role of government and civil society organizations as they are currently conceived?

If any form of socialism were to prevail, why not just let the government take care of everything, of our needs, our wants, and our cultural and educational aspirations? Does it make any difference if the need for welfare and social services can be met by government, either by direct action, by contract, or by grant to a private organization? After all, who has the ultimate responsibility, if any, for our health, welfare, education, cultural life, for taking care of the poor and the disenfranchised? How about natural or man-caused disasters? Should not governments from around the world, multilateral organizations, such those of the UN or the EU, provide the necessary rescue, emergency relief, development?

Where does giving to the church fit into all this? Do church sponsored social welfare organizations and activities, such as hospitals and medical clinics, homeless shelters, soup kitchens, tutoring programs, alcohol and drug recovery centers, and employment centers relieve the government of responsibility to attend to these needs? Should religious activities of churches be recognized by the government with special tax-related benefits, either by tax exemptions from income or property taxes, or by permitting deductions for donations given to the church?

Have you ever wondered how much more effective, cost-efficient, responsible, and easier it would be to simply have the government take care of all the welfare, charitable, and public benefit purposes that the government determines are worthy of support? For example, if there is a tsunami in some far-away place, or an earthquake in Central America, why should there be any charitable activity by public benefit voluntary associations or organization to address the damage, destruction and loss of life when governments from around the world can provide the necessary relief? Assuming they can, can they do so in a timely manner, particularly democratic societies? And, what would this all mean to the ideals of liberty, freedom, self-determination, and personal responsibility?

Moreover, have you ever assumed that governments are simply more transparent and accountable than charities or non-government organizations? How do governments reflect transparency and accountability, however these terms are defined, to the general public or even to people who inquire about specific government activities? Are all governments equally transparent and accountable to their citizens with respect to the projects they undertake and money they spend? Are governments sufficiently transparent and accountable to accurately regulate and monitor the nonprofit sector and the civil society movement, especially when that sector is in conflict with that government or with its declared public policies?

According to Transparency International's Global Corruption Barometer for 2009, governments around the world are not the greatest models of transparency, accountability, and freedom from corruption. For example, Transparency International 2009 Global Corruption Barometer reported that the U.S. government disclosed that $6.4 billion in stimulus money went to 440 nonexistent congressional districts, “creating or saving” around 30,000 phantom jobs. Further, the White House admitted in July that billions of dollars spent in Troubled Asset Relief Program funds might not be traceable.

Assuming that governments at all levels give tax benefits to churches and nonprofit organizations, such as tax exemption from income and property taxes, and the deductibility of contributions by donors, to what extent should governments regulate and monitor the activities of the sector, and of specific nonprofit organizations? After all, governments regulate all sorts of economic activities from corporations and business entities, and may in some places regulate, although lightly, the activities of the nonprofit sector. If the regulatory and monitoring scheme is undertaken by the tax authorities, or indeed some specific government agency that might regulate business activities, what level of expertise would you expect to be exercised by those authorities with respect to religious matters, medical care and health concerns, social services, and the like? This will be addressed in a future post forum.

Have you ever wondered about your giving to a non-government organization that receives subsidies from the government, either direct grant or by contract? If most commonly understood definitions and characteristics of civil society regard it as a network of voluntary associations, set apart from the State, that have a presence in public life and that express the interests and values of their members based on ethical, cultural, political, scientific, religious, philanthropic, and social welfare central to the common good of society, how does government entanglement with the sector, and with specific nonprofit organizations, jeopardize the public benefit purposes of the sector or of specific organizations, or does it? How does government balance the public benefit concerns of the sector and its benefit to society, and important public policies as identified in laws, regulations, and governmental proclamations?

For example, an organization is providing a valuable civic public benefit that under some theories of political philosophy may be asserted to properly be the functions of the government. What happens when the government enacts a law that places conditions on non-government organizations for the receipt of government funds through grants or contract when such conditions are contrary to the nature and character of that organization? Have you ever wondered what it would be like to advise or lead such an organization when those conditions would require the organization to violate its fundamental and principled character in order to receive funds from the government or retain its tax exempt status? Have you ever wondered, or faced the decision about giving to such an organization, that must violate its essential and fundamental public benefit and faith-based character in order to retain its tax exempt status? I have used three examples in which to explore some of these issues.

There was the recent situation in Washington, D.C. that illustrates the problems posed by these questions. For many years, Catholic Charities, a religious charitable organization, had received both government grants and contracts from the government of Washington, D.C. At issue was $18-20 million in city funds for 20 to 25 programs run by Catholic Charities. A medical clinic in the Spanish Catholic Center served 3,000 people. This clinic received approximately 60 percent of its budget from the city. Another program provided tutoring services for people preparing to take general education development (GED) tests received 35 percent of its budget from the city. Foster care and adoption placement services received 90 percent of its funding from the city. In addition to these services, Catholic Charities received funds from the city to offer mental health services, to operate nine homeless shelters, and during winter, to run hypothermia shelters.

The conflict between the city of Washington, D.C. and Catholic Charities, and indeed, between the city and the Catholic Archdiocese of Washington arose when the city government proposed changes in the city laws to provide a same-sex marriage law. Under this proposed law, religious organizations, including the churches, would not be required to perform or make space available for same-sex marriages.

However, according to reports on the proposed law, such organizations would have to obey the city laws prohibiting discrimination against gay men and lesbians. There was no exception in the proposed law for religious beliefs and practices. Many of the religious leaders of all denominations in Washington, D.C. opposed this proposed law, and for the most part, the public opinion polls run against this proposed law. Roman Church officials and Catholic Charities stated that they would have to suspend all its social services work for the city, if it would otherwise be required to provide employee benefits to same-sex married couples or allow them to adopt because these requirements were contrary to Church teaching.

A diverse group of approximately 150 prominent religious leaders, scholars, and civil society leaders, met in late 2009, to draft and announce a declaration of firm opposition to current and future laws impinging on the sanctity of life, marriage, faith, and liberty. The Manhattan Declaration stated in pertinent part:

While the whole scope of Christian moral concern, including a special concern for the poor and vulnerable, claims our attention, we are especially troubled that in our nation today the lives of the unborn, the disabled, and the elderly are severely threatened; that the institution of marriage, already buffeted by promiscuity, infidelity and divorce, is in jeopardy of being redefined to accommodate fashionable ideologies; that freedom of religion and the rights of conscience are gravely jeopardized by those who would use the instruments of coercion to compel persons of faith to compromise their deepest convictions.
* * *

Because we honor justice and the common good, we will not comply with any edict that purports to compel our institutions to participate in abortions, embryo-destructive research, assisted suicide and euthanasia, or any other anti-life act; nor will be bend to any rule purporting to force us to bless immoral sexual partnerships, treat them as marriage or the equivalent, or refrain from proclaiming the truth, as we know it, about morality and immorality and marriage and family. We will fully and ungrudgingly render to Caesar what is Caesar’s. But under no circumstances will we render to Caesar what is God’s.

The drafters and signatories released this Declaration in Washington, D.C. on 20 November 2009 as a statement of first principles that are timeless. The timing of its release was affected by the policy proposals of the new administration and Congress and their effects on churches and civil society institutions and entities, as well as on American society generally.

A little context might serve to suggest the impact of the policy issues that are being addressed in the Manhattan Declaration. First, some statistics. Admittedly, these statistics reflect activity in the United States third sector only, and the fact that the Declaration is a document addressed to the American context may mean limited application of these ideas outside the United States.

In 2007, Americans gave a staggering $306 billion to charity. This figure did not include more than $100 billion given to religious organizations, such as churches, foreign mission organizations, church-operated local food kitchens and homeless shelters, and large religious organizations, such as the Salvation Army, the Roman Catholic Church and its subsidiary charitable activities, and the Church of Jesus Christ of the Latter Day Saints (Mormon Church).

What is also significant is that 85 percent of all households in the United States gave to charity, of which the total number of givers in the United States with annual incomes lower than $100,000.00 was 65 percent. If the published statistics are accurate, giving by individuals comprise 75 percent of all giving in the U.S., totaling more than $222.89. Studies reflect the fact that religious organizations are the largest recipients of giving and religious motivation is one of the strongest impulses for giving. Moreover, according to a recent study reported by Independent Sector, 85 percent of all religiously-motivated giving households support secular organizations. What these studies tell us is that faith-based generosity, whether measured in terms of dollars or time, is real, measurable, and carries considerable impact.

The prior administration of President Bush launched a faith-based initiative in which religious charities could seek federal funds to combat problems like drug addiction and homelessness. The executive orders prohibited the use of any of the federal funds for specifically oriented religious purposes, such as, distribution of Bibles, proselytizing, and the like. The initiative also provided for some relief from regulations that made it difficult for private organizations to seek federal funds. The changes in the laws also permitted donors to give to charity and claim deductions on the tax return although they took the standard deduction which did not otherwise permit itemized deductions. This would have, according to the announcement, encouraged billions of dollars to public service organizations thus reducing dependence upon the federal government.

As would have been expected, this initiative was somewhat controversial. The main objection was that it would have blurred the lines separating church and state. However, there was also an objection within certain religious communities that accepting funds under this program would open up the opportunity for the government to intrude into the policies and affairs of the religious charitable organizations.

President Obama immediately modified the faith-based initiative program by opening it up secular groups. However, he also changed some of the substantive provisions of the prior faith-based initiative. For example, where previously religious organizations were permitted to obtain federal funds but were engaging in hiring discriminatory practice based on religious beliefs, the current faith-based initiative would not permit religious charities to discriminate on the basis religious beliefs, such as is the case in the current Washington, D.C./Catholic Charities dispute. Thus, if a religious charity required new hires to affirm the religious beliefs,of the hiring religious charity, or did not provide spousal benefits to unmarried couples, or same-sex couples, they would not be eligible for federal funds. Indeed, the fear among some religious communities was that churches that espoused their religious beliefs on moral issues, or religious charities that did not provide support for programs that advanced abortion, same sex marriage, or medical research techniques that violated their Biblically-based policies and teachings, would lose their tax exempt status. As was the case in President Bush’s faith-based initiative, this modification of the initiative is also controversial.

Now, the second example of the issues arising out of the interaction between government and the civil society sector. The Canadian government denied the charitable status of Dutch-based environmentalist group, Greenpeace Environmental Foundation in 1999 on the grounds that Greenpeace served no public purpose. But first, a little history. Greenpeace was launched in Vancouver, Canada in 1971 by a group of environmental activists to protest U.S. nuclear testing off the coast of Alaska. It was registered as a charity in 1976. In 1989, Greenpeace lost its Canadian charitable status on the basis of concern that it was not a true charity and was not providing a discernable public benefit. As a result, Greenpeace no longer had its tax exempt status and donors to Greenpeace could no longer claim deductions for the amounts given to Greenpeace.

Greenpeace responded by establishing Greenpeace Canada Charitable Foundation which was legally distinct from Greenpeace, International, but not functionally so. This organization lost its charitable status. The basis was its noncompliance with Canadian tax laws on charitable organizations and the Income Tax Act. Greenpeace responded then by establishing Greenpeace Environmental Foundation, which lost its tax exempt charitable status in 1999. According to Revenue Canada, although environmentalism is recognized as a public purpose charitable activity, the Greenpeace foundation did not qualify because its stated purpose was “public awareness." However, the general belief in Canada was that the Revenue Canada decision against Greenpeace was due to its extensive lobbying activity against the Canadian forestry experts.

A number of years ago, Bob Jones University, a private religious university, in the United States lost its tax exempt status as a result of a dispute with the government over asserted public policies that, according to the University, violated its religiously based policies and practices. The University, although not affiliated with any specific Christian denomination, was dedicated to teaching and propagating its religious beliefs as both a religious institution and as an educational institution, both of which were criteria for tax exemption under section 501(c)(3) of the U.S. Tax Code.

As stated by the IRS, the exempt purposes set forth in section 501(c)(3) of the Internal Revenue Code, and organization must be organized and operated exclusively for exempt purposes set forth in that section and none of the earnings may inure to any private shareholder or individual. The exempt purposes set forth in this section are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sport competition , and preventing cruelty to children or animals. "The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; . . . .”

The faculty members were all required to be devout Christians and taught courses according to a Biblical worldview. Entering students were screened as to their religious beliefs, and their public and private conduct was strictly regulated by standards issued by the University. For the most part, these beliefs were identified as consistent with widely held orthodox Biblical doctrines. There was no question in any of the litigation that the beliefs espoused by the University were religiously based beliefs and sincerely held by the University.

There were two matters in dispute with the Internal Revenue Service, one which had tax consequences, but did not involve the loss of tax exempt status, and the other which did. In the first, the university provided housing for some faculty members and its faculty members ate meals from time to time in the university dining room with students. The theory was that faculty members should be able to mentor and model for students better through this informal interaction with the students outside the classroom. The case before the courts was a withholding tax case concerning the excludability of the fair market value of the lodging and meals and had nothing to do with the alleged racial discriminatory policy at issue in the loss of the tax exempt status in the other dispute.

The thrust of the university’s argument in the first instance was that its primary character was that of a religious organization, and that it had expected its faculty and staff to be role models for students of proper Christian living. The appellant court held that the value of the University’s provision of lodging and meals was not excludable because residing in University housing and taking meals in the University dining hall or at subsidized meals in personal residences to permit interaction with students was not a condition of employment. Therefore, with the exception of the dormitory counselors, the value of the lodging and meals were includable within the taxable gross income. This decision was primarily based on the factual record rather than some complex legal analysis.

However, the real issue that attracted government attention and protracted litigation was a University policy that denied admission to applicants engaged in interracial marriages and which also prohibited interracial dating and marriage based on certain asserted interpretations of the Bible. Bob Jones University had received a ruling letter from the Internal Revenue Service (IRS) in 1942 confirming its tax exempt status notwithstanding the existence of this marriage and dating policy. Whether one would agree with that interpretation of the Bible today or not is not the point here. In November 1970, the IRS notified the University that the IRS was revoking the University’s tax exempt status as a “religious, charitable . . . or educational” institution. In response, the University filed a lawsuit to have the IRS decision enjoined.

The United States Supreme Court in Bob Jones University v. United States, held that the “common law” public interest requirement could be properly read into the relevant tax statutory provision governing tax exempt charitable status. In this instance, according to the Supreme Court, the “common law” public interest was the common community conscience, that is, the eradication of racially discriminatory practices in education.

The University argued that the plain language of the statute guaranteed it tax-exempt status, and that the absence of any language in the statute expressly requiring all exempt organizations to be “charitable” in the common law sense precluded such a reading. In light of the disjunctive language in the tax exemption, where “charitable” was merely listed as one of the possible qualifying exempt purposes, there was nothing in the plain language of that section that would have applied the “charitable” qualification to all listed exempt purposes. The Court of Appeals rejected this argument, as did the United States Supreme Court on appeal.

In sustaining the action of the IRS to revoke the tax exempt status of the University, the Court said that:

Such an examination [of the framework of the Internal Revenue Code against the background of the congressional purpose] reveals unmistakable evidence that, underlying all relevant parts of the Code, is the intent that entitlement to tax exemption depends on meeting certain common-law standards of charity – namely, that an institution seeking tax exempt status must serve a public purpose and not be contrary to established public policy.

. . . Congress sought to provide tax benefits to charitable organizations, to encourage the development of private institutions that served a useful public purpose or supplement or take the place of public institutions of the same kind.

When the Government grants exemptions or allows deductions all taxpayers are affected; the very fact of the exemption or deduction for the donor means that other taxpayers can be said to be indirect or vicarious “donors.” Charitable exemptions are justified on the basis that the exempt entity confers a public benefit – a benefit which the society or the community may not itself choose or be able to provide, or which supplements and advances the work of public institutions and advances the already supported by tax revenues.

That Bob Jones University was a religious educational institution and that policy of the University which prohibited interracial marriage and dating was based on firmly held religious beliefs did not matter. Here, the governmental interest at stake, namely, the eradication of discrimination based on race in education, was so compelling that it outweighed any claims of burden to the University due to the denial of tax benefits asserted by the University in its free exercise of religion protected by the Free Exercise Clause of the First Amendment to the Constitution.

The reasoning of the Bob Jones University v. United States decision has not been welcomed with unalloyed delight, in part because it reflects issues raised in each of these examples. First, the text the Supreme Court applied to the University, that is, an educational institution which engaged in certain practices determined to be at odds with some declared position of the government. According to the Court’s reasoning, this could not be seen as exercising a beneficial and stabilizing influence in community life, and was, therefore, not “charitable” within the meaning of Section 501(c)(3).

Secondly, there was the element of conformity that appeared to inform the Court’s analysis of the tax exempt status of an educational institution. According to the Court, the exempt organization must “demonstrably serve and be in harmony with the public interest,” must have a purpose that comports with “the common community conscience,” and must not act in a manner at odds with the declared position of the whole government. The dissenting opinion in Bob Jones University, agreed with this point, both on the basis of statutory interpretation and on the basis of the historical understanding of this section of the law, particularly by the IRS’s consistent interpretation Section 501(c)(3). With over one million registered charities in the United States, it would be impossible to believe that most of these organizations could prove that they “demonstrably serve and are in harmony with the public interest,” or that they are “beneficial and stabilizing influences in community life,” in a review of their tax exempt status by the IRS.

As stated in the concurring separate opinion in the Bob Jones University case, these tests suggest that the primary function of a tax exempt organization is to act on behalf of the government in carrying out governmentally approved policies. Moreover, as expressed in the concurring separate opinion, referring to an earlier Supreme Court decision, this view of Section 501(c)(3) is that the test ignored the important role played by tax exemptions in encouraging diverse, indeed often sharply conflicting activities and viewpoints.

Tax exempt private nonprofit groups receive tax exemptions because each group contributes to the diversity of association, viewpoint, and enterprise essential to a vigorous, pluralistic society that is one indispensable means of limiting the influence of governmental orthodoxy on important areas of community life.

Moreover, as stated in Transparency International’s Global Corruption Report 2009, civil society coalitions straddle borders, link grass-roots campaigners to policy experts and adopt a focus that is independent of national governments. As a result, civil society is able to play an essential role as a third force, ensuring that citizens and their interests are given due weight and oversight in policy-making. Thus, civil society groups act as independent watchdogs. They can serve as an important channel for citizens to engage with business and government leaders, and act as credible catalysts of multi-stakeholder actions on a large number of issues related to corruption. “Only strong civil society participation can build the societal consensus that is necessary to tackle corruption in all it forms.”

As noted by a former commissioner of the IRS, questions concerning religion and civil rights “are far afield from the more typical tasks of tax administrators – determining taxable income.” Indeed, the Supreme Court had often expressed concern that the scope of a government agency’s authorization be limited to those areas in which that agency fairly may be said to have expertise, and this concern applies to the asserted authoritative power of an agency that determines the scope of a public policy.

In another Supreme Court decision decided the same time as the Bob Jones University decision, the Court held that:

Both tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income.

If the tax exemption and deduction for contributions are forms of subsidy, then this would be a violation of the Establishment Clause of the First Amendment of the Constitution when applied to churches and religious charitable organizations. There is a troubling assumption about this, and that is the assumption that the government is the ultimate owner of all assets in a country, and it is only on the basis of some idea of stewardship by which the taxpayer is responsible for the management of assets the taxpayer has earned or obtained and which the government has generously allowed the taxpayer to possess for a time.

A danger inherent in the Bob Jones University decision is that if nonprofits are forced to comply with some public policy as articulated by a government agency in order to retain its tax exempt status, then any nonprofit organization, including a church, that disagrees with a government policy, for example, a war in Iraq or Afghanistan, or that provides sanctuary to aliens in violation of immigration laws, would be at risk of losing its tax exempt status. In that case, the power to tax religious institutions may be construed as the power to limit the free exercise of religion.

These examples and the problems they pose seem to direct our attention to the concept and role of civil society institutions and organizations. Do I as a taxpaying citizen interested in higher education, or in homeless shelters, soup kitchen, and tutoring services, or in environmental causes, have sufficient conviction in what is being accomplished by Bob Jones University, Catholic Charities, or Greenpeace International to give to those organizations and causes even though I cannot receive a tax deduction for my donation? What governments give to advance and support civil society, governments can take away, or deny in the first instance.

Sunday, November 1, 2009

Alexis de Tocqueville and Civil Society

As I was thinking about this post and the role of the “third sector,” “charity,” “public benefit,” “voluntary associations,” or whatever you want to call it, in the context of the idea of “civil society,” I recalled talks I gave in Milan, Italy at a conference sponsored by the Istituto Italiano della Donazione (IID) last November, and then in Amsterdam, the Netherlands, at the Annual General Membership meeting of the International Committee on Fundraising Organizations (ICFO) this past April. Both of these talks addressed the subject of engaging public trust and donor loyalty.

It is almost impossible these days to have a conversation about politics or public policy, especially when the policy addresses international issues, without someone mentioning “civil society.” According to some advocates, “civil society” simply means the fundamental reduction of the role of politics and public policy in society to expanding free markets and individual liberties. Others might argue that “civil society” is the most viable alternative to the authoritarian State and the tyrannical market. Others think of “civil society” as the missing link in the success of social democracy.

As I will discuss later here, there are definitional problems both respect to the definition of civil society and with the identification of what we think of as the third sector, charities, public benefit organizations, voluntary associations and non-government organizations. In a nominal international study of Johns Hopkins University on the third sector, researchers were faced with the same problem of definition. Different terms are frequently used almost interchangeably in different countries or regions of the world, and this can be a problem when it comes to funding, regulation, or monitoring organizations that are largely identified as belonging to “civil society.”

As recently reported by the World Bank, “there has been a dramatic expansion in the size, scope, and capacity of civil society around the globe over the past decade, aided by the process of globalization and the expansion of democratic governance, telecommunications, and economic integration.” Moreover, the World Bank reported that:

CSOs’(civil society organizations)influence on shaping global public policy has also emerged over the past two decades. This dynamism is exemplified by successful advocacy campaigns around such issues as banning of land mines, debt cancellation, and environmental protection which have mobilized thousands of supporters around the globe.

The World Social Forum held annually since 2001 draws CSO leaders from around the world. During the 2007 World Social Forum held in Nairobi, Kenya, more than 50,000 CSO leaders from different continents around met to debate and propose more equitable and sustainable alternatives to current models of economic globalization. So we are not talking about an insignificant presence in the socio-politico-economic life in the world.

UN Secretary-General Ban Ki-Moon, speaking at the World Conference Forum in Davos, Switzerland in January 2009, said:

Our times demand a new definition of leadership – global leadership. They demand a new constellation of international cooperation – governments, civil society and private sector, working together for a collective global good.

There are over 13,000 CSOs with established relationship with the UN Department of Economic and Social Affairs (DESA). Although the vast majority of these are NGOs, there are also institutions, foundations, associations, and almost 1000 Indigenous Peoples Organizations listed as CSOs with DESA. What the Secretary-General was pointing out was that the problems facing the world require solutions that are transnational and the participation of diverse groups and individuals.

Since these terms (civil society organizations, non-government organizations, third sector, public benefit organizations, voluntary associations, and charities) are used interchangeably, the problem is more a matter of research discipline, such as sociology, political science, law, political or legal philosophy, and economics, for example, and the classification and use of data in the analysis of these organizations. Moreover, the problem of defining the third sector enters into the political arena promoted by the European Union in E.U. and global policy in the UN as well as scenarios of globalization.

How the sector is defined and identified is important because it determines who is in and who is out of the political implementation of the policies. Specifically, for the States, for the E.U, and for the UN, for researchers and theoreticians of civil society, and for the wide range of organizations involved in the search for definitions, it affects their possibility of taking part in projects and policies, which means access to funds, information, networking, and increased potential for achieving their organizational goals.

But, in my talks in Milan and Amsterdam, I addressed something of a more general nature when I talked about Alexis de Tocqueville and his study reported in his book, Democracy in America The connection between Tocqueville and civil society did not escape the attention of Professor Dr. Henk E. S. Woldring of Vrije Universiteit, Amsterdam (the Free University of Amsterdam).

Professor Dr. Woldring wrote in State and Civil Society in the Political Philosophy of Alexis de Tocqueville, International Journal of Voluntary and Nonprofit Organizations, that de Tocqueville (1805-1859) was one of the first political philosophers who discussed extensively the concept of civil society. As I mentioned in my talks in Milan and Amsterdam, the first thing that struck Tocqueville during his visit to America in the early 19th Century, was that religions provided Americans with the strong moral character without which democracy could not function, but also that free voluntary associations existed as intermediate institutions between citizens and the State. Although the America, and I believe much of the world, is becoming increasing secular and religiously diverse, there is still something of a religious, or at least a moral, impulse behind giving, forming associations, and doing the work generally ascribed to civil society.

Professor Woldring wrote that Tocqueville identified these intermediate institutions between citizens and the State as the phenomenon of civil society in which citizens could realize their social freedom and equality. Moreover, according to Professor Woldring, Tocqueville distinguished between the competence of the State on one hand, and the proper consequences of free associations on the other. Therefore, according to Professor Woldring’s interpretation of Tocqueville, the competence of the State should be a limited one.

The so-called “civil society argument,” as it has been called, is actually a complex set of arguments. It has been commonly accepted that there is a dense network of civil associations that is said to promote the stability and effectiveness of the democratic polity through the associations on citizens’ “habits of the heart,” as Robert Bellah and his co-authors called it in “their book by that title, Habits of the Heart: Individualism and Commitment in American Life. Like Tocqueville, the authors and the subjects of the book concentrated on our character and how to create a morally coherent life. Indeed, the phrase, “habits of the heart,” was borrowed from Tocqueville’s Democracy in America. “Habits of the heart” was the term that generally described the values, goal, motives, and purposes held by individuals, and how they influence society and political thought and government.

The point is not only that religion and mores guide our character as a people, although much of the focus is on individualism, but now individualism in the context of communitarianism. However, pertinent to the civil society argument was Bellah’s comprehensive account of these ideas when he wrote:

We find ourselves not independently of other people and institutions but through them. We never get to the bottom of ourselves on our own. We discover who we are face to face and side by side with others in work, love, and learning. All of our activity goes on in relationships, groups, associations, and communities ordered by institutional structures and interpreted by cultural patterns of meaning. Our individualism is itself one such pattern. And the positive side of our individualism, or sense of the dignity, worth, and moral autonomy of the individual, is dependent in a thousand ways on a social, cultural, and institutional context that keeps us afloat even when we cannot very well describe it.

These ideas of Tocqueville and the Bellah group about “habits of the heart” seem to direct our attention to the concept and role of civil society institutions and organizations. But, what is the civil society? And how does the idea of civil society relate to government obligations, if any, to provide the broad range of services provided by civil society institutions, and to regulate their practices and monitor their transparency and accountability?

The concept of civil society has evolved since the coining of the concept in pre-modern times, when its importance was the idea of “good society.” The question, according to Socrates, was how individuals could reconcile their individual needs with the needs of society. Of course, this is still very much the question in political science. When individual claims were balanced against societal claims, presumably the balance would result in what was regarded a civic virtue which would then produce what was called a societas civilis in contrast to a barbaric society.

According to Plato, citizens dedicated themselves to the common good in a just society. Within the early natural law and the state of nature thinking, citizens acted virtuously and wisely, and practiced the occupations for which they were best suited. Philosopher-kings would rule such a society as enlightened leaders based solely on the common good.

Whereas, Plato asserted the rule by philosopher-kings in an oligarchy form of governance, Aristotle argued that governance must be performed for the common good in which all citizens could participate. Thus, he stressed that two aspects of liberty served by democracy were the opportunity for individuals to participate in the formulation of public policy and individual freedom protected by law, primarily constitutional law, from interference by the State. Aristotle argued the nature of a political order as civil society presupposing that there were multiple forms of interaction, association, and group life in which people participated in the social order. There was no real distinction between the State and society

Augustine, on the other hand, postulated that natural law was based on divine rule, rather than on reason. Civil society simple meant that society was under the protection of God and submission to God’s divine rule. Here, the role of the church was important in its decisions and policies as the basic foundation of civic virtue, law, and order of the society.

Thomas Aquinas reconciled these conflicting concepts of God’s society and Aristotle’s civil society by stressing guidelines that all people should be treated alike. Each life had sacred meaning and eternal import. So, Aquinas stressed civic manners in which each individual was consciously committed to strive toward the common good in order to create a civil society.

From these early theories there evolved the concept of a political order based on a social contract. Thomas Hobbes argued that agreements were needed in order to create order and peace, and the institutions to preserve them, and protect freedom. Thus, civil society was achieved when rational people entered into an agreement.

John Locke moved the argument forward to the effect that civil society results from a social contract. According to Locke, the State should not be regarded as a single body as viewed by Thomas Hobbes, but rather that government and society should be differentiated with the goal of preventing the power of government from threatening the rights of the society. Nevertheless, natural law philosophers, such as Hobbes, Locke, and Kant, used the term “civil society” to describe a society in which each person was equipped with such rights as the State could defend for them.

According the G. W. F. Hegel, the civil society was regarded as a pre-state society. Hegel built his theory on British writers, such as Adam Smith and Adam Ferguson, accepting that prior to the State there was a natural order to social life within the sphere of natural dependence, or the economy. Karl Marx denounced civil society. The rejection of civil society was largely responsible for the denial of any autonomous role for either law or society against the State.

In the post-modern perspective with the emergence of non-governmental organizations and the New Social Movements on a global scale, civil society was regarded a third sector apart from the political sector and commercial or business sector, replacing the State’s service provision and social care. Robert D. Putnam in an essay, Bowling Alone, and in his later book, Making Democracy Work, argued that civil society was a much more elaborated network of civic engagement fostered by civil associations of all kinds with denser networks in the community.

Although the term, “civil society,” is broadly used and is in vogue, its definition remains unclear. Nevertheless, the current understanding of the term usually refers to the public sphere set apart from the State and the market, according to some definitions and descriptions. This implies a spectrum of social organizations as well as community organizations, which will challenge and will uphold existing order. I think that part of the definitional and description problem is due to the fact that the conceptualizing the idea of civil society occurs in sociology, political science, jurisprudence, and history, each with its own disciplinary interests, history, and perspectives.

The definitional problem for civil society institutions and organizations is reflected in the variety of definitions of civil society. For example, the London School of Economics Centre for Civil Society’s definition is:

Civil society refers to the arena of uncoerced collective action around shared interests, purposes and values. In theory, its institutional forms are distinct from those of the state, family and market, though in practice, the boundaries between state, civil society, family and market are often complex, blurred and negotiated. Civil society commonly embraces a diversity of spaces, actors and institutional forms, varying in their degree of formality, autonomy and power. Civil societies are often populated by organizations such as registered charities, development non-government organizations, community groups, women’s organizations, faith-based organizations, professional associations, trade unions, self-help groups, social movements, business associations, coalitions and advocacy groups.

The Centre for Civil Society at the Johns Hopkins University defined civil society organizations as:

Any organisations whether formal or informal, that are not part of the apparatus of government, that do not distribute profits to their directors or operators, that are self-governing, and in which participation is a matter of free choice. Both member-serving and public serving organisations are included. Embraced within this definition, therefore, are private, not-for-profit health providers, schools, advocacy groups, social service agencies, anti-poverty groups, development agencies, professional associations, community-based organizations, unions, religious bodies, recreation organizations, cultural institutions, and many more. [Statement of the Sixteenth Annual Johns Hopkins International Fellows in Philanthropy Conference, Nairobe, Kenya]

The World Bank uses the term to refer to the wide array of non-government and not-for-profit organizations that have a presence in public life expressing the interests and values of their members, or of other interests and values based on ethical, cultural, political, scientific, religious, or philanthropic considerations. Therefore, “civil society organizations” refers to organizations, such as, community groups, non-government organizations, labor unions, indigenous groups, charitable organizations, faith-based organizations, professional associations, and foundations. But some listings of examples of civil society organizations also may include educational institutions, both nonprofit and for profit, corporations and other business entities that are part of the market forces in the world.

One writer wrote that “rarely in the history of development can a term have progressed so quickly from obscurity to meaninglessness without even a nanosecond of coherence.” But, even with these stabs at finding a definition, it is still unclear what we mean by the term. Is it an important political idea, since it was used just a few years ago to refer to a few freedom fighters in oppressive regimes in Eastern Europe, South Africa, and South and Central America? Or is it a trendy term for NGO activists? Is it a job creation scheme for academics? Or maybe, is it a refuge for politicians who have run out of ideas? As one writer said, “when an idea can mean so many things it probably means nothing.”

Although there is a lack of consensus around a commonly understood definition of “civil society,” there are certain characteristics that are generally associated with the term and what it means to be a civil society organization. These include:

Civil society is a part of society – that is, the world of voluntary associations. [However, civil society, from Aristotle to Hobbes, represented a kind of society that was identified with certain ideals. These may include political equality, peaceful coexistence, tolerance, cooperation, and the skills for living a democratic life. The problem here is that values and beliefs are fostered in the places we live and learn and are shaped by our families, schools, workplaces, colleges and universities, political institutions, and houses of worship.]

Civil society is good society – that is, it sets the contributions of voluntary associations in a proper context and guards against the tendency to privilege one part of society over others on the basis of some perceived ideological grounds. [However, good neighbors cannot replace good government, nonprofits should not be asked to replace business and substitute for functioning markets. But, how do societies decide the direction in which they should go?]

Civil society is a part of the public sphere – that is, what is the common good and how does the public deliberate about what is the common good democratically is central to civil society thinking. In its role as the public sphere, civil society becomes the arena for debating and negotiating alternative solutions to problems in the public sphere. If civil society is to advance good society as one of its goals, then part of this good society is poverty reduction and deep democracy. [However, this vision of the good society says little about how these goals are to be achieved, and the differences and particularities of associational life generate competing views about what it means to be a good society, anchored in religion, politics, ideology, race, and culture, for example.]

In an earlier post, I wrote about the INGO Accountability Charter, and the signatories to the original agreement. Some of these were more traditionally recognized global humanitarian organizations, such as Save the Children, Plan International, and World Vision International. Oxfam International is a confederation of 14 like-minded organizations working together and with partners to bring lasting change, end poverty and injustice, and work to advance human rights. Amnesty International and Greenpeace International advance primarily political agendas directed toward advocating for human rights in the case of Amnesty International, and for protection of the environment through non-violent confrontation in the case of Greenpeace International. Transparency International identifies itself as a global civil society organization leading the fight against corruption, “bringing people together in a powerful world-wide coalition to end the devastating impact of corruption on men, women, and children around the world.

There are several questions that come to my mind. Should there be some distinction between giving to academia, charities that serve the poor, the sick, and the homeless, civic groups, sports and social clubs that provide some level of cohesiveness and benefits peculiar to individuals of like-minded social or athletic interests, consumer organizations, cooperatives, cultural groups, museums, and libraries, environmental groups, foundations, policy institutions, public policy advocacy groups, professional organizations, religious organizations and churches, trade unions, etc.? These are some of the most common examples of civil society institutions and organizations.

Should there be a distinction in the tax consequences of donations made to any of these groups? Should there be a distinction in the level of government regulation and monitoring of these segments of civil society institutions and organizations? Are there any of these classes of organizations that should be regulated and monitored by government agencies beyond the minimal designation as tax exempt organizations or organizations that should be accorded some level of government respect or recognized status?

If there is no distinction between traditional charitable or humanitarian organizations and public advocacy NGOs within the scope of civil society, how does a government grant tax exempt benefits and allow tax deductible donations, when some of these intermediary associations are working against the government in the country in which they are raising funds? In light of the Hein Persche decision, does a State have the right to deny tax advantages to a civil society organization that works against the public policies of the State in which such tax advantages are sought within the scope of Article 56 of the E.U. Treaty?

In view of the large number of civil society organizations, the lack of clear definition of what is and what is not a civil society organization, how is transparency and accountability to be monitored? Indeed, what do these terms really mean and why should transparency and accountability really matter? Are they to be monitored by the governments of all the States in which these organizations are raising funds and performing their “public benefit” mission? Or, should monitoring be done by international monitoring organizations, such as performed currently by ICFO, on a very limited basis? In light of the variety of civil society organizations, are such monitoring organizations free to distinguish the variety of mission goals of the organization to determine whether in fact they are public benefit goals? And if so, what criteria is to be applied for the determination of public benefit?

I recognize that the answers to these questions are related to the legal regimes and traditions in various countries. I also realize that some of the problem countries have in addressing the issues of transparency and accountability arise because of the lack of consensus on an agreed set of definitions. Moreover, this problem may be exacerbated by the fact that fact that governments provide grants and funds to the CSO to promote its particular mission which may be consistent with government goals in that country. Does the government require audits of accounts in which government funds have been allocated to insure that those funds have been spent or invested for the purposes for which they were given? But, is the mere requirement for such limited audits sufficient to provide the requisite transparency and accountability to provide for some level of donor trust? How much more difficult would it be for an organization, such as ICFO, to establish accountability Standards and monitor all the organizations seeking some form of seal for compliance with such Standards?

Let the dialogue which is so much a part of civil society begin or continue.

Wednesday, October 7, 2009

Comité de la Charte, Twenty Years of Service to the French Public

As anyone who follows the public benefit, or nonprofit sector knows, there is increasing attention to the importance of transparency and accountability. As in the case of many concepts, the ideas of transparency and accountability are harder to define than they are to illustrate.

The International Committee on Fundraising Organizations (ICFO) exists for the primary purpose of advancing the cause of promoting transparency and accountability in the sector. It has done this largely through the good work of national monitoring organizations. And its the work of these national monitoring organizations where we find the illustrations of transparency and accountability, as well as the examples lack of transparency and accountability.

Burkhard Wilke, the ICFO Secretary General and Managing Director of Deutsches Zentralinstitut für soziale Fragen (DZI) (, wrote that since the end of World War II, the number of non-government organizations has increased significantly, and have become an important social counterpart of the economic and political forces in society. Most industrialized countries grant tax exempt status to these organizations, however, the NGO sector is minimally regulated by national, or in the United States, state authorities. The exception to this general rule is the accountability required by nations and states with respect to the projects, fundraising, and expenditures of funds provided by public subsidies.

The question arises as to why public benefit organizations should be transparent and accountable to the donor public. As I have written in a previous post, much of the giving, particularly with respect to addressing disaster situations, is based on emotional motivations. Therefore, charities often appeal to the donors’ compassion and emotional impulses, and use professional advertising and marketing techniques.

Therefore, as stated by Burkhard:

"Even when charities are perfectly accountable towards the public, many donors have difficulties fully understanding the often very detailed information to compare the organizations in which they are interested. That is why the assistance of private monitoring agencies is demanded by a still increasing number of donors as well as well as the charities themselves. The members of ICFO are building “bridges of trust” between reliable NGOs and the donors."

Today, we honor Comité de la Charte ( in Paris, France. In many countries, as in France, there are organizations that have been formed to provide some form of monitoring of charities. In some cases, there are rating systems based primarily or entirely on financial data or information provided by the charitable organizations themselves. Others are simply publishing the raw data on the Internet. Others are setting themselves up as independent monitoring activities unrelated to the sector, claiming some level of objectivity not otherwise present in the existing monitoring organizations, such as Comité de la Charte.

As the number of insipient monitoring organizations grows, whether by reason of newly established commercial enterprises or by organizations that arise from the civil society sector itself, there is the potential for confusion on the part of the donor public, both with respect to the legitimacy of the monitoring activity itself, and to the various models used to evaluate and monitor the charitable organization.

Comité de la Charte has established its credibility and reputation throughout the years of establishing Standards of Ethics and monitoring compliance with those Standards. Moreover, as Comité de la Charte has participated in ICFO with like-minded national charity monitoring in the exchange of information and experience, its role in French society has also been enhanced.

In recognition of this milestone, Comité de la Charte is sponsoring a colloquium on the anniversary of its founding. The topic is Organisations Qui Font Appel Á La Générosité: Les Défis de La Prochaine Décennie,” or Organizations That Rely on the Generosity: The Challenges of the Next Decade.

We commend Comité de la Charte on its twentieth anniversary celebration.

Thursday, October 1, 2009

Global NGOs and International Assessments

For many years, the International Committee on Fundraising Organizations (ICFO) has been considering recommendations and requests to establish a charity monitoring regime for large, non-government organizations operating internationally, both through national affiliates and directly.

With the tsunami causing major destruction and loss of life in Samoa, and nearby American Samoa and Tonga, and the strong earthquakes causing major damage and loss of life in Indonesia, charities once again mobilize for rescue, relief, and related operations, even as governments mobilize to address the immediate needs in the affected areas. Once again, issues of transparency and accountability come to the forefront.

As I noted in my previous post concerning charitable activity with respect to disaster relief, major international non-government organizations are becoming increasingly involved in addressing both natural disasters and man-made disasters, such as war, civil strife, and the attacks on the World Trade Center in New York and the Pentagon in the Washington, D.C. area. Fundraising is increasingly taking place on a world-wide and cross-border basis, as reflected on a much smaller scale in the Hein Persche decision.

The use of the Internet has dramatically increased the possibility of fundraising across international borders, often without many of the controls and accountability present in nationally based fundraising activities. What I mean by fundraising is simply the practice of soliciting donations for a public benefit or charitable purpose. This is different from the common use of the word, “fundraising,” in Europe to identify non-government organizations dedicated to charitable or public benefit activity.

There have been several questions at the forefront of the discussions concerning the possible accreditation or certification of the large international non-government organizations operating internationally. The responses to these questions have divided the leadership of ICFO for many years.

It is important to understand that ICFO, which was founded in 1958, was established primarily to foster a sound approach in fundraising and administration of charitable programs. Historically, ICFO did not have a direct role in monitoring and accrediting or certifying public benefit organizations. Rather, as an association of national monitoring agencies, its activities have been centered on the sharing of information between national monitoring agencies, formulating standards for non-government charitable organizations working internationally, helping establish new national monitoring organizations, and providing information about the various national monitoring systems and activities. Nevertheless, ICFO has also been involved in monitoring or assessing the international headquarters of non-government organizations working internationally, but has done so on a very limited and voluntary scale.

The principal issue in any international assessment program has been the role of ICFO verses the roles on the national monitoring agencies. My personal bias is in favor of strengthening the national monitoring organizations rather than simply strengthening the overall presence and status of ICFO. This is really a personal bias in favor of national sovereignty rights and responsibilities as distinguished from a regional or global approach to monitoring charities.

This simply is an acknowledgment that laws, regulations, customs, and traditions differ from country to country, and that statutory and regulatory regimes may vary significantly from country to country depending upon how active governments may be with respect to the regulation and monitoring of charities. While some of these laws and regulations may be harmonized through regional agreements or regimes, there will always be some differences.

Where there are tax consequences to the status of the non-government organization and to the donations made, minimal monitoring may be done by the governmental tax authorities. Moreover, tax laws frequently are the authoritative sources for the definition of charity and charitable organizations.

If transparency and accountability are important to the trust accorded non-government organizations and their capacity to perform their charitable activities internationally, then some monitoring scheme must be done at a level in which the funds are solicited, and were the charitable activity is taking place. My guess is that donors tend to trust charities governed by national and local laws more often than they trust large international organizations that are assessed and monitored by some regional or international monitoring body or organization.

The issue, therefore, is how can ICFO assess and monitor the headquarters of large public benefit organizations operating internationally without undermining the authority and reputation of the national monitoring organizations and their accreditation, or denial of accreditation of the national affiliate of the large international organization being assessed.

Closely related is the issue of how the ICFO certification of the headquarters of the internationally operating NGO is to be interpreted by donors to the affiliate where the main solicitations for funds are made. Here, the problem is an affiliate that has not been accredited or certified by the national monitoring organization because the affiliate is not in compliance with the national standards or does not satisfy certain firmly held national public policies. Where the affiliate claims that it is transparent and accountable by resting its laurels on the ICFO certification or assessment of the international headquarters, donors may perceive that the affiliate is in full compliance with the national standards.

A third issue is the absence of clear international standards that are sufficiently articulate to provide meaningful assessment and monitoring. Meaningful guidelines for charitable activities, operations, fundraising, and governance, on a world-wide basis would be ideal, but difficult to promulgate in a way that could offer adequate monitoring of the large international NGO’s, because standards and guidelines must be country specific in their adaptations.

There are no cross-border fundraising laws that are country specific, although this issue may be mitigated a bit in the EU as a result of the Hein Persche decision. Thus, although the headquarters of the major NGOs operating internationally may be required to comply with the laws of the country in which it is incorporated, and domiciled in a different country, in the country of domicile as well. The problem, however, relates to the many affiliates that are required to comply with the laws of the countries in which they are fundraising, or performing their public benefit operations, but may not be expected to comply with any local or national standards and guideline relating to public benefit organizations.

Some ICFO national monitoring agencies favor a global ICFO accreditation because they believe that otherwise they would not have access or the ability to scrutinize an international organization based in another country. According to this argument, if a national monitoring agency would accredit the national charity which is an affiliate of the international charity, that national affiliate would be required to produce the audited financial statement of the international organization if it was to be accredited by the national ICFO member.

Moreover, without a tie-in to what the national ICFO member monitoring agency was doing in its country, ICFO assessment of the international NGO or charity could lead to conflicts with at least some of the ICFO member monitoring agencies or other potential ICFO member organizations. That would be the case where the national charity is not accredited in its own right by the ICFO member agency but can refer to the ICFO positive assessment of the international NGO.

The ICFO International Standards cover five key areas of scrutiny. These include: the membership and the responsibilities of a governing body or board; the fulfillment of public benefit goals; the fiscal control, management, and reporting; fundraising practices; and the provision of public information. Each of these standards contained sub-elements that more specifically defined the Standard. These are set out on the ICFO website,, at ICFO International Standards.

ICFO developed these International Standards for international NGOs or not-for-profit organizations that directly or indirectly through subsidiary bodies, raised funds from the public for charitable or public benefit purpose. World Vision International headquartered in the United States and Plan International, headquartered in Britain, and chartered in the United States, are examples of NGOs that coordinate the activities of their respective many national organizations.

In 2003, a group of prominent civil society leaders came together as a result of the efforts of the International Advocacy Non-Government Organisations (IANGO) Workshop. See Discussion of the background to this workshop is beyond the scope of this post other than to say that there were several IANGO workshops over the next few years during which the conceptualization and creation of the INGO (International Non-Government Organisations) Accountability Charter emerged as one tangible outcome of the workshops. The launch of the Charter in June 2006 was the beginning of the process to establish and implement a system that included common standards of conduct for INGOs and created a mechanism to report, monitor, and evaluate compliance as well as provide a means of redress.

There were eleven leading INGOs comprising ActionAid International, Amnesty International, CIVICUS World Alliance for Citizen Participation, Consumers International, Greenpeace International, Oxfam International, International Save the Children Alliance, Survival International, International Federation Terres des Hommes, Transparency International, and the World YWCA. These have been joined by additional signatory Charter INGOs, including Cordaid, International Council for Adult Education, Panos Network, Plan International, and World Vision International.

The INGO Accountability Charter provides for reporting, monitoring, and compliance. The signatories are required to submit annual reports outlining their goals, activities, and achievements. The Charter specifies the contents of the annual report, however does not set forth the monitoring and compliance regime to enforce compliance with the Charter.

During the Annual General Membership Meeting in Milan, Italy in 2007, Dr. Burkhard Gnärig, the Executive Director of the Berlin Civil Society Center and one of the founders of the INGO Accountability Charter, introduced the members of ICFO to the INGO Accountability Charter and to the need for monitoring the major international organizations to insure transparency and accountability. His challenge basically was that if ICFO did not assume this responsibility, then some other organization would, and he suggested that it could well be an organization with a commercial background and less qualified to assess the charity sector.

Therefore, the Board of ICFO once again took up the issue seeking to find some resolution the debate that had prevented the adoption of an ICFO assessment policy that would serve as the mechanism for promoting an international assessment program that balanced the interests of the national monitoring agencies, the interests of the NGO sector operating internationally, and the interests of the donor of the donor public all in the interest in promoting transparency and accountability.

Accordingly, the ICFO Board recommended the following policy proposal to the international membership at an Annual General Membership Meeting. The membership approved the policy statement for publication to the major international NGOs and consultants and experts in the public benefit sector for comment and advice.

Policy Proposal

The International Committee on Fundraising Organizations (ICFO) may assess organizational headquarters of organizations acting internationally for compliance with ICFO International Standards under the following conditions:

The national affiliates of such international organization are accredited by member organizations in the countries in which they operate.

If one of the national affiliates of the organization seeking ICFO assessment and certification is not accredited or otherwise certified by an ICFO member organization in which the affiliate is located and operating in that country, the reason for non-certification must be clearly known to ICFO. The members of ICFO (not just the ICFO Board members) must authorize, with a majority of two-thirds vote, the ICFO Board to proceed with the assessment.

If the national affiliate entity of the organization to be assessed is not accredited by the ICFO member in its country, such ICFO member may veto an ICFO decision to assess the international headquarters and thereby prevent ICFO from proceeding with such assessment until the matter regarding the affiliate member has been resolved to the satisfaction of all ICFO members.

Berlin, February 2009

In light of ICFO’s consideration of adopting this international assessment program, I invite comments, either directly to this post, or alternatively to me at my email address or to the Secretary General of ICFO at