Sustainable Model of Financing NGOs (LV0023)

Status quo: According to the Enterprise Register data, 14,704 organisations were registered in Latvia as of August 2011. However, a comparatively small part of the country's population are members of those organisations, and a downward trend has been observed. A large part of NGOs are working in the areas of sports, culture and recreation (39%), while a considerably lower percentage are active in human rights protection, combating corruption, addressing ecological problems, and similar sectors.
There is a tendency for organisations to be linguistically separated – Latvian and Russian-speaking. Latvia's NGOs remain financially and administratively weak, are far more often being set up in Riga than in other regions of the country, and have a low number of members. Nevertheless, under the socio-economic crisis, it was NGOs that provided services in the social sector and in the field of interest education, where the public administration budget was limited.
At the same time, civil society organisations are not involved in public policy making to their full capacity, which undermines trust in public administration. Main objective is to enhance the legal and financial framework for increasing the institutional capacity of associations, quality participation of NGOs in decision making, strengthening them as social partners, promoting the delegation of public functions, where it is possible, to associations and foundations, especially in matters of civic education.

6. Establish a sustainable model of financing NGOs

Commitment Text:

Status quo: According to the Enterprise Register data, 14,704 organizations were registered in Latvia as of August 2011. However, a comparatively small part of the country's population are members of those organizations, and a downward trend has been observed. A large part of NGOs are working in the areas of sports, culture and recreation (39%), while a considerably lower percentage are active in human rights protection, combating corruption, addressing ecological problems, and similar sectors. There is a tendency for organizations to be linguistically separated – Latvian and Russian-speaking. Latvia's NGOs remain financially and administratively weak, are far more often being set up in Riga than in other regions of the country, and have a low number of members. Nevertheless, under the socio-economic crisis, it was NGOs that provided services in the social sector and in the field of interest education, where the public administration budget was limited. At the same time, civil society organizations are not involved in public policy making to their full capacity, which undermines trust in public administration.

Main objective is to enhance the legal and financial framework for increasing the institutional capacity of associations, quality participation of NGOs in decision making, strengthening them as social partners, promoting the delegation of public functions, where it is possible, to associations and foundations, especially in matters of civic education.

Responsible institution: Ministry of Culture

Supporting institution(s): NA

Start date: not specified....... End date: not specified

Context and Objectives

During development of the action plan in June 2014, ^{See Section 2.1 on the development of the action plan.}  NGOs submitted a proposal to find a sustainable way to finance Latvian NGOs by the end of 2015. They argued that their financing depended on international support from, for example, the European Economic Area and Norway Grants and the European Social Fund, which they claimed was unsustainable. NGOs insisted on the creation of a government-financed fund. The idea of a national NGO fund was first proposed by policy researchers and NGOs in 2004, ^{Policy analysis portal, http://providus.lv/article_files/1451/original/PSALsitan.pdf?1331627245.}  when it was approved ^{Official Law magazine, https://www.vestnesis.lv/ta/id/103070.}  by the government in a long-term policy plan for civil society development. Since then, NGOs have lobbied for such a fund and insisted that it be included in the current action plan.

The Ministry of Culture drafted a vague commitment to strengthen the legal and financial framework and institutional capacity of NGOs. The commitment aims to increase the number of NGOs working on public policies and to reduce their linguistic divide, geographic centralization, and administrative and financial weaknesses. This responds to one of the recommendations from the previous IRM report — the allocation of domestic financial resources to build NGO capacity.

The wording of the commitment is not specific since no concrete deliverable is proposed. It identifies the targets of capacity-building (i.e., NGOs, foundations, and associations) and indicates a possible focus (civic education), but does not specify any activities, such as the establishment of a fund. In fact, it is written in such a way as to include any government policies or activities that enhance NGO participation in decision-making. This is why it is not possible to assign a moderate potential impact. The government’s focus on establishing an NGO fund could have a significant impact on civic participation in Latvia. National funding for NGOs is a major step forward and has been a priority of Latvian NGOs since 2004. However, scarce financial resources, overly rigid procedures, and the unsustainability of financial flows could reduce the effect of the fund.

Completion

There is substantial completion of the commitment in light of the government’s creation of the fund for NGOs. ^{Home page of the Cabinet of Ministers, http://www.mk.gov.lv/sites/default/files/attachments/ogp_2_plana_vidusposma_zinojums_07.10.2016.pdf.}  

The government had committed itself to a national NGO fund by 2016 and created a working group that drafted a concept note entitled, “On the Creation of a Government-funded NGO Fund.” ^{Official Law portal, http://likumi.lv/doc.php?id=278602.}  The Ministry of Culture held public consultations on the concept note on 21 October 2015 and agreed on the new model. The model earmarks funds as a special line item in the state budget and assigns fund management to the Society Integration Fund, a public foundation with expertise in supporting NGO programs and projects. The Cabinet of Ministers approved the concept note and allocated 400,000 euros for project implementation in 2016, though it did not earmark a separate annual budget line. ^{Home page of the Cabinet of Ministers, http://tap.mk.gov.lv/lv/mk/tap/?dateFrom=2015-09-28&dateTo=2016-09-27&text=Par+valsts+finans%C4%93ta+&org=0&area=0&type=0.}

Early Results (if any)

The Society Integration Fund first called for projects on 3 March 2016. It would fund three main areas: strengthening NGO core activities, supporting civil society development activities, and strengthening NGO advocacy efforts. The first call resulted in 261 project proposals, ^{Home page of Latvian Society Integration Fund, http://www.sif.gov.lv/index.php?option=com_content&view=article&id=9965%3ASogad-tiks-istenoti-66-projekti-programma-%E2%80%9CNVO-fonds%E2%80%9D&catid=14%3AJaunumi&Itemid=186&lang=lv.}  66 of which were approved (35 for strengthening NGO core activities, 22 for civil society development activities, and nine for strengthening advocacy efforts). ^{Home page of Latvian Society Integration Fund, http://www.sif.gov.lv/index.php?option=com_content&view=article&id=9913&Itemid=127&lang=lv#projekti.}  Other organisations are expected to participate in policy development processes, such as working groups, supervisory committees, and policy monitoring, in their respective areas.

NGO representatives who were interviewed ^{Interviews with Iveta Kažoka, Policy Centre “Providus,” 22 August 2016; Jānis Volberts, TI local Chapter “Delna,” 22 August 2016; Liene Gātere, TI local Chapter “Delna,” 22 August 2016; and Kristīne Zonberga, Civic Alliance Latvia, 23 August 2016.}  were generally satisfied with the establishment of the fund, the inclusive development process, and the opportunity to participate in the fund’s strategy developing committee. However, they also pointed out several shortcomings. One is that more resources should be budgeted to meet the demand. According to those interviewed, the National Development Plan earmarked EUR 700,000 annually for the Fund, ^{Official Law portal, http://likumi.lv/doc.php?id=253919.}  but the government so far has earmarked only EUR 400,000 for 2017 and 2018.

Another issue is annual budgeting. The fund supports only programs and projects that can be implemented within five months. The call for projects was announced in March 2016 and, within a month, NGOs submitted proposals. Results were published on 1 June 2016. However, projects had to be implemented by 31 October 2016 for the Foundation to prepare accounts, release final payments, and submit reports to the government to release funds for the next year. This bureaucratic procedure, subject to the government budget process, does not allow for sustainable long-term policy monitoring efforts and, in some cases, can undermine NGOs that do advocacy work and depend on domestic financial resources. These issues were discussed at a meeting of the Memorandum Council on 29 June 2016. NGOs have asked the implementing agency to begin the next call for projects earlier. ^{Home page of the Cabinet of Ministers, http://www.mk.gov.lv/lv/content/nevalstisko-organizaciju-un-ministru-kabineta-sadarbibas-memoranda-istenosanas-padomes-201-1.}  

Next Steps

The IRM researcher suggests that the commitment be carried forward to the next action plan and focus on the quality of the NGO financing model. The following issues must be resolved moving forward:

• Allocating a greater proportion of the national budget to the fund to meet the demand for wider public involvement in decision-making;
• Securing sustainable financial flows for NGOs throughout the year, focusing on long-term programs;
• Securing national budget financing even if NGO programs receive foreign funds; and
• Reducing the administrative burdens on NGOs receiving financial support.

The IRM researcher also suggests monitoring other govermental sources of potential NGO income, such as new EU fund programs, and monitoring legal frameworks to prevent the reduction of existing indirect support to NGOs (such as tax breaks or existing regulations of economic activities).

Commitment 6. NGO Financing

Commitment Text:

Establish a sustainable model of financing NGOs

According to the Enterprise Register data, 14,704 non-governmental organisations were registered in Latvia as of August 2011. ^{This number increased significantly since the publication of the action plan. As of January 2016, there were 20,662 non-governmental organisations registered in Latvia.} However, a comparatively small part of the country's population is members of those organisations, and a downward trend has been observed. A large part of NGOs are working in the areas of sports, culture and recreation (39%), while a considerably lower percentage are active in human rights protection, corruption combating, addressing ecological problems, and similar sectors. There is a tendency for non-governmental organisations to be linguistically separated—Latvian and Russian-speaking. Latvia's NGOs remain financially and administratively weak, are far more often being set up in Riga than in other regions of the country, and have a low number of members. Moreover, only a small part of organisations are financially sustainable. Nevertheless, under the socio-economic crisis, it was NGOs that provided services in the social sector and in the field of interest education, where the public administration budget was limited. At the same time, civil society organisations are not involved in public policy making to their full capacity, which undermines trust in public administration.

Main objective: To improve the legal and financial framework for increasing the institutional capacity of associations, quality participation of NGOs in decision making by strengthening them as social partners, as well as to promote the delegation of public functions, where appropriate and possible, to associations and foundations, especially in matters of civic education. ^{There are only minor textual differences in the commitment text of the original and updated versions of the action plan.}

Responsible Institution: Ministry of Culture

Supporting Institutions: Society Integration Fund, ministries

Start date: 2014..................... ...................... End date: 2016

Editorial Note: The commitment text above is drawn from the updated version of the action plan, published in October 2016 and available at http://bit.ly/2EK34dH. It has been shortened for brevity. The original version of the action plan is available at http://bit.ly/2ptZ0sq. To see the changes between the two versions, visit http://bit.ly/2FPvK4r.

Commitment Aim

The aim of the commitment is to bolster the legal and financial framework for strengthening the institutional capacity of NGOs. The goal is to increase the number of NGOs working on public policies and reduce their linguistic divide, geographic centralisation, and administrative and financial weaknesses. Although the commitment text was vague and did not include a concrete deliverable, the government in practise focused on establishing an NGO fund that could have a significant impact on civic participation in Latvia.

Status

Midterm: Substantial

In response to a consistent request from civil society organisations, the government established a fund for NGOs, ^{Cabinet of Ministers, Latvijas Otrais Nacionalais Ricibas Plans 01.07.2015–30.06.2017, http://www.mk.gov.lv/sites/default/files/attachments/ogp_2_plana_vidusposma_zinojums_07.10.2016.pdf.} hence the completion of the commitment was substantial at the midterm of the action plan. Specifically, the government committed itself to develop a national NGO fund by 2016 and created a working group that drafted a concept note titled “On the Creation of a Government-funded NGO Fund.” ^{“On the Conceptual Report ‘On the Establishment of a State Funded Non-governmental Organisation Fund,’” Legislation of the Republic of Latvia, http://likumi.lv/doc.php?id=278602.} The Ministry of Culture held public consultations on the concept note on 21 October 2015 and agreed on a proposal that earmarked funds as a special budget line in the state budget and assigned fund management to the Society Integration Foundation, a public foundation with expertise in supporting NGO programmes and projects. The Cabinet of Ministers approved the concept note and allocated 400,000 euros for project implementation in 2016, albeit without earmarking a separate annual budget line. ^{“Conceptual Report ‘On the Establishment of a State-Funded Non-governmental Organisations Foundation,’” Legislative Proposals, Draft Legislation of the Cabinet of Ministers of the Republic of Latvia, http://tap.mk.gov.lv/lv/mk/tap/?dateFrom=2015-09-28&dateTo=2016-09-27&text=Par+valsts+finans%C4%93ta+&org=0&area=0&type=.} For more information, see the 2015–2016 IRM midterm report. ^{Open Government Partnership, Independent Reporting Mechanism (IRM): Latvia Progress Report 2015–2016, https://www.opengovpartnership.org/wp-content/uploads/2001/01/Latvia_Progress-Report_2015-2017_for-public-comment_0.pdf.}

End of term: Complete

During the second year of implementation, the government approved annual financing of 400,000 euros for the NGO fund for 2017, 2018, and 2019. By early 2018, there was also funding for 2020. In this sense, there is modest, yet sustainable, financial support for NGOs in the national budget. Of 149 project proposals, 42 were supported by the national NGO fund in 2017. ^{“NGO Fund in 2017,” Society Integration Fund, http://www.sif.gov.lv/index.php?option=com_content&view=category&id=410&Itemid=127&lang=lv.}

The second year of implementation also brought changes to the fund’s planning process and schedule for programme implementation. NGOs can now submit project proposals in December and begin implementation in March or April, depending on the quality of their projects. In the case of capacity-building programmes, the government now allows use of funds for expenses starting in January. In other words, the implementation period was extended. ^{In 2016, NGOs had to implement their projects between June and October. The implementation period was effectively five months. For more details, see the Latvia midterm IRM report 2015–2016, http://bit.ly/2AJnG7a.} Another improvement is that the government now invites NGO experts to evaluate the projects. As a result, the evaluations are more professional and accurate, since the experts know the specifics of the NGO’s field of work. NGOs are also involved in the fund’s consultative board, and the Council of Memorandum monitors the fund’s operations.

In 2017, the Ministry of Culture also continued to support NGOs outside of Riga with funding from the national budget (having allocated 160,000 euros annually since 2014). ^{“NGO Support,” Ministry of Culture, https://www.km.gov.lv/lv/integracija-un-sabiedriba/pilsoniska-iesaistisanas/nvo-atbalsts.} This fund supports NGOs working in the areas of civil society development and national minorities. Regional NGO centres organise project competitions, distribute the funding, and offer technical support to NGOs implementing projects through cooperation agreements with the ministry.

Although the activities described above will continue, there are now operational and sustainable mechanisms for supporting NGOs. Therefore, the IRM researcher considers the commitment complete.

Did It Open Government?

Civic Participation: Marginal

National funding for NGOs is an important step forward, as it has been a priority of Latvian NGOs since 2004. Interviewed NGO representatives were generally satisfied with the establishment of the fund, the inclusive development process, and the opportunity to participate in the fund’s strategic development committee. ^{Interviews by IRM researcher: Iveta Kažoka (Policy Centre Providus), 22 August 2016; Jānis Volberts, (Transparency International local chapter, Delna), 22 August 2016; Liene Gātere (Transparency International local chapter, Delna), 22 August 2016; and Kristīne Zonberga (Civic Alliance Latvia), 23 August 2016.} So far, 66 projects were financed in 2016 and 42 in 2017. Nonetheless, given that there are more than 20,000 NGOs registered in Latvia, the new financial resources—400,000 euros annually (although the National Development Plan earmarked 700,000 euros)—are modest. NGOs have asked the Society Integration Foundation to look for private and foreign funding to increase the financing available. ^{“NVO Fonda Strategiskas Planosanas Komitejas Parstavju Rekomendacijas NVO Fonda Parvaldisanai un Ieviesanai,” Cabinet of Ministers, 25 October 2016, http://www.mk.gov.lv/sites/default/files/editor/1741.pdf.}

However, overly rigid procedures reduce the influence of the fund. For example, the new funds are tied to specific projects and are not meant for long-term capacity building that could be more sustainable. There is also a high administrative burden imposed on NGOs that receive funds, namely through onerous reporting requirements for the amount of funding available, including mandatory reporting on each hour spent working for a project. NGOs prepared a list of recommendations on these issues, ^Ibid. submitted the list to the foundation, and discussed the recommendations at the Council of Memorandum on 30 November 2016 ^{“Agenda for the 30 November 2016 Sitting,” Cabinet of Ministers, http://www.mk.gov.lv/lv/content/2016gada-30novembra-sedes-darba-kartiba.} and 1 March 2017. ^{“Agenda of the Sitting of 1 March 2017,” Cabinet of Ministers, http://www.mk.gov.lv/lv/content/2017gada-1marta-sedes-darba-kartiba.} However, the Society Integration Foundation has so far refused to reduce the administrative requirements.

The Ministry of Culture’s support programme—with 160,000 euros in annual funds—is also an encouraging means of support for NGOs, but the funding goes to specific activities and does not support the sustainability of organisations. Additionally, the programme predates the start of this second action plan.

Given that the funding has been both modest and mostly directed at specific projects rather than underlying institutional capacities, the IRM researcher assesses the commitment to be a marginal, yet important, step toward more significant government support for NGOs and greater civic participation.

It is important to keep in mind that the NGO fund is only one of several government-financed programmes for achieving the commitment’s broader goal of integrating society. For example, the government also supports a programme for diaspora children and NGOs, and a programme for learning Latvian and solving demographic issues. ^{“SIF Administered Programs,” Society Integration Fund, http://www.sif.gov.lv/index.php?option=com_content&view=article&id=238%3ASabiedribas-integracijas-fonda-administretas-programmas&catid=2%3Afonds&Itemid=11&lang=lv.} Indicators to measure the success of the NGO fund include increases in the rate of participation in public life by citizens, volunteering of young people, cooperation among NGOs, NGO commenting on draft laws, and registered NGOs. Based on these indicators, the Society Integration Foundation plans to evaluate the impact of the government’s projects by the end of 2018. ^{“State Budget Program for 2002–2017,” Society Integration Fund, http://www.sif.gov.lv/index.php?option=com_content&view=section&id=13&Itemid=127&lang=lv.}

Carried Forward?

As in the previous midterm report, the IRM researcher recommends that the commitment be carried forward to focus on the quality of the NGO financing model. The following actions need to be addressed moving forward: allocating a greater proportion of the national budget to the fund, to meet the demand for wider public involvement in decision making; securing sustainable financial flows for NGOs throughout the year by focusing on long-term programmes; securing national budget financing even if NGO programmes receive foreign funds; and reducing the administrative burdens on NGOs receiving financial support.

The IRM researcher also suggests monitoring other govermental sources of potential NGO income, such as new European Union (EU) funding programmes, and monitoring legal frameworks to prevent the reduction of existing indirect support to NGOs (such as through tax breaks or existing regulations of economic activities). In practise, all of these monitoring duties are assumed by the Council of Memorandum, which is not the most appropriate forum for this task.

The third action plan does not include a stand-alone commitment on a sustainable model for financing NGOs. Nonetheless, as part of the commitment on improving the role of NGOs in policy development, the government does commit to prioritising government funding for advocacy activities.