1. Direct State Funding for NGOs
Luben Panov
Bulgarian Center for Not-for-Profit Law

2. Why should NGOs be supported?
considered closer to the people’s needs and more trusted in their social activity
provide services that the market cannot
they are more efficient and serve the public good

3. Main types of indirect support
Exemption from income tax for the nonprofit activity
Exemption from income tax for business activities
Tax benefits for donors – companies and individuals
1 % mechanism
Exemptions for volunteers
Free use of property
Exemption from VAT, customs duties, etc.

4. Main types of direct state funding
Direct budget subsidies for specific organizations (most often representative organizations of people with disabilities) - resembles institutional grants
Budget grants after a competition
Contracting - for provision of services
Other mechanisms – 1 % mechanism, lottery, vouchers

5. The international perspective
Sources of funding:
34 % - from the state (26 %);
12 % - donation (31 %);
53 % - from fees (42 %).
1,3 trillion USD is the GDP of the NGO sector;
If it were a separate country - №7 in the world – before Italy, Spain, Canada and Russia.

6. Sources of income (Bulgaria)
TYPES AND SIGNIFICANCE OF THE SOURCES OF FUNDING
Distribution of income by source
% of income
International donors
40%
Economic activity
17%
Membership fee
11%
Subsidy from the state budget 8%
Donations from companies
Bulgarian non-governmental organizations 6%
Donations from individuals
Charitable events 3%
Subsidy from the local budget 2%

7. Budget subsidies 2008 (Bulgaria)
4,333 mln. EUR;
Direct subsidies for 21 organizations;
A competition for EUR;
Criteria for evaluation of the proposals:
1. In line with the public benefit areas under the NGO Law;
2. Effectiveness of the proposed activities with regard to the expected results and influence over the target groups;
3. Sustainability of results;
4. Effectiveness of the expenses;
5. Capacity of the candidate.

8. Contracting
The state delegates the provision of services to private entities
It keeps its role in:
Funding;
Control of the spending;
Control of the quality of the services provided.

9. What does contracting cover?
Public services
Through tender, negotiations or other (e.g. vouchers)
Contracting vs. Grants – scope of work is given
Contracting vs. Procurement – quality, not price

10. 1% mechanism Taxpayers designate 1 or 2 % of their income
Hungary (1+1%), Slovakia (2%), Lithuania (2%), Poland (1%), Romania (2%)
Not a donation but another mechanism for support
Recipients are usually NGOs and public institutions

11. Separate funding entities
Foundation Investment Fund (Czech Republic)
National Civil Fund (Hungary)
National Foundation for Civil Society Development (Croatia)

12. Issues to be considered
Clear and transparent mechanism (de-politicized)
Activity or institutional support
Good monitoring
Centralized or decentralized system
Practical implementation
Dependence (independence) of recipients from the state

13. Bulgarian Center for Not-for-Profit Law (BCNL)
THANK YOU!
Luben Panov
Bulgarian Center for Not-for-Profit Law (BCNL)