Fundraising is a fast-evolving area affected by multiple laws and policies, including laws on CSOs, public collection, tax, accounting, data protection, games of chance, AML/CFT, telecommunications, payments systems, and many more. Besides legislation, the civil society and fundraising sector formulates its own standards in the form of self- and co-regulation. Monitoring legislation and policies can help identify gaps, negative trends and best practices to drive positive change.
By the end of this package, you will:
- Understand why monitoring the regulatory environment of fundraising is important;
- Understand how you can map the legal and policy environments in your country and identify good practices as well as gaps or trends that need to be addressed;
- Be empowered to identify actions based on the mapping.
The regulation of philanthropy and fundraising falls on a spectrum ranging from incentivising giving to controlling fundraising. Around 62% of the 91 countries covered in the 2022 Global Philanthropy Environment Index have a favourable environment for philanthropy; and 38% a restrictive philanthropic environment. This highlights the need to monitor legislation and work with governments and other stakeholders to make sure that fundraising is safeguarded by fundamental principles to ensure CSOs’ access to resources and maintain public trust.
CSOs can use a variety of fundraising methods to collect donations. All these methods are affected by a complex matrix of legislation, self/co-regulation and practices that are fast-evolving and often hard to locate and identify.
Through monitoring you can better understand and navigate this web of regulations and contribute to a better regulatory environment. You will be able to:
- Identify the relevant laws and practices;
- Keep up with regulatory trends and changes and raise the awareness of your colleagues and peers on these;
- Identify good practices that can serve as inspiration for others;
- Reveal gaps or issues that need to be addressed; and
- Initiate discussions and formulate recommendations on how to improve the environment.
Monitoring should be conducted in 3 areas:
- Statutory regulation: What laws and regulations are adopted by the government.
- Self- and co-regulation: Self-regulation refers to sector-wide standards or codes of practices developed by CSOs and other entities within the philanthropic sector that provide guidance on how fundraising shall be performed. Co-regulation is self-regulation combined with a statutory element (regulation by the government) and with the clear involvement of a public authority or public oversight.
- Implementation practice: How regulations and policies are actually applied by the sector, the government and other stakeholders, such as banks, media and private companies.
You can map the local environment for philanthropy by answering the questions in ECNL’s monitoring guide, for example on:
Fundamental guarantees
- Does the legislation provide basic guarantees for CSOs to access resources?
As we have seen in the introduction module, the right to access and use resources is an inherent part of the right to freedom of association. For example, the 2019 Kosovar NGO Law includes specific provisions to guarantee the right to seek, receive and use resources.
- Is anonymous donation allowed / not inhibited by law?
Privacy is an important condition for people to enjoy their right to freedom of association. States should respect the right to privacy of CSOs and their donors. However, anonymous donations are prohibited in some countries, including in Azerbaijan. Information about donors must be submitted to the Ministry of Finance. This considerably hampers CSOs’ fundraising ability: donors may refrain from donating to sensitive issues and from an administrative perspective it may be too time-consuming to collect small donations from a large number of contributors.
- Are CSOs that receive international funding stigmatised, labeled as foreign agents, or attacked in public media, by the government or by third parties?
Stigmatisation as foreign agents violates freedom of association and has a chilling effect on CSOs’ activities, especially those that work on human rights and good governance. For example, in 2023, the Hungarian government adopted a foreign agent law, which established an Office for the Defense of Sovereignty with a broad mandate to investigate activities that are carried out in the interest of foreign states, organisations of individuals (including through foreign funding) and aim to influence decision-making processes, democratic debates and elections.
- Do state institutions actively engage CSOs and other affected stakeholders when developing primary and secondary legislation that affects fundraising activities?
In Finland, the development of the new Fundraising Act (entered into force on 1 March 2020) was one of the pilot projects on how to support law drafters on consultation, stakeholder cooperation and engagement. The Law Drafting Development Group appointed by the Ministry of Interior included the representatives of CSOs among various other authorities. During the development of the new legislation, the Ministry gained a far clearer insight into fundraising in Finland by offering CSOs and stakeholders the opportunity to participate in numerous workshops and consultation events both in-person and online. The preparation work leading to the reformed Act has been praised by Finnish charities, the parliament and legislators.
Fundraising methods
- SMS donations: Is there a centralised system to obtain a designated number or do CSOs need to sign a separate contract with a telecommunication company? Are there any intermediary organisations that facilitate the access of CSOs to designated donation numbers?
SMS donation can be a great method to raise a large number of small donations, but it can be complicated to set it up, for example if separate contracts need to be signed with each telecom provider. To make this process easier, the Non-profit Information and Training Center (NIOK) Foundation in Hungary facilitates access to designated donation numbers.
- Crowdfunding: Are there any regulations on donation-based crowdfunding? What policies do financial service providers have in place for crowdfunding platforms?
Donation-based crowdfunding is different from crowdfunding, which is aimed at funding business initiatives, thus providing an alternative to lending from financial institutions. In Moldova, banks apply the same conditions to donation-based crowdfunding platforms as commercial enterprises, which means that crowdfunding platforms have to navigate requirements that are not apt to their nature.
- Face-to-face and door-to-door fundraising: do CSOs have self-regulatory standards for these methods?
It is important that face-to-face fundraising is conducted in a respectful and honest manner. If fundraisers are impolite, mislead or put pressure on potential donors, this harms the public image of CSOs. Self-regulatory standards can provide further guidance and good practices for fundraisers how to use this or other fundraising methods. For example, in the UK, the Code of Fundraising Practice sets the standards that apply to fundraising carried out by CSOs. This Code includes a section dedicated to the collection of donations and property on the street, door-to-door or on private sites.
Financial services and payments
- Do CSOs face any challenges with opening and maintaining bank accounts or processing the transfer of donations?
Increasingly, CSOs face challenges accessing financial services, often related to AML/CFT legislation, for example related to opening a bank account, client verification procedures, making and receiving transfers, especially cross-borders. This is also the case in the Netherlands, where CSOs are impacted by banks’ de-risking measures. CSOs’ advocacy efforts have led to a multistakeholder dialogue and the convening of a working group consisting of representatives from the government, banks and CSOs. This group jointly developed standards for banks’ engagements with the CSO sector, following a risk-based approach.
- Which laws/regulations govern donations in virtual currencies and are they recognised as an official payment system?
Virtual currencies are becoming more popular, especially for bigger organisations in some countries or for CSOs working in restrictive contexts. Therefore, it is important to check whether laws and regulations govern donations in virtual currencies. For example, the new Finnish Fundraising Act acknowledges the possibility of raising virtual currency. In Moldova, transactions in virtual currencies are prohibited since July 2023.
- Which payment gateways/payment service providers can be used to process the payments?
CSOs must make use of payment service providers, for example to process donations through their website. Paypal is not functioning in some countries (e.g. in Kosovo), limiting options to collect contributions through a donation button on the website.
Taxation
- Are there any tax benefits in place for corporate and individual donors (such as tax credit or tax deduction)?
Tax benefits can incentivise giving if they are sufficiently attractive. For example, in Romania companies that grant sponsorships to CSOs under the Romanian Sponsorship Law can deduct these sponsorships from the profit tax up to 20% of the profit tax due (to a maximum of 0.75% of their annual turnover for companies with an annual turnover of more than 1 million). Research shows that steps taken by the government to extent this grant facility in 2018-2019 have had significant impact on Romanian CSOs. Corporate sponsorship is now the main source of income for 20% of CSOs (up from 7% in 2015). The number of companies that make use of this facility increased from 34,811 in 2015 to 88,544 in 2022. The total declared expenses for sponsorship, patronage and private scholarships increased from 140,000 EUR in 2015 to 495,000 EUR in 2022.
- What is the VAT treatment of the supply of in-kind donations (such as food donations)?
Companies have an obligation to pay VAT on the value of the goods or services they sell, and the opportunity to retain the VAT paid on the procurement of goods and services. It is important to review the tax provisions for donations to determine tax consequences. For example, in-kind donations provided by a VAT-registered company are subject to VAT in Georgia, meaning that the cost of donations for companies are higher than only the cost of the goods or services.
- Is the sale of objects by CSOs considered as charitable or income from economic activity and therefore subject to any tax?
In most countries, CSOs’ income is exempt from income tax, meaning that 100% of donations made to CSOs can be utilised by them to cover their cost. This may not be the case for income from economic activity.nIn Moldova, the Tax Code does provide that such income is tax exempt if the economic activity is included in the organisation’s statute and the income is used for the statutory purposes of the organisation. While the tax exemption is a good practice, the requirement that the economic activity needs to be included in the organisation’s statute creates a level of legal uncertainty, as CSOs are not sure at what level of detail it needs to be included.
This is just a sample to give you an idea of the questions that are addressed in ECNL’s monitoring guide. Other topics covered include legacies, lotteries, social advertisement, registration, transparency and accountability.
It is important to keep in mind that not all issues need to be regulated by the government; regulation might not be necessary when fundraising can take place without any barriers.
If you want to assess the environment for fundraising, here are some steps to take:
In most countries, these can be accessed online in relevant government sites (e.g. dedicated portals for legislation, parliamentary website, websites of specific Ministries). Make sure you have the most recent versions, as they might have changed since their adoption. Be aware that fundraising is a multilayered matrix of regulations and practices in various fields that are complex by themselves (e.g., payment systems, telecommunication, etc.)
Relevant publications may be reports or articles on civil society and civic space in your country. Data showing the number of CSOs or providing information on income sources may also be helpful. If necessary, submit access to information requests to the state authorities to collect these.
Stakeholders, including CSOs, governmental bodies, donors, companies or media outlets can provide valuable input on the implementation of policies, practical challenges and good practices.
Analysis of all information gathered will help you identify opportunities for action and challenges to address.
Focus on how problems can be resolved and be aware of the risk that overregulation can create new problems. Some topics may be more suitable for self-regulation by the sector (as opposed to statutory regulation) as CSOs have more control over these standards and they can help enhance public trust.
Key stakeholders (notably CSOs) can provide support to check factual findings, test and prioritise your recommendations.
When your findings and recommendations have been validated by these key stakeholders (especially CSOs), publish and disseminate it widely (or as appropriate in your local context).
Monitoring is an ongoing process.
The regulatory environment is continuously evolving. You can stay up to date with new developments, by following announcements of legislative authorities, monitoring the parliamentary agenda, subscribing to relevant newsletters, participating in relevant events and staying in contact with key informants.
When the assessment has been completed, you have a good understanding of the environment for philanthropy. Now it is time to follow up on your findings and advocate for better regulation or enhanced implementation of policies.
- Build a coalition to join forces for better results; mobilise like-minded CSOs who are committed to push for a better regulatory environment for fundraising. Together, you have a stronger voice.
- Identify your priorities and objectives based on the findings of the monitoring.
- Identify key stakeholders. Who are local champions that can inspire others? Who are potential allies? Who are the actors that can advance your issues but need to be convinced?
- Craft your message carefully for each stakeholder, outlining gains and benefits, keeping their interests in mind.
- Design your advocacy strategies. How will you engage with your targets? How will you mobilise a critical mass to support your activities? Will you use a (e.g. through a social media campaign or a petition?
- If you want to change a law or provide input on a draft law, make sure you understand the legislative procedure so you know when and how you can influence the process and provide input (e.g. through a public consultation, policy makers and members of parliament).
Testimonials
Philanthropy has the power to drive sustainable development and create transformative change. In contexts where philanthropy is not deeply rooted and mainstreamed into the social milieu, enabling policies are crucial for unleashing its potential. Effective monitoring framework is essential to guide the policies, best practice and build the capacity of the stakeholders. Congratulations to ECNL for providing comprehensive tools and learning resources that empower local CSOs, donors, and communities. Your efforts are crucial in setting the base and achieving the true impact of philanthropy.
Find some examples of CSOs mapping issues and providing recommendations on how to improve the environment for philanthropy in their countries. Click on the countries to learn more!
