Appendix IV

NGO concerns on the Slovakian 'Third Sector Law'

Despite numerous calls of many NGOs in Slovakia for public discussion on the draft law and comments of Slovak and international institutions calling for substantial changes in the draft, there is still not enough will for cooperation from the Slovak government, according to the NGOs. Therefore they started the national Third Sector SOS campaign; initiated and coordinated by the Gremium of the Third Sector. This campaign is supported by hundreds of Slovakian NGOs.

For additional information on this important legislation you can contact the Center for Environmental Public Advocacy (CEPA)
Ponicka Huta 65, 976
33 Poniky
Slovakia
Phone/fax: +42 88 93324
E-mail: cepa@seps.bb.sanet.sk

"There are several parts in the Slovak draft of the foundation act which are of particular concern:

1. Two-level registration process. The founder needs to get approval for establishment of a foundation by the local authority of the state administration before registration of the foundation at a court. Moreover, the state authorities are provided with very broadly defined criteria for issuing the approval to a founder. This might lead to political abuses, e.g. in case of a foundation intending to support policies or reforms which the government is not interested in or where founders are known due to their critical positions to the government.

2. Broadly defined criteria for abolishment of foundations even in cases in which there are existing other legal sanctions (e.g. fines and penalties for violating e.g. rules in accounting or in timely setting of foundation's bodies, etc.) before abolishment of the organization.

3. The requirements for limited overhead for foundations. The current proposal is that any foundation with higher than 10% overhead could be abolished. While the non-profit community does not principally oppose the idea that foundations should direct most of their funds towards the fulfillment of the purposes that are of public benefit (rather than towards their own internal operations) such restriction in the current Slovak economic context seems to be both dangerous and unnecessary. This provision might well force the abolishment of the REC's office in Bratislava for example. It represents one of a series of excessive operating restrictions placed by the government and not the NGO community.

4. The basic assets. The draft requires minimum value of the basic assets of the foundations of 100,000 Sk (app. 2,700 ECU). This means that a foundation can not use this sum during its entire life under any circumstances. This provision might lead to liquidation of substantial part of small foundations in Slovakia.

5. Mandatory auditing of foundations exceeding 3 million Sk (app. 81,100 ECU) of their annual expenses (including e.g. grants provided to NGOs). This requirement and the overhead 10% limit restriction are in direct conflict with each other since the cost of the audit (often exceeding 50,000 Sk, i.e. 1,350 ECU) is part of the overhead costs. It should be pointed out that businesses do not have a mandatory audit until they have exceeded 40 million SK in one year.

6. Mandatory changes in the structure of foundations. The draft of the foundation act requires the rotation of the members of the board every 3 years. Since the law is to regulate private foundations such provision misses logical justification and might lead to destabilization of foundations. Similar restrictions are not required for corporations or other for-profit enterprises.

7. Entrepreneurial activities of the foundations are prohibited even in case they would serve to fulfillment of the goals of the foundations and its operation.

8. The draft includes several provisions that might be abused from political reasons, e.g. "a foundation must not engage of political parties and movements or support their activities" without any definition of what such engagement/support mean; the state authorities are to permanently control the operations of the foundations and are authorized to submit a proposal to court to abolish the foundations if they violate this act.

9. Other provisions that are both unnecessary and make the operations of the foundations more complicated. E.g. the requirement that all donations must be registered at the tax authorities with the indication of the person who provided them; the foundations must send their annual reports to the state authorities; the foundations must operate according to the annual budget approved by their boards by the end of March; etc.

Equally disturbing as the content of this legislation, is the process with which it has come forward. The details of the law were proposed without any discussion in public and despite the fact that such legislation was not included in the annual legislation plan of the Slovak government."