Sign our letter to Barroso

29 April 2010

José Manuel Barroso, President of the European Commission
Brussels, Belgium

Dear Mr President,

RE: Consultation report on the second triennial review of the European financial regulation

Civil society has welcomed the public consultation on the review of the European financial regulation run by the European Commission last year.

However, we are concerned that the consultation report neither clarifies nor justifies how the Commission plans to use the results, as is requested by the general principles and minimum standards for consultation of interested parties (COMM (2002)277), providing that detailed feedback is due to respondants.

The European Union's support for civil society is vital, both as a higher-level defensor where this is needed, and as an important source of funding in the EU and the rest of world.

Over the years, complaints have grown about the financial regulation for not taking the needs of civil society into account and undermining financial sustainability of organisations and delivery of projects.

Working in partnership with the European Active Citizenship Programme, a civil society working group, gathering some of the most important Euroepan networks, has been set up to review the financial regulation and identify areas of improvement.

The working group reacted (a copy of the full text is submitted here) to the consultation and identified four priorities:

Non-profit rule:
The rule fails to acknowledge the fundamental nature of civil society organizations set up for the public good, without shareholders and profit sharing. It essentially prevents CSOs from building reserves, developing new sources of income, and safeguarding financial sustainability. Many member states do not have such a rule, which leads us to believe it could be abolished.
Match-funding and in-kind contributions:
Civil society organizations bear all the risks when committed match-funding (i.e.co-funding) doesn't materialize; a situation which happened frequently last year because of changing economic conditions. Moreover, civil society organizations are good at leveraging resources such as volunteering, sponsorship in kind and pro bono. Decreasing the level of match-funding and allowing sponsorship in-kind and volunteer time as in-kind match-funding (in accordance withArticle 56 Paragraph 2 sub paras (a) (b) and (c) of EC Regulation 1083/2006 dated 11 July 2006) would both encourage innovation and acknowledge the unique value provided by citizens and still untapped by the EU.
Lump sums/flat rates and contribution to indirect costs:
simplifications are welcomed, but civil society organizations bear costs like any other organization. These market-conformed costs should be recognized. The ceiling of 7% for indirect costs is not realistic for even the most efficient for-profit corporations. The costs should be related to outputs, promoting a culture of social investment and social impact over and above financial accountability.
Bank guarantee:
This is not an appropriate instrument to guarantee the financial capability of a civil society organization applying for a grant because the organization wouldn't apply for a grant if it could provide guarantees to receive a loan from a bank. As a result this is discriminatory in favor of large well-funded organizations. A register based on track record would be a more effective system to safeguard tax-payers money.

Knowing your commitment to promoting a lively European civil society, we very much rely on you for these recommendations to be duly taken into account, and, in the event that this would not be the case, that proper explanation will be given by the Commission when issuing its proposal.

Yours sincerely,

AdEd Knowledge Company LLP (UK)

Agora Central Europe (Czech Republic)

Akademie für Ehrenamtlichkeit Deutschland (Germany)

ANT Foundation (Italy)

Association of Chief Executives of Voluntary Organisations - ACEVO (UK)

BTCV (UK)

CEJI - A Jewish Contribution to an Inclusive Europe (Belgium)

Central and Eastern European Citizens Network (Slovakia)

Centre des Jeunes Dirigeants de l'Economie Sociale - CJDES (France)

Centre for Civic Initiatives - CCI (Bosnia and Herzegovina)

Centre for Democracy and Human Rights - CEDEM (Montenegro)