“Thank you for all the great work that ECNL did this year to help the Montenegrin NGO sector. Although a year is a short timeframe, I believe that progress made by ECNL and CRNVO in 2005 has successfully laid the foundation for genuine improvements in the civil society sector in the future. Thank you once again. Hopefully, we will remain in contact as friends and colleagues in the future.” ORT/Montenegro
From February 2005-December 2005, ECNL implemented an NGO law reform project in Montenegro, as part of the Montenegro Advocacy Program (MAP), led by ORT/Montenegro and funded by the U.S. Agency for International Development. ECNL focused on the following activities during the project year:
Amendments to the NGO Law
The current Law on Non-Governmental Organizations (NGO Law) in Montenegro does not provide clear guidelines on the extent and scope of legitimate economic activities NGOs can pursue. As a result, hundreds of businesses and cafes are registered and operating illegitimately as NGOs, thus detracting from the good work of the smaller number of genuine NGOs.
Indeed, the vague and overbroad legal provisions regulating the economic activity of NGOs, and the interpretation of those provisions by the registration authority and oversight agencies, were identified by all key stakeholders (government officials and NGOs alike) as the most critical NGO legal framework issue.
During the project, ECNL co-hosted three roundtables on the topic in Podgorica. These roundtables served several purposes relating to the amendments to the NGO Law.
- First, they educated participants on the complex regulatory issues surrounding NGOs’ economic activities and contrasted the Montenegrin regulatory framework with regional and international good regulatory practices.
- Second, they provided useful and direct input in preparing amendments to the NGO Law.
- Third, they provided a forum to reconcile different views with regard to the precise scope and content of the proposed amendments, and helped create consensus and broad-based support for the final version of the proposed amendments.
The result of the roundtables and NGO/government discussions was consensus around a recommendation to set a monetary or percentage threshold relating to income generated from economic activity, up to which an NGO would be permitted to engage directly in economic activity, and above which an NGO would have to establish a separate company to engage in those activities. The recommended threshold was the subject of some controversy, with the NGO community and the Ministry of Finance backing different approaches. ECNL advised the Ministry of Finance to adopt a compromise solution, which would set the monetary threshold between 8,000 euro and 4,000 euro and set the percentage threshold between 30% and 20%.
ECNL worked with local partners to prepare revised amendments to the NGO Law, reflecting this consensus agreement. These amendments were submitted to the Ministry of Finance by the end of December. It is now up to the Ministry – and to the Center for the Development of Non-Governmental Organizations – to champion the proposed amendments and ensure that they are submitted to Parliament. Should the proposed amendments be enacted, the impact will be profound for Montenegro. The Ministry has agreed to a compromised solution that favors legitimate NGOs with a diversified income portfolio and discourages the use of the NGO organizational form by would-be businesses.
The revised law will be instrumental in rooting out NGO abuse of economic activity, and in improving the overall reputation and image of the NGO sector in Montenegro. Montenegro’s overly vague regulatory framework will be tightened to better guard against the dangers of abuse. An improved NGO public image will, in turn, help legitimate NGOs to attract resources to support their activities. Moreover, the process of the NGO law reform, demonstrating the benefits of dialogue between the sectors, will also improve relations between the sectors and hopefully lead to improved dialogue when problems and issues arise in the future.
Financial Supervision of NGOs
On December 22-23, 2005, the Center for the Development of Non-Governmental Organizations and ECNL hosted a two-day seminar on the tax and accounting framework for NGOs in Montenegro. The seminar primarily sought to clarify outstanding issues, which have arisen in the implementation of tax and financial laws as they impact on NGOs, and to harmonize the practice of supervising authorities relating to those issues. Representatives of various governmental agencies (the tax office, labor inspectorate, tourist inspection, etc.) as well as NGOs participated in the seminar.
The seminar resulted in clarifying a number of critical issues, including:
- the tax status of donations made to support NGOs’ economic activities, rather than to support their basic statutory purposes;
- the notion of “profit” in the Corporate Income Tax Law as it impacts on NGOs;
- the right to a rebate under the VAT Law;
- the legal implications for NGOs that have engaged volunteers in their activities, given that currently volunteers are not recognized in Montenegro;
- the accounting rules for donations that are carried over to a new fiscal year;
- the accounting rules that apply to branch offices of foreign NGOs;
- whether an NGO may have multiple bank accounts;
- under what circumstances an NGO must file a tax return;
- what is the procedure for custom clearance of imported humanitarian goods;
- may an NGO which is not registered under the VAT Law claim a rebate for imported humanitarian goods, etc.
To amplify the impact of the seminar, and to reach those NGOs that could not attend, the Center for the Development of NGOs plans to prepare and publish a brochure on NGO tax and accounting rules.
ECNL would like to express its gratitude to ORT/Montenegro and to USAID/Montenegro for their support and guidance during the project year. ECNL would also like to thank the Center for the Development of Non-Governmental Organizations for its professionalism and long- term partnership.