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. Last Updated: 07/27/2016

Regulating the Work of NGOs

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In January a new federal law was signed into effect by President Vladimir Putin, introducing significant changes to the way nongovernmental organizations are regulated. When the legislation was introduced in the State Duma, the explanatory note attached to the bill stated that a mechanism of control needed to be established for NGOs. On the face of it, who could argue? Virtually every country regulates the work of NGOs. But Russian NGOs were puzzled. Why weren't the provisions of previous legislation considered sufficient?

The previous law "On Noncommercial Organizations" had a very important provision: The amount and nature of NGOs' income, their assets and property, their expenditures, their employees and salaries, as well as volunteer work could "not be a commercial secret." Simply put, every aspect of the functioning of NGOs was required by law to be public and accessible to literally everyone. At any time any organization -- state, private, or public -- or any individual could demand that an NGO present all its documentation. This meant that even a concerned or curious citizen could enter an NGO and ask to see the books, the charter or any other documents. And by law, the NGO had to comply.

Under the previous legislation, financial oversight was more stringent than with commercial organizations. In addition to standard accounting requirements, NGOs had to provide an annual report to the tax inspectorate on their activities to demonstrate that their funds were spent in accordance with their charter and grants or donations received. If not, the funds were to be considered "profits" and taxed at a rate of 24 percent.

Donors and grant-making organizations also followed up on the funds they provided to NGOs. In most cases the contract signed between the donor and the NGO required that the NGO provide a full accounting of expenditures, including copies of receipts. Most contracts included a standard article stating that if the funds were not spent as contractually stipulated the donor would have the right to inform the tax inspectorate. And if funds were not spent as stipulated in the contract, the tax inspectorate would levy a 24 percent tax on them.

In addition to those systems of control that applied to all NGOs, there were additional controls put on certain kinds of NGOs.

An NGO with the status of a foundation was required to publish a report annually on all of its assets and property -- not just real estate or office equipment, but literally everything the NGO had bought and used over the course of the year, down to boxes of paper clips and pencils. Foundations were required by law to be audited once a year, and the independent auditor's report had to be submitted to the tax inspectorate.

A charitable organization was required to submit an annual report on its activities that included information on the employees at the management level, the nature of its charitable activities and the results of its activities. And all charitable organizations had to provide full and complete access to their reports.

NGOs with the status of public associations were required to publish an annual report on how their assets were used and send it to the government department that registered it. The staff of the registration department had the right to attend all events and activities conducted by the association, investigate whether the activities were in keeping with the chartered goals, and demand financial and other documents from the NGO's managers. And restating provisions of other laws, this law stipulated that the prosecutor's office had oversight over public associations and that the tax inspectorate was responsible for ensuring that all funds were received and spent in accordance with the association's charter and the contractual stipulations of the funders.

Why weren't these "mechanisms of control" considered sufficient? Russian NGOs can't answer that question. Nor can we predict how the new law is going to be implemented. But we hope that our work will be allowed to continue.

Yana Leonova is deputy director of the NGO School, a Moscow-based foundation for the development of noncommercial organizations.