INGO Forum Meetings 2010

INGO Forum Meeting

Friday, November 26, 2010, 15:00 - 17:00 hours

Venue: VUFO-NGO Resource Centre meeting room

Read the presentation Health Partnership Group and 5-Year Health Plan by Ton van der Velden, Pathfinder International.

INGO Forum Meeting - Financial Situation and Next Steps

Thursday, 22 April 2010, 15:00 – 17:00 hours

Chairs:

Don Tuan Phong, PACCOM Director General (from 15:30)

Marko Lovrekovic, VUFO-NGO Resource Centre Managing Co-Director

Diana Measham, Country Representative, PACT Vietnam

Venue:

Meeting Room 3

La Thanh Hotel, 218 Doi Can, Hanoi

51 individuals from 46 organisations attended the meeting

1. Strategic discussion on the VUFO-NGO Resource Centre's future

Marko Lovrekovic briefed participants on the financial situation of the Centre, referring to a PowerPoint presentation. The main points were:

The NGO Resource Centre has been experiencing a financial deficit – to various degrees – since its establishment in 1993. The current ‘crisis’ came about when the bank balance of the Centre dropped to less than US$10,000 as a result of several different factors. However the ‘crisis’ is not really a crisis in the sense of being a one-off situation; it has only revealed an underlying problem of insufficient income from membership fees. These have only ever covered between 30% and 80% of operating expenses, depending on the year, but never the full cost of operations. Historically, these deficits were covered by donations from individual members and through financial support from multi-lateral donors.

The problem of a permanent budget deficit has been dealt with on a year-by-year basis, sometimes in the past by tapping into a surplus of funds, which had remained from an initial generous financial donation at the time the Centre was established. Additional income was secured sporadically from development agencies, through projects involving deliverables that have themselves always put a strain on the Centre’s limited human resources and have removed the focus away from the Centre’s core services – rather than enabling the staff to improve and to expand core activities for the benefit of all INGO members.

The short-term nature of this approach made a negative impact in 2009. This was worsened by the impact of the Global Financial Crisis on the Centre and all its members. Several other factors further influenced the financial health of the Centre, including: the long gap in leadership before the new director was hired; a decrease in the number of members; an abrupt reduction in financial support from external donors and supporters due to the Global Financial Crisis (e.g. the Ford Foundation closed its office in Vietnam); operating cost of the Centre increased. Together, these exhausted the remaining surplus of funds.

The only permanent solution for securing sustainable operations of the Centre was to introduce fees that will support 90% of the operating expenses - in contrast to the current 50% support - and this was decided by the Steering Committee on 15 April 2010. The remaining 10% will be covered by introducing charges for advertising on the Centre's website for non-members. Before the new membership fees structure comes into force and the new practice of charging non-members is implemented, there was an immediate need for ‘emergency funding’ that would bridge the gap during the ‘crisis’ - hence the request sent to all members for financial assistance. At the same time the Centre is continuing its fundraising efforts and working on recruiting new INGO members.

Members have responded generously to the request for emergency funding and so far have made grants totaling US$12,000.

However, beyond the short term, if the financial situation does not improve the following services will be at risk: maintenance of the NGO Resource Centre’s website (jobs, events, news, downloads); facilitation of 17 sectoral working groups; moderation of 28 mailing lists (with over 9,000 subscribers); publishing of the annual INGO Directory; finalisation of a new online INGO database; regular INGO Forum meetings; dialogues with the People’s Aid Coordinating Committee (PACCOM) regarding the policies and legislative issues that affect all INGOs operating in Vietnam; the library, several publications; representation at the Consultative Group meetings; participation in other development forums in Vietnam; connection with regional and global networks; and other ongoing support to over 100 INGO members.

Discussion, Questions and Answers:

Mr Phong from PACCOM said that since its inception the VUFO-NGO Resource Centre had been a crucial vehicle for INGOs and UN partners, collecting and sharing information and practices, linking government agencies with INGOs. PACCOM's position was that the Resource Centre should be maintained and supported, and that in future it may serve not only INGOs, but also government agencies, local NGOs and multilateral organisations. Suggestions from PACCOM were:

encouragement is needed from the Resource Centre and PACCOM for more INGOs to join. Currently 103 out of 700 active INGOs are members. PACCOM will share its list of all INGOs in Vietnam with the NGO Resource Centre, as it does every year;
In the past the NGO Resource Centre received extra core funding from some NGOs, and this needs to be encouraged. PACCOM will encourage NGOs to provide extra funding;
PACCOM supports the increase in membership fees;
Expatriate staff wages take up a large part of annual expenses. Maybe in future there should be more options for volunteer work, even in management positions;
PACCOM can contribute to costs, such as publication of the INGO Directory, and some other publications. PACCOM is limited by regulations from contributing to the cost of expatriate staff;
PACCOM also has office space available for the NGO Resource Centre to relocate to. However INGO staff may not be pleased to visit the centre if it is based at PACCOM. There may also be a perception of less freedom if the Resource Centre is located in an official Vietnamese institution. This issue will be further discussed;
PACCOM can also offer many facilities free of charge to INGOs;

Comments from INGOs included:

The new fees are reasonable, but while volunteer staff can be considered there is also a need for full-time staff. It may be feasible to include in INGO grant requests to donors a line item for a small percentage of the grant for the operations of the NGO Resource Centre;
Several INGOs expressed the view that the new fees were fair. One small INGO said it would be difficult for her organisation to pay the increase;
The new fees need to be expressed in more categories, depending on INGO budgets;
Currently there is little difference between services to members and non-members. Services should be offered to members only, to encourage others to join;
A clear fees scale is needed for new members - more work needs to be done on this before it can be implemented. On the new scales large INGOs are not paying much more than small INGOs, but proportionately have much bigger budgets;
Money could be saved by not printing the INGO Directory, and providing a PDF version that can be individually printed off. There could be a charge for advertising on the website, and for displaying an INGO's logo on the website. Were large NGOs consulted about the new $1500 annual fee - large NGOs are happy to support the Resource Centre, but only up to a point;
Consider sponsorships - paying a higher amount in return for sponsorship recognition;
The Health Partnerships Group is talking about starting working groups. These working groups could be merged with the Resource Centre's;
Also needed is a category for UN agencies to pay - they are heavily involved in the working groups;
Two INGOs said they had not been contacted in several years about paying fees;
The Resource Centre is a public good, but there is a need to restructure the organisation. A small proposal for $200,000 could be used to build the base on a solid footing, by bringing in a consultant, with the help of donors;
The centre is certainly a public good for which there is no incentive to pay, but its important to find the right balance for payment for services. Many of the services offered for free create information that is also valuable for members, such as the Opportunities mailing list. There is a need to find a balance between what we charge for and what we lose access to if we do charge, such as information about events and job vacancies;
The Steering Committee is considering branding, and with more sustainable funding can move in the direction of advertising and sponsorship;
The Resource Centre is already very effective in using volunteer staff, but also needs professional full-time staff. Because of the financial situation Marko Lovrekovic is now himself volunteering his services as Co-Managing Director until the situation becomes more sustainable;

Comments from Marko Lovrekovic

The Resource Centre is small and does not have the time at present to pro-actively recruit new INGO members. However most of the larger INGOs are already members;
The new fees are based on budgets in the existing list, which are now five years out of date;
Regarding Health Partnerships Group working groups, it is up to individual working groups to decide what they do. They are established by INGOs with support from the Resource Centre, but the Resource Centre doesn't tell them what to do. The Centre will strongly support the new Health Working Group;

2. Update on Personal Income Tax (PIT), new decrees and legislative changes by PACCOM (People's Aid Coordinating Committee)

The new decree on INGOs in Vietnam, which will replace Decision 340 from 1996 is still under consideration by the Ministry of Foreign Affairs.

The Ministry of Planning and Investment has issued Circular 7, which will guide the implementation of the new Decree 64, which regulates foreign aid in Vietnam and came into force in January 2010. Decree 64 affects INGOs indirectly and one of the changes in foreign aid regulation is that the authority to approve INGO projects has been decentralised in 95% of cases to the ministerial or provincial level, rather than requiring approval by the Prime Minister, as was the case before. Ministries and provinces will be able to approve any projects up to any value, except for: a) projects involving imported goods such as cars; b) projects with religious, security or national defence aspects. These will still require approval by the Prime Minister. The new decree may be accessed online at the Ministry of Planning and Investment's website.

Personal Income Tax - Expatriate staff working in Representative Offices of INGOs are exempted from paying PIT if they are paid from funds raised outside Vietnam and if this privilege is included in the memorandum of understanding (MOU) between the INGO and the Vietnamese Government;

PACCOM has the authority to amend any MOU that doesn't yet include a clause on PIT exemption.

The Government has for 20 years signed MOUs with INGOs that have Representative Offices, but not with INGOs with Project Offices in Vietnam. There is no authorisation yet for MOUs with Project Offices. Staff in Project Offices are exempt from PIT only if the clause on exemption is included in their terms of reference.

Regarding the letter sent to INGOs last year from the Hanoi Tax Department, the Prime Minister has made a statement that INGOs who are eligible for PIT exemption have maintained their exemption both before and after 1 January 2009. PACCOM will make available to INGOs this statement from the Prime Minister.

Discussion arising from Mr Phong's presentation

INGOs asked if the letter sent to INGOs in August 2009 still applied. The letter said that for staff to be exempt from paying PIT, it must be proven that the funds came from outside Vietnam. The INGOs said that most INGOs were funded from project money, even though the funding came from overseas, and the letter said that project staff were not exempt from PIT.
Mr Phong said that August letter was accurate and that project staff were not exempt from PIT.

INGOs said that the legal definition of a project is an agreement signed between the Vietnamese government and an INGO. So if a project is not part of such an agreement then legally it is not a project.
Mr Phong agreed that this was the case.

INGOs asked about the definition of locally raised funds - for example if an INGO gave money raised externally to an organisation within Vietnam - would the funds now be considered local funds.
Mr Phong said that the money granted to the second organisation would still be considered to have been sourced outside. Outside money included funds raised from foreign institutions operating in Vietnam.

INGOs asked that if a foreign company operating in Vietnam made a grant, would this be considered local funds?
Mr Phong said that money from a foreign company operating in Vietnam would be considered to be sourced from outside. He directed INGOs to a Ministry of Finance circular guiding financial management that arose form Decree 93.
INGOs asked when Mr Phong expected that the Prime Minister might sign the new decree replacing Decision 340.
Mr Phong said there were three scenarios:

1. If everything moved quickly the decree would be signed by July 2010
2. If the current situation continued, the decree would be signed in September or October 2010
3. Past experience showed that the decree might not be signed until after the next congress of the Communist Party of Vietnam in 2011

The forum closed at 17:30 hrs

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