THE POLICY OPTIONS

To make such a system work in Hungary, a comprehensive action plan is required.

The recommendations on how it can be implemented are described in Section Four of this chapter, which covers actions required.

The stakeholder analysis shows that it is challenging to convey to NGOs that set-ting up transparency mechanisms is in their long-term best interest and would not be an additional burden on their administration. With a one-time state investment and continuous maintenance, a well-designed transparency mechanism could eventually lower costs for state administration and increase the public’s trust toward NGOs. This, in turn, would raise the level of private giving. Fortunately there have not been any major fraud cases among Hungarian NGOs. Such a situation would cause irreparable damage to the entire sector.

Without taking action, the private support of NGOs will not increase, and it could likely decrease if this situation is left unresolved.

2.3 Option 3: Improving Tax Incentives for Private Philanthropy The effects of the third option—to improve tax incentives for private philanthropy—are often overestimated but should nonetheless be considered. This option is practiced in Australia, where the government provides considerable tax advantages to private donors.

Employing this option could increase revenues for NGOs, but this has yet to be fully proven and has never been tested in a post-socialist country. The state, which could legitimately take away such revenue, would be the sole obstacle in exercising this option.

All the other stakeholders, including NGOs, companies, individuals, and the media, would most likely welcome such an opportunity.

Through this option, NGOs would be able to attract the necessary funding. How-ever, without accountability mechanisms in place, potential fraud could cause major setbacks to the sector.

2.4 Option 4: Investing in Socially Responsible Behavior

NGOs have repeatedly requested that funds be allocated to raise public awareness of what constitutes socially responsible behavior. However, this type of investment is dif-ficult to measure and is not visible in the short term. The U.K. government has been practicing this option through the Giving Campaign that was created in July 2001.²⁵ This campaign’s aim was to encourage people to make charitable contributions in a tax-effective manner and to increase total contributions by half a billion pounds during the three years of the campaign. The total cost of the program was GBP 4,257,000. The numerous contributing charities included Inland Revenue, Charities Aid Foundation, and National Council for Voluntary Organizations.

Several organizations may welcome the introduction of this policy choice, however the associated costs may be disconcerting to certain stakeholders as well as the general public, who could otherwise serve as an ally.

2.5 Option 5: Status Quo

The fifth option requires the maintenance of the status quo, thereby eliminating gov-ernmental involvement. Since other stakeholders are not prepared to get too thoroughly involved, the NGO sector could, at best, remain at its current stage of development and would not evolve into an independent and sustainable sector.

2.6 Balancing the Options

Policy choices must be made based on the specific policy’s ability to assist an NGO in achieving its mission. A well-informed policy decision will strengthen the Hungarian nonprofit sector by establishing mechanisms that support the allocation of independent, politically unbiased, resources to the sector, thereby contributing to its independence and sustainability.

Except for Option 5, status quo, the four options above could have a significant impact on dramatically increasing revenues for the third sector. If correctly implemented, these policy options could generate funding independent of the state. They are all feasible and timely options, which address the political and socio-economic climate.

They can also have a positive, long-term impact on attracting donors. Stakeholders’

support—apart from state support—varies from one scenario to the other. Some may even serve to enhance the government’s image. Nonetheless, all policy options could produce both positive and negative and results.

To make an informed policy choice, the options are weighted according to the eight criteria shown in the table below. Extensive explanations accompany the rationale for one criteria being more weighted in one scenario and less so in another. For the sake of this exercise, a ranking system has been developed to clarify relative weights.

Criteria are ranked between 0 and 5, with 5 being the best. In the cost category, a ranking between 5 and 0 is given; the lower the number, the more costly the option.

These ratings are not scientific, but are based on available information and common sense. Wherever possible, the available information was used, but in most cases there is no certifiably measurable data behind the ranking. The numbers provided were measured against the ranking of other policy options. The aim was to be objective, though discrepancies may exist. Nonetheless, the rankings are deemed to be realistic.

Table 3.

Policy Option/Effects

Increased revenues To NGOs Brings independent resources soon Timeliness Lasting effect Cost Stakeholders’ support + PR for government Side effect/s Total points

Increase state support to NGOs

5 2 0 3 –5 5 5 3 18

Mechanisms for good governance, transparency, accountability

3 3 5 5 –3 2 2 5 22

Improving tax incentives for private philanthropy

3 3 3 4 –3 4 4 3 21

Invest in raising public consciousness, socially respon-sible behavior

3 1 3 5 –3 3 5 3 20

Status quo 0 2 2 0 0 3 3 0 10

It is obvious that, if action is taken, positive results will occur. Decision-makers need to know which policy option will produce the most positive results. The follow-ing list details how the measurfollow-ing of options can help. If the rankfollow-ings in the chart are condensed, a list of priorities can be drawn in the following order:

1. Set up mechanisms for good governance, accountability, and transparency.

2. Improve tax incentives for private philanthropy.

3. Invest in raising public awareness and socially responsible behavior.

4. Increase direct state support to NGOs.

5. Maintain the status quo.

The first three options received such similar rankings (22, 21 and 20) that one may consider implementing all three policies. If this is not an option, the policies can be in-troduced in succession. In such a case, the following order would be the most logical:

Policy Timing for introduction

Set up mechanisms for good governance, accountability, and transparency.

Year 1 and 2

Improve tax incentives for private philanthropy. Year 2 and 3

Invest in raising public awareness and socially responsible behavior. Year 3 to 6

This method of policy implementation would comprise a six-year program divided into three stages. Each stage would last approximately two years.

An action plan needs to be developed, to implement mechanisms for good govern-ance, accountability, and transparency. This was determined to be the best option as it lays the groundwork for future development.

This chapter proposes a plan of action by which to implement such mechanisms, but will not address the actions required for the remaining options, as this can be done at a later stage.