Enhancing Civil Society by Steve McCoy

Enhancing Civil Society A proposal to identify and implement a package of measures to improve the accountability and performance of civil society in Malaysia

Prepared by: Steve McCoy January 2008

Summary The Civil Society Sector1 exists to create a better society. It provides vital services, strengthens communities, identifies and addresses new needs, provides volunteer service opportunities and an outlet for the philanthropic aspirations of the public, and is often a powerful advocate for the marginalised in society. There are considerable benefits to society in having a civil society sector which is modern, dynamic, innovative and equipped to meet the challenges it faces. One of the most crucial challenges faced by the sector lies in its ability to build and maintain public confidence. A lack of trust in the public arena represents a significant barrier to the sector developing its full potential. The sort of public confidence needed by the sector is not one that can be created overnight by a public relations branding exercise. Rather, it needs to be cultivated over time with 3 important components: First, it must be built on a foundation of good governance, high accountability, ethical practice, and substantive programmes producing a track record of public-benefit service provision verified by credible impact and performance assessments. Secondly, it can only be built through the provision of relevant information made available and accessible2 in the public domain. Thirdly, it can only be built when good intentions are matched by a capacity to carry them out. This proposal seeks to address the question on how the sector can build and maintain public confidence and overall credibility by identifying and implementing a package of measures that will create a more enabling

for the purposes of this proposal, the term Civil Society Sector is used broadly to describe the sum total of not-for-profit organisations and networks that lie outside the formal state apparatus, and makes no distinction between it and some of the other terms used to describe the sector - third, informal, non-profit, not-for-profit, non-governmental, voluntary, charity, philanthropic, community, tax-exempt, social enterprise, and so on. One of the background documents proposed in stage 1, â&#x20AC;&#x2DC;Towards a Taxonomy of Civil Societyâ&#x20AC;&#x2122;, will deal with the question of terminology (both definitional and classificatory) and how this impacts analysis of the sector, public perception, and the ability to manage expectations. 1

Accessible here means that the information is easy to obtain, and that the information is easy to understand. 2

operating environment for the sector, and enhance its ability to overcome barriers that make it difficult to deliver high-quality public services, engage in effective cross-sectoral partnership, and in particular, meet the criteria of the aforementioned 3 components. The project proposed is positioned within the context of a wider national concern to improve integrity in public life as expounded in the National Integrity Plan (NIP), published in 20043 . This proposal argues that an approach which sets out to realise the integrity agenda for civil society as it is spelt out in the NIP4 , is an appropriate and good means of achieving these ends.5 However, the proposal suggests that a process rooted solely within the sector and consisting of the adoption of self-regulatory frameworks to improve integrity is unlikely to achieve the objectives set out in this agenda, and argues for a holistic, multi-sectoral approach which attends to both regulatory and self-regulatory mechanisms in parallel6. Such an approach is similar to those already being implemented for the government and private sectors, and the proposal rests on the premise that any serious intent on realising the integrity agenda for civil society will require similar levels of political will and resource deployment. In addition, the proposal recognises the importance of taking a long-term view, and argues for permanent solutions to be found for the need civil society has for resources beyond those required for the timeframe of this project, so that any impetus created in this direction may be sustained. Through a focus on 4 main strands - regulatory frameworks, self-regulatory mechanisms, information provision, and sector capacity - the proposal suggests a mapping of the current landscape of the civil society sector, and a 3

The National Integrity Plan, http://www.iim.com.my/v2/pin/eng/hubungi.htm

The integrity agenda for the civil society has the following objectives: First, to enhance the integrity of civil society organizations (or NGOs); secondly, to enhance the role of NGOs in promoting integrity; and thirdly, to strengthen cooperation between NGOs, the government and the private sector in enhancing integrity. See NIP, Section Title: Strategies in implementing the National Integrity Plan, point 14. 4

The difference between ‘means’ and ‘ends’ here is used conceptually, and not meant to suggest that the pursuit of integrity in public life is not a laudable end in itself. It is, however, a useful concept to distinguish between public confidence as an indicator of good service delivery (service being the ‘ends’ of public life), and integrity as the ‘means’ by which the service is delivered. This theme - the difference between ‘means’ and ‘ends’ - is taken up further in one of the background papers suggested in Stage 1 of the project, which looks at the process of embedding self-regulatory frameworks and other ethical codes into organisational culture. 5

Although the generic term ‘regulation’ can be used to define the whole gamut of accountability processes and mechanisms, for the purposes of this proposal, it is used in its narrow sense referring to statutory supervision of the sector through the mandatory requirements of its legal framework, and is thus distinct from self-regulatory frameworks which are taken on as accountability tools by civil society organisations and networks on a voluntarily basis. 6

review of adaptable â&#x20AC;&#x2DC;best practicesâ&#x20AC;&#x2122; models, before settling on a reform package to enhance the sector. The project is designed in 5 Stages: The first stage is essentially preparatory in nature - with the gathering of baseline date on the current state of the sector, and information on key governance and accountability issues in the form of background papers. Once gathered, an interim report will be published and the information contained therein re-packaged and made ready for consultation through various means. The second stage is consultative in nature, where views and opinions on the key challenges facing the sector and the options for moving forward are canvassed from the sector and its main national stakeholders. This stage is followed by an analysis of the findings and the production of a final report containing various recommendations for reform, whether they be changes in primary legislation, policy, administrative practice etc. After a further round of track-specific consultation, and once accepted by the relevant authorities, these recommendations are then implemented in the fourth stage, along with a series of capacity building and training initiatives following the launch of the final report. Depending on the breadth of recommendations, several implementation tracks will run in parallel, each with their own monitoring and reporting protocols. The final stage provides for independent evaluation of the process as a whole, and culminates in an evaluation report after a suitable fixed period of time, which would provide a basis for any fine-tuning that might be required and a starting point for future reform of the sector to ensure that regulatory frameworks keep pace with contemporary developments. The proposal envisages a multi-sectoral National Steering Committee overseeing a programme of activities initiated and coordinated under the auspices of the IIM or a joint UNDP-IIM team, with a mixed Project Team supported by an Advisory Group reporting directly to the National Steering Committee. The proposal design also envisages the set up of a new body/institution at Stage 4 to supplement the work of, or take over from the Project Team so that initial capacity building initiatives may be carried on beyond the timeframe of the project to ensure sustainable growth and steady progress in the sector. As such, the project is expected to generate a number of documents, including:

• • • •

•

• • •

a Project Scope Document accompanied by background papers. various written submissions in response to the Scope Document. a Project Team Interim Report which incorporates data from written submission and finalises the scope of the project. a Consultative Manual which provides general guidelines for the participatory process, details of the various processes used to canvas opinion, and discussion papers formulated from the Interim Report. a Project Team Final Report which reviews the process, lists the recommendations for reform and the rationale behind them, and sets out a timetable for implementation along with associated their mechanisms. Response Reports to the final report from various authorities with amendments, if any, to the implementation timetable. various track-specific implementation progress reports. a Final Evaluation Report measuring the impact of the project as a whole.

Enhancing Civil Society

Background and Rationale Concerns over the performance of the civil society sector in Malaysia have been periodically voiced in various quarters. One such series of comments were triggered by the Auditor-General’s 2006 report which criticised the lack of procedures in awarding government grants to non-governmental organisations.7 Although this section of the report dealt with the perceived lack of compliance of a government ministry with internal procedures, several newspaper articles took the opportunity to turn the spotlight on civil society, and raised the issue of the alleged misuse of funds by NGOs - reflecting a long-standing public concern over the lack of accountability of NGOs in Malaysia.8 Such allegations could be very damaging to the civil society sector where, unlike the government sector which is guaranteed a revenue stream from taxation, not a single cent raised by civil-society organisations is done so on the basis of obligation. The long-term sustainability and growth of the sector is contingent on building confidence, not only in its financial prudence and transparency, but in the sector’s legitimacy, and overall capacity for integrity, good governance and performance. Public concern over accountability9 , however, often goes hand-in-hand with a degree of ambivalence. In the current environment, where little is expected in exchange for financial support, most NGOs are able to operate relatively

The Ministry of Women, Family and Community Development was criticised for spending RM5.96 million more than the approved allocation and for several weaknesses ‘such as the withdrawal of financial aids which were not in accordance with the stipulated procedures such as financial aids was given to non-eligible NGO, agreement letter were delays/not signed despite payment was already received and NGO using the financial aids for unallowable purposes’. The report goes on to say that in order to overcome these weaknesses, ‘monitoring on NGO activities which involved financial aids needs to be enhanced’. Jabatan Audit Negara, Synopsis, Auditor General’s Report on the Activities of Federal Government Ministries/ Departments 2006, p.26. 7

New Straits Times, Ministry denies report on misuse of funds by NGOs, 12 September 2007; The Star, Sharizat: We can’t punish NGOs for technical errors, 10 September 2007; The New Straits Times, Ever wondered if it’s money down the drain?, 26 September 2007. 8

Accountability is concerned with the obligation that civil society organisations and their leaders have to justify words and deeds to a specific set of internal and external stakeholders and the general public. It is the mechanism by which organisations are held responsible for their decisions and actions. 9

unhindered despite these concerns.10 Nonetheless, the fact that public discontentment may not yet have reached critical levels should not be seen as a licence for complacency. Neither ignoring nor failing to address this issue adequately should be options, as there are considerable advantages to addressing governance dysfunction in the sector before the onset of a crisis. Recognising the importance of a culture of integrity and good governance, the Malaysian Government initiated and formulated the National Integrity Plan (NIP) in 2004 to fulfill the fourth challenge of Vision 2020, namely, "to establish a fully moral and ethical society whose citizens are strong in religious and spiritual values and imbued with the highest ethical standards"11. A new body, the Integrity Institute of Malaysia (IIM) was formed in 2005 to spearhead the plan’s implementation, and an 18-month capacity building programme with UNDP began in September 2005 which resulted in the joint publication of a guiding framework to the NIP published in February 2007.12 This document provides a theoretical and practical (‘best practices’) framework for the NIP13 , offers guidelines for informed discourse and discussion concerning the various elements in a National Integrity System14 , and is intended to stimulate further research into these elements 15. The implementation of the plan began in April 2004 with its first phase of activities taking it to 2008. During the 9th Malaysia Plan period (2006-2010), the government has indicated its intention to ‘intensify its efforts to enhance the integrity and transparency of the public and private sectors and further improve the level of good governance in order to facilitate development’ 16 this includes the integrity agenda for civil society17 .

This is often achieved either through an organisation’s association with people of eminence, or by leveraging the emotional content of some of the issues dealt by them (children in need, humanitarian aid, environmental concerns etc.), or through the simple fact that service provision needs often outweigh apprehension over performance and actual delivery. 10

Message of the Prime Minister of Malaysia in the introduction to the National Integrity Plan.

Mr Jeremy Pope, former Managing Director of Transparency International was appointed in August 2005 to help frame the curriculum of the IIM. He ran a week-long course for 70 Master Trainers from the public service, private training firms and civil society organisations; delivered a lecture to senior government officials and business leaders, and prepared the report, National Integrity System: a Guiding Framework, following a series of consultations and panel discussions. 12

National Integrity System, p.vii

National Integrity System, pp.vii, xv

National Integrity System, p.xvi

The Ninth Malaysia Plan 2006-2010; 25.13, p.488

The Ninth Malaysia Plan 2006-2010; 25.14, p.489

Understandably, most of the efforts made to strengthen integrity and good governance within Malaysian society have been focused on the government and private sectors.18 Measures taken have included legal review and reform19 ; the establishment or strengthening of regulatory and oversight bodies 20 ; the streamlining of associated procedures21 ; the promotion and adoption of ethical codes of conduct, good governance guidelines, and administrative best practices to supplement legal frameworks 22; the provision of capacity building initiatives

‘Most of the corruption in a society involves two principle actors – the government and the private sector’ National Integrity System, p.60. This is also driven in part by the privatisation of traditional public sector activities making the need to check possible corruption in the activities of both arenas all the more urgent. 18

For example, Anti-Corruption legislation has been updated 3 times since it was first passed in 1950. Regulations such as Listing Requirements, Practice Notes and Guidance Notes have been reviewed and updated to enhance corporate governance. Company directors are now required to attend the Mandatory Accreditation Programme and the Continuing Education Programme, and a review of the corporate governance framework for financial institutions by Bank Negara Malaysia improved the minimum qualifications for independent directors, compensation issues, and Minimum Internal Audit Standards. (9th Malaysia Plan, 25.07; 08, p. 486) . There has also been a review of current practices for the formation of independent audit committees and the appointment independent auditors. (NIP, p.118) and ‘Whistleblower’ legislation (NIP, p.102, and National Integrity System chapter 18). 19

For example, the Ant-Corruption Agency, set up in 1967, intensified its approach in addressing corruption (9th Malaysia Plan, 25.12, p.489). The Companies Commission of Malaysia (SSM) stepped up surveillance activities to ensure compliance to the Companies Act 1965 and the Registration of Business Act 1956 (9th Malaysia Plan, 25.09, p.487). Other oversight mechanisms include The Public Complaints Bureau; The Special Cabinet on Government Management Integrity chaired by the Prime Minister and Integrity Management Committees at federal, state and district levels; The Companies Commission of Malaysia; The Securities Commission; Bursa Malaysia Securities Berhad; The High Level Finance Committee set up by the Ministry of Finance etc. 20

For example, the Malaysian Administrative Modernisation and Management Unit (MAMPU) was established to initiate changes in government administration. 21

For example, core and secondary values have been established for every organisation and member in the public service. In the private sector, the Malaysian Code of Business Ethics and the Malaysian Code on Corporate Governance (MCCG) provides a set of principles and best practices for companies on ethical conduct and corporate governance - listed companies are required to include a statement in their annual report regarding how MCCG principles are being applied (see National Integrity System p. 27) in addition to Malaysian Securities Exchange Berhad’s Listing Requirements. Rukuniage Malaysia outlines 6 principles for conducting business. The Charter of Core Business Values was developed on best practices as identified by multinational corporations in the country (9th Malaysia Plan, 25.11, p.487) Other codes in use are the Standards of Corporate Governance developed by the Organisation for Economic Cooperation and Development (OECD) and the World Bank; the International Anti-Bribery Convention signed in 1999 (see NIP, p.118); the Code of Ethics for Judges (1994). And Code of Ethics for Members of the Administration (1997). 22

through awareness campaigns, fora and other training opportunities 23 ; methods for measuring progress 24; access to incentive schemes 25; and the appropriate allocation of resources. Civil society is recognised in the NIP and its guiding framework as an important element in the drive to strengthen good governance and accountability within a National Integrity System26 and the documents single it out as a great potential partner in this effort27 , as ‘it encompasses much of the expertise and networks needed to address issues of common concern’ 28. As such, NGO representatives have been mobilised as stakeholders both in the formation and implementation of the National Integrity Plan.29 In the drive to promote the critical issue of good governance, civil society is generally viewed as the sector that performs the role of watching and

For example, the Companies Commission of Malaysia (SSM) stepped up awareness campaigns on compliance with the Companies Act 1965 and the Registration of Business Act 1956, and trained corporate directors on their fiduciary duties (9th Malaysia Plan, 25.09, p.487). The Malaysian Institute of Corporate Governance (MICG) conducted corporate governance training programmes and the Business Ethics Institute of Malaysia conducted training programmes to promote Rukuniaga. The Institute of Internal Auditors Malaysia produced various handbooks and tools in partnership with other agencies, and the Malaysian International Chamber of Commerce and Industry (MICCI) continued governance training (9th Malaysia Plan, 25.11, p.488). Awareness campaigns like ‘Clean, Efficient and Trustworthy’, ‘Integration of Islamic Values’, ‘Excellent Work Culture’; Conferences and seminars run by Bursa Malaysia and the Securities Commission with the aim of fostering the exchange of best practices, knowledge and ideas towards improving Corporate Social Responsibility, governance and integrity issues in the business community. A number of indices have or are being developed to measure progress being made in integrity. The Malaysian Corruption Index; the Malaysian Corporate Governance and Business Ethics Index; and the Malaysian Public Service Delivery Index are part of the National Integrity Index, along with the Malaysian Family and Community Cohesiveness Index; the Malaysian Courtesy Index; and the Malaysian Quality of Life and Societal Well-Being Index. The Minority Shareholders Watchdog Group conducted the Corporate Governance Rating Survey and developed the Corporate Governance Screencard as well as the Corporate Governance Monitoring Control Sheet. (9th Malaysia Plan, 25.06; 25.10, p.486, 487). 24

The Government of Malaysia offers significant taxation and other benefits to the private sector in order to encourage them to establish and maintain meaningful corporate social responsibility programmes. see National Integrity System, p.27. ‘A National Integrity System is the sum total of institutions, processes, people and attitudes that collectively work to create trust by ensuring that entrusted power is exercised with integrity’. National Integrity System, p.xv. The NIP lists ‘the components or institutions involved in the movement to enhance integrity as follows: Family, Community, Civil Society (NGOs), Socio-culture (education, health, sports and recreation, media, arts, literature and heritage), Religion, Economy, Politics and Administration’. See NIP, Section Title: Overall Approach in Enhancing Integrity, point 3. The Guiding Framework identifies ‘integrity pillars of a society seeking to govern itself in an accountable fashion: the Executive, Parliament, the Judiciary, the Civil Service, ‘Watchdog agencies (Public Accounts Committee, Auditor-General, Ombudsman, Police, Anti-Corruption Agency, etc.), Civil Society (including the professions and the private sector), the Mass Media, and International Agencies’. National Integrity System, p.viii. 26

see NIP, p.83; National Integrity System, p.63.

National Integrity System, p.60.

See footnote 12 above.

facilitating governance reforms in the government and private sectors, rather than being the focus of reform initiatives itself. However as the guiding framework points out, civil society is in no position to demand higher standards in public affairs from the government or private sector ‘than the standards NGOs themselves are prepared to apply to their own’30. Built into the nature of civil society is the problem of legitimacy. Unlike the government sector which derives legitimacy from its electorate, and the private sector which is accountable to their shareholders 31, NGOs are selfappointed, and thus can be perceived as ‘do-gooders’ who are not accountable to anyone but themselves. Although true for all sectors, NGOs in particular ‘have to earn the trust of the community and the respect of the government of the day’32. While there are exceptions, the concerns expressed in the press recently would seem to indicate that Malaysian civil society as a whole has yet to do this. In addition, the guiding framework notes that many NGOs fail, either through non-existence or non-compliance, to meet basic internal governance requirements 33 and hence, ‘fail in their role to protect the public interest’.34 Not only does this have repercussions on the sector’s sustainability and inhibit growth 35, it significantly handicaps its ability to be a credible and effective partner in addressing socio-economic issues and participating in the protection and promotion of the public interest – not least of which are efforts to build integrity throughout Malaysian society.36

National Integrity System, p.62.

An increased awareness of Corporate Social Responsibility and the recognition that it is in the interest of the private sector to have broader responsibilities beyond the ‘bottom line’, has meant that corporations have begun to look beyond traditional strategies to increase shareholder value. Nonetheless, even with social accounting taken into consideration, the main accountability conduit for the private sector remains with their shareholders – albeit enlightened shareholders who perceive themselves as community stakeholders as well. 31

National Integrity System, p.62.

Critical governance elements include clear organisational goals, the appropriate use of funds and sustainable financial strategies, the monitoring and evaluation of programme impact and overall quality management, public disclosure of management systems, policies and decisionmaking, the capacity for meeting legal requirements, and unambiguous roles of the Board/ Executive committee, the membership/constituencies and donors. 33

National Integrity System, p.62.

Growth here refers not just to the number of organisations, but to the number of viable organisations, the number of constructively engaged stakeholders and the quality of the work being done. 35

While a healthy civil society and a informed citizenry is vital to a national integrity system, a ‘dispirited public… acquiescent in the face of social and administrative abuses, provides an ideal breeding ground for corrupt and abusive conduct’ National Integrity System, p.61. 36

Reflecting this state of affairs, the guiding framework notes that ‘as a first step in implementing the National Integrity Plan with civil society, civil society should be invited to examine its own ethical performance in order to strengthen its capacity and credibility to be a meaningful partner with government’37 . Similarly, the NIP states that ‘as for the other components, such as the family, community, civil society, and the socio-cultural sector, there are various bodies including NGOs which can initiate integrity-related programmes’38. Issuing invitations to NGOs to improve their accountability in a situation where accountability within the sector is weak, is an obvious reaction. However, as an approach to the overall problem, it is one unlikely to win sufficient sectorwide support or create the impetus needed to bring about the substantive changes required to realise the objectives set for civil society in the NIP39 , as it presumes a degree of capacity within the sector largely missing. By and large, civil society organisations fall somewhere within a spectrum of three categories with respect to governance and self-regulatory measures. First, there are organisations with the capacity (motivation, know-how and time, as well as financial and human resources) for good governance and accountability - such organisations would, in all likelihood, have these in place already. As the guiding framework notes, ‘responsible NGOs ensure that they are run democratically and accountably’. 40 Secondly, there are organisations that recognise the importance of good governance, but lack the capacity to embed these measures 41 into their organisational culture. Such organisations may have or could develop codes of conduct and ethics that are well-intentioned, but nonetheless end up as being vague expressions of principle - providing little more than window

National Integrity System, p.62.

NIP, Section: Title: Overall Approach in Enhancing Integrity, point 6.

National Integrity System, p.62. A number of professional bodies and NGOs have made promising attempts at self-regulation. The NIP notes the Malaysian Bar Council, the Malaysian Medical Association, the Malaysian Board of Engineers, the Malaysian Board of Architects and the Association of Chartered Certified Accountants; consumer associations, teachers’ associations, care providers, environmental organisations and ‘other civil society organisations that monitor adherence to ethical values such as human rights, good governance and transparency’. NIP, p.119. 40

see footnote 33 above.

dressing, not unlike the production of â&#x20AC;&#x2DC;annual reports that are often public relations exercisesâ&#x20AC;&#x2122;42. Thirdly, there are organisations comfortable with the status quo and complacent over their level of service delivery.43 Any approach attempting to realise the integrity agenda for civil society would have to meet the dual challenges of providing sufficient incentive to overcome the inertia inherent in category 3 organisations, and providing enough support and resources for category 2 organisations to be able to breathe life into what otherwise would be decorative documents. Crucially therefore, such an approach must be holistic, and not piecemeal, on a number of different levels. First, the approach needs to be holistic in that it needs to attend to both regulatory and self-regulatory mechanisms. Regulatory mechanisms include legal and fiscal frameworks for civil society, their associated regulatory or oversight bodies, and the monitoring and enforcement procedures that go with them. Mandatory provisions within a legal framework provide donors with an assurance that their money will be used for the purposes for which it was given, and protected from fraudulence 44 and/or financial incompetence. It also provides registered civil society organisations a certain degree of legitimacy through the immediate public perception that they are regulated by the state. The heterogeneity of the sector, with a wide variety of types, sizes, themes, capacities and structures makes it impossible to formulate a single framework that can address all accountability issues of the sector. The regulatory framework, therefore, provides civil society with minimum standards of accountability, and needs to be supplemented by sub-sector specific voluntary self-regulatory frameworks.

National Integrity System, p.63. The gulf between category 1 and category 2 organisations should not be underestimated. The difference in being able to perceive a self-regulatory framework as a means-to-an-end with a behavioral focus, rather than an end in itself with a perception or PR focus, is considerable. 42

Such a mindset is reinforced by a working environment that continues to provide financial support for activities through various means and mechanisms (see footnote 10), without meaningful results-orientated monitoring and evaluation of these activities (see for example Auditor-Generalâ&#x20AC;&#x2122;s comment in footnote 7). See also Working Assumption 4 below. 43

While the scale of irregularities is probably minuscule compared to government and businesssector misconduct, the public should rightfully expect a much higher standard of conduct from civil society groups that rely on voluntary contributions. 44

The need for self-regulation is also driven by the recognition that it is difficult, if not impossible, to build a culture of ethics and accountability through obligation alone. Self-regulatory mechanisms include codes of conduct and ethics, organisational values, policies, procedures and other internal governance instruments that may either be tailored to individual organisations or shared across networks which could be sectoral, national or international. They allow civil society organisations to move beyond the minimum standards provided by regulation, and build credibility, effectiveness and sustainability through the adaptation and application of â&#x20AC;&#x2DC;best practicesâ&#x20AC;&#x2122; of the field in which they operate. An enabling environment for civil society requires both, mandatory regulatory mechanisms - which require obligation, and voluntary self-regulatory mechanisms - which require willingness, in optimal working condition. 45 In addition to these frameworks, enforcement and the dissemination of information are equally important in ensuring their efficacy. Without adequate enforcement, regulatory mechanisms can be no more than bureaucratic hurdles for organisations to overcome. Without an adequate dissemination of information on the sector to the public 46, regulatory mechanisms cannot be the accountability tool for the sector it ought to. Secondly, the approach needs to be holistic in that a reform of regulatory and self-regulatory frameworks must be complemented with capacity building mechanisms. The capacity for regulatory bodies to be able to enforce the minimum standards of accountability for civil society efficiently and fairly, and the capacity for civil society organisations to be able to meet their legal and fiscal requirements without compromising mission accomplishment, needs to be addressed with support mechanisms put in place to ensure that this is so. Capacity building objectives should also include looking at the provision of a permanent solution for the constant need civil society has for knowledgebased resources and expertise, so that organisations may gradually and continually improve performance as their internal capacity allows.

see Working Assumption 4 below.

High standards for disclosure and public reporting are needed. Vehicles such as annual reports, organisational and project evaluations, strategic plans based on external assessments, and regular communications to provide channels for public access to information about the organisationâ&#x20AC;&#x2122;s work, financial status, governance structure and operational impact. Information provision under the regulatory framework should include a reliable set of public assessment records that will distinguish bona fide NGOs from those that are not, and provide appropriate overall and sub-sector specific performance indicators from an independent source, so that the public is not forced to rely solely on individual brands and self-supported claims when basing decisions on providing support. 46

Thirdly, the approach needs to be participatory and consultative in method, and holistic in terms of constituency. That is, the process needs to be able to reach and engage the whole of Malaysian civil society47 , and also include its main national stakeholders in the government and private sectors. The breadth, in terms of constituency, of such an undertaking raises a number of challenges: First, the number and diversity of views that would undoubtedly come from such a wide-ranging constituency provides a considerable organisational challenge - one that demands careful and detailed planning to flesh out the participatory framework provided in the project design. Secondly, it raises the need for a central convening authority. Unlike the government and private sectors, no single civil society organisation has the resources to galvanise the whole sector, neither is there an umbrella body or network that can fulfill this function.48 As such, this proposal envisages a multisectoral National Steering Committee overseeing a programme of activities initiated and coordinated under the auspices of the IIM or a joint UNDP-IIM team. Thirdly, a multi-sectoral approach raises questions concerning the relationship between the sectors beyond those of a practical or organisational nature - in particular, the role each would play within this process of review and reform. Suggestions of a lack of accountability or unethical behaviour would naturally provoke a defensive reaction, regardless of the sector, organisation or individual involved. The natural tendency of NGOs would be to grapple with these issues from within, and on their own terms. This tendency arises, not only because independence is one of the core values and key strengths of the civil society sector, but it is also driven in part by the fact that there has been a history of States bringing in new laws to curb the influence of NGOs when it is felt politically expedient to do so. Sensitivity to the fact that governments can use regulatory mechanisms as a manipulative tool to silence dissenting voices, and/or the fear that a strengthening of accountability may lead to an overbearing influence from the private sector (as funders) and the government - which could then lead to cooptation, a deflection of original purpose or a stymieing of innovation - is 47

this refers not only to those organisations that are more towards the â&#x20AC;&#x2DC;category 3â&#x20AC;&#x2122; end of the spectrum, but also to the need of ensuring that those oriented more towards advocacy work are involved as well as the usual service-delivery organisations. The NIP mentions a possible role for the Registrar of Societies, but this is limited to monitoring the implementation of integrity programmes (see NIP, Section Title: Overall Approach in Enhancing Integrity, point 6); and in any case, the Registrar of Societies has no jurisdiction, for example, over NGOs registered under the Companyâ&#x20AC;&#x2122;s Act. 48

reflected in the NIP. Its overall approach states that ‘the implementation, monitoring and coordination of integrity-related programmes should be done “from below”… (because) we need to be mindful of the sensitivity of these various groups to what they may perceive as “outside” meddling and interference’49 . Such sensitivity, however real, could inhibit appropriate action or, at best, lead to incoherent action – counterproductive to overall aim of the NIP, which is to foster a culture of integrity ‘in a comprehensive, integrated and systematic manner’50. While the independence of the sector is crucial, the government has an important role to play in providing an efficient and effective regulatory system and for providing support. The guiding framework to the NIP points out that, ‘the government has a duty to provide a legal and regulatory framework which allows the necessary space for civil society to operate. This includes permitting freedom of expression, freedom of association, and freedom to establish non-governmental entities. Laws... should be clearly understood, accessible, consistent with international norms, and not needlessly restrictive or cumbersome.’51 With these guidelines in place, and when a review and reform process is set within the context of the wider national concern for integrity in public life as it is spelt out in the NIP - where independence of the civil society sector is essential to fulfilling its role as one of the pillars of integrity in the national integrity system - perceptions of meddling and interference are unwarranted. Civil society needs to be equally engaged with the government sector in a horizontal, participatory and consultative process – seeking broad-based discussion and canvassing a wide range of views and opinions 52 so that the delicate balance of an effective legal framework can be found - one that prevents fraudulent diversion of charitable assets for private gain, builds public confidence in the sector and stimulates it to better performance, protects the independence of the sector while at the same time protecting legitimate social NIP, Section Title: Implementation Mechanism, point 13. See also NIP, Section Title: Overall Approach in Enhancing Integrity, points 2 and 11. 49

NIP. Section Title: Factor Affecting Integrity, point 14.

National Integrity System, p.61

It is also hoped that the impetus created by this holistic approach would also provide the sector with opportunities to discuss and address some of the other pressing issues pertaining to the sector, such as the problem of duplication within operational fields and the paucity of professional level human resources and expertise. 52

interests from abuses of freedom of expression and association which do not meet public benefit criteria. In addition to the need for a holistic and systemic approach, the guiding framework also notes that â&#x20AC;&#x2DC;meaningful change is unlikely to come about in the absence of strong political willâ&#x20AC;&#x2122;53 with high level engagement and sufficient resources being made available to see the process through to completion. This proposal, therefore, builds on the intent spelt out in the NIP and its guiding framework, and applies the principles contained therein into a schedule of activity with the overall objective of building and maintaining public confidence in the civil society sector as a measure of its credibility by identifying and implementing a package of measure to enhance the operating environment of the sector.

National Integrity System, p. 2.

Enhancing Civil Society

Objectives The aim of this project is to identify and implement a package of measures to enhance the operating environment of civil society and enable the sector to develop and maintain public confidence and credibility. It has as its vision, the creation of an environment that enables the development of a stable, efficient and effective sector - well-informed, innovative in strategy, thorough in preparation, transparent, accountable and financially sustainable, able to mobilisie an increasingly professional workforce, and work in constructive partnership with both government and private sectors. Public confidence is built not through public relations spin, but on a foundation of good governance, high accountability, ethical practice, and substantive programmes producing a track record of public-benefit service provision verified by credible impact and performance assessment; through the provision of relevant information made available and accessible in the public domain; and gradually, as the sector improves in governance and performance supported by sustainable capacity building measures It seeks to achieve this aim by identifying and addressing key factors related to the sector through: • • • • • • • •

an audit of the current state of the sector review and reform of the legal and fiscal frameworks regulating civil society review and reform of regulatory bodies, mechanisms and their associated procedures the identification, promotion and facilitation of self-regulatory frameworks the identification and adoption of accountability incentive schemes the identification and activation of communication channels for public access to relevant information concerning the sector the provision of sufficient resources to manage the transition period the identification and adoption of sustainable capacity building instruments to support the long-term development of the sector.

Assumptions and Theory of Change The following assumptions lie behind the development of this proposal: 1.

That it is not only good, but essential for organisations and people to be progressively more accountable in a stakeholder democracy.

That an effective, efficient and accountable civil society sector, alongside a similarly healthy government and private sector, is a mark of a secure and confident society in the modern world, and indispensable for its sustained development.

That in the development of society, the government, private and civil society sectors have distinct but complementary roles; and there is value in working in partnership towards common aims and objectives.

That the establishment of an enabling environment would enhance the performance of the civil society sector to the benefit of society as a whole.54

That while a culture of accountability cannot be built on the basis of obligation alone, mandatory requirements through legislation are nonetheless essential tools in establishing this culture, alongside a willingness to formulate and submit to voluntary codes of practice, conduct and ethics.

That regulation without enforcement is meaningless bureaucracy, and cannot be the accountability tool for building public confidence and support that it ought to.

That contextual matters matter, and any reform initiatives must reflect current realities and socio-political sensitivities.

Key Factors The bulk of the key factors that need to be addressed by the sector will emerge following the audit of the sector, and from the written submissions to

This assumption is naturally intuitive. Counter-intuitive, however, is the discovery that civil society can flourish, albeit underground, in an environment that is extremely restrictive, as has been the case with some totalitarian regimes or in an environment where civil society has had to compensate for weak government. It would seem that the worst possible environment for civil society is one where there is a relatively strong government, and little is expected from civil society in return for financial support - so that the â&#x20AC;&#x2DC;perform or perish principleâ&#x20AC;&#x2122; is absent.

the project scope document and background papers 55 proposed in stage 1. These will include guiding principles, gaps in policy, deficiencies in service, opportunities for administrative efficiency gains etc. However, the 5 general factors identified in the NIP56 as those ‘that can undermine integrity’ are all directly relevant to the civil society sector and are considered here in brief.

Individual Weaknesses The NIP points to the lack of a value system among individuals through a lack of a proper religious upbringing, weak self-discipline and work ethics, the lack of an ability for self-appraisal, and ‘life demands’ that may increase the temptation for corruption and an abuse of power. 57 In concert with the NIP and its guiding framework, the primary thrust of this proposal in dealing with this factor is on building a culture of integrity and ‘reforming systems, rather than on blaming individuals’.58

Leadership As noted in the NIP, ‘leadership is extremely vital in developing the culture of any organisation or of a society’59. Civil society organisations are governed by Board members or Trustees, and it is from here that good governance measures and accountability habits are formulated. They act as guardians of the interests of the organisation’s membership or constituency, while ensuring that the organisation operates in a way that is in compliance with statutory obligations and in accordance with its own mission and values. In addition, they need to proactively and selfcritically take responsibility for organisational structures, operations, policies and activities; and develop accountability mechanisms for internal practice and external relations with those their organisation interacts with on an ongoing basis - donors, partners, suppliers and contractors, as well as the communities in whose name resources are leveraged to undertake certain pieces of work.

A suggested list of Background Papers can be found in Appendix 1.

See NIP, Section Title: Factors Affecting Integrity, points 1-14.

NIP, Section Title: Factors Affecting Integrity, points 4-6.

see National Integrity System, pp.vii,3.

NIP, Section Title: Factors Affecting Integrity, point 7.

Weaknesses in accountability throughout the sector is in part, a result of a weakness in its leadership. In support of the National Integrity Plan, Transparency International Malaysia ‘entered a plea for NGO board members to be trained in accountability…to ensure that NGO leaders effectively manage their own organisations and enhance their integrity’60 . The guiding framework noted problems associated with the failure of Boards ‘to develop guidelines on its functions, tenure and active participation in the internal governance of an NGO’. It particularly draws attention to the lack of democratic internal governance elements in many Malaysian NGOs, as most operate with a handful of individuals ‘or around the personality of a single individual’. Such boards, often founder-driven, tend to dominate and influence the agenda of the organisations to the detriment of the organisation’s independence.61 Weaknesses of governing boards in the sector, however, are not limited to an overbearing dominance and micro-management, but range from this to the other end of the scale - an under-engagement by the Board on the issues pertinent to the organisations they serve, and the tendency to rubber-stamp decisions made by management. In addition to the governing board, leadership is also provided by the executive or management of an organisation. Although secondary, the quality of guidance offered to a governing Board by the executive and the sort of working relationship forged between the two can be just as crucial in determining the overall performance of an organisation. While legal reform is one option62 , the main thrust in this proposal for addressing and improving the quality of leadership in the sector lies with the identification and promotion of self-regulatory mechanisms, resource provision, and capacity building initiatives.

Systems and Procedures The NIP identifies 6 aspects relating to systems and procedures that affect integrity.63 •

A lack of transparency in the management of public interest.

www.sun2surf.com/article.cfm?id=12968, 13 February 2006. See National Integrity System, p.62 60

see National Integrity System, p.62

For example, the guiding framework suggests that the lack of any legal requirement on the tenure of board members in The Societies Act 1966 should be reviewed. see National Integrity System, p.62. Other schemes that fundamentally challenge governance dysfunction, such as ensuring that governing boards are selected and operate according to clearly defined and transparent procedures, could be looked at as well. 62

NIP, Section Title: Factors Affecting Integrity, point 8.

• • • • •

Weaknesses in the systems, procedures and guidelines for the implementation of tasks. Ineffective and at times selective enforcement. The lack of proper monitoring and evaluation of the effectiveness of strategies or programmes. The lack of human and material resources. Outmoded and unclear legal frameworks and the presence of contradictions in some legislation.

Even without the sector audit proposed in stage 1, a quick glance should indicate that all 6 aspects identified here are relevant to improving accountability in the civil society sector. These aspects are relevant on 2 levels: The first level concerns systems and procedures related to the regulatory framework that oversees the sector as a whole. Much of the legal context for civil society is outdated and has not evolved in a way that best meets the needs of contemporary communities.64 Enforcement of the legal framework is cursory, and ineffective in dealing with the perception that it is often selectively applied. The lack of proper monitoring and evaluation of the effectiveness of strategies or programmes, which was picked up in the Auditor-General’s report of 2006 65, directly affects levels of public confidence in the sector; and the lack of transparency66 and up-to-date systems in the management of the sector as a whole risks undermining public confidence further. Weaknesses in the overall regulatory system are naturally directly related to a lack of human and material resources. One of the challenges for a reform programme would be to reorganise systems, modernise and simplify

The most common legal forms for civil society organisations in Malaysia are societies, trust companies, public limited companies, and Muslim trusts. All legislation covering these forms were formulated within the first 10 years of independence: the Societies Act 1966 regulates the formation and functioning of societies; the Companies Act 1965 and the Trust Companies Act 1949 provides for the registration and regulation of public limited charitable companies and trust companies respectively; while Muslim trusts, awqaf (plural of waqf, endowment), are governed by the Mohammedan and Hindu Endowments Ordinance, 1906. While it is true that the Societies Act was amended in 1981, it was done so within a specific socio-political context and not as a result of a review and reform process to improve the performance of the sector. These amendments were later changed in 1983. 64

‘...monitoring on NGO activities which involved financial aids needs to be enhanced’. Jabatan Audit Negara, Synopsis, Auditor General’s Report on the Activities of Federal Government Ministries/Departments 2006, p.26. 65

A lack of transparency here does not necessarily imply deliberate secrecy or a lack of openness, which are attitudinal problems. A lack of transparency is also the result of the lack of effective communication channels and proactive measures to make disclosed information in the public domain accessible.

procedures with clear guidelines in place so that efficiency gains will be able to meet, at least in part, this deficiency in resources. The second level concerns self-regulatory frameworks that are voluntarily taken on by individual organisations or sub-sector specific networks of organisations. Systems and procedures are crucial to managing the complexity67 of civil society accountability. Although promising models have been developed by the international NGO community in recent years, particularly in the field of downwards accountability, the lack of human and material resources, as identified in this section of the NIP, makes it difficult for the sector to gain access to and make use of this expertise. As stated earlier, addressing this capacity deficit must be seen as a priority.

Structure and Institution The NIP recognises the importance of structure and institutions to the smooth functioning of society. It notes that outmoded and unfocused structures are inefficient and ineffective68 , that poor coordination between different institutions or structures may lead to unhealthy competition and/or a shirking of responsibility69 , and that a system not thoroughly thought out could lead to conflicts of interest between different institutions or structures 70. While this section of the NIP has the government sector primarily in mind, the principles behind the importance of structure, and the part institutions can play in strengthening accountability are applicable to the civil society sector as well. Formal structures relating to civil society largely concern regulatory and enforcement mechanisms. As noted earlier, the project proposed seeks to address the fragmented nature of current regulation 71 under its legal The complexity of civil society accountability arises from its need to deal with multiple stakeholder groups. It has 4 accountability levels to consider: First, upward accountability to donors, and having to meet the formal requirements of regulatory provision. Secondly, downward accountability to the people who are being served or the constituency in whose name the rationale for an organisationâ&#x20AC;&#x2122;s existence is put forward. Thirdly, lateral accountability to other agencies, partner organisations and/or networks, and common standards. Fourthly, internal accountability to organisational mission, values, staff and volunteers. 67

NIP, Section Title: Factors Affecting Integrity, point 9.

NIP, Section Title: Factors Affecting Integrity, point 10.

NIP, Section Title: Factors Affecting Integrity, point 11.

For example, there is no central register of civil society organisations in Malaysia, as oversight falls to a number of different agencies. The lack of this management tool makes it impossible to monitor the development of the sector, identify gaps and weaknesses in service provision, and set in motion coherent mechanisms to address these. 71

framework and enforcement mechanism review. The project also intends to explore the possible adoption of informal or semi-formal structures as a means of addressing the problem of duplication, the lack of coordination, and unhealthy competition between organisations within the sector.

Culture The NIP recognises the importance that culture plays in any integrity system and notes that â&#x20AC;&#x2DC;a culture that does not stress integrity will influence individuals to be laid back, irresponsible and develop the habit of shirking their responsibility or passing the buck to othersâ&#x20AC;&#x2122;.72 This proposal recognises that establishing a culture of accountability in the civil society sector will take a sustained effort on the part of multiple actors over a period of time, and therefore in addition to a review and reform process, calls for long-term and sustainable mechanisms to facilitate steady improvement in accountability and performance throughout the sector.

Expectations Central to the working methodology of this proposal is a multi-sectoral consultative stage to ensure that decisions on policy and direction are taken by consensus following a thorough review of a significant body of material and wide-ranging discussion. However, without pre-empting this process, the following are several expectations that can be used as a guide to determine timeframes, and human, budgetary and other resources required for this effort: â&#x20AC;˘

That review of the regulatory and fiscal frameworks for civil society will lead to reform - and thus serve as a foundation for an increasingly enabling environment for organisations operating within the sector. Notwithstanding the extent of reform recommended following the consultative and analytical stages, a reasonable expectation would be that existing provisions be repealed and replaced by a single Act governing the sector (including public trusts) - reflecting a rationalisation of current legislation to increase its user-friendliness and effectiveness as an accountability tool; and an updating of the same to reflect both developments in the field of non-profit regulation, and the specific contextual factors and current needs of the sector.

NIP, Section Title: Factors Affecting Integrity, point 12.

•

That multi-sectoral engagement and discussion about regulatory frameworks would spur the further development of sub-sector and field-specific self-regulatory frameworks; and that adequate capacity building mechanisms be put in place in order to sustain the impetus created and ensure steady progress in the areas of good governance, accountability and public confidence.

•

That a new permanent body be established to take over from the Project team at Stage 4, in order to oversee and monitor the various implementation tracks, and periodically report on their progress. In addition, this new body would be given the initial mandate of building public confidence in the sector and equipping civil society organisations to maximise their potential. Wider responsibilities can be given to this body after a suitable period and evaluation of it’s initial effectiveness, to include supplementing or replacing regulatory mechanisms as a Commission for the sector.73

Methodology As noted earlier, this proposal envisages a multi-sectoral National Steering Committee overseeing a programme of activities initiated and coordinated under the auspices of the IIM or a joint UNDP-IIM team, with a mixed Project Team supported by an Advisory Group, reporting directly to the National Steering Committee. The project is designed in 5 Stages: •

The first stage is preparatory in nature - with the gathering of baseline date on the current state of the sector, and information on key governance and accountability issues in the form of background papers.

•

The second stage is consultative in nature, where views and opinions on the key challenges facing the sector and the options for moving forward are canvassed from the sector and its main national stakeholders.

•

The third stage is analytical in nature where the findings from the previous stage are synthesised into a final report containing various recommendations for reform.

This body may either be governmental, or wholly independent as a non-governmental organisation, or as a quasi-governmental body. The various organisational models and mandate options are examined in the background paper ‘Institutions and Accountability’. 73

â&#x20AC;˘

The fourth stage involves the implementation of these recommendations, along with a series of capacity building and training initiatives.

â&#x20AC;˘

The fifth stage provides for independent evaluation of the process as a whole.

Enhancing Civil Society

Stage 1: Preparation Key Challenge: To ensure sufficient breadth, depth and reliability of information.

Field and Desk Research (see Appendix 1) Preparation of an updated register of civil society organisations, and qualitative and qualitative surveys regarding the sector.

Press Release/Conference (Public Survey)

Preparation of the project scope document and a series of background papers on key governance and accountability issues regarding the sector.

Project Scope Document and Background Papers Formulation of documents from research data. Distribution of documents to key stakeholder leaders; publication on project website, along with invitation for written submissions.

Press Release (Written Submissions)

National Steering Committee

Written Submissions

Project Team Interim Report Incorporation of written submissions. This report finalises the scope of the project and forms the basis of the Consultative Manual.

Press Conference (Interim Report)

National Steering Committee

Project Consultative Manual Repackaging of material from the Interim Report into â&#x20AC;&#x2DC;user-friendlyâ&#x20AC;&#x2122; thematic and subsector specific discussion papers and questionnaires. Manual also contains reference to participatory frameworks and consultative methodologies.

National Steering Committee

Stage 2: Consultation Key Challenge: To ensure that participatory frameworks and consultative methodologies are able to capture all voices.

Project Consultative Manual Information on participatory frameworks and consultative methodologies.

Press Releases (Consultative Process)

Discussion papers and questionnaires

Distribution of material and consultation with sector and national stakeholders according to participatory framework.

Collation of consultative material

Stage 3: Analysis Key Challenge: To exhibit level of discernment which ensures that reform recommendations are both substantial but practicable.

Analysis of consultative material

Project Team Final Report Production of final report which reviews the process, lists recommendations for reform and the rationale behind them, sets out timetable for implementation along with associated mechanisms.

National Steering Committee

Stage 4: Implementation Key Challenge: To ensure that impetus gained in earlier stages is not lost through slow implementation.

Project Team Final Report Presentation of report to relevant authorities, sector and its national stakeholders.

Press Conference (Final Report) National Steering Committee other authorities and further track-specific consultation

Implementation of recommendations through various tracks

Responses from various authorities, including impact assessments

Launch of new body to oversee implementation and monitor its progress, build sector capacity, and build public confidence in sector

Stage 5: Evaluation Key Challenge: To ensure impact measurement indicators, monitoring mechanisms and reporting protocols are in place in good time.

Monitoring and reporting on progress of implementation. Progressive track-specific and overall impact evaluation of project.

Evaluation Report Collation, analysis and presentation of assessment data with recommendations on continuous monitoring activities and possible future reform initiatives.

Press Releases (Implementation progress)

Press Conference (Evaluation Report)

Appendix 1: Field and Desk Research for Stage 1 Field Research: Mapping the current landscape of the sector Establish an up-to-date and definitive register of civil society organisations to elicit crucial information about the sector, including: • Total number of organisations. • Current income of the sector. • Number and distribution of income sources across the sector. • Concentration of income across sub-sectors, geography, and other demographic factors. • Current expenditure and its distribution. • Estimated current assets and liabilities. • Workforce data - full-time, part-time, voluntary (including Trustees); % of total national workforce. • Estimated value of unpaid work in relation to direct services, administration etc. • Growth and development trends in numbers of organisations and patterns of economic activity. • Distribution of regulatory mechanisms across the sector, vis a vis, legal form of organisation, governing document, governing body, liability, responsible regulator etc. • Distribution of self-regulatory frameworks across the sector - subsector specific, across networks, or accreditation systems related to specific activities such as fundraising etc. Provide a narrative summary of the historical development of the sector as contextual material to observed growth and development trends. Perform a public survey (see Appendix 2) on trust and confidence in the civil society sector to: • determine current levels of public confidence. • determine how levels of trust vary according to different demographic factors - age, gender, geography, ethnic composition, personal involvement in the sector, attitude to the sector as a whole, amount donated to charity in a year etc. • identify drivers of trust. • establish a baseline metric for measuring how public confidence changes over time. • examine relationship between trust and performance of charities. ‘branding’ or profile of charities. international v local charities.

scrutiny of charities. understanding of charities. involvement with charities. attitude towards the sector. giving. fundraising methods.

Perform an management-level survey (see Appendix 3) of civil society organisations to: • update and confirm registry information. • supplement registry information so that sufficient categories of data can be gathered for sector analysis. • canvas initial opinions regarding key issues concerning sector, including: fundraising and financial sustainability. regulation and its administrative burden. tax exemption and associated procedures. sector capacity. financial reporting. communication strategies. self-regulatory frameworks and codes of practice. working in partnership with other NGOs, the government and the private sector.

Desk Research: Key adaptable models

factors,

underlying

principles,

and

Provide the following background papers to accompany the project scope document:

A taxonomy of civil society. A background paper that attempts to address the definitional and classificatory challenges posed by the sector. • Defining the sector involves capturing the distinctive purpose or characteristics of the diverse range of organisations involved that sets it apart from the government and private sectors. As a brand name for the sector, it has important implications for public recognition and understanding; and as an umbrella term, it is related to an understanding of distinctions in legal status, legal form, and the implications which follow as part of the regulatory infrastructure, including tax benefits and other incentive schemes.

•

Classifying the sector involves finding attributes which distinguish organisations within the sector apart. A classification system which divides the sector into sub-sectors, whether it be on the basis of beneficiary grouping, size, function, operational field etc., has important implications on the monitoring and evaluation of the sector, scale and scope analysis, the identification of overlaps and gaps in service provision, and the development of effective self-regulatory frameworks.

Key characteristics and challenges. A background paper that seeks to identify and provide an overview of underlying principles and pragmatic approaches to the challenges peculiar to the civil society sector. These include, • The independence of the sector and how this impacts regulation and partnership working. • The diversity of the sector and how this impacts competition and sector sustainability, duplication and efficiency in service delivery, and regulatory frameworks. • The complexity of sector accountability and how this impacts stakeholder management. • The legitimacy of the sector and how this impacts involvement in public policy appraisal and public service planning and delivery. • The transparency of the sector and how disclosure or the lack of it impacts public confidence.

Regulatory Frameworks A background paper that considers the statutory supervision and public scrutiny of the sector based on the premise that an efficient regulatory system is essential for an effective sector. This paper: • examines the rationale for regulation, and identifies key principles and components behind an effective regulatory system. • provides an overview of different regulatory models, tools used for regulation, and the latest developments in the field. • outlines legal issues that make up a regulatory legal framework. • describes current patterns of both generic and functional regulation, and identifies redundancy, overlaps and gaps in the system. • reviews current regulatory infrastructure and jurisdiction, and examines the administrative burden associated with regulation. [Note: The legal framework surrounding government support in the form of direct subsidies through permitting organisations to bid for government grants and contracts, and indirect subsidies through tax preferences are covered separately in the background papers ‘Government Relations’ and ‘Fiscal Frameworks’ respectively. The legal framework surrounding public charitable collection issues is covered by the background paper ‘Accountability in Fundraising’.]

Fiscal Frameworks A background paper that examines the principles, systems and procedures related to tax preferences that are available to the sector and its supporters, including, • income tax exemption or preference for civil society organisations from donations, grants, and membership dues. capital gains earned on assets or the sale of assets. earned income from income-generating activities. VAT and customs duties. other related tax and fiscal laws such as inheritance tax, property tax, sales tax, death duties for bequests, etc. • tax credit or deductions against personal or business income tax for donors. • schemes for promoting tax efficient giving.

Accountability in fundraising A background paper on accountability measures covering the area of fundraising, which is often the public face of the sector and thus has a marked influence on public attitudes towards the sector. This includes, • an examination of current legislation, jurisdiction and associated mechanisms governing the public collection of charitable funds. • an exploration of self-regulatory mechanisms to complement improvements to the formal regulatory system in the form of an overall code of good fundraising practice, various specific codes covering the different aspects of fundraising, and possible forms of accreditation for organisations that voluntarily agree to abide by these codes.

Self-Regulation A background paper that provides an overview of the latest developments in generic and sub-sector specific self-regulatory frameworks, and examines the capacity needed to embed these into organisational culture.

Information Dissemination A background paper that compares current levels of disclosure, quality of information provided, accessibility of information and the provision of communication channels, with what is needed to build public confidence and greater credibility for the sector. This includes, • the system of providing general and comparative information on the sector as a whole to the public and other national stakeholders. • standard information returns that are part of the mandatory requirements of the regulatory framework, and whether these are accessible and suited to the public’s need to base decisions of support.

•

self-regulatory transparency indices and disclosure codes that would allow organisations within the sector to benchmark themselves against comparable bodies in other sectors, provide credible information on performance and programme outcomes in a way that illuminates achievements against objectives, and provide greater consistency in the way costs and expenditure is allocated so that meaningful financial comparisons can be make.

Sector Capacity A background paper based on the premise that, with the exception of a small minority involved in the fraudulent practice of diverting public-benefit funds for private gain, the bulk of the sector’s difficulty in building and maintaining a secure base of public support stems from its lack of capacity in key areas. It recognises that building sector capacity to ensure that it has the skills, knowledge, structures and resources to realise it’s full potential is a crucial component to achieving this project’s objectives. This paper: • examines the different aspects of sector and organisational capacity. • reviews and assesses current sector capacity and identifies key and priority deficiencies. • provides an overview of options to overcome these with a long-term and sustainable view to developing the effectiveness and efficiency. • examines the capacity needs of national sector stakeholders required for the strengthening of constructive and mutually-beneficial partnership, and for the of managing realistic cross-sectoral expectations.

Government Relations A background paper appraising current practices regarding government-NGO partnerships and exploring new ways to help the government and the sector improve their relationship to mutual advantage, and fulfill their complementary roles in the development and delivery of public services, including: • the development of a shared vision and a common set of principles. • a working framework on how the two sectors should work together on national and local levels. • best practices in partnership working. • a code of practice to streamline and strengthen approaches to funding and procurement. • a code of practice to streamline and strengthen approaches to consultation and policy appraisal.

Partnership with the Private Sector A background paper examining the traditional relationship between the private sector and civil society, the impact of corporate social responsibility programmes on the sustainability of the civil society sector, and innovative partnership models for collaborative initiatives between the sectors.

Institutions and Accountability A background paper that expands the recognition in the NIP of the importance of structure and institutions, and its assertion that outmoded, unfocused and poorly coordinated structures are inefficient and ineffective. This paper: • identifies the principles behind the importance of structure and the part institutions can play in strengthening sector accountability. • reviews the different institutions currently involved in the operating environment of the civil society sector, and identifies redundancy, gaps and overlaps in function. • provides an overview of the different models of ‘charity commissions’, and a framework for assessing their relative strengths and weaknesses. • presents the rationale behind the establishment of a new permanent body as suggested under the expectations of this proposal, outlines a suggested mandate for this body and lists it’s functions and objectives, provides a possible 5-year corporate plan along with indicators to evaluate its effectiveness, and suggests an organisational structure with appropriate accountability and reporting mechanisms.

Participatory framework and consultative methodologies A background paper based on the recognition of the importance of open dialogue, and the premise that early, consistent and wide-ranging stakeholder consultation is directly related to engendering ownership and securing the eventual success of this undertaking. This paper examines: • the variety of forms and platforms available (written submissions, listening events, meetings and seminars, visits to representative groups and other interested parties, surveys of stakeholders and the general public, internet discussions fora, qualitative research including in-depth interviews and focus groups etc.) to improve decision making by ensuring that decisions are soundly based on evidence. • the design of a mixture of targeted and general consultations to get the best spread of views and open up decision-making to as wide a range of people and organisations as possible. • a general code of practice to ensure consistency across all platforms, and specific administrative arrangements and protocols for each form. • timeframes so that reasonable intervals are allowed for responses and their analysis. • human and financial resources required to maximise the effectiveness of participation and consultation, including the need for a multi-lingual approach to mitigate the possible effects of privileged access.

Appendix 2: Public Survey on trust and confidence in the civil society sector Purpose: • •

• • •

To determine current levels of public confidence. To determine how levels of trust vary according to different demographic factors - age, gender, geography, ethnic composition, personal involvement in the sector, attitude to the sector as a whole, amount donated to charity in a year etc. To identify drivers of trust. To establish a baseline metric for measuring how public confidence changes over time. To examine relationship between trust and performance of charities. ‘branding’ or profile of charities. international v local charities. scrutiny of charities. understanding of charities. involvement with charities. attitude towards the sector. giving. fundraising methods.

Some suggested questions: How much trust do you have in charities - from 1-10. How much do you trust charities to do the following - from 0-10: Make a positive difference to the cause. Make sure fundraising is ethical and honest. Spend the money donated wisely and effectively. Make sure that the organisation is well managed. Make sure a high proportion of donated money gets to the end cause. Inform donors how the charity is run. Inform donors how the money donated was spent. Inform donors of the impact on the beneficiaries after the money was spent. To what extent do you agree or disagree with the following - disagree a lot, disagree a little, neither agree nor disagree; agree a little, agree a lot: don’t know. Most charities are trustworthy.

Most charities are not trustworthy. I trust charities more if I’ve heard of them. Charities are regulated to make sure that they act for the public benefit. Charities spend too much on their administration. I trust charities if they help local people. Charities use unfair fundraising techniques. I know very little about how charities are run. I trust charities with well known patrons. I trust big charities more than small ones. I trust charities if they help people in other countries. I am confident donating to an unknown charity if the cause is good. Can you name some of the charities that you trust: Are there any charities or types of charities that you don’t trust: Do you trust international charities more than local ones- yes; no; there is no difference: Why do you trust some charities more than others: They have a good reputation. I have seen what they do. I believe in the cause. They do an important job. They are regulated well. They are set up for the public good. I have heard a lot about them. How important a role do you think charities play in society today Extremely important; Very Important; Quite Important; Not very important; Not important at all. Approximately how much money did you donate to charity in the last year - more than RM1000; less than RM100; can’t remember; I don’t give to charity generally; I prefer to give good rather than money. When you are asked to donate money to a charity, do you usually try to check up on the charity first - Yes; No; I don’t give to charity. Why don’t you check up on the charity: Can’t be bothered. Too embarrassing. Not enough time.

Don’t know how to. Don’t want to feel ungenerous. Easier to give a little money to get rid of them. Prefer only to give to my favourite charities. I don’t ask because I won’t know if they are telling the truth or not. I don’t because the cause is worthwhile. Other. Don’t know. When you have donated money, have you done any of the following yes; no: Asked for proof of identification. Asked to see a valid licence. Checked to see if the collection box was sealed. Asked to see a letter from the charity. Checked if the charity was a registered charity. Checked that it was a genuine charity (how did you check). Given to a charity you hadn’t heard of. Given to a charity you had heard of but didn’t know how the money was going to be spent. Asked how your money was going to be spent. Found out how the charity was run. Other. How have you given to charity over the last year: Collection box. Street collector. Collection envelope. Sponsored someone. Door to door collection. Cheque by post. Standing order. Credit card by phone. Credit card by internet. Joined a charity as a member. Direct debit on the street. Newspaper appeal. Radio appeal. Charity event. Bought items for charity (eg, cards, gifts etc) Pledged money to charity in my will. Did you give to the tsunami appeal - yes; no; how.

Have you been involved with a charity - No; Yes, as a volunteer; Yes, as a paid employee; Yes, as a Trustee; Yes, as a Committee Member; Yes, as a member. Are you still involved in that capacity - Yes; No. In which ways have you or your or friends been helped by a charity over the last 5 years: received financial help. received personal care from charity workers. received advice from a charity after getting in touch with them. used the services of a charity. other. none of these. donâ&#x20AC;&#x2122;t know. When you are asked to donate money, how important are the following from 0-10; The cause is more important than the organisation asking for donations. The method of fundraising is more important than the cause. The method of fundraising is more important than the organisation. I prefer to give when I have a chance of winning something myself, eg a competition or a raffle. A charity that is officially registered gives me confidence that the money will be spent well. What issues relating to charities most concern you - from 0-10: People posing as fund-raisers/collectors who are not. Charities paying for their collectors. High administrative costs of charitable organisations. Charities are too political/being too political. Some causes are not allowed to be charities when they should be. Some causes are allowed to be charities when they should not be. Charities spend too much money on advertising. Charities spend too much money on organising events. The government should take more responsibility for the kind of work charities do. The government should give more responsibility to charities. Other -

Don’t know. Nothing. Which of these would you have most confidence in to give you accurate and reliable information about charities - from 0-10; A charity’s annual report and financial accounts. Charity leaflets. Friends or relatives who have a connection with the charity. Information you requested from a charity. A charity’s website. Magazine articles. Newspaper advertisements/appeals by a charity. Newspaper articles. People collecting money for charity. Radio advertisements/appeal by a charity. TV advertisements/appeal by a charity. TV news or documentaries. Radio news or documentaries. Independent information about the performance of a charity. Other. Which of these organisations have you heard of: The Securities Commission. The Companies Commission. Bursa Malaysia. The Bar Council. The National Audit Office. The United Nations Development Programme. Institute Integrity Malaysia. The Anti-Corruption Agency. The Law Society. Which organisation or organisations do you think are responsible for regulating the work of charities to make sure they operate within the law: The Securities Commission. The Companies Commission. Bursa Malaysia. The Bar Council. The National Audit Office. The United Nations Development Programme. Institute Integrity Malaysia. The Anti-Corruption Agency. The Police. The Auditor-General.

The Government (unspecific) The Department of (various). A Charityâ&#x20AC;&#x2122;s trustees/governing board. A charityâ&#x20AC;&#x2122;s staff. The courts (unspecified). Consumer organisations. Local government departments. To what extent to do you agree or disagree with these statements disagree a lot, disagree a little, neither agree nor disagree; agree a little, agree a lot: donâ&#x20AC;&#x2122;t know. There are too many regulations governing charities. There needs to be tighter control over the law governing charities. The law governing charities should be enforced better. When I give money, I feel confident that most of it will go directly to the cause. Charity trustees should be accountable by law for the way in which the charity operates. There should be more information about charities so I can make better decisions on which to support. There are too many charities. It should be easier to be a charity.

Appendix 3: Stage 1 Sector Survey Purpose: â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

To update and confirm registry information. To supplement registry information so that sufficient categories of data can be gathered for sector analysis. To canvas initial opinions regarding key issues concerning sector, including: fundraising and financial sustainability. regulation and its administrative burden. tax exemption and associated procedures. sector capacity. financial reporting. communication strategies. self-regulatory frameworks and codes of practice. working in partnership with other civil society organisations, the government and the private sector.

Some suggested questions: (Work in progress)