1 The Danish Council on Social Volunteering Nytorv 19, 3. sal DK – 1450 Copenhagen www.frivilligraadet.dk [email protected] European Commission 25/8 2005 Directorate-General Justice, Freedom and Security Directorate D: Internal Security and Criminal Justice Unit D2: Fight against economic, financial and cyber crime LX 46 3/154 ; B-1049 Brussels, BELGIUM Att:  Ms Dora Balazs and Mr. Nicolas Kaye Comments on the document “Draft Rec ommendations to Member States regarding a Code of Conduct for Non-profit Organisations to Promote Transparency and Accountability Best Practices” A. General comments The Danish Council on Social Volunteering – a state body appointed by the Minister of   Social   Affairs   -   would   like   to   comment   on   several   aspects   of   the   draft recommendations regarding a Code of Conduct (COC) for Non-profit Organisations (NPOs) to Promote Transparency and Accountability Best Practices: The Council for Social Volunteering supports transparency practices both in general and specifically to avoid misuse of funds for criminal purposes and terror financing. However, we fear that these draft recommendations can do much harm to the non- profit sector in Denmark without clear documentation that the recommendations will address the alleged vulnerability of  non-profit organisations to criminal exploitation, including the possible financing of terrorism. The  Council  for  Social  Volunteering  is  of  course  willing  to  enter  into  a  detailed discussion on how to avoid misuse and promote transparency in our sector. But in such  a  discussion  there  is  a  need  for  more  detailed  knowledge  and,  not  least, documentation. The non-profit sector is very diverse and functions in various ways in the  EU  member  states.  In  Denmark  –  and  in  other  Nordic  countries  -  we  have  a constitutional  guaranteed  right  to   freedom  of  association   with  no  obligation  to register.  The  right  to  organise  without  having  to  register  with  any  governmental authority  has  been  a  fundamental  right  in  developing  the  Danish  democracy  and welfare state. By  changing  this  fundamental  right,  we  find  that  a  minimum  of  factually  based documentation is needed to substantiate that the alleged problems with NPOs and terror   financing   in   Denmark   are   best   addressed   with   this   COC   and   the recommendations to member states. This is not the case at present. B. We have three main concerns:

2 1.  Freedom  of  association  will  –  in  a  Danish  context  -  be  compromised  by  the requirement for registration in COC. Furthermore, the registration requirement in the COC  cannot  be  seen  as  voluntary  if  member  states    are  making  registration  a requirement for organisations in order to obtain preferential tax treatment, the right to collect funds and access to public grants. 2.  The  consequences  of  the  many  types  of  governmental  control  in  the  COC  may harm  people’s   willingness   to   get  involved  in  non-profit  work,  especially  among minority  ethnic/marginalised  groups.  Moreover,  we  fear  it  may  lead  to  a  general mistrust that is not founded or fair when we look at the way the NPO-sector works in Denmark. 3.   The   requirements   needed   for   being   in   compliance   with   the   COC   may   be detrimental  to  the  development  of  innovative  and  new  types  of  organisations  and network  that  are  not  -  and  cannot  -  be  as  formalised  or  carry  the  administrative burden as proposed in the draft. Thus, with this proposal we risk creating a very big monitoring system that is liable to have negative consequences for the civic engagement – even without knowing if or providing   a   minimum   of   documentation   that   the   proposed   requirements   and mechanisms would work as indented in a Danish context. Therefore,  we  would  like  to  see  an  in  depth  examination  of  the  existing  level  of transparency  in  the  Danish  NPO-sector,  the  efficiency  of  rules  and  regulations already  in  place  (for  example  the  regulation  of  public  collections  for  charities)  and the  problems  with  transparency  -  before  starting  to  devise new  mechanisms  of control. Moreover, despite lack of documentation, will NPOs who may be committing serious criminal acts be more visible for the relevant authorities in this “registration and  transparency  system”  than  today?  Speaking  abstractly,  is  it  not  possible  to employ   other   means   to   identify   the   last   hypothetical   0,1   percent   without overburdening the 99,9 percent? C.  Besides  these  general  comments  and  concerns,  we  have  some  specific comments to the proposed COC: 1. In section B bullet point 1, it is not clear whether the proposal is a registration-list over all members in an NPO or the directors/executive committee members. While there in most organisations is transparency when it comes to executive committee members, directors and so on, it will be very critical if all members have to register. For  many  people  membership  and  doing  voluntary  work  for  an  organisation  is  a personal and private matter - registration here can be compared with being forced to register for which party you vote. If all members of an NPO have to register we fear that  many  would  turn  away  from  supporting  and  being  active  in  NPOs,  especially among marginalised groups. One example could be an organisation that works for and with HIV-infected citizens, an illness where social stigma sadly is still a reality. Here,  members  can  risk  to  be  exposed  by  a  registration-list  in  a  way  they  do  not wish.

3 Moreover,  it  will  be  even  worse,  if  these  recommendations  later  on  will  create  a demand  for  registering  beneficiaries.  Beneficiaries  could  be  social  clients  where exactly  the  need  not to  register  is  important  for  the  ident ity  and  raison  d’être   of NPOs,  not  seeing  beneficiaries  as  “clients”  with  files.  It  could  also  be  former refugees  who  have  very  bad  experiences  with  registration  and  therefore  will  turn away  from  participating  in  society  though  NPOs.  It  could  be  devastating  for  our sector if mistrust, rules and regulations come in between NPOs and the people they are trying to help or support.   2.  The  requirements  of  proper  book-keeping  and  Annual  Financial  Statements  of income  and  expenditures  (bullet  point  2  in  section  B)  are  already  regulated  in Denmark. But the requirement of being able to present to a new regulatory authority an  annual  report  that  states  how  activities  have  promoted  the  NPO’s  General Objectives  is  a  form  of  control  that  we  cannot  support.  Already  because  it  is  a violation of the freedom of association. A board and leadership in an organisation is responsible  towards  the  organisation  and  the  members  –  not  a  governmental authority - as long as nothing illegal is taking place. 3. Bullet point 3 in section B  – full and accurate audit trails of funds - could in fact also  mean  criminalising  almost  every  NPO  working  or  supporting  activities  outside their country. NPOs have to follow proper book-keeping practices which is currently the  case.  But  the  requirements  of  full  and  accurate  audit  trails  can  prove  to  be almost impossible in the real world. And in real terms it will mean a reverse burden of proof, which is inconsistent with the European Convention on Human Rights. D. Overall conclusions The fight against terrorism is important but a new proposal is needed. Our main concerns are: Lack of documentation The proposals are out of proportion Inconsistent with democratic values as freedom of association In real terms it will reverse the burden of proof when it comes to full and accurate audit trails of funds Administrative burden for NPOs Detrimental to the development of innovative and new types of organisations and network Detrimental for the social work of NPOs, especially among marginalised groups Sincerely Terkel Andersen

4 Chairman, The Danish Council on Social Volunteering