(Illustration by Laura Marshall)
As other articles in this series have discussed, compliance requirements are ramping up around the world and present a significant burden on philanthropic organizations of all kinds. These include restrictions and barriers related to the formation and registration of organizations, and the kinds of activities organizations can and cannot do. They also include barriers to accessing tax incentives or tax exemption; constraints on domestic funding and operations by cross-border foundations and nonprofits; increasing restrictions on unregistered or unincorporated domestic groups; often exceptionally onerous reporting requirements; impediments to fundraising and access to resources, both domestic and overseas; and direct repression of civil society, nonprofit, and philanthropic organizations, including the imprisonment of civil society leaders.
Although restraints like these are more severe in countries like China and Vietnam, they are not limited to authoritarian states. US government agencies, for example, are increasingly attempting to restrict, silence, and even close down nonprofits and philanthropic institutions through the use of executive orders, defunding of nonprofits, threats to advocacy groups and foundations, and greater compliance requirements.
Yet even in the midst of this bleak and darkening picture, there is some reason for hope. In a variety of countries in Asia and the Pacific, successful compliance with state laws and norms is enabling civil society organizations and funders to pursue reform and even oppose state policies that seek to repress civil society and its influence. Initiatives such as the Centre for Asian Philanthropy and Society and other efforts are helping organizations use compliance to carefully expand their scope of action, strengthen their operations, and, by professionalizing the compliance industry, increase the sector’s autonomy, even in highly controlling states.
Organizational Strength Through Compliance
First, organizations that comply with regulatory norms get something in return from the state; their legality gives them at least some space for action, even if their vision and goals don’t align. In India, for example, it’s hard for nonprofits to meet national and state-level compliance on issues related to governance and investment of funds, and enforcement of the country’s Foreign Contributions Regulation Act, which stipulates rules for the receipt of foreign funding, is both robust and frequently changing. Organizations that receive significant foreign funding sometimes live in fear of sanctions, deregistration, the withdrawal of tax benefits, closure, and the arrest of their leaders.
But compliant organizations in India are lawful organizations, and lawful organizations can advocate for their cause, operate more transparently, and even challenge the state to defend marginalized populations or their own interests. For example, when the Indian Ministry of Home Affairs stopped Greenpeace India’s access to overseas funds, Greenpeace India successfully sued the government. As the Environmental Law Alliance Worldwide noted, a prerequisite to the action was compliance: “Greenpeace India established that it was properly registered under the Foreign Contributions Regulation Act … and regularly filed necessary returns with the Ministry of Home Affairs.”
Second, many organizations are building internal capacity to meet compliance requirements in ways that make them stronger overall—often far stronger—than they were in the past. Throughout Asia, for example, ever-increasing compliance mandates are forcing organizations to develop accounting, audit, corporate, budget, employment, and tax skills and capacity to establish their legality and gain domestic funding, overseas funding, and contracts with government for service provision. In China, for example, organizations that achieve high regulatory and governance ratings from assessment bodies experience less harassment from the state, and have more opportunities to work directly with the government at national, provincial, and sub-provincial levels.
While contracting and collaborating with government to deliver services generally gives states greater control over nonprofit operations, it also allows nonprofits to win state funding and advance their own agendas. A recent Bridgespan study documents how foundations like the Tanoto Foundation in Indonesia and the Jollibee Group Foundation in the Philippines have used cooperation and contracts with government to further their own programmatic goals, such as services related to childhood stunting and school lunch programs, and advocate for policies and services that may sometimes go beyond state priorities. Compliance is a prerequisite for these activities.
Third, compliance strengthens the nonprofit sector’s agency and autonomy by professionalizing the compliance industry. Across Asia, nonprofit accountants and accounting firms, lawyers and law firms, tax specialists, and other professionals have come into their own in the past decade, contracting with civil society organizations and serving as a compliance bulwark against the state.
The ForNGO public interest law firm, for example, has helped Chinese charitable organizations and foundations meet compliance requirements since 2012. In India, compliance professionals have existed for much longer. For several decades, consultancies like the Centre for Advancement of Philanthropy and AccountAid, and other lawyers, accountants, and advisors have helped Indian nonprofits meet compliance mandates at the national and state levels, and often emerge stronger for the battle.
The Road Ahead
Compliance burdens on nonprofit and civil society organizations remain intense, even crushing, in areas of Asia and beyond. For many nonprofits and foundations, the question is how to maintain some level of autonomy and find ways to reform, criticize, or oppose state power when it impedes their work or threatens their right to operate.
In addition to the approaches above, organizations can strengthen processes that promote democracy and a culture of criticism within their own walls, as we have sometimes seen in China and elsewhere. They can also use their legalized status to build coalitions with others in civil society—including the media, legislators, even sympathetic government officials—often at the local level, as we see in the Philippines and elsewhere in Asia. And they can try to prevent their organizations from being overwhelmed by compliance—in part by becoming proficient in it, engaging specialized help, and, where possible, pushing for a reduction in requirements—to keep space for advocacy and the provision of services.
Indeed, without underestimating the burden of compliance systems, organizations that use them to legitimize and fortify their operations in these ways can withstand significant oversight and find ways to achieve what really matters—creating the social change and equity they seek.
Read more stories by Mark Sidel.