ECNL Response to the Public Consultation on the Review of the Financial Regulation

The EuropeanCenter for Not-For-Profit Law (ECNL) has published a 39page response to proposed new EU financial regulations that would apply tononprofit organizations (NPOs).  ECNL raisesconcerns about our key issues: (i) a cap on indirect expenses; (ii) treatmentof in-kind contributions; (iii) treatment of exchange rate changes; and (iv)information about upcoming and awarded grants and paperwork for applicants.  ECNL’s report indicates that the proposedregulations on these issues  may  deter NPOs from engaging with the EC onimportant matters.

First, ECNL’s report states that the EC’s 7% cap on indirect(administrative) expenses is in direct conflict with the EC’s goal of increasedtransparency and accountability because it constrains the resources that NPOscan devote to professional financial management, accounting and reporting.  The report suggests that the EC raise theflat rate and introduce new methods of calculating NPO direct costs to allowfor full reimbursement of legitimate direct costs.

Second, the report suggests that the EC provide appropriate guidance andcriteria on how NPOs should record and report in-kind contributions.

Third, the report lays out several difficulties regarding exchange rate changes.  ECNL suggests that the regulations classify exchangerate losses as project expenses and exchange rate gains as project income.  Such classification would permit recovery oflosses and offsetting of gains (either through reduced EC funding or paymentsto the EC).

Finally, the report identifies major inefficiencies in the disseminationof information regarding available grant funding.  The inefficiency is caused by late reportingby the various EC Directorates-General and a failure to categorize and organizegrant data.  The ECNL proposesaggregating all of the grant award information in one well-structured portalwith information from all Directorates-General and financial instruments.  Specifically, ECNL suggests that the portalshould contain information on (1) annual work programs of departments andfinancial mechanisms; (2) calls for proposals and tender opportunities; and (3)awarded grants and contracts.

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