PCNC - Background and Rationale

The Role of Philippine NGOs

The Philippine NGO sector has developed a strong reputation for the delivery of basic services to the urban and rural poor. This has been recognized by national and local government, by other NGOs in the region, and by the donor community. In fact, NGO participation in all aspects of governance is enshrined in the Philippine constitution. The past administrations of President Aquino and President Ramos have included NGOs in local and national consultations on important issues and have encouraged them to participate in the governance processes of the country.

The newfound recognition of the role and contributions of the NGO sector in Philippine development has led to the spectacular rise in the number of NGOs in the country. Some reports state that there are as many as 60,000 non-profit, non-governmental organizations registered in the Philippines today.

Partnership Between Government and NGOs

This rapid expansion in the number of NGOs has also given rise to concerns about the government's ability to regulate all of these organizations and ensure that the resources that they receive are actually being used for their declared goals and objectives. This concern led the Department of Finance (DOF) to initially recommend that only donations to the government's disaster relief program be tax-deductible when it first submitted its draft Comprehensive Tax Reform Package (CTRP).

Upon representation by the non-profit sector, however, at the very first consultative mechanism on the CTRP, the government did acknowledge that in general, the non-profit sector was an effective complementary sector to government. However, the government needed to be assured that donations to the NGOs were not being used as tax dodges by some donors.

The Department of Finance (DOF) then challenged the NGO community to establish a self-regulatory mechanism and body which could certify to the legitimacy, accountability, and transparency of NGOs, especially those receiving donations from individuals or corporations in the Philippines. Only those NGOs so certified would receive the status of donee institution, and donations to these certified donee institutions can be deducted from the donor's income tax.

In response to this challenge, the Philippine Council for NGO Certification (PCNC) was organized by six (6) of the country's largest national networks of NGOs. After many meetings and consultations among NGOs and between the PCNC and the government, a Memorandum of Agreement (MOA) was signed between the Department of Finance and the PCNC. The MOA authorized the PCNC to accredit NGOs applying for donee institution status, as long as these NGOs meet the minimum standards for certification. The certification from PCNC would then serve as the basis for the Bureau of Internal Revenue (BIR) to grant donee institution status to NGOs which have been certified by the PCNC. This arrangement serves as a new model of partnership between government and non-government sectors.

Seal of Good Housekeeping

These efforts of the six national networks, however, are not only to pursue tax incentives for donors to NGOs but also, and even more importantly, to promote professionalism, accountability, and transparency among their members, and the Philippine non-profit sector, for that matter. Already, horror stories have been told about so-called fly-by-night NGOs or other organizations established solely for the vested interests of individuals or groups under the alleged purpose of social development. This time, the six networks have made commitments to enjoin their own members to apply for PCNC certification and to make recommendations to the Council for de-certification of any erring member. The PCNC certification shall then become a "seal of good housekeeping" which hopefully shall also help the funding agencies and partners, both local and foreign, in their decisions on which NGOs deserve their support.