Hungary: The end of the public foundations

The so called public foundations are unknown abroad, they exist only in Hungary since 1994. The introduction of these foundations had a twofold aim. On one hand, to find not only state funds but also civil support to the activities of foundations serving public functions. On the other hand, they aimed to involve independent experts in the decision-making process. Unfortunately, these aims could be only partly fulfilled. The private funds do not appear at all, the public foundations therefore are financed from state funds. The foundations use the money to finance their own functioning, and only a fraction is distributed through applications among civil organisations. In other words, they distribute state funds, while they run as independent organisations financing their committees, staff with salary and offices. The activities of these organisations are regularly checked by the State Tax Office and the Hungarian Court of Audit. That means that it requires further state funds to finance the audits. Since 1994, the different governments set up more than 40 public foundations and including those which were established by the local governments, the total number rises over 100. The proportion of the state funds available to these foundations was always depending on which government founded the organisation and at the given time which political force was forming the government. Now the Gurcsány-government took into its head to save money on the public foundations by abolishing them. The only exeptions are those organisations which were founded by the Parliament´s decision or by international agreement. It means that by end of 2007 only one-fourth of these foundations could still exist. However, this raises the questions if any of these organisations can be held responsible for the lack of transparency in distributing tax payers´money, knowing that the relevant law does not define which percentage of the 21 billion HUF (approx. 7.500.000 ?) given to them in 2005 the foundations should distribute among the civil societyorganisations. The idea of abolishing the public foundations however is not a recent one. Different governments have considered it almost since the introduction of the law concerning the establishment of the public foundations. The reason for that is that these public foundations are strange creatures: the founder can be the government, the local government or the Parliament. The founder defines the aim of the public foundation and gives the money to run the organisation. Foundations under Hungarian law always become independent from the founders, and the latter does not have the competence to intervene in daily matters. In case of the public foundations, this means that the government, the ministry or the local governments remain responsible for the function of the foundation, even though legally they have no control over them. One can ask what the motivation of establishing the public foundations was, if it can gives space for such a controversial situation. The reason is simple, as the different state organisations could become partners of the private foundations. The consideration behind the establishment of public foundations was therefore originally to organise civil society activity in a more transparent way and within a more regularised environment. Due to the original proposal by the current government, every public foundation would have been abolished until the end of 2007. However, there is now an idea which the government is backing which would allow a transition period in which every public foundation would be individually reviwed and decided if the abolition or the continuation is the more reasonable option. This amendment also would make it possible for local governments to decide if they still wish to maintain and finance public foundations or prefer to abolish them. The situation untill now was therefore quite complicated, but with the proposed changes it will not be simplified, at least not on the short run.