A. How To Start An NGO B. SEC Registration C. PCNC Accreditation D. Frequently Ask Questions

A. B. C. D.

How to start an NGO SEC Registration PCNC Accreditation Frequently ask Questions

A. HOW TO START AN NGO Before you start the paperwork or recruit members, the first thing to do in starting an NGO is this: ask yourself some basic questions. You need to have a clear idea about what you really want to do. Try to answer these questions in a single statement:

1.1 BASIC STEP 1. What is the purpose of this NGO? Why do you want to set up an NGO? STEP 2. Who are your beneficiaries? Think about who will benefit from your NGO. Will you cater to children, who can’t afford to attend school, or women who are constantly battered by their husbands or partners, or aspiring entrepreneurs who need financial guidance, etc? STEP 3. Do you have a planned Board of Directors? The Board members must be of legal age, and the number of members must not be less than 5, and not more than 15. STEP 4. When and where do you plan to establish this NGO? 1.2 ORGANIZE As soon as you have your Board of Directors ready and confirmed, organize a meeting together. STEP 5. Write your Vision statement. How do you see this NGO after one year, three years, or eight years? What are your beliefs or core values as a team? STEP 6. Write your Mission statement. How will you achieve your vision of the NGO? (The purpose of the NGO is usually the organization’s standard mission statement.) Keep the statements short and easy to understand. Tip: Let each Director/member say each statement in his or her own words.

STEP 7. Decide on your goals as an NGO. What do you want to accomplish in the next 3, 6, or 12 months? What results do you intend to see in a specific period of time? These results need to be specific, and measurable. STEP 8. Choose a name. The SEC Memorandum Circular No. 8-2006 says that the corporate name must include the word Foundation. * 1.3 PREPARE YOUR DOCUMENTS Every organization has its corporate documents. You’ll need these when you apply for registration, certification, etc. Have them either typewritten or computer-printed. Make copies of each document to keep in file. STEP 9. Write the Articles of Incorporation. The Articles of Incorporation are your corporate document that contains basic information about your NGO. See this page to know more about how to write one. (Note: Any corrections in the articles of incorporation should be duly notarized before filing for SEC registration.) STEP 10. Draft the By-Laws. Bylaws contain the rules and the procedures for your meetings, elections of officers, etc. See this page to know more about how to draft your own bylaws. STEP 11. Prepare a list of members, and another list of contributors and/or donors. Include the date of birth, specific address, and Tax Identification Number (TIN) of each member. (Note: Majority of the members must be residents of the Philippines.) STEP 12. Prepare the Minutes of the Organizational Meeting. The organizational meeting is usually the first formal meeting of the Board of Directors. It is often during the organizational meeting where the articles of incorporation and bylaws are approved and signed, and decisions are made about electing or appointing officers. (Note: The articles of incorporation and bylaws should be signed on the same date.)

B. SEC REGISTRATION An NGO must be registered first at the Securities and Exchange Commission (SEC), and to be registered, you’ll need some more documents. STEP 13. Prepare the following documents accordingly (according to the official SEC website): If you intend to register as a foundation, prepare a notarized certificate of bank deposit not less than Php1,000,000 (one million)*, and a statement of willingness to allow the SEC to conduct an audit. You are also expected to include the word “foundation” in your official organization name. For religious groups, refer to Sections 109-116 of the Corporation Code of the Philippines, and include an affidavit of verification by the chief priest, rabbi, minister, or presiding elder. For federations, submit a certified list of member-associations. For condominium associations, submit your Master Deed, and certification that there is no other existing similar association in the condo project. STEP 14. Secure a Name Verification Slip. Unit.

You can get one from the SEC website or from the SEC Name Verification STEP 15. Write an affidavit of an incorporator or Director undertaking to change the corporate name. If this wasn’t included in your Articles of Incorporation, have an affidavit ready. This affidavit is necessary in case the SEC receives notice that another corporation or person has acquired a prior right to the use of your NGO’s name, or that name has been declared misleading or confusingly similar to a registered name. STEP 16. Submit 4 copies (with cover sheets) of each document for SEC registration. In summary, these documents are: (1) the Articles of Incorporation, (2) ByLaws, (3) Name verification slip, (4) Affidavit, (5) List of members, (6) List of donors/contributors, (7) Notarized bank deposit certification, and (8) Statement of willingness to allow an audit. Note: An NGO’s registration papers also includes an endorsement from a government agency that corresponds to its purpose: charitable institutions must obtain endorsement from the Department of Social Welfare and Development (DSWD); educational institutions must be endorsed by the Department of Education (DepEd), the Commission on Higher Education

(CHED), and/or the Technical Education Skills and Development Authority (TESDA); and hospitals must get endorsement from the Department of Health (DOH). * Many have question the Php1M bank deposit requirement for foundations. Apparently this is for security purposes, as foundations are expected to use these funds to extend grants, etc. C. PCNC ACCREDITATION The Philippine Council for NGO Certification (PCNC) is the body that certifies/accredits non-profit organizations that meet the established criteria for financial management and accountability. An NGO that has operated for at least two years is usually eligible for accreditation. STEP 17. Fill up and submit the Letter of Intent form. (Download form) Once the PCNC receives this, you will be asked to submit several forms. STEP 18. Fill up the Application for Accreditation as a Donee Institution. STEP 19. Fill up the Survey Form. STEP 20. Submit 4 folders, containing a copy of each form, and a down payment of Php 1,000. Send these to: The Executive Director Philippine Council for NGO Certification, Inc. 6th Floor, SCC Bldg., CFA-MA Compound 4427 Interior Old Sta. Mesa, 1016 Manila Notes: You can download all necessary forms from the PCNC website. PCNC accreditation currently costs Php10,000.

D. FREQUENTLY ASKED QUESTIONS: NGO’S

Q: What makes an organization an NGO? You can actually do the paperwork on your own, but it is best to have them checked by a lawyer and to seek legal advice before filing your registration.

In the Philippines, an NGO is often a non-stock, nonprofit organization and meets several criteria: 1. Its founders or decision-making body do not involve people who work for the government. 2. It has a self-regulatory mechanism/body to certify that the organization is legitimate, accountable, and transparent – especially if it receives donations or government funds. 3. Its aims are non-commercial, non-lucrative, of public interest, and for the common good. 4. It has form/registration.

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Q: What is the difference between NGOs and NPOs? Most NGOs in the Philippines are non-stock, nonprofit organizations, so most people use the two terms interchangeably. Technically, however, not all NGOs are NPOs, and not all NPOs are NGOs. An NGO (nongovernmental organization) can actually either be nonprofit or for-profit entities. On the other hand, an NPO (nonprofit organization) is not a profit-making entity. It can’t simply make a profit and distribute it among its members. An NPO does not necessarily mean ‘charitable’ either. Q: What are the types of NGOs? According to the World Bank, there are two types of NGOs/NPOs: Operational NGOs (often relief-oriented or developmentrelated, and community-based) and Advocacy NGOs (usually directed towards raising awareness).

Q: What do NGOs do? NGOs under Philippine Laws operate and organize for any of the following purposes: 1. Social welfare, such as human rights, sexual abuse victims, child labor, prostitution, juvenile crimes, counseling (e.g. Red Cross, Amnesty International)

2. Charity, such as orphanages, basic services for/distribution of food, clothing, or medicine to the poor, housing, disaster relief services (e.g. Visayan Forum Foundation) 3. Education, such as scholarships, journalism workshops, school materials (e.g. Vibal Foundation, Tapulanga Foundation) 4. Environment, such as the restoration or conservation of nature, animal rights (e.g. WWF, PETA) 5. Health, such as hygiene, vaccinations, medicine, waste disposal, drug addiction recovery (e.g. Bukas Palad, KBCF Operation Paglingap Foundation) 6. Scientific research 7. Religion (e.g. Universal Wisdom Foundation) 8. Culture, such as the arts, music, and sports/athletics (e.g. Bayanihan Folk Arts Foundation, Inc.) 9. Economic, such as loans, skill training, financial consulting, job search assistance (e.g. NWTF) Q: How do NGOs/NPOs get funding? NGOs/NPOs get funds through different methods. They: –

Accept voluntary private donations

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Sell handicrafts, artwork, goods, etc.

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Charge for services

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Receive other grants from local agencies

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Charge membership dues

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Organize fundraising events, like charity sports

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Are partially or fully funded by the government

NGOs that receive funds from the government retain their NGO status as long as no government official is a member or a director.* Q: Are “nonprofit” and “not-for-profit” the same? Some groups make a distinction: not-for-profit refers to an activity – a hobby, for example (i.e. fishing). Nonprofit refers to an organization established for purposes other than profit-making. Technically, however, there is no significant difference between the two terms.

Q: Are NGOs/NPOs exempt from paying tax?

NGOs/NPOs have more tax exemption privileges than commercial businesses and for-profit corporations, but these privileges are NOT absolute. This tax exemption refers only to real property exemption, and not to other types of tax. Income earned by a non-stock, nonprofit institution from the sale or lease of its real property is subject to tax. Interest income from bank deposits and yield from deposit substitutes are likewise subject to the final withholding taxes. Q: What skills are necessary in running an NGO? Working in an NGO requires basic bookkeeping, events management, great communication and leadership skills, an ability to empathize, and a genuine desire to lend a hand and/or serve the NGO’s purpose. Q: How many NGOs/NPOs are there in the Philippines? There is an estimated 60,000 registered NGOs in the country.

Frequently Asked Questions: Starting an NGO Q: How can I start my own NGO? Click here for instructions on how to start an NGO. Q: What is a Board of Directors? The Board of Directors sets the policies and strategies for the NGO. It often includes the founders of the organization. A Board of Directors may also be called the Steering Committee, the Advisory Group, Board of Trustees, etc. Q: What is the minimum number of Directors? The number of Directors must not be less than 5, and not more than 15. All Directors must be of legal age. Q: Director, Trustee, Incorporator — are they all the same? An incorporator is the NGO’s version of a film producer. The incorporator, or founder, organizes the NGO, elects the first Board of Directors, and submits the Articles of Incorporation.

Once the NGO is registered, the Board of Directors begins to manage/direct the affairs of the organization. Incorporators usually join the Board of Directors. The terms ‘Director’ and ‘Trustee’ are often interchanged; however, ‘Trustee’ gives a more charitable impression. Q: Why is it necessary to have a Board of Directors? Directors provide guidance and much needed advice. The Board can develop plans, handle policy issues, etc. Selecting Board members from your community can also bring greater awareness. (e-myth). The Board is also said to be the conscience of the organization. Q: What is a VMG statement? A VMG statement is the vision, mission, and goals of your NGO. It is the guiding principle of the organization. Every decision, project, or even bylaw must serve the purpose of the organization. If you need help to write your VMG statement, click here. Q: Is it required that I put the word ‘Foundation’ in my NGO name? Not Necessarily Q: What are Articles of Incorporation? The Articles of Incorporation are the primary corporate document of your NGO. They contain basic information, the list of incorporators and Directors, and other policies. CLICK HERE to see a sample on how and what goes into the Articles of Incorporation Q: What are Bylaws? The bylaws are your NGO’s operating manual or handbook. This includes all your rules and procedures – about important decision-making, attendance, elections, and appointment of officers, etc. CLICK HERE to see a sample on how and what goes into the By-Laws. Q: What are Minutes of the Meeting? The Minutes of the Meeting refers to the record of a meeting. The first meeting with the Board of Directors is often called the organizational meeting and the Minutes must be recorded.

Frequently Asked Questions: SEC Q: What is the SEC? SEC is the Securities and Exchange Commission. It is responsible for the registration of securities, evaluation of the financial condition and operations of the organization for security issue. It is an agency under the Office of the President of the Philippines. Q: Are NGOs required to be registered at SEC? Yes, an NGO must be registered at SEC. Q: How can I register? There are two ways: you can register at the SEC Verification Unit, located at the SEC Building, EDSA, Greenhills, Mandaluyong City, right across the Philippine Overseas Employment Administration (POEA) and the EDSA Shrine. Or you can go online and use the SEC-iRegister, which is easier and more convenient. After paying the reservation fee, you get a name verification slip — this is one of the main requirements. Q: What do I need to register at SEC? Name verification slip, articles of incorporation, bylaws, affidavit, list of members, list of donors, a notarized certificate of bank deposit of no less than Php1,000,000, and statement of willingness to allow the SEC to conduct an audit. Q: How long does the SEC registration take? Assuming that all required documents are submitted and all information therein provided is in order, applications for registrations of new corporation/partnerships with the SEC are processed within an approximate of 7 days from date of filing. Q: How much does the SEC registration cost? Filing fee and Legal Research Fee (LRF) are dependent on the Authorized Capital stocks. Please refer to the SEC Fees calculator for the calculation of the Registration Fee of Stock Corporation SEC Fees Calculator

SEC SEC stands for the Security and Exchange Commission — the Philippines’ body that handles the registration of all NGOs or nonprofit organizations in the country. The SEC head office is located at SEC Building, EDSA, Greenhills, Mandaluyong City, Metro Manila. Visit the official website at www.sec.gov.ph to learn more. Telephone (632) 584 – 0923 or 584 – 1119 Email [email protected] EXTENSION OFFICES 1. BAGUIO CITY Baguio Convention Center Government Center, Baguio City Annie Tesoro [email protected] (074) 442-8171 / 442-8170 2. LEGASPI CITY SEC Building, 2nd Floor Chiniel (Avon) Building, Rizal Street, Albay District, Legaspi City Marylou Duka-Castillo [email protected] (052) 480-8272

3. ILOILO CITY SEC Building, Gen. Hughes Street, Iloilo City SEC Officer-in-Charge Russell I. Ildesa / [email protected] / (033) 337 2557 / 335-0025 4. CEBU CITY SEC Building, V. Rama Avenue, Guadalupe, Cebu City SEC Director Lindeza R. Rogero-Gavino / [email protected] / (032) 253-5337 / 253-6987 5. DAVAO CITY SEC Building, Corner Luisa Drive and University Avenue, Juna Subd., Matina, Davao City Javey Paul Francisco [email protected] (082) 298-2170 / 298-1893 6. CAGAYAN DE ORO CITY SEC Building, Corner 14th and Tomasaco Del Lara St., Cagayan De Oro City Renato Egypto [email protected] (088) 857-4325 / 857-7225 7. ZAMBOANGA CITY SEC Building, San Jose Panigayan Street, Zamboanga City Jesus Salvador Uro [email protected] (062) 991-7163 / 993-1437

8. TARLAC CITY 2nd Floor, Legislative Building, Tarlac City Richard Laus [email protected] 491-0140 / 491-0142

Frequently Asked Questions: PCNC Q: What is PCNC? The PCNC is the Philippine Council for NGO Certification. It certifies NGOs/NPOs “that meet the established criteria for financial management and accountability.” The PCNC was established by several NGO networks including the Caucus of Development NGO Networks (CODE-NGO), Association of Foundations (AF), and the National Council for Social Development Foundation (NCSD). Most NGOs that are at least two years old can apply for accreditation. Q: Are NGOs required to be accredited / certified? An NGO with SEC registration can still operate without being accredited. However, while some organizations do not need to apply for accreditation (e.g. sports clubs, transport drivers’ organizations, vendors’ associations), other NGOs are highly recommended to be accredited. Q: How can I apply for accreditation? The accreditation process goes like this: 1. The organization inquires with PCNC for the requirements. 2. PCNC sends the following forms to be filled-up by the applicant NGO: (a) letter of intent (1 copy) and (b) an application for Accreditation for Donee Institution Status and checklist of requirements (1 copy). 3. The applicant NGO submits the Letter of Intent and Application Form together with their latest Audited Financial Statement and the initial payment of Php 1,000.00. 4. PCNC sends applicant NGO a survey form to be accomplished in four (4) copies. 5. The applicant NGO submits the survey form with complete attachments, and the balance of the application fee according to the socialized fee scheme based on Total Assets, as follows: A. Organizations with total assets of Php5M and below B. Organizations with total assets from Php5M – Php15M

– Php 10,000 – Php 15,000

C. Organizations with total assets from Php15M – Php50M D. Organizations with total assets above Php50M

– Php 15,000 – Php 15,000

6. The secretariat forms the evaluation team line-up. 7. The evaluators confirm their availability; PCNC secretariat makes arrangements for the visit. 8. The evaluation team conducts the evaluation visit. 9. The PCNC Board deliberates on the evaluation team’s recommendation. 10. NGO is then notified on the PCNC Board’s decision. 11. For certified NGO, the PCNC Secretariat submits certification results to the BIR. 12. The BIR issues Certificate of Donee Institution Status to NGO. *Applicants are given 1 (one) year to complete the application process (submission of all required documents & payment of Balance of application fee); otherwise, their down payment of 1,000.00 will be forfeited. Q: What do I need to be accredited? To apply for accreditation, your organization has to be: 1. A non-stock, non-profit domestic corporation*, or association, organized under Philippine laws 2. Operated exclusively for religious, scientific, cultural, educational, or social welfare purposes, youth and sports development, or for the rehabilitation of veterans 3. Formally operating for at least one (1) year *Definition of a “non-stock, non-profit corporation or organization” is based on the BIR Revenue Regulations No. 13-98. Q: Is the PCNC accreditation a one-time certification only? Does it expire? Yes, the certification expires after a certain period. An NGO can obtain a certification that lasts from one (1), three (3), or five (5) years — depending on its years of existence and ratings from the evaluation. When an organization’s certification expires, it needs to apply for renewal.

PCNC Directory The PCNC (Philippine Council for NGO Certification) is the body that accredits and certifies registered NGOs in the Philippines.

Mailing Address 6th Floor, SCC Building, CFA-MA Compound 4427 Interior Old Sta. Mesa St. Sta. Mesa, Manila Telephone Numbers +63 (02) 782-1568 +63 (02) 715-9594+63 (02) 715-2756 Email address [email protected] Frequently Asked Questions: Tax Exemption Q: What is tax exemption? Tax exemption is a reduction or elimination of the taxes normally imposed on individuals and organizations by the government. Q: Are NGOs/NPOs exempt from paying tax? Tax exemption, according to Section 30 of the Tax Code, can be granted to an organization that is non-stock and nonprofit, and operated or organized exclusively for charitable purposes. It is essential to remember, however, that this tax exemption is not absolute. However, NGOs, whether engaged or not in microfinance activities, are not exempt with respect to their withholding tax liabilities. They are required to file withholding tax returns and remit withholding taxes on all income payments that are subject to withholding. Q: What is Donor’s Tax (aka Gift Tax)? Donor’s Tax is a tax imposed on the privilege of transmitting property by and from a living person to another by way of donation. Q: What is a ‘donee institution’? An organization with a donee institution status is granted the right to receive taxdeductible and tax-exempt donations under the 1995 Tax Code. The PCNC can

certify NGOs for this status, which is subject to the final approval of the BIR. Donors to a donee institution are entitled to donor’s tax (30% of donation plus 12% value added tax) and 100% tax deductibility of donations from gross income of Donor Company.

Q: How can I have my NGO accredited as a donee institution? The accreditation of NGOs/NPOs to donee institutions can be done by the following agencies: Department of Social Welfare and Development, for charitable/social welfare organizations, and foundations; Department of Science and Technology, for organizations engaged in research and other scientific activities; the Philippine Sports Commission for organizations and foundations engaged in sports development; National Council for Culture and Arts, for organizations engaged in cultural activities; and the Commission on Higher Education, for organizations engaged in educational activities. Previously, the PCNC was the duly designated accrediting entity for donee institutions. However, it was eventually deemed that it may amount to an undue delegation of power, since the PCNC is a private body. With the issuance of Executive Order No. 671 (October 2007), this function has been transferred to the several agencies listed above. Q: What is the basis of the BIR to grant an NGO the donee institution status? The NGO must be certified by the PCNC (Philippine Council for NGO Certification). Q: Are there tax benefits granted to taxpayers who donate to accredited institutions? Yes! Donors enjoy certain tax privileges like deductibility of donations and exemption from donor’s tax. Full deductibility of donations is allowed only for donations to accredited NGOs. For donations to non-accredited NGOs, the deduction is allowed only up to 10% for an individual donor and 5% for a corporate donor, of the donor’s business income. Donations to accredited NGOs/NPOs shall be exempt from donor’s tax as long as not more than 30% of the said donations for the taxable year shall be used by such NGO for administration purposes. Q: Do NGOs receive tax incentives?

Yes, Philippine NGOs receive tax incentives under the law, such as tax exemption and donee institution status, which allows local donations to be deducted from the donors’ taxable income and exempted from donors’ tax. Q: Can the donations be deducted in full? Yes, donations, contributions or gifts that are made within the taxable year to accredited NGOs can be fully claimed as deduction. However, the deduction cannot exceed 10% of the income of an individual donor, and 5% for a corporate donor.

Frequently Asked Questions: Current NGOs Q: What are the yearly reporting requirements of an NGO? (1) Annual report, (2) GIS/General Information Sheet, and (3) Financial statement; BIR, quarterly income statement, monthly withholding taxes for rental, yearly withholding taxes summary for rental, yearly registration, financial statement; city hall, yearly registration. Q: What yearly reports should an NGO file with the SEC? a. General Information Sheet (GIS) as of Date of Annual Meeting (6 copies), within 30 days from date of annual meeting as specified in the bylaws b. Audited Financial Statement (AFS) duly stamped “Received” by the BIR, within 120 days from end of the fiscal year as specified in the bylaws (5 copies) c. Issuer of securities registered under the Revised Securities Act (RSA) or SRC, within 105 days after the end of the fiscal year (5 copies) d. Issuer of securities not registered under the RSA or SRC, within 120 days (5) e. Securities Brokers, within 110 days after the end of the fiscal year as specified (5) Q: What is an annual report? An annual report is an in-depth outline of the activities and/or accomplishments made by the organization in the previous year. The report includes audited annual accounts and gives an overview of the NGO’s progress. Recent annual reports tend to be more concise and show information through brief text and graphics/infographics. Some annual reports are printed as brochures, booklets, etc. (See samples here.)

Q: Can an NGO form a for-profit business? The idea may be unusual for some NGOs that are firmly nonprofit, but yes, there are a few cases of NGOs with a development program that turn into an independent, for-profit enterprise. Q: I only have volunteer workers for now and I’m thinking of giving them compensation for their hard work. Is there a borderline between a daily compensation and a salary? “Hiring staff/employees might require your organization to register with SSS (Social Security System), PhilHealth, and Pag-ibig Fund to ensure that your staff receives the benefits the government mandates to employers. Update also your BIR registration for including additional filing of BIR return – withholding taxes on compensation income. Employers with more than 5 employees are also encouraged to register with DOLE (Department of Labor and Employment). Q: Can an NGO own/partner with a business? Yes, although most NGOs that join forces with businesses are usually experienced organizations. Examples include Greenpeace and McDonald’s, CARE and Unilever. “Some NGOs do not approve of the idea of NGOs working with commercial corporations, while some are open to partnering with them to create shared value. Partnerships between an NGO and a business can be risky for both; but if everything goes well, the risks can be worth it. For businesses, for example, working with an NGO can bring credibility and reputational gains.” An NGO and a business can also form a conventional project alliance – a business donates to fund a project run by an NGO, for example. These are often more shortterm than true partnerships. Q: How can an NGO change its bylaws (e.g. number of Directors)? There is no fixed way to amend or revise bylaws. The NGO can decide for itself how changes can be made by stating it down formally in the original version of the bylaws. According to Robert’s Rules for Amending Bylaws, you should at least require a two-thirds vote and previous notice to make any changes in your bylaws. Each member must be given a chance to voice his/her opinion. Who will revise and review the bylaws Draft the new version of bylaws. Give notice to those authorized to vote on the amendments

Decide how the voting will be done: show of hands, ballots, etc. Propose the revisions and vote Direct the secretary to fully record the sequence of events in the meeting minutes, including the text of the original bylaw, the proposed version, who proposed the new version, the final version, and who seconded/motioned for the vote, and the result of the vote. Q: How can I close/shut down my NGO? Shutting down / Dissolution of an NGO can either be Voluntary (induced by the organization) and Involuntary (revoking of an organization’s certificate by the Board). Voluntary dissolution; upon application for registration, NGOs are required under the law to submit a prescribed form accompanied by an authenticated constitution by the subscribers of the organization. Every constitution must have a dissolution clause. Thus the manner in which an organization is voluntarily dissolved is laid out in its constitution. It is general practice however, for voluntary dissolution to be carried out by a resolution at the annual general meeting through a ¾ majority vote by the members of the organization. The members must be given written notice 30 days in advance specifying the proposal to dissolve. Involuntary Dissolution- would be possible if there are compelling public interest in so doing, the NGO may have gone bankrupt, has not been active for an extensive period over several years , there should be at least two failures to file annual reports on their accounts, and/or has engaged in serious misconduct in the sense of willfully engaging in an activities that are inconsistent with the objectives for which an NGO can be founded.