Recent Evolution Paths of the Non-Profit Sector

Attempts for Legislative Reforms

Summary

The chapter illustrates some recent developments that have affected the non-profit sector. Indeed, the aim of this section is to highlight the attempts at legislative reform that have tried to adapt the essential characteristics of Non-Profit Institutions in order to make them more efficient. The chapter illustrates two case studies of legislative reform: Italy and Australia. These are two very interesting examples for the purposes of the book as they’ highlight very different approaches even if they are aimed at the same sector.

The cases of the reforms of the non-profit sectors in Italy and Australia represent precisely two examples of legislative reform approaches which, although characterized by different methodologies and tools, appear inspired by the common approach of bringing the non-profit sector to the context ofprofit-oriented organizations. Unfortunately, although the objective of implementing reform processes that lead to an improvement in the effectiveness of Non-Profit Institutions is acceptable, these attempts at convergence can also produce distorted effects. The reasons for this conclusive observation he precisely in the need to protect the physiological diversity that exists between the two worlds just mentioned that live according to very different rules because they’ respond to completely different purposes (Putnam, Leonard!, & Nanetti, 1994; Deakin, 1995; Kearns, 2000; Moore, 2000; Powell & Steinberg, 2006; Hoffinan, Badiane, & Haigh, 2012; Nardo & Siboni, 2018;). The for-profit sector is based on some fundamental elements, such as the objective of maximizing economic value, the need to guarantee the highest level of financial performance which, in turn, allow us not only to guarantee the survival of companies, businesses and other types of profit-oriented organizations, but also to guarantee their evolution and development: economic, financial, dimensional, strategic, etc. On the other hand, however, the organizations of the non-profit sector are driven by completely different purposes and, therefore, the aforementioned objectives relating to the maximization of economic value and financial petformance may have effects that may not be compatible with the social purposes that distinguish the mission of the Non-Profit Institutions.

For this reason, the chapter tries to illustrate, albeit in a very concise manner, the characteristics of the legislative reforms applied in the two countries in order to try to identify useful considerations for tracing potential future development trajectories of the non-profit sector valid in the international context.

A Comparison Between Two Reform Approaches in Non-Profit Sector: Italy and Australia

In this chapter, we will try to explore the non-profit sector in the light of some legislative reform attempts. In this perspective, it is necessary to premise that the reforms that have had as then- object the Non-Profit Institutions are many. The purpose of this book is not to delve into this aspect, but to provide some insight into modem Non-Profit Institution’s management. Nevertheless, it seems usefill to offer a perspective on this aspect as well. To do this, we have chosen two countries Italy and Australia because then-respective reform approaches seem to represent two opposite trends. They represent two examples of legislative reform styles which, although characterized by different methodologies and tools, appear to be inspired by the common approach of leading the non-profit sector into the managerial orbit of the for-profit context, in order to obtain an improvement in effectiveness of Non-Profit Institutions.

Non-Profit Sector Legislative Reform: The Italian Case

According to the latest official census1 of the Italian National Institute of Statistics (ISTAT), the non-profit sector in Italy includes 359,574 organizations which, overall, employ 853,476 employees (Italian National Institute of Statistics, 2020). The number of Non-Profit Institutions increased with average annual growth rates substantially constant over tune (around 2%) while the increase in employees, equal to 3.9% between 2016 and 2017, stood at 1.0% in the two-year period 2017-2018. Compared to all industrial and service companies, the incidence of Non-Profit Institutions continues to increase, going from 5.8% in 2001 to 8.2% in 2018. unlike the weight of employees which remains almost stable (6.9%).

In the last survey period, the Italian Non-Profit Institutions showing the highest increase are those active in the sectors of rights protection and political activity (+9.9%), social assistance and civil protection (+4.1%), philanthropy and promotion of volunteering (+3.9%) and trade union relations and interest representation (+3.7%).

The distribution of Italian Non-Profit Institutions by economic activity remains almost unchanged over the most recent years, with the culture,

Recent Evolution Paths of the Non-Profit Sector 49 spoil and recreation sector which brings together almost two-thirds of the units (64.4%), followed by those of social assistance and civil protection (9.3 %), trade union relations and interest representation (6.5%), religion (4.7%), education and research (3.9%) and health care (3.5%).

From a legislative point of view, the Italian non-profit sector has recently been the recipient of an important regulatory reform. This path begins in 2016, with law no. 106/2016 which establishes the basic principles of a matter, however leaving the definition of the details on the concrete application of these principles to the implementing decrees of the Ministry of Labor and Social Policies. In 2017, therefore, five implementing decrees were approved:

  • • Legislative decree n. 40/2017, about the universal civil service;
  • • Legislative decree n. 111/2017, about “five per thousand” rule;
  • • Legislative decree n. 112/2017, about the social enterprise;
  • • Legislative decree n. 117/2017, about the Third Sector Code (TSC); and
  • • Presidential Decree 28 July 2017, about the Italian Social Foundation.

Consequently, the current definition of the non-profit sector and its logical-conceptual perimeter derive from the examination of the various organizational forms that have been recognized as such over time. In fact, as just mentioned, the Italian legislative context regarding the non-profit sector has seen the succession of a vast series of rules that have tried to adapt to the changing needs of a sector characterized by high dynamism (Civitillo, 2016). In this sense, in addition to the Italian Civil Code, the following rules must be remembered about Italian Non-Profit legislation:

  • • Law n. 266/1991, for voluntary organizations;
  • • The Legislative Decree n. 460/1997, for non-governmental organizations, for amateur sports associations for non-profit organizations;
  • • Law n. 383/2000, for social promotion associations.

This progression finds one of its most relevant goals in the aforementioned Legislative Decree n. 117/2017 which introduces the TSC with the aim of systematically reorganizing all organizations operating in the sector which, from this moment on, are defined as Thud Sector Entities (TSEs).

The innovative scope of the 2017 regulatory reform is very broad and does not end with the simple new name of the Italian Non-Profit Institutions. In this sense, it provides:

a. The provision of the TSC (with the Legislative Decree n. 117/2017), aimed at containing all the rules concerning TSEs;

b. A single legal profile for all TSEs, regardless of the type of organization; and

c. The establishment of the Single National Register of the Third Sector (RUNTS, in Italian).

The establishment of the TSC responds to the specific purpose of completely reorganizing the discipline regarding TSEs in order to support citizens and communities to pursue the common good, to raise the levels of active citizenship, cohesion and social protection, favoring the participation, inclusion and full development of the person, to enhance the potential for growth and employment, in implementation of the Constitution.

For this reason, according to the new legislation, TSEs can be defined as organizations that exercise, on an exclusive or principal basis, one or more activities of general interest in the form of voluntary action or free provision of money, goods or services, or of mutuality or production or exchange of goods or sendees. In other words, TSEs are non-profit organizations, which cany' out activities of general interest, or aimed at achieving civic, solidarity and social utility purposes.

The law defines activities of general interest as those having as then-object:

  • a) Social interventions and services;
  • b) Interventions and health services;
  • c) Social and health services;
  • d) Education, instruction and vocational training, as well as cultural activities of social interest with an educational purpose;
  • e) Interventions and services aimed at safeguarding and improvement of environmental conditions and the wise and rational use of natural resources, with exclusion of the professional activity of collection and recycling of urban, special and hazardous waste;
  • f) Interventions for the protection and enhancement of cultural heritage and the landscape;
  • g) University and post-university training;
  • h) Scientific research of particular social interest;
  • i) Organization and management of cultural, artistic or recreational activities of social interest, including activities, including editorial, promotion and dissemination of the culture and practice of volunteering and the same activities of general interest;
  • j) Sound broadcasting of a community nature;
  • k) Organization and management of tourist activities of social, cultural or religious interest;
  • l) Extra-school training, aimed at prevention of early school leaving and academic and educational success, to the prevention of bullying and the fight against educational poverty;
  • m) Instrumental services to TSEs;
  • n) Development cooperation;
  • o) Commercial, production, education and information, promotion activities carried out in the context of or in favor of fair-trade supply chains, in order to allow the workers to lead a free and dignified existence, and to respect trade union rights, as well as to commit to the fight against child labor;
  • p) Services aimed at insertion or reintegration into the labor market for workers and disadvantaged people;
  • q) Housing and other temporary residential activities aimed at satisfying social, health, cultural and training needs or working;
  • r) Humanitarian reception and social integration of migrants;
  • s) Social agriculture;
  • t) Organization and management of sports activities amateur;
  • u) Charity, distance support, free transfer of food or products or provision of money, goods or services in support of disadvantaged people or activities of general interest;
  • v) Promotion of the culture of legality, of peace between peoples, nonviolence and unarmed defense;
  • w) Promotion and protection of human, civil, social and political rights, as well as the rights of consumers and users of activities of general interest;
  • x) Care of international adoption procedures;
  • y) Civil protection; and
  • z) Requalification of unused public assets or assets confiscated from organized crime.

Although this definition of TSE is particularly broad, it entails a series of obligations including:

  • • The obligation to register for the Single National Register of the Third Sector (RUNTS);
  • • The use of the mandatory name TSE in any conununication or deed of a public nature;
  • • The keeping of accounting records and drafting of the financial statements;
  • • The preparation of the social report;
  • • The keeping of the documentation required by law that can be viewed by all members;
  • • The prohibition of direct and indir ect distribution of profits or revenues or income;
  • • That must be reinvested for the performance of statutory activities, in pursuit of the purposes of social utility or solidarity; and
  • • The devolution of assets in the event of dissolution to other TSEs or, in the absence of it, to the Italian Social Foundation, a structure with the aim of supporting funding paths for the Italian social sector.

The new regulatory fr amework provides for a precise classification of the types of organizations that can be considered TSEs:

  • a) Voluntary organizations (ODV, in Italian);
  • b) Social promotion associations (APS, in Italian);
  • c) Philanthropic organizations;
  • d) Social enterprises, including social cooperatives;
  • e) Associative networks;
  • f) Mutual aid societies (SOMS, in Italian); and
  • g) Other types of associations, foundations and other private entities, other than companies, set up for the non-profit pursuit of civic, solidarity and social utility purposes.

On the contrary, according to the new legislation, these are not TSEs:

  • • Public administrations;
  • • Political formations and associations;
  • • Trade unions;
  • • Professional associations, and associations representing economic categories;
  • • Employer associations; and
  • • Entities subject to management and coordination or controlled by the aforementioned entities, with some specific exceptions.

Further innovations introduced by the TSC are:

  • • The introduction of the National Council of the Third Sector (NCTS);
  • • The introduction of the National Control Board (NCB);
  • • The provision, once the RUNTS is operational, of a simplified procedure for the recognition of the legal personality of TSEs;
  • • The revision, reorganization and more synergistic use of the financial resources provided for by the previous legislation in favor of certain types of entities and those of the new financial instruments established by the TSC; and
  • • The revision of the tax legislation applicable to each type of entity.

Based on what has been mentioned previously, the RUNTS consist of the folio whig sections:

  • a) Voluntary organizations;
  • b) Associations for social promotion;
  • c) Philanthropic organizations;
  • d) Social enterprises, including social cooperatives;
  • e) Membership networks;
  • f) Mutual Aid Society; and
  • g) Other TSEs.

To avoid any opportunistic behavior of the Non-Profit Institutions, no organization can be simultaneously registered in two or more sections of this register.

Furthermore, all essential information relating to the Non-Profit Institutions must be entered in the RUNTS, such as the name of the organization, the legal form, the registered office, the date of incorporation, the object of the general interest activity carried out, the tax code or the VAT number, the minimum assets, the subjects who have the legal representation of the entity and those who hold corporate offices with indication of powers and limitations.

The register must also include the amendments to the articles of association. the resolutions for transformation, merger, demerger, dissolution, extinction, liquidation and cancellation and all provisions relating to the Non-Profit Institution.

Finally, one of the most important aspects concerns the fact that, in order to analyze and evaluate the social impact of the activities carried out by the TSEs, the TSC has the obligation to draw up the social report, according to guidelines adopted by the decree of the Ministry of Labor and Social Policies, for all TSEs that have revenues or income exceeding 1 million euros. In addition, the social report must also be filed with the RUNTS and published on its website.

Furthermore, to ensure adequate levels of financial transparency, TSEs with revenues, annuities or income in any case denominated in excess of 100,000 euros per year must in any case publish annually and keep updated on their website, or on the website of the association network to which they belong, any emoluments, fees or considerations attributed to managers and members of the administration and control bodies for any reason.

Concluding this brief examination of the non-profit sector in Italy, it is first of all necessary to underline that it has reached a particularly relevant dimension both if we consider its overall size (number of organizations, functions and objectives pursued, quantity and variety of goods and services offered, etc.), and if we analyze its importance for the community

  • (quality of the goods and services offered, innovative capacity, occupational relevance, etc.). Furthermore, this relevance tends to grow systematically, considering the evident expansion of the needs destined for citizens who:
  • • Private for-profit companies have no interest in satisfying, in consideration of the low profit margins); and
  • • Public administrations cannot provide an adequate response due to the limited resources and organizational skills available to them.

It is for these and other similar reasons that the reform of the non-profit sector in Italy takes place in a particularly delicate temporal context, characterized by a situation of profound economic crisis, as well as high unemployment.

The reform is based on the recognition of the non-profit sector for the Italian socioeconomic context: the Non-Profit Institutions in Italy are able to contribute to relaunching and improving the national welfare system as a whole, as well as the country’s employment status.

As seen earlier, to implement this reform, the approach followed by the Italian legislator was focused on the economic-productive development of Non-Profit Institutions, trying—on the one hand—to reduce the limits to which they were typically subjected in the past and—on the other hand— guaranteeing them the possibility of carrying out activities of a productive nature in a continuous and professional way (with qualified employees), alongside or in place of the typical and classic social purposes. This reform, therefore, has substantially “entrepreneurialized” the non-profit sector, instead of trying to push toward a better definition of the particularities of the various organizations that are part of it.

In this perspective, the initially declared objective of simplifying the management of Non-Profit Institutions has not been achieved at all, considering that many of the innovations actually tend to complicate the management requirements required of these organizations (e.g.. reporting, social reports and control bodies).

Consequently, and despite some important positive elements of innovation, it is necessary to highlight that the new Italian legislation on the nonprofit sector cannot be considered decisive, above all because it does not yet appear to emphasize the fundamental characteristic of pluralism that characterizes this particular sector: the objectives, the types of activities, the sectors of intervention and the legal forms that the Non-Profit Institutions can take are so diversified as to require legislative interventions that protect this distinction rather than attempting to standardize as the Italian reform of 2017 seems to have done.

 
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