CSOs’ Funding Suffered in 2021 Due to Laws

USAID’s sustainability index sheds some light on the challenges plaguing Cambodian CSOs in 2021
Ou Virak, president and founder of Future Forum, speaks at launch of Civil Society Organization Sustainability Index for Cambodia. Kiripost/Prak Chan Thul
Ou Virak, president and founder of Future Forum, speaks at launch of Civil Society Organization Sustainability Index for Cambodia. Kiripost/Prak Chan Thul

Although the pool of donor funding for Cambodia continued to rise in 2021, largely due to the development community’s support for Covid-19 impact mitigation activities, foreign funding for civil society organisations (CSOs) narrowed further.

The lower funding, according to the CSO Sustainability Index 2021 for Cambodia developed by the US Agency for International Development (USAID), is linked to “CSOs’ various capacities in grant writing, financial reporting, monitoring and evaluation and report writing”.

“CSOs at the village and district levels particularly lack the necessary financial and human resources to successfully procure such funding,” USAID stated in a report published last November.

The report was carried out by US-based human development NGO FHI360 and International Center for Not-For-Profit Law, which were appointed as project managers, while Phnom Penh-based Future Forum acted as the local partner.

It noted that CSOs remained heavily dependent on international donor support, both to operate, particularly for overhead costs and to implement programs.

The key foreign donors in 2021 include the World Bank, Asian Development Bank and the Open Society Foundation (OSF). Apart from the European Union, Cambodian CSOs received support from bilateral donors like the US, Japan, Australia, and, “increasingly, China”.

Scarce and rare

Meanwhile, the report highlighted that bureaucratic hurdles have raised the difficulty level for CSOs to receive receiving foreign funding in 2021, compounded by Articles 25 and 27 of Law on Associations and Non-Governmental Organisations (LANGO).

Apparently, the statute places “burdensome” reporting requirements on CSOs that receive foreign funding.

In fact, respondents to a 2021 Fundamental Freedoms Monitor Project survey by Cambodian Center for Human Rights shared that banks required “excessive” details, all of which presented “obstacles to CSOs with already-constrained capacities”.

Within that context, domestic funding to support CSO operations remains scarce and public fundraising campaigns are rare.

“In 2021, CSOs received some local support through digital platforms for banking and ride sharing, through which donations could be made to CSO partners in the system, but it is unclear how much support the platforms generated.

“Some CSOs also receive funding through diaspora and individual donations but these are limited. CSOs do not generally collect membership fees,” USAID stated.

Heavy taxation

Some CSOs continued to develop potential revenue-generating streams through social enterprises. For example, youth empowerment organisation Friends International utilises a social enterprise model in which it runs cafes to generate revenue for its training and support programs for at-risk Cambodian youth.

“However, with the rise of COVID-19 cases in 2021, such venues were temporarily closed. At the same time, social enterprises’ usual reliance on foreign tourism for support continued to be hampered by global travel bans,” the index stated.

Generally, attempts to diversify revenue streams risk overstretching operations that can no longer deliver their intended outputs, and these sources of funding remain limited and insufficient.

“Burdensome disclosure requirements also threaten CSOs with potentially heavy taxation as a result of non-traditional revenue streams.

“Nearly all CSOs have a financial officer. In line with domestic income and taxation laws, as well as international donor requirements where applicable, most CSOs undergo at least an annual budget review and audit conducted by an independent external auditor,” it said.

Funding secured

Given the challenges, USAID said financial viability “deteriorated slightly” in 2021 and continues to be one of the “weakest dimensions” of CSO sustainability in Cambodia.

“CSOs primarily have access to short-term funding sources and very few organisations have any degree of financial sustainability.

“Donor funding continued to shift toward pandemic relief and away from traditional programming, and CSOs struggled to access financial support and usual fundraising opportunities due to travel restrictions and the shift to online work,” it said.

Therefore, even where funding does exist, the “sustainability of that funding is an ever-present issue”, it added.

According to the CSO roadmap (2020-2025) by membership-based Cooperation Committee for Cambodia, an umbrella body for NGOs, 22 percent of its members secured funding periods of between three and five years, 41 percent - between one and three years, and 37 percent - six months to one year.