5 Cultural Policy Resources in South East Europe
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HOME  E-library  Articles & Reports  4. Funding mechanisms
4. FUNDING MECHANISMS
15.10.2001 | author: Oana Radu
The National Cultural Fund of Romania
FIRST PUBLISHED IN
Policies for Culture Journal, October 2001
ABOUT THE AUTHOR
Oana Radu
is Programs director of the ECUMEST Association in Bucharest, and regional coordinator for South East Europe of the Policies for Culture programme. She holds an MA in cultural management from the Dijon Business School, France.
(oana.radu@ecumest.ro)
This article is dedicated to the National Cultural Fund in Romania, created in 1998, which represents a potentially effective alternative mechanism for support to culture.

Before proceeding to the presentation of the Romanian National Cultural Fund, I would like to point out that a variety of more or less similar tax-based (off-budget and/or general budget) funds and bodies, with a general cultural scope sprang up in the countries of Central and Eastern Europe during the last decade. Among them one can count: the National Cultural Fund, Hungary (founded in 1993); the Cultural Endowment of Estonia (1994); the State Culture Fund for Slovakia; the Culture Capital Foundation, Latvia (1998); the Fund of Support for Culture and Sports, Lithuania (1998); the National Cultural Fund, Romania (1998); the National Cultural Fund, Bulgaria (1999). Taking into account that in all these countries public support to culture is granted at the central level mainly by/through the Ministries of Culture and that the use of the arm’s-length principle is limited, it would be interesting and useful to evaluate whether and to what extent the above-mentioned mechanisms are a motor for change in cultural policy-making and implementing in these countries. It might be argued that these mechanisms are all very young to allow either for a true impact in the sector or for an assessment of their impact on cultural activities and the public support to them. I would like, however, to shortly list here some questions, that might facilitate their evaluation and comparison. An evaluation that remains to be made. (1)

Who pays? (Do they bring more or/and alternative resources?)
> Are they an attempt to attract additional funds from alternative sources for the cultural sector? If so, are they truly supplementing public support to culture, or do they represent a substitute to the decreasing budgetary allocations for culture?
> Are they aimed to better match those who pay with those who benefit from public funds? > Are ‘traditional’ (i.e. budgetary) sources used as well?

Who decides? (Do they also bring different ways of funding arts and culture?)
> Are new funding structures created?
> Are different decision-making mechanisms implemented? (such as the participation of representatives of the cultural sector in the decision-making?)

Who benefits?
> What do they support: artists, projects, activities, institutions?
> Were they aimed at facilitating the access of different categories of applicants? Or, to rephrase the question from a different angle: Is it a sole/determinant source of public funds for cultural NGOs? (2)


The National Cultural Fund of Romania - Points of departure

Four years ago, in July 1997, the Romanian Ministry of Culture launched and organized a seminar on “How can we produce money for the society”. It was aimed at putting into discussion two different systems of attracting alternative resources for the cultural sector: the National Lottery in the UK and the National Cultural Fund in Hungary (namely the use of dedicated state lottery versus dedicated taxes) and the extent to which they could be applied in the Romanian context. Representatives of these organisations were invited, along with representatives of the Ministry of Finance and the Romanian Lottery. The latter displayed a certain resistance or scepticism towards the lottery system, so that finally the Hungarian Cultural Fund model was considered more fit to the Romanian context and was used as source of inspiration in conceiving a new source of funds for culture in Romania - what was to become the National Cultural Fund.

In August 1998 (3), a governmental ordinance founded the National Cultural Fund (NCF), as an off-budget fund to be administered by the Ministry of Culture, “with the aim of protecting and promoting the cultural heritage, of developing and promoting contemporary cultural values.” It took some time before it became operational and even now one can say that it is just at its beginning. The creation of the Fund was aimed, in a country with a very limited budget allocated to culture, at attracting additional off-budget sources for the cultural sector, rather than delegating decision-making, increasing competition and transparency in the allocation of funds, or allowing for all natural and legal persons to have access to public funding.


WHO PAYS?
The NCF is fuelled entirely by off-budget sources, with an overwhelming proportion coming from dedicated taxes, supplemented by the interest from Fund’s accounts and all penalties for the non-transfer in due term of the dedicated taxes. The law provides also for funds obtained in the framework of international cooperation, revenues from sponsorship, donations, bequests or any other liberalities to fuel the Fund.

The dedicated taxes are calculated as surtaxes on the selling price/tariff for various goods and services more or less connected with the cultural field, respectively:
> 5% on the selling price of reproductions, copies or casts of cultural movable goods in public property, or of historical monuments in public property, as well as 3% on the selling price of calendars or postcards, posters, or combined publications, other than the former;
> 5% on the selling price of cultural movable goods through public auction;
> 2% from the revenues of real estate agencies from the sale of historical monuments;
> 20% on the selling price of publications with an erotic content, as well as on the price of selling or renting of audio (sic!) tapes with an erotic content;
> 2% on the price of selling or renting of records, audio and video compact disks, recorded audio tapes and other products of the kind having a cultural destination;
> 2% on the selling price of imported cultural goods;
> 2% on the selling price of folk art products;
> 2% from the incomes of commercial companies whose activity takes place inside or within the protection area of historical monuments in public property;
> 1% from the revenues of commercial companies from organising luna-park type of activities;
> 1% from the incomes of commercial companies performing cultural agency activities;
> 3% from the general estimate of investments authorised to be performed by commercial companies for the buildings located within the protection area of historical monuments in public property;
> 5% on the selling price imposed by telephone companies on added value services (4). All quotas provided for in the law are applied to the total amount of revenues, VAT-free, the amount thus obtained being added to the selling price (and, respectively, to the tariffs) for the respective goods and services.

The control of the observance of the obligations to pay the dedicated taxes to the Fund is performed by the Ministry of Culture through its deconcentrated units in the territory (the County Directorates for Culture, Religious Affairs and National Cultural Heritage). The administration of the Fund is performed under off-budget regime by the Ministry of Culture, namely by the Department for Budget, Financial Resources, Investment and Administration. The resources of the Fund are kept in a off-budget account at the Bucharest State Treasury, held by the Ministry of Culture.

The Fund amounts not spent within a fiscal year are carried forward to the next year’ Fund budget. This still is was one of the advantages of the Fund as compared to budgetary sources, which cannot be carried over to another fiscal exercise. So far the resources of the Fund were very scarce, due, according to the current Minister of Culture, to the difficulties of collecting the due dedicated taxes.


WHO DECIDES?
The decision making body is represented by the Council of the National Cultural Fund, which is made up of 11 members, presided by the Minister of Culture. The Council has no legal person and functions “under the coordination of the Ministry of Culture”. Its major aim is to set up the strategy and the annual priorities in the use of the National Cultural Fund.

Appointment of members
The Minister of Culture, who is automatically a member of the Council and its president, appoints the other 10 Council members, out of which 5 members are appointed upon suggestion from civil society – i.e. the “organisations of creators”. (N.B. The 2001 law amended the initial provision of the ordinance, which stated that the appointment of the five members was done by “the creators’ unions, cultural foundations or the professional or cultural associations” as follows: 2 members from the creators’ unions, with proposals to be submitted by the National Alliance of Creators’ Unions in Romania – ANUC; a member proposed by the professional creators’ associations other than the above mentioned unions; a member representing the professionals and/or cultural organisations in the field of folk art, folklore and amateur culture; a member proposed by a foundation or an association active in the cultural field).

The proposals made by the organisations of creators, with the exception of those submitted by the Alliance of Creators’ Unions in Romania, must be accompanied by documents stating the legal existence of these organisations, their representative character (the importance and the nature of its activity during the last three years), as well as the most recent annual report and accounts of the organisation.

The revocation of membership to the Council can be done upon the resignation of any member or upon dismissal by the Minister of Culture, provided that the member has unfoundedly absented two consecutive ordinary meetings of the Council, or that the member has committed actions which are not compatible with the quality of member of the Council. The latter situation refers to committing an offence in relation with or during the exercise of his/her profession; the accept, request or refusal to reject advantages of material or other nature from applicants to the Fund; or the unrightfully disclosure of information about the Council’s activity.

Time mandate
The Council’s members have a non-renewable four-year time mandate, with the composition of the Council being changed every two years by 5 members (two of those designated by the creators’ organisations and three of the members designated by the Minister of Culture). The first composition of the Council was appointed in March 2000, to be subsequently replaced entirely in June 2001 by the new minister of culture, before the legal end of their time mandate.

Procedure and mandate of the Council
The attributions of the Council are actually very large. Thus, the Council:
> sets up the annual strategy and priorities of the Fund’s distribution, depending on the expected level of attracted funds;
> establishes the eligibility conditions for the competitions for financial support from the Fund;
> selects the cultural programs and projects that will receive financial support from the Fund;
> decides on the exact amount to be granted to selected projects and programs;
> controls the closing and implementation of the contracts concluded with the recipients of financial support;
> organises the publication of annual reports on the financial support awarded from the NCF.

The Council members are remunerated for their work, although initially a honorific mandate was provided for. The Council has an ordinary meeting every four months. Decisions are taken by open vote, which cannot be delegated, based on simple majority of its members. The Secretariat of the Council is provided by the Department of Legislation and Management of the Ministry of Culture and Religious Affairs.


DECISION-MAKING MECHANISM on the distribution of the Fund’s resources
The amounts collected in the Fund can be used, according to the law, for:
> the creation, preservation and promotion, in Romania and abroad, of national and universal cultural values;
> the support for the initiation and implementation of cultural programmes and projects, in Romania and abroad;
> the development of the international cultural relations of Romania;
> the stimulation of creativity and the support of competitive cultural projects and programmes, which are proposed by natural or legal persons, under private or public law.

Financial support is awarded on the basis of contracts closed with the Ministry of Culture and can be granted in the form of reimbursable or non-reimbursable support. Financial support is made available on the basis of project-based open competitions or tenders, the dates of which are set by the NCF Council. For each call for projects, funding priorities are set by the Council of NCF. Other eligibility and decision-making criteria than those provided by law are also approved by the Council for each competition.

The public call for projects must be announced at least 25 days before the application deadline, via national coverage mass media. The competition must take place, according to the law, no later than 10 days after the application deadline. The announcing of selected projects to receive financial support is done by listing them at the premises of the Ministry of Culture, no later than 5 days after the competition has taken place. So far, applications were/are available only in hard copy at the offices of the Ministry of Culture in Bucharest.

Eligible applicants
Natural or legal persons, under the private or public law, which prove to have the capacity to develop the submitted project.

Eligible projects
There are no limits to the size of financial support awarded by the Fund. There is, however, a maximum percentage from the total project costs that the Fund’s contributions may cover: 70% if the project is submitted by one or more individuals or private law legal persons; 60% when the project is submitted by one or more public law legal persons, respectively. The existence of funds up to 100% of the project budget must be proved. Moreover, the minimum 30%, respectively 40% contribution of the applicant(s) must not come from budgetary sources.

Selection of projects
The law provides that financial support is granted to “viable” projects that respond the annual strategy and priorities set by the Council. Selection is made on the basis of the following criteria:
> the main objectives of the cultural project (innovative; realistic; measurable; the methods of attaining each objective);
> the justification of the project;
> the target group/beneficiaries of the project (identified/estimated beneficiaries; the interdisciplinary and multicultural character of the project);
> the impact of the project (to what cultural, educational, social needs is the project answering?; the impact on communities addressed; the originality of the project);
> the partners and the key personnel involved in the cultural project;
> the estimated budget of the project (contribution of the applicant; other attracted sources available).


WHO BENEFITS?
The Fund became functional in 2000, when the first Council was appointed, being at present to its second public call for projects to be funded for the achievement of set objectives. In the current session, the Fund calls for projects that “aim to promote Romanian cultural values in the country, in the Romanian communities abroad, for contributing to the confluence of Romanian culture with universal spirituality”. Interestingly, this very vague ‘theme’ was literally taken over from the first call for projects that took place in September 2000, under the coordination of a Fund Council with a completely different composition…

The first competition (September 2000) saw only 15 applications being submitted, out of which six projects were granted the total amount of 860,000,000 lei (approx. USD 36,000), leaving an apparently important (undisclosed) percentage of the available funds to be forwarded to the 2001 budget, in lack of ‘valid project proposals”. As for the current and second call for projects, having as deadline the 9th of November, the amount available was not made public. However, in the interview conducted in June 2001 for the “Cultural policies” supplement of “22” magazine, the minister of culture declared that the Fund had available, at that time, “a symbolic amount of several billion lei” (1 billion lei = approximately USD 32,400).


WHERE TO?
As seen above, the National Cultural Fund is now, in the Romanian landscape of public support to artistic and cultural activities an unimportant ‘actor’, due to the small resources available. It is, however, a potentially important mechanism for the cultural sector and a possible motor for change in the mechanisms of allocating public money to culture. What it needs is to be made truly functional, so that it has an impact on/in the sector. In this respect:

> First and foremost, there is a need for improving the collection of dedicated taxes that represent sources of the Fund. Otherwise, if resources will continue to be as limited and insignificant as they have been so far, the Fund will be only another useless construction.

> Secondly, it is necessary to improve funding procedures, mainly in terms of increased transparency of its functioning and decision-making. The yearly report requested by the law, for instance, was not yet published. The publicity around it, the access to applications and the communication of the competition results (the project that received funding) are not well publicized. Another improvement would be, I think, to also announce the amount available for funding for each session/call for projects. In this context, it is important to mention a ‘landmark’ in organizing public competitions for cultural projects in Romania, aimed at changing the way money are allocated to culture and how this process is perceived by both the public bodies distributing public funds and the (potential) beneficiaries of such support – the European Cultural Fund for Romania (Euroart), developed in 2000-2001 in the framework of the only PHARE programme for culture in Romania (“The Cultural Dimension of Democracy”). Its mechanism of distributing funds through call for projects could provide a very useful set of procedures for turning the Fund into a viable and transparent mechanism. Some of these procedures seem to have been borrowed by the NCF, but much still needs to be done.

> A better administration of the Fund is also essential. The way it functions at present, with a variety of departments and persons within the Ministry being in charge with various specific tasks (along with other tasks with no relation to the Fund), but no one person coordinating their activity, leads to many people and ultimately no one in charge. There would be a need, therefore, in the current way of functioning, of a person in charge with administrating the Fund and coordinating the activities of the various departments and bodies (an executive director). Or even a separate department/service within the Ministry of Culture.

If the collection of dedicated funds will be improved, I believe, however, that the best option would be the creation of a legal person – an autonomous public body (another option would be a non-governmental organisation, but I am aware that in the current context it would never be accepted). Let’s note that the already referred to National Centre of Cinematography, for instance, administers the National Cinematography Fund. Besides increased flexibility and transparency in the allocation of the Fund’s resources to cultural activities, an autonomous body that would administer the Fund would also make it more attractive for private contributions, such as the donations, bequests, sponsorship, etc. which are already listed as potential sources to the Fund.

In this context, I would like to point out that the administration of the Fund, as it is conceived now, would be very difficult to improve, since Fund’s resources can be used only for awarding grants. Therefore, all administrative and personnel costs, including the members of the Council and the people in charge of the collection of the dedicated taxes, must be covered from other sources than he Fund, namely from the budget of the Ministry of Culture.

I would like to end this presentation in the same way it was begun - that is with some questions. In a country where everybody has identified heavy taxation as a burden and an impediment to development – is it correct to expect such tax-based alternative resources to be encouraged and developed? And if so, should they be expected to partially substitute the resources from general taxes or simply to supplement them? Would it be better to identify non-tax sources and stimulate their increase and use? Or should there be attempted to diversify as much as possible the sources of funds as well as the decision-makers on their allocation? My point in advancing these questions is that what is needed is a comprehensive analysis of the Romanian context and its opportunities and limitations, a public debate on the public support to culture followed by a clear political choice and the development of a coherent and transparent system of public support to culture. Within which the National Cultural Fund could have an important role to play.


Footnotes

(1) Basic information about most of these mechanisms is available on the Budapest Observatory website: www.budobs.org.
(2) Drawing on J. Mark Schuster’s paper “The Brooklyn Museum, the Saatchi Collection, and Arts Funding Policy: Who Should Pay? Who Should Decide? And What Difference Should it Make?” and his article “Funding the Arts through Dedicated State Lotteries”, International Journal of Cultural Policy, Vol. I, Issue 1 (1994) and Issue 2 (1995).
(3) By the means of the Government Ordinance no. 79/1998 on the organisation and functioning of the National Cultural Fund, approved with modifications by the Law no. 247/2001.
(4) It must be noted that many products or services ‘eligible’ for being subject to a ‘cultural tax’ were already earmarked, at the moment the Fund was created in 1998, to other (cultural) ends. The National Cinematography Fund, for instance, was and still is fuelled with various surtaxes on the selling prices of recorded videotapes, on the revenues from the distribution on any support of foreign films or films forbidden to minors, on the price of acquisition of advertising space to television stations, etc. (This Fund is administered by the National Centre of Cinematography - a specialized public body under the supervision of the Ministry of Culture and Religious Affairs, before January 2001 having been in direct supervision of the Government).

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