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 A Primer
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What is PCNC?
PCNC or the Philippine Council for NGO Certification is a private, voluntary, non-stock, non-profit corporation that serves as a service organization whose main function is to certify non-profit organizations that meet established criteria for financial management and accountability in the service to underprivileged Filipinos.
PCNC was established by six of the country's largest national NGO networks and is authorized by the
Department of Finance to certify non-profit organizations applying for donee institution status.
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What is Certification for Donee Institution Status?
Certification for donee institution status is part of the provisions of Republic Act 8424 otherwise known as the Tax Reform Act of 1997 which provides in Chapter VII, Section 34 (H) that contributions, gifts, or donations actually paid or made to donee institutions which are accredited/certified domestic non-stock, non-profit corporations and associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes, or for the rehabilitation of veterans, or to non-government organizations, shall be allowed as business deductions for income tax purposes.
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What is the difference between donee institution status and tax-exempt status?
TAX-EXEMPT STATUS is enjoyed by all entities enumerated under Section 30 of the Philippine Tax Code which does not require said entities to secure certification from an accrediting body in order to qualify for income tax exemption, while DONEE INSTITUTION STATUS is granted only to the following entities:
- non-stock corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes or for the rehabilitation of veterans, no part of whose net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person;
- civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;
- a non-stock and non-profit educational institution.
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What are the advantages of certification for donee institution status?
Donations to donee institutions are tax-deductible and/or exempt from donor's tax (Section 34(H) and Section 101 of the Philippine Tax Code). In other words, aside from being exempt from donor's tax, local donors, whether individual or corporate, can deduct the amount they have donated from their taxable income derived from trade or business as computed without the benefit of the deduction. Donations to some donee institutions, however, are subject to limited deductibility: 10% for individual donors and 5% for corporate donors.
Thus, tax incentives such as those mentioned above encourage local donations and, especially in these times of dwindling financial resources from abroad, complement PCNC's aim to strengthen private sector participation in our country's social development.
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What else is to be gained from applying for certification?
The process of evaluation/accreditation/certification provides the applicant organization the opportunity of self-assessment and improvement with the help of peer organizations.
Certification by PCNC shall also be a "seal of good housekeeping" that funding partners and prospective donors may consider in their choice of organizations to support.
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What about entities that presently enjoy donee institution status?
Entities that were previously granted the donee institution status before the existence of PCNC were given a three (3)-year grace period UNTIL December 31, 2001 to use their status, after which date, they have to apply to PCNC before they can be registered again as qualified donee institutions.
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What is the certification process?
Organizations seeking certification shall file with the PCNC Secretariat a letter of intent to apply for certification and submit the necessary documents. If the organization is qualified for evaluation, it undergoes the evaluation process which includes site visits by an evaluation team. A recommendation based on the results of the evaluation is then submitted to the Board.
If the applicant NGO has met the minimum criteria for certification, the Board gives a 3-year or 5-year certification to the organization and informs the Bureau of Internal Revenue (BIR) which then issues to the organization a certification of DONEE INSTITUTION STATUS.
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What are the major criteria for certification?
The following are the major criteria to guide the PCNC in evaluating requests for accreditation:
- MISSION AND GOALS
The mission and goals of the non-profit, non-stock corporation/NGO should justify. Statements of mission and goals shall serve as guideposts for its planning and operations and a framework for decision-making.
- RESOURCES
This criterion focuses on the adequacy of the resources and the effectiveness of the structure and systems of the applicant organization.
- PROGRAM IMPLEMENTATION AND EVALUATION
The organization must demonstrate that it is effectively using its resources to accomplish the purposes for which it was created. Evaluation shall consider the program and projects implemented within the last two years and the presence of clearly-defined policies, systems, priorities, and guidelines in implementing the organization's programs and services.
- PLANNING FOR THE FUTURE
The organization must provide evidence that it has the capability to implement and monitor its programs and projects and to ensure organizational sustainability.
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For more information, contact The Secretariat, Philippine Council for NGO Certification (PCNC), tel. nos. 7821-568;7159-594;7152-756 or telefax 7152-783.
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