ECSOFT Initial Assessment Report.pdf

Empowering Civil Society Organizations for Transparency (ECSOFT) Activity

LEADER WITH ASSOCIATES COOPERATIVE AGREEMENT # 720-112-18-LA-00001

Initial Stakeholder Needs Assessment Report

Submitted: May 10, 2019

Approved: July 8, 2019

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page i of ii

Table of Contents Acronyms ...................................................................................................................................................... ii

1. EXECUTIVE SUMMARY

1.1 Needs Assessment Goals

1.2 Roadmap to the Document

2. SUMMARY OF METHODOLOGY

2.1 Sampling Plan

2.2 Assessment Tools & Approaches

3. OVERVIEW OF THE CSO ENVIRONMENT

3.1 State of Civil Society

3.2 Issues with Funding

3.3 Issues with Government Control and Registration of CSOs

3.4 Summary

4. GOVERNMENT NEEDS

4.1 Desk Research of Government Needs

4.1.1 GoAz international commitments on eliminating corruption and increasing accountability

4.1.2 State of corruption

4.1.3 Existing practices on increasing transparency and accountability

4.2 Government Interviews

4.2.1 Needs for support under the ECSOFT project

4.3 Recommendations

5. CSO NEEDS

5.1 Desk Research of CSO Needs

5.1.1 International assistance regarding CSOs and anti-corruption

5.2 CSO Interviews

5.3 CSO FGDs and Surveys

5.3.1 Regional specifics

5.3.1 Specific needs of CSOs operating through business format

5.4 Recommendations

6. CSO-GOVERNMENT COOPERATION

6.1 Desk Review of CSO-Government Cooperation

6.2 Interview Data for CSO-Government Relations

6.2.1 Potential areas for cooperation

6.3 FGDs and Surveys on CSO-Government Collaboration

6.4 Recommendations

7. CONCLUSIONS: RECOMMENDATIONS FOR ECSOFT

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page ii of ii

Acronyms

ASAN Azerbaijan Service and Assessment Network AZAKA Anti-Corruption Academy BLCD Building Local Capacity for Development CPI Corruption Perception Index CSO Civil Society Organization CSOSI Civil Society Organization Sustainability Index CST Civil Society for Transparency ECSOFT Empowering Civil Society Organizations for Transparency EITI Extractive Industries Transparency Initiative EU European Union FGD Focus Group Discussion FHI 360 Family Health International FMS Financial Monitoring Service GoAz Government of Azerbaijan GRECO Group of States against Corruption ICNL International Center for Not-for-Profit Law KII Key Informant Interview MLSPP Ministry of Labour and Social Protection of the Population MoJ Ministry of Justice NGO Support Council

Council on State Support to NGOs with the President of the Republic of Azerbaijan

OGP Open Government Partnership PY Program Year SMS State Migration Service SPC State Property Committee STA State Tourism Agency TOP Transparency and Openness Activity USAID United States Agency for International Development

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 1 of 41

1. EXECUTIVE SUMMARY

The Empowering Civil Society Organizations for Transparency Activity (ECSOFT), which is financed by the United States Agency for International Development (USAID), aims to support the Government of Azerbaijan’s (GoAz or government) agencies and civil society organizations (CSOs) and enhance the capacity and sustainability of CSOs, to assist government institutions with increasing their transparency and accountability.

To achieve this goal, the ECSOFT team conducted a Needs Assessment (Assessment), identifying government institutions’ needs and mapping civil society as a starting point for this 3.5 year project.

The Assessment was conducted over the period of December 2018 to April 2019, during which ECSOFT conducted desk research and engaged with 91 CSOs and 8 GoAz agencies through ten in-depth interviews, eight semi-structured interviews, six focus group discussions, and 81 surveys.

Geographically, 24 Baku-based CSOs and 67 regional CSOs participated in Assessment activities;

the 8 GoAz agencies were all located in Baku.

With legislative changes in 2014-2015, access to foreign funding by CSOs in Azerbaijan was significantly impeded and, as a result, the civil society sector in general was weakened. With recent positive shifts in Government’s attitude to local CSOs and foreign donors since 2017, the Assessment was intended to highlight areas of opportunity for engagement. Based on the findings, ECSOFT will plan programmatic activities, which may potentially include: offering certain capacity-building activities for GoAz agencies and CSOs; supporting GoAz-CSO joint projects; and providing technical assistance with policies and regulations. Additionally, findings from this Assessment may provide insights for donors developing their own assistance plans.

1.1 Needs Assessment Goals

The Assessment was designed to collect data to inform future programmatic activities in line with ECSOFT’s objectives. As such, the five primary goals and findings of the Assessment were:

1) Identify government agencies interested in improving their transparency and in cooperating with

CSOs to do so, which would benefit from ECSOFT’s assistance.

Of the initial ECSOFT list of 12 GoAz agencies1 identified as potentially interested in improving their transparency and cooperating with CSOs, eight2 agreed to participate in the Assessment. Of

1 Council on State Support to NGOs (NGO Support Council); State Tourism Agency (STA); State Committee for Family, Women and Children Affairs; Financial Monitoring Service (FMS); State Property Committee (SPC); Azerbaijan Service and Assessment Network (ASAN); Ministry of Taxes; State Migration Service (SMS); Ministry of Finances;

Commission on Fighting Against Corruption; Ministry of Foreign Affairs; and Ministry of Labour.

2 The Council on State Support to NGOs (NGO Support Council); State Tourism Agency (STA); State Committee for Family, Women and Children Affairs; Financial Monitoring Service (FMS); State Property Committee (SPC), Azerbaijan Service and Assessment Network (ASAN); Ministry of Taxes, State Migration Service (SMS).

Anti-Corruption Academy (AZAKA) met with ECSOFT team. However, ECSOFT considers AZAKA a service provider, rather than a beneficiary of the ECSOFT project. Therefore, we do not account for it within 12 GoAz agencies on the original list of potential beneficiaries of ECSOFT.

The official reason given by the four agencies that did not meet with ECSOFT was that a request must be routed through the Ministry of Foreign Affairs and the US Embassy before a meeting could be scheduled. Going through this

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 2 of 41 these eight, six agencies were identified as potential immediate project partners, with specific projects and technical assistance needs that align with ECSOFT’s general project objectives. These six agencies were:

1. Council on State Support to NGOs (NGO Support Council);

2. State Tourism Agency (STA);

3. State Committee for Family, Women and Children Affairs;

4. Financial Monitoring Service (FMS);

5. State Property Committee (SPC); and

6. State Migration Service (SMS).

The NGO Support Council was deemed to be a good project partner as it was interested in increasing the transparency of its appeals procedure for CSOs that were denied grants. The STA expressed interest in increasing transparency and accountability in local governance by supporting communities to come together to define priorities for infrastructure development and funding relating to tourism. The State Committee for Family, Women and Children Affairs requested assistance with strengthening the capacity of its existing public council. The FMS is interested in drafting a handbook on money laundering prevention dedicated to CSOs, as a potential risk group, and is willing to consult with CSOs on its content. The SPC is interested in assistance with establishing a public council, which can serve as a public oversight body. The SMS is interested in assistance with facilitating cooperation between itself and CSOs. CSOs, for example, could contribute to strengthening the capacity of the SMS’s Media Center, which aims to set-up relations with the public, and the SMS would welcome assistance from CSOs with raising public awareness about its services and monitoring the SMS’s work.

Identification of the six agencies above does not exclude additional government agencies from future engagement under the program. ECSOFT will continue to partake in conversations with GoAz agencies that express interest in cooperation with civil society and/or increasing transparency and accountability of their policies and procedures. ECSOFT will specifically continue coordinating with the eight government agencies which participated in the Assessment, as well as the Ministry of Justice (MoJ) and the Commission on Combating Corruption of the Republic of Azerbaijan.

2) Assess the degree to which identified government agencies are willing to work with CSOs and accept their recommendations.

Six government agencies (NGO Support Council, FMS, SPC, STA, SMS, and the State Committee for Family, Women and Children Affairs) completed a guide/questionnaire,3 responded to follow-up calls, and participated in introductory semi-structured interviews with the ECSOFT team. These six agencies expressed their willingness and a history of cooperation with CSOs (except the FMS, procedure would have substantially delayed the start of the assessment. At the same time, the law does not prohibit GoAz agencies from meeting with foreign organizations directly, as demonstrated by other agencies that met with ECSOFT. After consultations with USAID and perceiving that these agencies lacked political will to cooperate and used a bureaucratic excuse to avoid meeting with ECSOFT, we decided to not pursue these meetings at this stage.

Officials affiliated with the Commission on Fighting Against Corruption were travelling and/or not available at the time of the Assessment’s start and during the ECSOFT visit in January. They promised to meet with ECSOFT during the next visit, tentatively July 2019.

3 The ECSOFT team communicated with the NGO Support Council via e-mails and through several in-person meetings, in addition to the semi-structured interview, during which all information envisioned for collection via guide/questionnaire and follow-up interview was collected.

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 3 of 41 which is newly established), and gave suggestions for areas of potential cooperation. While this is a promising indicator, the degree to which identified government agencies are willing to accept CSOs recommendations and input is still to be determined. Based on the findings, ECSOFT proposes to implement activities that will provide assistance to the government agencies, which is responsive to their needs, involve CSO-government cooperation, and/or contribute to improving their transparency and accountability. ECSOFT will assist with establishing and strengthening the capacity of public councils for the SPC and State Committee for Family, Women and Children Affairs, and with establishing an advisory council under STA, as a forum for consultation on decision-making and legislative drafting. ECSOFT will also support joint projects implemented by these agencies and CSOs. Based on the experience of implementing pilot activities, ECSOFT will further assess the degree to which government agencies are willing to cooperate and accept CSO input in the process of CSO-GoAz cooperation.

3) Identify potential partner CSOs that are already positioned to undertake activities to increase transparency in the public sector and provide recommendations to increase the CSO’s capacity, as well as help with their on-going activities to increase transparency in the public sector.

Through the Assessment, ECSOFT identified five CSOs and five NGO resource centers that currently have the capacity to engage in implementing activities focused on transparency in the public sector. All five of the CSOs listed below have experience working with different GoAz agencies; they are listed below with additional information on recommendations highlighted in CSO’s Section 5.4 Recommendations.

Citizens’ Labour Rights Protection League. This organization has experience with monitoring government agencies’ activities, analyzing legislation, and providing recommendations.4 Based on its experience, ECSOFT believes it could effectively monitor select GoAz agencies on their compliance with the access to information legal requirements. As a result of such monitoring, it may create an Access to Information Index to assess the compliance of these agencies with Access to Information requirements.

Entrepreneurship Development Foundation. This organization has monitored projects of GoAz agencies, provided mass media coverage of corruption issues, and provided recommendations to the GoAz on improving the business environment and anticorruption legislation. It has the capacity and interest to monitor the use of state funding dedicated to installation of road signs throughout the country.

Development of Society and Civil Relations Association. This association’s strong experience in public service delivery monitoring is demonstrable through its previous projects.

During the Assessment, the SPC stated that it knew of this association and would be willing to partner with it in upcoming activities.

“Priority” Social and Economic Research Center Public Union. This organization has cooperated with several government agencies and has also provided input to the Strategic Roadmaps on Developing the National Economy, an important national-level policy paper. Its chairperson actively contributed to drafting the regulation of the Ministry of Labour and Social

4 For example, a report on monitoring hotline services run by the GoAz agencies produced by the Citizens’ Labour Rights Protection League is available here: http://labourrights-az.org/en/wp-content/uploads/2013/09/GOVERNMENT- HOTLINE-SERVICES.pdf.

http://labourrights-az.org/en/wp-content/uploads/2013/09/GOVERNMENT-HOTLINE-SERVICES.pdf http://labourrights-az.org/en/wp-content/uploads/2013/09/GOVERNMENT-HOTLINE-SERVICES.pdf

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 4 of 41

Protection of the Population (MLSPP’s) public council and participated as an expert in two monitoring reports on implementation of Azerbaijan’s Law on Public Participation.5 ECSOFT believes that “Priority” can: 1) assist GoAz agencies who would like to set up public councils; and

2) train CSO representatives who are interested in participating in public councils, by making them more informed and better positioned to engage with GoAz agencies.

NGO resource centers6 in Shirvan, Shamkir, Guba, Gabala and Mingachevir. The NGO resource centers were originally established to assess the needs, capacities, and operational contexts of regional CSOs in Azerbaijan and provide technical support and capacity development activities that responded to assessment findings. As such, these resource centers are well-positioned to conduct capacity development activities and assist regional CSOs with implementation of ECSOFT-supported activities.

4) Identify those CSOs which are interested in engaging with the government agencies and which would need to increase their capacity in order to effectively engage with government agencies and identify types of support ECSOFT could provide to help them to achieve this goal.

Out of 91 CSOs engaged in the Assessment, 79.1% (72) have experience working with the GoAz agencies on implementation of activities or projects, and almost all CSOs are interested in working with the GoAz but would need capacity-building assistance to expand and improve their cooperation with the GoAz. The Assessment found that CSOs identified a number of shared needs.

Of the 91 CSOs, 36 (39.5%) answered a question about training on improving fundraising skills; of these, 97.2% (35) requested training on this topic.7 Similarly, 49 (53.8%) of the 91 CSOs responded to a question on grant proposal writing, of which 95.9% (47) identified a need to enhance their capacity.8 Out of 91 CSOs, 63 (69.2%) responded to a question asking whether training on CSOs’ legal rights and obligations and accountability and transparency standards would be useful for their engagement with the government; of these, 90.5% (57) affirmed this need.9 Training on new tax regulation was another priority, about which 59 (64.8%) of 91 CSOs responded to a question about this need; of these, 91.5% (54) stated that this would be useful for them. Additionally, 59 (64.8%) CSOs participating in the Assessment addressed a question about the usefulness of training on citizen engagement; of these, 98.3% (58) stated that training on citizen engagement would be useful for them.10

The Assessment identified CSOs in the focus group discussions and interviews which are interested in receiving training on specified topics to better engage with the GoAz agencies. To broaden the reach of technical assistance, ECSOFT will ask the NGO resource centers and the NGO Support Council to identify other interested CSOs, as these agencies are well-connected and aware of CSO needs. As such, ECSOFT will consult these entities to determine additional training topics based on

5 The Law of the Republic of Azerbaijan on Public Participation entered into force on June 1, 2014 (the Law on Public Participation).

6 The network of five NGO resource and training centers was established by the UNHCR in the late 1990s to boost the civil society institutions in the provinces of Azerbaijan. These centers are not part of the UN system but rather independent entities. The centers provide technical and infrastructure support, as well as arrange training programs to build capacities of local CSOs.

7 Table 6, Question 9.

8 Table 6, Question 9.

9 Table 6, Question 9.

10 Table 6, Question 9.

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 5 of 41 needs in addition to the requests. While ECSOFT proposes to provide direct trainings to CSOs using its own experts, the program will also provide financial support to local CSOs with strong capacity to conduct quality trainings as a supplementary means of technical capacity support for CSOs requesting specific trainings.

ECSOFT also plans to invite NGO women’s resource centers under the State Committee for Family, Women and Children Affairs to participate in training. These resources centers independently implement their activities, while benefiting from the trust of and some support from the State Committee. The resources centers conduct various training activities for women in the regions and are well aware of their needs. Through ECSOFT, they can potentially conduct training to raise awareness of corruption and enable women to defend their rights, as well as other areas to be identified. In Program Year (PY) 1, heads of these resource centers will be invited to participate in trainings for regional CSOs. In addition, ECSOFT will assess the capacity and needs of these centers with the goal of providing them with additional technical and financial support in PY 2.

5) Provide recommendations for potential issues which CSOs can use as a vehicle to engage and influence transparency and anti-corruption in a safe, meaningful, and collaborative way with the Government of Azerbaijan.

As highlighted under point 1, GoAz agencies identified specific issues of their interest. The Assessment team believes that the GoAz may engage with CSOs on these issues in the most meaningful and non-conflictual way. Through desk research, the Assessment determined that additional areas for assistance may be identified later by reviewing Azerbaijan’s international commitments (the Open Government Partnership, Group of States against Corruption, and others), and national policy papers on “Strategic Road Maps.” These papers outline a broad range of national policy and economic goals against which all government agencies are required to report on their progress. ECSOFT anticipates encouraging an enabling environment by bringing together CSOs and government to define projects in which CSOs’ can support government agencies in monitoring progress towards achieving their commitments.

1.2 Roadmap to the Document

This report provides a description of the methodology used to conduct the Assessment and an overview of the CSO environment, providing context for better understanding GoAz and CSO needs; presents findings relating to the needs of select GoAz agencies and CSOs, as well as findings related to the state of cooperation between the GoAz and CSOs. Each section of the Assessment report concludes with recommendations to ECSOFT, relating to topics covered in each section. The report concludes with key recommendations to assist ECSOFT with planning activities.

2. SUMMARY OF METHODOLOGY

2.1 Sampling Plan

Two main stakeholders were targeted through this Assessment – government agencies and CSOs.

The Assessment used a purposive voluntary sampling approach for all stakeholders. Stakeholders were targeted based on their willingness to engage in CSO-GoAZ collaborative activities, interest in improving transparency and accountability and a willingness to participate in the Assessment. The following sections further illustrates the sampling approach based on the different stakeholders.

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 6 of 41

Selection of Government Agencies. ECSOFT identified GoAz agencies to participate in the Assessment based on their previous communications with USAID indicating interest in improving transparency and accountability, and/or openness to possible cooperation with USAID-supported projects. ECSOFT reached out to 12 government agencies to inform them about the ECSOFT project and the Assessment. The following GoAz agencies responded to ECSOFT’s outreach and participated in the Assessment:

1. Azerbaijan Service and Assessment Network (ASAN);

2. Financial Monitoring Service (FMS);

3. Ministry of Taxes;

4. State Property Committee (SPC);

5. State Tourism Agency (STA);

6. State Committee for Family, Women and Children Affairs;

7. State Migration Service (SMS); and

8. NGO Support Council.

Selection of CSOs. When attempting to identify the CSOs best positioned to respond to

ECSOFT’s Assessment, it was noted that two groups naturally emerged: 1) higher capacity CSOs with previous experience of cooperation with the GoAz, interested in engaging with GoAz agencies; and 2) lower capacity CSOs who might be interested in cooperation with the GoAz but lack capacity to do so. Further classification and details are as follows:

• Group 1: CSOs which are already positioned to undertake activities to increase transparency in the public sector based on their technical expertise or work experience engaging with government agencies. These CSOs were identified per recommendation of consultants conducting the Assessment and/or per recommendation of government agencies during introductory semi-structured interviews. Ten Group 1 CSOs participated in Assessment.

• Group 2: CSOs which need to increase their capacity in order to engage with government agencies, with ECSOFT helping them to achieve this goal. CSOs from this group were identified and gathered for focus group discussions with assistance of regional NGO resource centers in Shamkir, Mingachevir, Gabala, Guba, and Shirvan. A total of 81 Group Two CSO interviewed and/or participated in focus group discussions as part of the Assessment during January-February 2019. In all the regions, the following criteria was used to select Group 2 CSOs:

o All CSO-participants are registered legal entities, with working experience of at least 3 years;

o At least one CSO per region is led by women;

o CSOs have recent experience of cooperation with the government bodies and/or indicate interest in establishing/continuing/expanding cooperation with the government;

o At least five different sectors are represented (such as youth, women/gender, education, regional development, preservation of cultural heritage, etc.);

o Must have representation of a director or another senior manager.

Geographic Scope. The Assessment covered 24 regions of Azerbaijan. ECSOFT conducted semi-structured interviews with government officials and in-depth interviews with CSOs in Baku.

ECSOFT also organized six focus groups in Baku, Guba, Gabala, Mingachevir, Shamkir, and Shirvan. In order to broaden the Assessment’s geographic scope, CSOs from surrounding areas were invited to attend the focus group discussions held in all cities but Baku.

2.2 Assessment Tools & Approaches

Data collection under the Assessment was conducted by using desk research, conducting in-depth Key Informant Interviews (KIIs) and semi-structured interviews, facilitating focus group discussions (FGDs), and through mixed methods surveys. Tools were piloted and refined during the

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 2 of 41 implementation of the Assessment to better capture the most salient findings that would inform ECSOFT programming.

Desk research. The desk research reviewed legislation, policy papers, other assessments, reports, analyses or similar documents prepared by other organizations and/or within different projects, and information available in mass media. Information was collected and analyzed in the following areas: overview of the CSO environment, including the state of civil society (within Section 3. Overview of the CSO Environment); GoAz international and national commitments in regard to corruption and accountability; and state of corruption (within Section 4. Government Needs), CSO capabilities; international support regarding CSOs and anti-corruption (within Section

5. CSO Needs); and CSO-government cooperation (within Section 6. CSO-Government Cooperation).

Data collected from interviews. Group 1 CSOs participated in KIIs conducted in-person or by phone. Data was recorded using the Interviewer’s guided questionnaire for Group 1 CSOs.

Representatives of the GoAz agencies were interviewed during the introductory semi-structured interviews. Collected information was documented in a detailed report, following each interview. In addition, the Assessment team disseminated the interviewer’s guide/questionnaire to them in order to help them to prepare for the follow up in-depth interviews and per their request. The in-depth interviews took place with five out of six respondents that completed the interviewer’s guide/questionnaire11 in writing, adding to the information received during the semi-structured interviews. Information collected through interviews and guides/questionnaires was summarized in a detailed report prepared by the ECSOFT team.

Data collected through surveys and FGDs. At the beginning of each FGD, all participants of Group 2 CSOs, completed the survey. The goal of the survey was to collect quick quantitative data on basic demographics of the CSO (e.g. how many staff, a CSO’s legal status, registered or not), area of activity, years of experience, gender of management), data on government agencies as partners in cooperation, means of engagement with the government, challenges encountered during such cooperation, and needs for supporting CSOs’ capacity to engage with government.

Group 2 CSOs participated in FGDs following completion of the survey. With the consent of the participants, all FGDs were audio recorded. The project expert then prepared summaries of these discussions. The quotations of the respondents participating in this Assessment do not contain specific names for privacy and other reasons. All data collected during the interviews and discussions are available in MG Consulting’s office in Baku.

3. OVERVIEW OF THE CSO ENVIRONMENT

This section provides introductory information regarding the state of civil society in Azerbaijan and serves as a backdrop for understanding the needs of CSOs and the GoAz, and history between the

11 During the introductory semi-structured interviews, the Assessment team provided interviewees with a list of questions which served as a guide for a follow-up in-depth interview. The in-depth interview with key informants (GoAz agencies) was the tool identified in the original methodology. This was used only with six GoAz agencies, due to the GoAz agencies’ lack of consent.

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 3 of 41 two’s relationship. The Assessment team collected the majority of this information through desk research which included analysis of legislation and review of implementation practices; this is reinforced by information collected through KIIs, FGDs, and surveys during the assessment. This section is structured to highlight the key components of the CSO environment and to provide an overview of the state of civil society at large.

3.1 State of Civil Society

In 2017, there were approximately 4,350 registered CSOs in Azerbaijan, and over 300 unregistered groups.12 This number includes a broad range of legal entities, including public associations and foundations, as well as sports federations, labor unions, and other types of CSOs. According to official sources, the CSO sector employs about 30,000 people;13 however, there is no data on how many CSOs are active and implementing activities versus merely registered entities. No official breakdown by area of activity exists, but the distribution of grants among CSOs active in various areas might be an indicator. The highest concentration of CSOs is in Baku. Most regional CSOs are concentrated around the NGO resource centers located in Guba, Gabala, Mingachevir, Shirvan, and Shamkir. Active CSOs are also located in Ganja, Gazakh, and Sheki regions.14 Some regions, for example, Nakhichevan, have only very few CSOs.

The state of civil society in Azerbaijan substantially deteriorated starting in 2014. According to the 2015 Civil Society Organization Sustainability Index (CSOSI) report, “The unprecedented crackdown on CSOs in Azerbaijan that began in 2014 intensified in 2015. Critical voices were systematically silenced through investigations, interrogations, penalties, searches, travel bans, and freezing of bank accounts. CSOs therefore significantly reduced their operations, engaged in self-censorship, and diminished their international advocacy efforts. As funding opportunities decreased, many CSOs became affiliated with the government, shifted their focus to non-sensitive topics, left the country, or exited the sector. As a result, very few independent CSOs, most of which are represented just by their leaders, remain in Azerbaijan.15 Taking into consideration that most of the sector’s revenue came from foreign grants,16 and given the GoAz’s unfriendly attitude towards CSOs and CSO leaders in 2014-2015, the sector experienced a deterioration from 2014 until mid- 2017.17

The situation started to change in 2017, when the GoAz adopted legislation simplifying the grants registration procedure and reduced harassment of CSOs. It further improved in 2018 when the MoJ registered several EU, USAID, UN and Japan Embassy grants, and almost no instances of CSO

12 “A number of NGOs were registered in the state,” QHT.az portal, http://www.qht.az/index.php?action=static_detail&static_id=30294.

13 Speech by Ali Hasanov, Assistant for Public and Political Affairs to the President of Azerbaijan, 22 June 2018, www.azernews.az.

14 Per opinion of Mahammad Guluzade, Director of MG Consulting.

15 https://www.usaid.gov/sites/default/files/documents/1861/Europe_Eurasia_CSOSIReport_2015_Update8-29-16.pdf.

16 In 2012, according to estimates by the Center for Public Initiatives, 80 percent of the sector’s revenue comes from foreign sources, 15 percent comes from government sources, and only 5 percent comes from other sources such as membership fees, economic activities, and individual and corporate donations (as quoted by the 2012 CSOSI https://www.usaid.gov/sites/default/files/documents/1863/2012CSOSI_0.pdf).

17 We did not find data supporting this claim statistically. For example, according to CSO Sustainability Index, Azerbaijan report, at the end of 2012, there were 2,850 registered CSOs in Azerbaijan.

https://www.usaid.gov/sites/default/files/documents/1863/2012CSOSI_0.pdf.

http://www.qht.az/index.php?action=static_detail&static_id=30294 http://www.azernews.az/ https://www.usaid.gov/sites/default/files/documents/1861/Europe_Eurasia_CSOSIReport_2015_Update8-29-16.pdf https://www.usaid.gov/sites/default/files/documents/1863/2012CSOSI_0.pdf https://www.usaid.gov/sites/default/files/documents/1863/2012CSOSI_0.pdf

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 4 of 41 harassments were reported. While no official data is available, there is some evidence that some CSOs active in human rights and democracy areas, which ceased their activities in 2014-2015, did not re-start them in 2017. ECSOFT experts obtained data relating to the Building Local Capacity for Development (BLCD) project.18 The review of the list of the BLCD project19 beneficiaries, which were chosen by BLCD as key Azerbaijani CSOs engaged in national, regional, and community public interest agenda in Azerbaijan, demonstrated that of 20 CSOs which were BLCD beneficiaries,20 currently 3 CSOs are formally closed, 1 formally suspended its activities for a period of 5 years with the MoJ, and 1 more informally froze its operations. Of the 15 remaining CSOs, 5 continue to function as CSOs funded through random grants; the rest switched to operating as businesses, raising revenue through either individual service contracts and/or affiliated business companies. In sum, only 25% of most active and professional pre-crackdown CSOs, supported by BLCD, stayed in operation, while another 25% left the sector and the remaining 50% switched to operating as businesses.21

3.2 Issues with Funding

Limited access to funding is a key issue for Azerbaijani CSOs. It substantially worsened in 2014, when the President ordered the Cabinet of Ministers to change the rules on the registration of grants, which resulted in multiple changes to legislation restricting access to foreign grants and funding from foreign sources in general.22 During 2014-2016, almost no foreign grants were registered, due to the lack of the new legislation and an unofficial moratorium on implementation of the old legislation. All CSO respondents were unanimous that foreign funding in any form (grants, service contracts, or donations) has not been made available to the majority of CSOs since 2014. Foreign funding in all forms requires registration with the MoJ, which has full discretion to decide whether to register such funding or not, and rarely registers it.23

For some CSOs, state funding became a primary source. The GoAz distributes funding in the form of grants and contracts through various government agencies, including the NGO Support Council and some national level agencies, including, inter alia, the Youth Fund under the President of Azerbaijan, Ministry of Education, and Ministry of Culture. The NGO Support Council plays the lead role in supporting CSOs, with an annual grant portfolio of 3,000,000-5,000,000 AZN (about $1,700,000-$2,900,000 per year) during the last three years.24 However, the grant amounts

18 The USAID-supported Building Local Capacity for Development project (BLCD) was implemented in Azerbaijan in 2012-2016 by Chemonics International and focused on strengthening capacity of organizational and technical capacities of key CSOs engaged in national, regional, and community public interest agenda in Azerbaijan.

19 The USAID-supported Building Local Capacity for Development project (BLCD) was implemented in Azerbaijan in 2012-2016 by Chemonics International and focused on strengthening capacity of organizational and technical capacities of key CSOs engaged in national, regional, and community public interest agenda in Azerbaijan.

20 Building Local Capacity in Azerbaijan, Final Report, March 28, 2016, https://www.chemonics.com/resource/azerbaijan-building-local-capacity-development-project-final-report/azerbaijan-blcd-final-report/.

21 An ECSOFT consultant conducted phone calls with former BLCD project beneficiaries, March 18-19, 2019.

22 Amendments to several legal acts dated February 3, 2014; November 16 and 20, 2014; October 22, 2015; December 28, 2015; and finally, the Presidential decree dated October 21, 2016; Cabinet of Ministers decisions dated January 11 and 24, 2017; June 26, 2018, www.president.az and www.justice.gov.az.

23 No 9, FGD Shamkir; No 16, FGD Baku; No 4, FGD Mingachevir.

24 Approximately $2,600,000 in 2016 (http://cssn.gov.az/documents/2016%20hesabatpdf.pdf); In 2017, it financed 494 projects in the amount of 3.15 million AZN ($1,850,000):

https://www.chemonics.com/resource/azerbaijan-building-local-capacity-development-project-final-report/azerbaijan-blcd-final-report/ https://www.chemonics.com/resource/azerbaijan-building-local-capacity-development-project-final-report/azerbaijan-blcd-final-report/ http://www.president.az/ http://www.justice.gov.az/ http://cssn.gov.az/documents/2016%20hesabatpdf.pdf

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 5 of 41 disbursed to individual CSOs are very small. According to the annual report of the NGO Support Council,25 in 2016, the Council issued 5,369,535 AZN across 556 awards, or, on average, slightly less than 10,000 AZN per grant (approximately $5,900). In the 2018 grant competition announcement, the Council limited the ceiling for potential grants to 10,000 AZN for CSOs with at least a year in the business, and even less for new CSOs (3,000 AZN or approximately $1,760).26 In addition, the Council is bound by its internal regulations to issue only one grant per individual CSO per year. At the same time, grants from the Youth Fund seem to be decreasing. In 2018, the Fund spent 683,500 AZN for 99 grant awards for CSOs (grants to individuals are not counted herewith), which makes an average grant of 6,904 AZN (approximately $4,061).27 Thus, as compared to the previous year, the average grant amount from the Fund decreased about $500.

Some respondents confirm that grants amounts have been further reduced recently. According to a respondent, “after the Youth Fund was given a new status of a public legal entity, the amount of the grants has dropped to 4,000-5,000 [AZN]”28 (approximately $2,350-$2,950). One respondent stated that “the grants available are in the range of 5,000 AZN. How can we keep a sustainable CSO with such a small amount?”29 Other respondents also complained that such insufficient and random funding does not allow for sustainability.

Legislation allows CSOs limited opportunities to raise funding from local private sources, such as donations. However, the law restricts CSOs’ ability to collect donations from the public. Donations cannot be given in cash, the exception being when the recipient of a cash donation of up to 200 manat ($115) is a charity.30 Rather, donations must be made via bank transfer. A donation of any value shall be registered with the MoJ.31 CSOs are required to submit detailed information to the MoJ for each individual donation, including the names and passport details of donors (anonymous donations are prohibited). In practice, this creates problems for CSOs, as well as for those few who wish to donate small sums, such as described by one of the recipients. “Our shelter for victims of domestic violence has received no grants for the past couple of years and we raise money from donations. Under the law, we have to submit a list with sums, names and details of donators to the MoJ. Some people are poor and donate small sums.”32 Anonymous donations are not allowed in Azerbaijan.33

Since 2019, the tax on income generated through business activities has also been increased. The majority of CSOs do not have the skills to produce goods and services which can be sold for a profit, or, at least, to cover expenses to produce them. Other CSOs serve beneficiaries which simply https://azertag.az/xeber/QHT_lere_Dovlet_Desteyi_Surasi_2018_ci_ildeki_fealiyyeti_ile_bagli_hesabat_verib-1240027 and http://azayguliyev.az/news.php?id=1060.

25 “Report about activities of the NGO Support Council in 2016,” NGO Support Council, www.cssn.gov.az.

25 “The NGO Support Council announced a competition on the funding of projects of CSO resources and training centers,” NGO Support Council, http://cssn.gov.az/news.php?id=3692&lang=en.

27 “The Youth Foundation of the Republic of Azerbaijan announces the results of the 11th grant competition,” Youth Foundation of Azerbaijan, https://youthfoundation.az/42251.

28 No 10, FGD Baku.

29 No 11, FGD Gabala.

30 Azerbaijani law does not establish rules for the registration of charities.

31 Decision of the Cabinet of Ministers of Azerbaijan # 336, November 13, 2015.

32 No 15, FGD Baku.

33 Information about a donor is a part of mandatory information to include in annual financial reports submitted to the Ministry of Finance of Azerbaijan (MoF).

https://azertag.az/xeber/QHT_lere_Dovlet_Desteyi_Surasi_2018_ci_ildeki_fealiyyeti_ile_bagli_hesabat_verib-1240027 http://azayguliyev.az/news.php?id=1060 http://www.cssn.gov.az/ http://cssn.gov.az/news.php?id=3692&lang=en

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 6 of 41 do not have resources to pay for such goods and services.34 Under limited funding circumstances, civil society resorts to engaging volunteers. However, volunteer help is not very efficient as there are still expenses for travel and cost of materials that CSOs need to cover.35

With regard to CSOs’ difficulty in obtaining funds, participants of the Assessment noted that certain donors impose requirements which are not feasible for local CSOs. For example, some CSOs complain that the EU’s 10% cost-sharing requirement is not possible for them.36 Though aware of the difficulties in registering grants with the MoJ, a number of donors are not flexible in terms of including business entities – even those set up by CSOs – as potential funding recipients.37 Intermittent and insufficient funding leads to outflow of professionals and makes working in CSOs unattractive as an occupation for young people, which, in its turn, undermines the future of the sector. “Imagine that a CSO is several years old, sufficiently developed and all we can raise today is a couple of 5,000 AZN (equivalent of $2,950) grants from public agencies. […] This forces professionals to leave the sector. How can civil society develop further?”38

Further, salaries paid by CSOs are subject to the same taxation as those paid by businesses;

especially heavy is the 15% payroll tax on employers, applied on employees’ gross salaries. To ease the cost of doing business, CSOs avoid entering into employment contracts with staff, even in rare cases when they managed to secure long-term grants, and prefer to conclude service contracts with their staff.39

Limited funding also cuts civil society off access to innovations and to international experience.

According to a respondent, “this is about money, but also about access to information and new technologies …We simply cannot keep pace. We do not have funds to educate ourselves in new developments and technologies.”40 Some respondents complained that there is no unity within the civil society, even when there are some national issues on which the civil society should express a unanimous, strong voice.41

3.3 Issues with Government Control and Registration of CSOs

Government agencies have broad authority to control CSOs’ affairs. The MoJ is the primary government agency in charge of control over CSOs’ activities. Specifically, the MoJ has authority to audit CSOs’ activities on their compliance with the law and their own bylaws. The auditing can take place in different forms, for example, requesting a CSO to provide all contracts and other internal documents in order to be checked for compliance with the law, by-laws of this CSO or with the vague anti-money laundering legislation, or, visiting a CSO’s office for in person audit at any time. Such authority is implemented without adequate administrative safeguards against abuse.42

34 No 7. FGD Guba 35 No 7, FGD Guba.

36 No 10, In-depth Interview.

37 Ibid.

38 No 4, FGD Mingachevir.

39 No 16, FGD Baku.

40 No 4, FGD Baku.

41 No 9, FGD Shamkir.

42 Key Concerns and Recommendations on the Protection of Fundamental Rights in Azerbaijan, Briefing Paper For EU- Azerbaijan Human Rights Dialogue, International Partnership for Human Rights, October 2017, ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 7 of 41

Failure to provide documents or information results in stiff penalties up to 5,000 AZN (approximately $2,600). Due to a lack of funding, CSOs are not able to hire skilled lawyers and accountants to guarantee proper documentation and reporting.43

Another issue in the relationship between the MoJ and CSOs is that in order to conduct business with the MoJ, CSOs are required to attend all meetings in person. CSOs have to travel to Baku and meet with the MoJ officials to deliver documents requested by MoJ or to respond to MoJ questions.

While the MoJ delegated authority to deal with CSOs in the regions to their respective regional departments, they did not set up smooth mechanisms for doing so.44 As a result, regional CSOs suffer the most as travel to Baku is expensive and time consuming.

CSOs are also required to register with the MoJ changes in their bylaws to be included in the State Registry of Non-commercial Entities. Any changes in the CSO governance (i.e., change of chairman, change of board, change of number of members, change of address, and opening of branches, among others) shall be registered with the MoJ and the MoJ shall issue a written excerpt to the CSO. This registration is a time-consuming bureaucratic process. Even without any changes in governance, in practice, CSOs are required to obtain new excerpts approximately every two years, as a confirmation of their valid governance structure. The application package consists of many supporting documents, which take time and effort to produce. Without such excerpts, CSOs cannot access funding from the NGO Support Council, as “the Council requires a fresh excerpt every time we apply for a grant and the MoJ issues excerpts with long delays.”45 According to respondents, all these bureaucratic delays affect project implementation quality. “Our CSO has short term grants – three months of operation. Last time, because of the bureaucracy we received access to our funds at the end of the project period. The project was not well implemented.”46

The MoJ is also in charge of registration/approval of all foreign grants and rarely grants such approval. CSOs also face extensive reporting requirements relating to expenditures of such foreign grants. The most vital services related to CSOs to be provided by the MoJ (i.e., grant registration, or obtaining excerpts from state register) are not available online. Tax reporting, on the other hand, is digitalized and simplified. However, few CSOs are familiar with newly adopted CSO Accounting Standards, which came into effect in January 2019. Gaining an understanding of them is a huge task, and CSOs generally cannot afford professional accountants to assist due to lack of funding.

CSOs confirmed the practice of regional authorities requiring them to notify or obtain permission from authorities about public events. Though this practice is not based on the law, it is common and extremely disruptive for CSOs’ activities, as CSOs do not know for which activities they are supposed to obtain prior permission (from the local government’s perspective) and whether they will be able to obtain such permission. At the same time, conducting an event without such permission may result in a deteriorated relationship with the local authorities, which CSOs are terrified to risk.47 This practice was reported in all regions, except for the cities of Mingachevir and Baku.

https://iphronline.org/wp-content/uploads/2017/10/IPHR-submission-on-FRs-for-EU-Azerbaijan-HR-dialogue-Oct- 2017.pdf.

43 No 4, FGD Mingachevir.

44 No 14, FGD Gabala.

45 No 1, FGD Guba.

46 No 14, FGD Gabala.

47 No 8, FGD Gabala; No 5, FGD Guba; No 14, FGD Shirvan.

https://iphronline.org/wp-content/uploads/2017/10/IPHR-submission-on-FRs-for-EU-Azerbaijan-HR-dialogue-Oct-2017.pdf https://iphronline.org/wp-content/uploads/2017/10/IPHR-submission-on-FRs-for-EU-Azerbaijan-HR-dialogue-Oct-2017.pdf

ECSOFT – Initial Stakeholder Needs Assessment Report – May 10, 2019 Page 8 of 41

Last, but not least, CSOs complained of bureaucratic obstacles created by banks, imposed by the Financial Markets Superior Authority48 and its Financial Intelligence Unit.49 In addition to legal requirements which include a copy of a contract with the donor and certificate of grant registration with the MoJ, some banks require extra documents beyond their authority.50 There were also cases when banks demanded a new grant registration certificate for each transfer under the same grant.

This applied not only to foreign grants, but also to grants from the government. In the rare case of foreign funding, recipient CSOs only received transfers in their bank accounts after long delays and audits by the Financial Intelligence Unit, though under the law, audits are applicable only for transfers in excess of 20,000 AZN.51

Presently, the majority of CSOs, especially in the regions, are not well aware of their legal rights and responsibilities52 nor can defend their rights.53 This makes it even more difficult for them to navigate a complex and restrictive legal environment, making them more susceptible to penalties.

For example, many CSOs do not know the limits to government officials’ authority when auditing CSOs’ activities nor what their rights are in the audit process.