The contribution of the voluntary activity carried out by Third Sector organizations to support specific disadvantageous situations in the society is unquestionable.
Without such contribution, many difficult situations would get even worse, where the government is unable to intervene.
Players in the third sector are all those who provide (most of the times, silently) or intend to provide resources, also as (voluntary) donations, contributions, or time without expecting any return, through activities in favour of beneficiaries also with the intermediation of third sector organizations.
This is a developing sector that deserves attention and dedication.
This TopHic edition will discuss some typical aspects of the third sector.
In particular, the Expert’s opinion article will discuss financial statements issues, as they are now subject to a specific regulation under OIC accounting standard no. 35, which is specifically addressed to third sector organizations.
The Focus on article will discuss tax aspects that regard not only third sector organizations, but also their relevant consequences for donors (for example, in terms of deductibility of voluntary donations).
Third sector is very extended and has been specifically regulated only recently. It now requires entities to pay attention to the legal form, the organization and the coverage of risks: in fact, according to the most recent data, the Third Sector is worth approximately 5% of GDP and involves 5.5 million volunteers.
Legislative Decree no. 117 dated 3.7.2017 has introduced the regulatory framework for the third sector, consisting in a systematic discipline that represents a consolidated act, called “Code of the third sector”.
The first articles of the Code, regarding the aim and general principles, help us better understand the third sector.
In fact, it provides to the systematic reorganization and revision of the current rules on third sector organizations, in order to support the independent initiative of citizens that contribute – even as associations – to pursue the general good, to increase civic activism, cohesion and social protection, favouring participation, inclusion, and the full development of persons, to enhance the growth and employment potential, in compliance with articles 2,3,4,9,18 and 118, para. four of the Italian Constitution.
As regards the regulation general principles, it recognizes the social value and function of third sector organizations, of associationism, of voluntary activities and of the culture and practice of donation as expression of participation, solidarity and pluralism; it promotes their development, spontaneousness and autonomy and it favours their original contribution to pursue civic, solidaristic and social utility aims, also through a collaboration with the Italian government, with regions and with local institutions.
According to the most recent research, third sector is made up of about 360 thousand entities that are being structured. It was estimated that more than 50% of entities have been created over the last 15 years: this demonstrates how this sector is still under development, at least as regards the legal aspects and their built-in fragilities.
In fact, research showed that approximately 12 thousand entities cease to exist each year, due to a shortage of economic or organizational resources.
As a further specification, third sector organizations are defined as voluntary work organizations, social promotion associations, philanthropic entities, social enterprises, including social cooperatives, TSO associations, mutual aid associations, recognised or non-recognised associations, foundations and other private entities set up to pursue not-for-profit civic, solidaristic, and social utility aims by performing, as their exclusive or main activity, one or more general interest activity as voluntary action or donation of money, goods or services, or as mutual aid or production or exchange of goods or services and which are entered with the national register of the third sector (art. 4 of Legislative Decree no. 117).
Some research shows a very mixed reality from a legal perspective; the majority of TSOs are incorporated as associations, but there are also social cooperatives or foundations.
Of course, we do not intend to underrate a crucial aspect that is the sourcing of the needed financial resources and the organization and provision of activities to support the needs of beneficiaries, as well as the commitment and the not-for-profit purpose of volunteers.
In this development phase, it is also important to think about the specific needs in order to choose the most appropriate legal form, governance and effective organization (as concerns the management of funds, of personnel and of volunteers, as well as risk management) of the TSO to meet such needs.
Therefore, it is crucial to implement modern and effective management processes in order to develop professionals being able to liaise with the external environment, in particular with the Public Administration in order to collect more funds (now, including those from the NRRP).
The capacity to manage risks is also important, i.e., the capacity to choose the most appropriate coverage through proper policies in a context where the insurance world has still to adapt to, since for-profit insurance policies are often used also for TSOs. Mandatory coverages set under the code of the third sector include accidents, sickness, civil responsibility and volunteers. Other important aspects to be considered are: the attention to frail persons that take part in the activities, welfare to attract and retain qualified workforce, cyber risk for those who retrieve and process data, and reputational risk. All this also means having respect for donors.
As already mentioned, the world of TSOs is very mixed and has specific characteristics, but it also requires complying with many regulatory as well as corporate and organizational aspects.
It is a real pleasure to mention that many professionals and employees of our organizations are active in the third sector, either as volunteers, or as members of entities, or as consultants, but most of all as people who silently dedicate part of their free time to assist people in need.
