The Public Benefits Organizations (PBO) Act of 2013 represents a significant legislative milestone for the regulation and promotion of public benefit organizations (PBOs) in Kenya, encompassing a wide range of non-governmental organizations (NGOs). This Act was introduced to create a more transparent, accountable, and enabling environment for these organizations, allowing them to carry out their activities effectively while adhering to legal standards.
The PBO Act Comes into Force
The Public Benefits Organisations Act 2013 (the PBO Act) officially came into force on 14 May 2024. The operationalization of the PBO Act brings a myriad of changes to the regulation of non-governmental organisations and public benefit organisations. This long-awaited development is poised to significantly impact how NGOs operate, ensuring a more structured and compliant framework for their activities.
Important Definitions under the PBO Act
Public Benefit Organisation (PBO): A PBO is defined as a voluntary membership or non-membership grouping of individuals or organisations that is autonomous, non-partisan, non-profit-making, and Organised and operated locally, nationally, or internationally; Engages in public benefit activities; and Is registered as such by the Public Benefit Organisations Authority (PBO Authority).
Public Benefit Activity: This refers to any activity that supports or promotes public benefit by: Enhancing or promoting economic, environmental, social, or cultural development; Protecting the environment; Lobbying or advocating on issues of general public interest; or Advancing the interest or well-being of the general public or a specific category of individuals or organisations.
Key Provisions of the PBO Act
The PBO Act provides a comprehensive framework that governs the operations of NGOs in Kenya. Here are some of the key elements:
Definition and Registration: The Act defines PBOs as non-profit entities operating for public benefit in areas such as education, health, human rights, environmental protection, and more. Registration under the Act is mandatory for organizations wishing to be recognized as PBOs, with the PBO Authority being responsible for their oversight.
Governance Standards: PBOs are required to maintain strict governance standards, including transparent financial management, regular audits, and proper record-keeping. These measures are designed to ensure accountability and foster public trust in the activities of PBOs.
Rights and Obligations: While the Act protects PBOs from unwarranted government interference, it also imposes obligations such as adherence to national laws and maintaining a non-partisan stance in their operations.
Tax Benefits: Registered PBOs enjoy tax exemptions, which are crucial in supporting their charitable missions. This provision is particularly beneficial for organizations that rely on donor funding.
Oversight Mechanisms: To ensure compliance, the Act establishes oversight mechanisms, and non-compliance can result in severe consequences, including deregistration and fines.
Effect on National NGOs and Change of Regulator
The PBO Act repeals the Non-Governmental Organisations Coordination Act, 1990 (the NGO Act), which previously governed the registration and regulation of NGOs. Under the NGO Act, the Non-Governmental Organisations Co-ordination Board (the NGO Board) acted as the regulator for the NGO sector. The PBO Act, however, establishes a new regulator, the Public Benefit Organisations Authority (the PBO Authority), which will take over the functions of the NGO Board.
The PBO Authority’s functions include:
Registration and de-registration of PBOs;Maintenance of a register of PBOs with details of their sectors, affiliations, and locations;Receiving and reviewing annual reports from PBOs;Advising the government on PBO activities and their role in development within Kenya;Instituting inquiries to determine if PBO activities comply with the PBO Act; andProviding advice and training to PBOs.
Status of NGOs
NGOs that were previously registered under the NGO Act are required to seek registration as PBOs under the PBO Act within one year from 14 May 2024, i.e., by 13 May 2025. Failure to apply for registration under the PBO Act within thirty days after receiving a specific notice from the PBO Authority will result in the cessation of their NGO status.
NGOs that were exempt from registration under the NGO Act are now required to apply for registration under the PBO Act within three months from 14 May 2024.
Registration of Public Benefit Organisations
The PBO Act mandates the registration of all PBOs in Kenya. An organization cannot claim to be a PBO or receive the benefits associated with PBO status unless it is registered under the PBO Act. The benefits of registration include:
Indirect government support, such as exemption from specified categories of taxes;Direct government financing; andPreferential treatment in public procurement.
Applications for registration as a PBO must be made to the PBO Authority and include:
The PBO’s constitution;Founder’s name and address;PBO’s physical and postal address;Public benefit and principal activities;Prescribed fee; andAny other information that the PBO Authority may request.
The PBO Authority may approve or reject an application and, if rejected, must provide reasons for the decision.
International Public Organisations
International organizations registered outside Kenya that intend to operate within Kenya must apply to the PBO Authority for a certificate to operate. These organizations must:
Ensure that one-third of their directors are Kenyan citizens residing in Kenya; andMaintain an office in Kenya.Additionally, international organizations are required to have an authorized Kenyan agent—a Kenyan citizen resident in Kenya—who can receive official summons, notices, and inquiries on behalf of the organization.
The PBO Authority may exempt international organizations from registration if they do not intend to:
Engage in direct implementation of any activity or program in Kenya or operate from Kenya to implement any activities or programs in another country; orRaise any subscriptions or engage in any other form of fundraising in Kenya.
The Public Benefits Organisations Tribunal
The PBO Act establishes the Public Benefits Organisations Tribunal, which is responsible for determining appeals from the public or PBOs against the decisions of the PBO Authority and handling complaints related to breaches of the PBO Act.
Compliance Status of NGOs in Kenya
As we assess the current state of compliance with the PBO Act among NGOs in Kenya, it’s evident that the sector has made progress, but challenges remain:
Registration and Compliance: Many NGOs have successfully registered under the Act and are benefiting from the associated legal and tax advantages. However, some organizations still operate outside this framework, either due to bureaucratic hurdles or to avoid stringent oversight.
Governance and Transparency: Larger NGOs generally meet the governance and transparency standards mandated by the Act. However, smaller NGOs often struggle with these requirements due to limited resources, leading to inconsistencies in compliance.
Financial Reporting: While many NGOs have embraced financial transparency, issues of fund mismanagement and inadequate financial reporting have surfaced in some cases, raising concerns about accountability.
Government Relations: The relationship between NGOs and the government can be complex, particularly for those involved in advocacy or human rights work. There have been instances where the government has been accused of using the PBO Act to exert undue control over NGOs, including delayed registrations and threats of deregistration.
Challenges in Full Implementation
Despite being enacted over a decade ago, the full implementation of the PBO Act has faced significant delays, mainly due to political considerations. This has led to uncertainty within the NGO sector, with organizations unsure of the full legal and operational implications of the Act. Consequently, many NGOs are operating in a somewhat ambiguous legal environment, which hampers their ability to fully leverage the protections and benefits of the Act.
Looking Ahead: Recommendations for NGOs
For NGOs to enhance compliance and safeguard their operations, it is essential to:
Strengthen governance structures and ensure financial transparency.Engage in constructive dialogue with the government to address challenges related to the Act’s implementation.Collaborate with other NGOs and civil society organizations to advocate for the full and fair implementation of the PBO Act.