A strategic step towards achieving Vision 2030
In a significant regulatory step aimed at developing and empowering the non-profit sector in the Kingdom of Saudi Arabia, the National Center for Non-Profit Sector Development has adopted the new executive regulations for the Law of Associations and Foundations. These regulations serve as a fundamental legislative tool to enhance governance in the non-profit sector, raise transparency levels, and ensure the financial and administrative sustainability of organizations, thereby contributing to achieving the desired developmental impact and aligning with the objectives of the Kingdom's Vision 2030.
General context: Empowering the third sector as a partner in development
The Kingdom of Saudi Arabia places increasing importance on the non-profit sector, also known as the third sector, as a key partner in the national development process. Vision 2030 aims to increase this sector's contribution to the GDP from less than 1% to 5% by 2030. To achieve this ambitious goal, it was necessary to update the regulatory and legal framework governing the work of associations and non-profit organizations. The establishment of the National Center for the Development of the Non-Profit Sector as an independent body to regulate and oversee the sector led to this new regulation, which serves as the executive arm, setting clear standards for operation and strengthening trust between organizations, the community, and donors.
Key features of the new regulations: strict governance and oversight
The executive regulations included a set of detailed provisions governing all aspects of civil society work, from establishment and financial and operational management to oversight and dissolution of organizations. Among the most prominent provisions were:
- Prohibition of conflict of interest: The regulations explicitly prohibit employees of the National Center or supervisory bodies from working in any civil society associations and institutions in any capacity, whether functional or advisory, in order to ensure the impartiality of oversight and prevent any conflict of interest that may affect the integrity of the sector.
- Strict financial controls: The regulations require organizations to contract with a licensed external auditor and submit periodic financial reports. They also establish precise rules for handling Zakat funds in separate accounts and hold the board of directors fully responsible for the association's funds and assets, with the requirement to document all revenues and expenditures.
- Clear conditions for establishment: The regulations set precise conditions for the founders, including that the founder be a Saudi national and of full legal capacity, with a clean criminal record in crimes involving moral turpitude and dishonesty, which raises the level of trustworthiness in those in charge of these entities.
- Expanding the scope of civil work: The regulations opened the door to the establishment of associations in broad and diverse fields, including religious, social, health, environmental, developmental, cultural, professional, and creative aspects, thus allowing for the fulfillment of the community’s multiple needs.
The importance and expected impact of the regulation
This regulation is expected to bring about a qualitative shift in the civil society work environment in the Kingdom on several levels:
- At the local level, increased transparency and governance will enhance the trust of community members and donor companies in the sector, encouraging increased donations and volunteerism. It will also contribute to improving the efficiency of organizations and better allocating their resources to achieve their development goals and serve beneficiaries more effectively.
- At the regional and international levels, the Kingdom presents a sophisticated regulatory model that can be emulated in the region. Furthermore, the controls related to receiving foreign funding and participating in international events, which require prior approvals, ensure that organizations' activities comply with national regulations and protect the sector from any exploitation, thus enhancing the Kingdom's reputation in international forums as a leading country in combating money laundering and terrorist financing.
Towards a sustainable future for the non-profit sector
In conclusion, the new executive regulations are not merely a set of mandatory rules, but a roadmap for building a strong, reliable, and sustainable non-profit sector. By balancing operational flexibility with effective oversight, these regulations pave the way for associations and civil society organizations to become more influential players in achieving social and economic development and to contribute effectively to building a prosperous future for the Kingdom of Saudi Arabia.
