Assistant of Head of Directors Council

Foundation of Dukes-Philanthropists Ostrozky 

Round table 1 “Activity of Philanthropic Organizations in Ukraine”

October 7

 Direction on System Philanthropy

In Ukraine in the time of economic crisis an issue of stability has arisen acutely, and accordingly a question of systematic participation in philanthropy in any sense of this word – wide or narrow. How is it displayed? Business and citizens, when they felt economical misfortunes, began to reduce amount of their donations. Business in better case reduced level of salaries to its employees, and thus displayed its social responsibility, but didn’t simply dismiss all. Due to such conditions, we cannot talk of charitable donations (in terms of money or goods). Charitable funds and nonprofit organizations automatically began to feel this situation.

Apparently, nonprofit sector of Ukraine these days faces a new challenge and new tasks, which lie in becoming independent and stable institutions.

Foundation of Dukes-Philathropists Ostrozky belongs to those organizations that care about their development and apply new approaches in ensuring possibility to become financially stable charitable fund and continue implementing important social and charitable projects and programs. Therefore along with presently traditional methods of fundraising and business and community involvement in philanthropy, we try to develop new ones, using successful practices of other countries in the world.

 

Among programs we work on, the following could be distinguished:

 

System of social discounts “Mnohokartka”. This program was repeatedly introduced to public during conferences and round tables. It engages business involvement in philanthropy trough giving discounts on its products and services, which is very important as it is not always possible to give out money, but it is easier to save money for citizens. Besides that every citizen joins philanthropy by buying a card, because every fifth card of social discount is given to those who are unable to afford it (poverty-stricken and disabled). To carry out such a project is impossible without interaction of business institution (in our case it’s “Profconsult” company) and government institutions (Department of Social Care and Work, that defines the list of poverty-stricken persons and those, who have special need in it). Thus every year for one person charitable donation of 1500 gryvnias could be done; simply one will not have to spend them.

 

Charitable program for non-profit organizations “Fund of Social Action”. Program is developed according to model of American Community Shares. The program embodies systematic attraction of charitable donations from labor communities as business institutions, and others. During the program every employee can make conscious charitable donation for implementation of certain projects and programs. Due to our experience, workers had to choose among 13 non-profit organizations that were to be included in the program. Of course, this program needs some correction of details related to bookkeeping. As employee donates not with money, but through the way of deduction of certain sum or percentage from her salary. This donation can be done every month, once in a quarter, once a semester or once a year, depending on a will of a worker. In time since the crisis began, to apply to employees and administration of institutions has become more complex, but during so to speak “renewal” from economic shock we have time for change of attitude of Ukrainians towards philanthropy and responsibility of everyone for welfare of their communities and country as whole.

 

Nominal Charitable Programs. Here could be added target charitable and social programs of business corporations. This is but the most promising way to provide long-term participation in philanthropy. Nominal programs engage development of conceptions of charitable and social projects. Philanthropist during certain time (for example 10 years) annually will make charitable donation of 10 000 gryvnias, these money will not be possible to use, only distributed profit from them. Philanthropist decides himself on what and who will be supported (stipends for talented students, support of artists, grants for initiative groups of citizens). According to Ukrainian law charitable fund is able to use up to 20% from this distributed profit for administrational costs. This model could be named “endowment”. Skeptics will say that there is no need in this foreign words, but if read Ukrainian laws carefully, then observant will notice, that from 1992 due to the law this word could be named Ukrainian. During 2008-2010 Foundation of Dukes-Philanthropists Ostrozky brought out the theme of endowments for charitable funds (in particular, in the publications of journal “Visnyk Blahodiynytstva” – “Charity Review”). During the last year together with West-Ukrainian Centre of Social Partnership with participation of professional Ukrainian and American lawyers and economists, was conducted preparatory work on joint Ordinance of Cabinet of Ministers and National Bank of Ukraine on approval of Method Recommendations on concession of services in endowment management to individuals, enterprises and organizations. This document is very important and may become new impulse in providing of systematic philanthropy, because first of all it addresses to banks and other financial institutions, which will also take part in the development of endowments. During work with text of the Ordinance experts proposed minimum of three models of finance attraction into endowment (they can be viewed in “Charity Review” #1 (7) spring 2010), prepared a set of legislative document needed for founding an endowment. Work of founding an endowment of non-profit organization and finance attraction for its replenishment, and therefore an increase of size of given help and systematic support of social projects and programs for realization of which endowments are actually founded, needs great efforts. The greatest complexity, that will arise of the way of these organizations, which decide to attract finances purposely for replenishment of endowment, will be ability to explain to potential philanthropist why it is worth to donate into projects of long-term influence, when real results could be seen in 5-10 years. Of course, endowment can operate now, if principal sum of endowment is big enough to provide big enough income, because only profit from principal sum of endowment may be spent on programs and projects. According to Ukrainian law at least three simple forms of donation attraction can be used in money equivalent on endowment formation, depending on the form of property rights for principal sum of endowment, which may be interesting to philanthropist.

 

Donation Agreement (Philanthropists is entitled for principal sum of endowment)

Philanthropist opens special deposit account, or submits money for management by certain financial institution, that will endeavor development of this money. To an agreement philanthropist adds a statement that percents from invested money will have to be incorporated to bank account of one or another non-profit organization (that will lead administration of social programs and projects chosen by philanthropist). If a bank or financial institution foresee an opportunity to make tripartite agreement, then this document can substitute a statement.

Bank/ financial institution in stated term and according to conditions of agreement places percents from investment activity on a bank account of certain charitable non-profit organization.

From its side non-profit organization, that has attracted charitable donation in such a way, develops a package of documents needed. To such a package a description of developed charitable program may belong (Statement of charitable program), that will be realized from the finances of endowment. Statement of charitable program is approved and signed by a philanthropist and a head of non-profit organization.

 Non-profit organization from the time of foundation of endowment takes responsibility to propose to philanthropist new possibilities for endowment development; using finances from endowment realize projects and measures defined by philanthropist in the Statement; to prepare and provide philanthropist with a report on conducted activity.

Administration of charitable programs and preparation of financial report are accomplished by non-profit organization.

Philanthropist in such way keeps his right to follow the development of endowment, movement of profit from the endowment, approve proposals of measures, that have to be taken, or support that should be provided.

*Attention! If philanthropist chooses such a form of interaction, then he cannot use tax privileges – tax credit for principal capital of endowment (in size from 2% to 5% of profit of previous year).

 

Donation Agreement (Philanthropist passes principal sum of endowment to non-profit organization )

Second possible form of endowment foundation suggests that philanthropist passes finances to non-profit organization, which independently conducts activity of development of principal sum of endowment (the search of bank institution or another finance institution that will lead investment activities)

Non-profit organization keeps all duties before the philanthropist, as in the first case.

* Attention! In such form of collaboration philanthropist may use tax privileges – tax credit for principal capital of endowment (in size from 2% to 5% of profit of previous year) and cannot demand of return of principal sum of endowment, because it may lead to penalty sanctions towards philanthropist from tax administration.

3. Agreement of loan (Philanthropist loans certain sum of money for defined term to create endowment)

Not usual, but completely possible form of interaction between non-profit organization and philanthropist suggests that philanthropist may loan certain sum of money to create endowment.

Non-profit organization keeps all obligations to develop Statement of charitable program and administration of appropriate projects.

Time of endowment development in this case may be more durable, because during first-second year non-profit organization is able to incorporate finances not for realization of philanthropic projects and programs, defined by philanthropist, but on formation of principal sum of capital.

Philanthropist from his side provides for use for defined period of time (1, 2, 5 years) certain sum of money. Non-profit organization may use this money to obtain income in percents of deposit and so on. After the term stated in agreement (1, 2, 5 years) non-profit organization is obliged to return loaned sum of money to philanthropist, and received dividends keeps organization, as principal sum of endowment.

* Attention! If philanthropist chooses such form of interaction, in such conditions he cannot use tax privileges – tax credit and principal capital of endowment (in size from 2% to 5% of previous year profit).