‘Endowments 2017’ discusses role of endowments in NGO sustainability
The metropolitan forum “Endowments 2017” brought together representatives from the NGO, Government and business sectors to discuss the role of endowments in modern day Russia.
Special purpose capital such as endowments can provide a sustainable base for NGO activity in the long term, says Artem Shadrin, Director of the Department of Strategic Development and Innovation at the Ministry of Economic Development. NGO revenue received from investing in endowments is exempt from income tax. Nowadays, Government actually co-finances charity donations from the public through tax relief on private income, Shadrin added.
However, donors aren’t yet clear why they should prefer endowments over donations. If an organisation can only spend income received from endowments, it then has to choose between long-term operational stability and resolving real problems in the here and now, Shadrin says.
“So, there’s a dilemma here. Either allocate more money to provide as much help as possible to an organisation which is receiving donations, or accept that money raised through donations is used sparingly and regarded as a long-term financial contribution” said Shadrin.
Shadrin believes this issue can only be resolved by promoting donations using endowments to citizens who wish to make donations as well as to professional benefactors and donors. Non-commercial organisations that have taken on the task of promoting the idea of endowments such as the Vladimir Potanin Foundation and which organise training courses for NGOs can play a significant role here, he added. In addition, it is important to mobilise trust funds and donor organisations which can facilitate the wide dissemination of endowments across Russia.
Endowments are the most civilised, proper and transparent way of supporting NGOs which allows them to plan and develop their work over the long term, said Mikhail Shvidkoy, Scientific Head of the Higher School of Policy in Culture and Management in the Sphere of Humanities at Lomonsov Moscow State University. However, Shvidkoy also commented that endowments arouse a degree of psychological suspicion among a lot of donors.
“It’s society as a whole rather than the individual which is the issue here in that endowments imply a level of stability within society, particularly as regards private property and its protection under all manner of legislation”, said Shvidkoy. Donors need to understand that the rules of the game will still be the same 10-20 years after the creation of endowments. However, at the moment, people are very distrustful of institutions, the law and law enforcement agencies.
The law on NGO special purpose capital came into force 10 years ago and its anniversary has not gone unnoticed by organisations that have created their own special purpose capital, said Oksana Oracheva, Director-General of the Vladimir Potanin Foundation. She said that sufficient time has now elapsed since the law came into force for a number of conclusions to be drawn, but not long enough to assess the full impact of endowments which are essentially for the long term.
“What have we achieved over the past 10 years? We have created more than 150 special purpose capital funds. Here, we’re speaking principally of specialist organisations because in most cases, although not all, the law requires that an organisation creates special purpose capital not from within but as an independent separate fund”, said Oracheva. Around 20 organisations have created special purpose capital “internally”. However, it’s very difficult to establish how many organisations have decided to create endowments in this way as this is not mentioned in any statistics, she added.
In creating special purpose capital, the amount is less important than what it is intended to achieve. All the same, special purpose capital doesn’t sound particularly “financial”. It’s all about an organisation’s ethos and future and how we give future generations the chance to use special purpose capital the way we do today. Oracheva added that each organisation needed to employ a model for creating special purpose capital. Every organisation that is still thinking about their strategic plans has to decide if it needs to engage in conventional fundraising or have an endowment which allows money to be saved for the long term, she said.
It’s very important that an endowment reflects the ethos of an organisation, says Alla Samoletova, Head of the Rector’s Office at the European University in St Petersburg. “An endowment is an important instrument for creating financial and institutional sustainability as well as being a transparent tool which donors can understand and become more familiar with and begin to participate in the process”.
The “Endowment 2017 forum” forms part of the “Special purpose capital growth strategy” project which is being run by the Vladimir Potanin Foundation. A pilot of the project took place during 2012-2014. Employees from Russian universities, museums, theatres, charities and other organisations learned how to create and develop endowments during the two-year trial. The final educational module was completed at the Moscow School of Management “Skolkovo” on 30 March. The third stage of the project will begin in 2017.