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Russian Endowment Law: How It Works . Natalya Kaminarskaya Tbilisi, July 2, 2008 . About Donors Forum. DF Basics. Professional association 44 participants in 200 8 / 15 participants in 2002 Cumulative budget - 160 mln US $ a year
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Russian Endowment Law: How It Works Natalya Kaminarskaya Tbilisi, July 2, 2008
DF Basics Professional association 44 participants in 2008 / 15 participants in 2002 Cumulative budget - 160 mln US $ a year Networking and services to participants and philanthropic society in general Partners in different sectors
DF Mission The Donors Forum is a coalition of private and public Russian and Foreign grantmaking organizations that actively implement the Forum’s mission through their cooperation The DF mission is to enhance the development and effectiveness of organized grantmaking that is aimed at supporting the development of a democratic, civil society in Russia
What We Do Meeting space Annual conference Regular research Competitions to promote philanthropy Representation Strategic partnership with different stakeholders
Main Characteristics of NGO Sector Number of NGOs – 228 000 About 5% of all legal entities in the country Contributing about 1% to GDP 55% of population never heard of them 20% of NGOs – charitable by name, but only 5% charitable by fact Number of donors – less than 0,1% of NGOs 100 private and corporate foundations, 30 community, 20 endowments
Russia’s «Specific» Way • Philanthropy quite developed • Market share – 1.5 bln US $ with companies 2-11% net income contribution • State and business – major players • Citizens – rather passive and low profile • State involvement – controversial
State: Latest Contribution • 2001 – closed list of “approved” foreign donors • 2005 – changes to NGO law on registration and reporting • 2006 – Endowment law • 2008 – Concept paper on philanthropy and volunteering • 2008 – draft law on tax deductions for individuals
Brief History • First mentioned – beginning of 90s • First attempt – draft foundation law 1998 • NPO leaders meeting with president Putin – December 2005
Endowment “Race” • March 2006 - president Putin meeting with business leaders • March 2006 – Annual meeting of Russian industrialist union • April 2006 – Philanthropic forum with Medvedev as guest speaker • June 2006 – Draft law • October 2006 – Draft law in the parliament • December 30, 2006 – Law signed by president
Unique Features • Timing – extremely quick • Process – experience analysis and stakeholders involvement • New mechanism for Russian philanthropy • Complex regulation: new law and changes in tax code
Endowment * Part of assets belonging to an NGO, that is established at the expense of donations, given by a donor (donors) to an NGO, and transferred by the NGO into trust management by a managing company in order to receive income used for financial chartered activities of this NGO or other NGOs according to provisions of the law *) From the Federal Law 275, December 30, 2006
Endowment Basic • Who: individuals or legal entities • How:donation or bequest • What: cash
Themes to Support • Education • Science and scholarship • Healthcare • Culture • Physical culture and sports (not professional) • Arts • Archiving • Social assistance (support)
Two Approaches • NGO – endowment owner and the only benefactor • Specialised organisation for endowment management (foundation) – endowment owner; the only purpose of establishment – creating endowment, disposal and distribution of income generated by it in favor of other benefactors
Approach 1: NGO*) – endowment owner Donor NGO – endowment owner Endowment Endowment income Managing company *) N/a for a certain types of NGOs
Approach 2: Specialised Organisation (Foundation) Donor NGOs – benefactors Specialised organisation - foundation Endowment Endowment income Managing company
Limitations • Themes – 8 specific only • Amount: not less than 3 mln roubles (125,000 US $) • Period: not more than 1 year • Type of funds: cash only • Required Body: Endowment board (i.e. Council for endowment disposal) • Managing company - trust management of funds • Investment mechanisms • Types of income generating activities for NGO-owner • Only type of activities for specialised NGO
Logic Decision on setting up endowment Approach selection Foundation NGO- owner Documents and Board of Trustees Changes to the Charter Registration Endowment Board Fundrasing 3 mln roubles +, 1 year Raised! Haven’t raised Managing company selection RETURNING FUNDS ENDOWMENT CREATED!
Things to Consider • What do you need endowment for? • 5-10-15 year strategy • What management structure to use? • Who’s going to manage? • Control system • Responsibilities • Fundraising • Who and how is going to do it? • Administrative funds? • Board members?
Expensive Long way Complicated Limitations Long term Sustainable Innovative Tax breaks perspectives New donors To Be or Not to Be?
First Results • 20 endowments in 2 years: • 3 foundations and 17 NGO-owners • 6 regional and 14 Moscow based • 16 education, 3 culture, 1 healthcare • 10 more planned till the end of 2008
Lessons Learned • Simple • Integrated in legislation • Significant tax deductions included • Info campaign • Training and methodical support • Challenge grants and/or awards
Thank you! Questions? Natalya Kaminarskaya Dfinfo@donorsforum.ru +7 499 978 5993