Press Room

Endowment Verdict Is Reached. The Closing Conference Highlights.

On June 2, 2014, the Conference "Endowments: Pro et Contra» took place in Moscow. The Conference had summarized the two-year activities under the pilot Endowment Growth Strategy Program of the Vladimir Potanin Foundation aimed to support the development of endowments in Russia. The Program had been completed in partnership with the Russia Donors Forum and the New Economic School.

In 2012-2014, the Vladimir Potanin Foundation conducted a pilot two-year program. The program aimed at raising awareness of non-for-profitorganizations, potential donors and all stakeholders in the application of the endowment model as an effective tool for advancing NGO sustainability and development, as well as at promotion of effective fundraising.

The program had two main components: education and outreach. As a result of the open competition, 24 winners have been selected by the Program Expert Committee – representatives of museums, universities, schools and non-for-profitorganizations, including working in the social sphere. They received an opportunity to complete "Effective fundraising for endowments" course at the New Economic School.

For them, a special course was developed aimed at the promotion of models of the Target Capital and modern methods to attract donor funds. A distinctive feature of the course was its applied orientation and constant adaptation to the practical needs of the audience. Participants also worked on their capstone project and received an opportunity to apply the knowledge and skills received to the practical needs of their organizations.

In 2013 based on the interim results, using his personal assets Vladimir Potanin made a contribution to the endowments for 5 non-for-profit organizations which took part in the Program and demonstrated real breakthrough in fundraising.  In June 2014 once participants completed working on their projects  Vladimir Potanin made contributions to the endowments for 8 non-for-profit organizations. Total contributions amounted to 24 million rubles.

The final step of the program was the preparation and publication of a collection of best practices, in which the participants talked about fundraising campaigns conducted, successes and difficulties. The program concluded with a final Conference "Endowments: Pro et Contra», held on June 2, 2014, in Moscow. Program participants presented the best cases, which they had developed during the frames of the Program. 

At the Conference, program participants – representatives of endowments from MGIMO, Ural Federal University, Peterhof Museum Complex, Tomsk State University, and Penza Community Foundation “Civil Unity” – talked about their fundraising campaigns to Target Capital. For some, the determining factor of success was the work with students and alumni, for others - the lottery, for the third - to attract attention through charity performances with the heads of the city and regional administrations.

The central event of the conference was the discussion on the advantages and disadvantages of the endowment models in the form of the court trial session "Endowments against Charities”. The main question was "To Be or Not To Be an Endowment in Russia?".  "Prosecutor" Maria Chertok (CAF Russia), "Defense Lawyer" Larisa Zelkova (the Vladimir Potanin Foundation), "Judge" Boris Tsirulnikov ("Togliatti Foundation"), "witnesses" and "the jury" gave their answers during the “trial”.

In her speech, the Prosecutor stated that endowments in Russia do not meet expectations, and she listed their "crimes" to the public. In 2012, the share of endowed funds in the general budget of Russian foundations was 1%. Endowments conserve large amounts (total Russian endowments’ funds are about 25 billion rubles), instead of spending them on addressing the most pressing social problems. Received Income is comparable to the rate of inflation. During the eight years of the "Law on Endowment" being in force, 130 endowments have been registered with more than half of them were unable to raise the required 3 million rubles. The level of transparency among endowments is poor. Moreover, as the Prosecutor stated, they contribute to further the gap between non-for-profit organizations and well-fixed institutions.

"Of the 65 formed endowments 41 belong to universities, mostly governmental. Needless to say, that they already have premises, budget financing, staffing, etc. For them, the availability of additional funds, including endowment funds is like a cherry on the cake. However, whether or not this "cherry" is worth 25 billion rubles in an environment where the majority of NGOs could barely make ends meet, and fight for every ruble? "(Maria Chertok)

In her justifying speech, the Defense Lawyer stressed that the comparison of the endowments with NGOs is made exclusively in favor of the former; they attract resources more efficiently, and their transparency is higher. Only endowments were able to accumulate such an impressive amount of money not for specific projects, but for the infrastructure costs. The Defense also denied the Prosecutor’s information about the level of profitability of endowments, which, according to her, is higher than inflation. Moreover, endowments’ income spending is of a much higher quality and transparency than NGOs’, which often spend money inappropriately. Besides, the conditions for the creation of endowments in Russia are much more complex than those, in which charities developed their basic capitals, what again underlines the viability of Russian endowments.

"The cornerstone of the endowments development is open, clear spending. The reporting, which exists today,  how closely financial regulators can monitor the capital management of endowments, as well as how closely donors assess the resources they provide for endowments – this experience would be good to analyse and apply to nonprofit organizations. In her speech, the Prosecutor mentioned that endowments have tax breaks – my opinion is that it is right to give tax exemptions to those, who are able to comply with strict financial discipline." (Larisa Zelkova)

The court also made "witnesses" charges in accusing (Irina Sam, Yuzhny Federal University) and defense (Alla Samoletova, European University in St. Petersburg). Present in the room offered viewers to vote "for" or "against" endowments. After pleadings, jury retired to deliberate.

At the result, the jury recognized unproven the actions of the accused in offenses against solving urgent social problems and found no corpus delicti in the harming other organizations.

The verdict: Endowments were recognized guilty in a distraction of significant resources from addressing urgent social problems. Endowments were sentenced to "community service" to address pressing social problems. Wherein, the court acknowledged that endowments do not harm the activities of other organizations. The court ordered endowments to prepare and post for public access the annual reporting to promote the endowment mechanism among potential benefactors. The Court also requested the State represented by the Ministry of Economic Development to take steps to immediately activate the legislative work in the sphere of endowments.

After the trial, the Director of Innovation Development Department of the Ministry of Economic Development of Russia Artem Shadrin spoke:

- We are preparing for entering into government the legislative initiatives associated with the removal of restrictions on donations to Endowments, and adoption of tax incentives for businesses, who donate to endowments, - he said. - We look forward to active participation of business, similar to that demonstrated by the Vladimir Potanin Foundation. I think we can really use the existing capacity of Endowments, through this mechanism to ensure the inflow of private investments in the non-for-profit sector.