Leap of Faith

Foundations Struggle To Reform Opinions, Laws

By Ksenia Bilan

Victims of trickery and deceit at the hands of the ruling class for decades, Ukrainians have been slow to embrace Western concepts of charity.

Over the past several years, industrialists and political leaders have started forming and funding non-profit charitable foundations. The foundations, in turn, have developed programs that run the gamut from involvement in the arts to medical care and research, education and community development.

To cynics, these tycoons are just assuaging their guilt and trying to buy respectability after years of accumulating assets through dubious deals and strong-arm tactics. Optimists believe that the nation’s wealthiest men and women are merely doing what their counterparts in more developed nations have done for years – dedicating a portion of their considerable wealth to helping their countrymen through causes in which they have taken a personal interest.

Yet unlike the situation in other countries, Ukrainians tend to be suspicious of charities, even when they may be on the receiving end of a benefactor’s largesse.

“The problem is that there is a lack of transparency in Ukraine at any level, including foundations, and people don’t trust them,” says Ivanna Klympush-Tsintsadze, executive director of the Open Ukraine Foundation organized by Arseniy Yatsenyuk and Zbigniev Drzymala.

Klympush-Tsintsadze said that many people harbor negative attitudes toward foundations in the erroneous impression that they were created to facilitate money laundering.

“Everyone talks about it, but I don’t know of any foundation that was organized to launder money,” said Olena Matsibokh, head of the board of the Krona Foundation, which was founded by the Niko group of companies and their partners.  “In reality, it is impossible to do that through a foundation. This misconception was created as a result of a 70-year gap in the charity culture.”

  “The public’s distrust of foundations is in part due to the fact that until recently, many foundations didn’t employ competent professional staff. Their programs lacked quality and didn’t show good results,” Matsibokh continued.

The nation’s foundations and public charities are beginning to realize that a little image-building might go a long way toward eliminating stereotypes and creating public esteem. While no coordinated campaign has been developed in Ukraine’s nascent non-profit community, efforts to educate the public through the mass media have had limited success.

Open Ukraine’s experience is that the media treats foundations the same as they would a profit-seeking business. By refusing to mention a charity’s name in articles, the press does a disservice to readers who may also benefit from the foundation’s services, Klympush-Tsintsadze said. She also said that practice make attracting donors more difficult.

As a result, she says, “75 percent of the public doesn’t know anything about foundations at all.”

“Journalists do a poor job of helping charity,” agrees Krona’s Matsibokh. “They write very little about it, and the general impression is very unpleasant.  It’s easier to write about murder than about necessary and good things.”
Larger, better funded organizations seem to fare better.

“The foundation cooperates actively with mass media, conducting information campaign on our Stop Tuberculosis and Cancer Can Be Cured projects,” said Nonna Shmidik, PR manager for Rinat Akhmetov’s Foundation for the Development of Ukraine.  “We also have a common project, Your Child, with the newspaper Segodnya, which helps orphans find families.”

One complaint shared by all non-profit organizations in the country is the state of the law.  In the west, non-profits are tax-exempt.

“We are purchasing a house for a family. They are required to pay a 15 percent tax on the value of the home when they take ownership. For a low-income family, this is a huge amount of money,” Shmidik noted. When the charity pays the tax, those funds go to the state budget instead of being utilized for other charitable purposes.

“If we give a grant to a boy in Lviv, we have to pay tax from this grant, so he doesn’t receive the full UAH 25,000 grant, for example,” says Klympush-Tsintsadze. On a positive note, she says that foundations do not pay VAT.

Changing the law would cost the government relatively little, but would free up hundreds of thousands more hryvnia for charity each year.

“The legislation concerning charity foundation activities need to be improved.  However, a transparent and honest fund can operate quite effectively with it. There are changes needed which we are trying to resolve by working with officials,” Matsibokh said.

“Foundations are helping the state solve the most critical social problems. We are not only providing financial help, purchasing equipment and remodeling hospitals, we are working to improve legislation,” Shmidik explains, adding to that her foundation has initiated and is participating actively in the development of bills and amendments in parliament.