Upon request by the EU-Russia Civil Society Forum, Oleg Sharipkov, Head of the "Civil Unity" Foundation, tells about a successful pratice of setting up an endowment in Russia:
Few people know that there has been a law on endowments for non-profit organisations in Russia since 2007. After having read the text of the law, we, representatives of Russian community foundations, had the impression that as if the law was not written for us. It was so incomprehensible and difficult to implement. However, the main thing was that it provided an opportunity for developing endowment funds. It is the very sort of “long” money that we had been dreaming of since the creation of community foundations. Although the law is intended for museums and universities in the first place, it can be used by NGOs as well.
In 2014, we decided to give it a try. We set up our own endowment fund. Apparently, our endowment is still the only one in Russia among the local community foundations and resource centres. Today, it has more than 7 million roubles, i.е. about 100,000 euros. The amount of money is small, but it allows us to receive an annual income of up to 14,000 euros. With this money, we can support the work of many small non-profit organisations and citizens’ initiative groups in the Penza Region.
What is an endowment? These are funds of an NGO or a foundation, which are transferred to the management of a financial management company that lists the generated revenue to an NGO. One should note that these funds are not taxed. They may be directed to support projects and activities of various NGOs working in the fields of education, health, social protection, culture, art, mass sports, environmental protection, providing citizens with free legal support and legal education. The most understandable example of an endowment fund is the Nobel Prize. Once formed, the Nobel Foundation has been working for over hundred years and annually grants awards to the best scientists.
What does an NGO need to set up an endowment fund? First of all, it is necessary to amend the charter or create a subsidiary organisation – a specialised trust management fund. After one year from the receipt of the first donation, it is necessary to collect at least 3 million roubles (around 43,000 euros). For this, one may not use own funds or budget money. Thus, we are talking only about donations, and there must be a contract with each donor which stipulates the purpose of the money transfer as the setting up of an endowment.
Once an NGO has collected 3 million roubles, it has 30 days to make a trust management agreement and transfer the funds to a managing company. Only after having done this, an endowment fund is set up.
Endowment is a source of funds able to provide for the activities of an NGO for many years. That is why many NGOs would like to know how to use this tool. “Civil Unity” has issued several manuals on this topic as well as the book “Endowments. Inception. How to Set Up an Endowment Fund in the Region?”, which describes our experiences in detail and gives expert advice. You can download manuals, the charter, and other documents from the website of the “Capital of Local Community” Fund (https://penza.capital). We are always happy to answer questions you may have.