Is the current legislation sufficient for the development of the foundation sector and for the increase of its role in society?
By Oksana Oracheva, Program Director, Vladimir Potanin Foundation
Recent discussions about the need for a special law on foundations in Russia is coming from a desire to create a more favourable environment for philanthropic activities in our country, and to understand what we can learn from our own experience and from our colleagues in Europe where the foundation sector has a much longer and richer history. Is the current legislation sufficient for the development of the foundation sector and for the increase of its role in society? What are the institutional conditions and administrative barriers that foundations deal with? Does the current legislation contribute to the consolidation of the foundation sector?
In 2011, after 20 plus years of foundation sector development in Russia, it was time to reflect on the sector’s role in civil society. In October of last year, the Russian Donors Forum presented the first “Report on Institutional Philanthropy in Russia”. The report was a first and much needed attempt to provide a systematic study of institutional philanthropy in general and of different types of foundations in particular. One of the major conclusions was that there has been a significant growth of the foundation sector in Russia. Foundations are playing a greater role (both in their impact and financial power) in Russian society, increasing their contribution to the development of education and science; arts and culture; health care; and protection of children’s rights, among other areas. Having analysed different types of foundations and the existing legal framework, the report also states that Russian foundations encounter various obstacles in their activities. Today Russia has quite a complicated legal and regulatory environment. Foundations are subject to a series of different laws, including but not limited to the Civic Code; the law on NGOs; the law on charitable organisations and charitable activities; and the law on endowments. Most of the legal norms that regulate the foundation sector in Russia were adopted in the early stages of the sector’s development. Significant changes to various federal laws have been made in the last few years in an effort to reflect the evolving nature of the philanthropic activities, roles and capacities of foundations of different types (including community foundations, endowments and fundraising foundations); to reflect new approaches to philanthropy; and to gain an understanding of the public good in the existing legal and regulatory framework. This has further complicated the legal situation.
Therefore, we are now grappling with the question of whether the Russian foundation sector needs a special law on foundations or whether the current legal framework is appropriate, and, if so, should the foundation sector then concentrate on its further improvement through making necessary changes within itself. This issue was reviewed in depth at the international conference “Legislation on Philanthropy: Russian Reforms and the European Experience”, organised by the Vladimir Potanin Foundation, the Russian Donors Forum, CAF Russia and the Public Chamber of the Russian Federation in September 2011.
The experts identified some advantages of having a special law on foundations. The current legislation provides quite a broad definition of a foundation as a philanthropic institution and does not clearly distinguish donor institutions from foundations of other types. The new law could address this issue by separating out donor institutions and giving clear definitions of the other types of foundations. The current legislation is too fragmented and inconsistent. There is a need for a more systematic approach to streamlining foundation sector regulations. The law would simplify foundation registration and reporting and therefore would allow foundations to more efficiently channel funds to public benefit purposes.
At the same time the benefits of having a special law on foundations are not so straightforward, and changes in the legislation may have a negative impact. Overall, the recent legislative changes — including tax benefits for individual donors, public support for socially-oriented organisations, simplification of regulations for foreign foundations operating in Russia, public support for volunteerism and social advertisement development, among others — are very positive for
the foundation sector’s development. However, there are certain legitimate concerns that the new legislative developments would require protection of what has already been achieved. We would not want to let the progress made in the philanthropic sector get lost in the new legislation. Another concern is that the new law would complicate the legal framework instead of simplifying it. Moreover, it is still unclear whether the foundation sector itself is ready for such a law as the law would limit room for manoeuvre. Thus, there is no definite answer and no consent on the issue that a special law on foundations is needed for Russia. But there are no doubts that the growing foundation sector needs to have its distinctive voice. The ongoing discussions and analysis are good instruments for self-understanding of the sector’s needs, for creating a better regulatory environment, for consolidating the sector, and for further increasing its visibility and role in society.