State acts to encourage university endowment funds

Endowment funds are gaining popularity among Russian universities as they attempt to attract new, long-term sources of funding and reduce dependence on the state. Such activities are a part of massive reform of the higher education system currently being implemented.

The situation regarding endowment funds is complex, and currently only 50 universities have their own funds, with a total value of 18 billion rubles (US$600 million).

The process of establishing endowment funds has been slow, despite legislation adopted in 2006 regulating the "formation and use of endowment capital of non-profit organisations".

One of the main proponents of the initiative is Prime Minister Dmitry Medvedev, who said recently: “The idea of endowment funds is very close to the Russian government. In line with our plans for the future, all Russian universities must form their own endowment funds.

“If Russian universities create endowments of at least $100 million, it will be a good result for the next several years, and the government plans to provide all the needed assistance to achieve this goal.”

Until now, the private sector has expressed little interest in donating to universities, mainly due to low social responsibility levels in businesses, the absence of incentives, and donor uncertainty that their financial contributions will be used for long-term future-related projects rather than current needs.

Marina Sitnina, vice-president of Gazprombank – one of Russia’s largest banks, which is known for its charitable activities – commented that in contrast to Western countries, in Russia endowment funds were uncommon, with one reason being lack of fund-raising expertise and experience in universities.

“In addition, the establishment of endowment funds has been prevented by the lack of benefits to donors as well as undervaluation of the image of a philanthropist in the country. Charitable activity in Russia mostly takes place outside the public sphere.”

According to state plans, this situation should change in the near future. The government intends to create conditions to attract funds to endowments, through active lobbying among local business for charitable contributions to be made to universities.

This is expected to take place through the implementation of a package of measures, the main component being exempting endowment funds from income tax along with other financial incentives.

There are also plans to change the practice of endowment fund formation. Currently, funds in Russian universities mainly comprise a small number of large donations from wealthy individuals or companies – there is a complete lack of small donations from many people, which is common in American and British universities.

In addition, the government plans to implement measures to more strictly control spending by endowment funds.

Establishing funds is part of reform of the national higher education system, one of the main aspects of which is enhancing research activities in universities and transforming them into the primary centres for science, instead of the old-fashioned National Academy of Sciences.

Russian universities have welcomed the latest state initiative, believing that it will help more actively promote scientific and research activities, and will also help to solve many social problems, as well as contributing to the development of university infrastructure.