Accountability and Transparency

Legal Mechanisms for NGO-Government Partnership in Ukraine

The International Journal
of Not-for-Profit Law

Volume 6, Issue 3, June 2004

By Alexander Vinnikov*

Background: Cooperation in the 1990s

In the 1990s the Ukrainian government cooperated with a few nationwide quasi-non-governmental organizations (QUANGOs), mostly established in previous decades. Traditionally, they included associations dealing with, for example, disabled people and foreign relations, as well as such new umbrella organizations as the National Committee for Youth Organisations. Each year the law on the national budget included special funds for subsidizing those organizations.

Local governments either cooperated with the branches of these QUANGOs or set up their own institutions, generally for the purposes of political patronage. Many businesses took legal action against forced contributions to such institutions, and usually they gave tax-deductible donations to QUANGOs such as foundations supporting the local fire services or district zoning instead of giving to private institutions or NGOs.

However, Ukraine was marked by relatively low public funding for NGOs in the 1990s. The share of budget funds in the declared income of NGOs was in the range of 10-15 million euros. It never exceeded 12-13 percent of total NGO income, or 0.1 percent of Gross National Product. “Partnerships in kind” were more common and quite efficient in providing specific social services. For instance, many local governments allowed operating NGOs to use or rent public premises and facilities for a token fee. But even this form of partnership was unstable and based on unilateral decisions of local governments.

Positive Legal Changes

In 2000-2001, important legislation on NGO-government partnership was passed, mainly due to the strengthening of service delivery by advanced NGOs, which took the lead in many important areas (e.g., HIV prevention and support for the homeless and victims of domestic violence).

The new budget code has banned the setting up of any quasi-government funds except those within the national or local budgets. Government agencies have been legally excluded from setting up and funding charities as well. Thus, discretionary powers of local governments and specific agencies in NGO partnership have been substantially reduced and legal mechanisms introduced incrementally.

Many government bodies are still suspicious about NGOs’ objectives, institutional capacity, and supposed political affiliations. A fairly common perception remains that NGOs are entities that should simply implement government policy. NGOs seeking to influence policymaking, provide expertise, or monitor public policy are widely considered agents of social instability. This trend can be changed only through practical cooperation and initiatives by NGOs.

Government Initiatives

Nevertheless, the national government has supported some important partnership programs. In 2000, the Fund for Social Investments was set up by the Cabinet of Ministers in cooperation with the World Bank in order to involve NGOs in setting priorities and funding community facilities for social purposes.

Currently, the Cabinet of Ministers is setting up advisory boards involving NGO representatives in all national executive agencies. This represents an important step forward in policymaking procedures, though complicated by the lack of reliable databases of operating NGOs and the lack of recruitment procedures. Accordingly, it is possible that members of these advisory boards will end up being selected on a political basis, notwithstanding the actual needs and expertise of the broader NGO community.

The extensive powers of local governments made possible the implementation of helpful models of NGO partnership on the basis of local regulations in some cities (e.g., Odessa, Kamyanets, and Boyarka). In the capital city, Kyiv, the special program of grants for social purposes is large enough to fund even long-term projects (over 5 million euros), but is still underused. However, the vast majority of local officials prefer to wait for new laws, in part because they lack their own funds and badly need transfers from the national budget.

Partnership Mechanisms

At present, there are three principal legal mechanisms for government-NGO partnership:

Procurement Regulations

First, since January 2003 the Law on Procurement has allowed all legal entities to take part in procedures for public procurement at the national or local levels. Under Ukrainian law, five procedures may be applied to procurement:

  • open tenders on goods, facilities or services;
  • tenders with a limited number of participants;
  • two-step negotiations;
  • quotations; and
  • single-supplier bargaining.

Local governments are free to choose procurement procedures up to 5,000 euros per supplier in a fiscal year. Such an amount is effective for many small local NGOs in Ukraine. Subsidiaries of NGOs serving the disabled benefit from preferential terms enumerated in the law and in resolutions of the Cabinet of Ministers. Of course, private companies usually have advantages in most areas, but some NGOs have already won large contracts for, among others, media coverage of pension reform and training for unemployed people starting their own businesses. In keeping with Presidential Decree 637/2001, “On a Strategy for Poverty Relief,” a focus on competition and tenders prevails in the allocation of public funds to social service NGOs.

Social Services

Second, the controversial new Law on Social Services provides legal mechanisms for funding NGO-run institutions for orphans, the disabled, and the elderly. However, the procedures for accreditation of such institutions and training for social workers and volunteers have not been developed yet.

Though Ukrainian legislation still precludes the privatization of social facilities, it is already evident that the government cannot afford to fund the existing network of clinics, community centers, childcare facilities, etc. As simply cutting back funds and institutions would not be effective, local governments promote conditionally renting some facilities to operating NGOs with similar purposes.

Assigned/Programmatic Subsidies

Third, the Law on Social Programs 1602 (2000) promotes partnerships aimed at meeting public social standards. It allows NGOs to be agents, partners, or subcontractors of government agencies in implementing programs approved under the budget code and this law. The primary aims of such programs are to set the specific objectives and priorities of social development for one to five years, as well as to secure minimum social standards and guarantees provided under Special Law 2017 (2000). The law specifies mechanisms of NGO involvement in development and implementation of these programs. The sources for program funding are assigned (or programmatic) subsidies from the relevant budgets.

Currently most active in subsidizing specific programs via partnerships with NGOs are the Ministry of Labour and Social Welfare, the Ministry of Health, and the State Committee for Youth and Family Affairs.

Since 2003, subsidies from national or local budgets as well as from special government funds have been tax-exempt income for NGOs except churches and cooperatives. Further, services subject to licensing may be provided by NGOs if the activities are enumerated in their articles and related to their statutory activities (Article 7.11.13 of the Law on Corporate Income Tax). This is especially favorable for charities, as providing services for reimbursement of costs only is a charitable activity under the Law on Charities and the new Civil Code.

However, many NGOs believe the reporting requirements and other paperwork related to these subsidies are excessive and the terms non-transparent, so they prefer to solicit private funds.


Legal mechanisms for effective NGO-government partnership in Ukraine can be considerably improved if the NGO community becomes more active in drafting and lobbying for specific regulations instead of taking a reactive approach to casual government initiatives.


* Alexander Vinnikov,, is a Legal Advisor at the Institute for Sustainable Communities in Kyiv, Ukraine. This article originally appeared in the Winter 2003-Spring 2004 issue of the Social Economy and Law (SEAL) Journal, published by the European Foundation Centre. We are grateful to SEAL for permission to reprint it.