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.
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.
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.