Recently, the Financial Monitoring Agency announced the high-profile arrest of Perizat Kairat, the founder of a charitable foundation. She is suspected of embezzling 1.5 billion tenge, collected from Kazakh citizens to assist those affected by floods.
In light of this resonant investigation, a correspondent from Tengrinews.kz decided to explore how public foundations operate in Kazakhstan: through which schemes dishonest organizations steal funds, and whom, conversely, one can trust.
As explained by legal consultant Aiman Aysina, charity can take various forms. There are public organizations, private foundations, and state-involved funds. However, all of them have the right to collect money and direct it towards charitable activities, provided they have a license.
Establishing a foundation is easy. The main condition is no profit
According to the lawyer, anyone can become a founder of a charitable organization: an individual or a group of individuals. It is important to note that a charitable foundation is a legal entity but not a commercial organization.
"A public foundation is an association of individuals that creates the foundation, essentially a legal entity, a non-commercial organization that, in its activities, cannot pursue profit. By law, they have the right to engage in entrepreneurial activities, but only within the framework of their statutory goals. For instance, a foundation may be established to assist children suffering from cancer. Within their activities, they can sell merchandise or items to use the proceeds for the purposes outlined in their charter," Aiman Aysina explained.
She stated that opening a foundation is "not prohibitively difficult." To do this, one needs to contact the Public Service Center (PSC) to register a public or any other type of foundation.
A list of required documents includes:
- charter draft;
- draft orders;
- capital size at the time of registration;
- founder's identification document.
The foundation's charter must include a collegial body (board of trustees), a governing body (director or president), and an auditing commission. It is also crucial to specify the foundation's statutory goals and the beneficiaries of its assistance.
Registration of the organization may be denied if the required documents do not meet the criteria.
Are foundations required to report on their expenditures?
By law, charitable organizations in Kazakhstan must publish reports on the funds received and the purposes for which they are spent. The reports must also include the organization's administrative expenses and employee salaries.
In the republic, there is a law on non-commercial organizations, according to which founders and leaders of foundations are not allowed to use any property of the organization for personal gain, even if they themselves transferred their property to the foundation. Everything transferred to the foundation is utilized within the framework of its activities.
As lawyer Aiman Aysina noted, foundations must undergo regular audits.
"Either the foundation must have an in-house auditor who will prepare the report and publish it annually in the public domain, or they hire an auditing company that has a license for auditing activities. They create a financial report that reflects all income and expenditures made for the foundation's purposes," the expert explained.
Who to trust? There is no unified registry, but there are thefts
Many foundations, according to the lawyer, publish not only reports but also their charters, orders, and decisions of the board of trustees regarding the purchase of specific goods in the public domain.
Whether to trust a foundation or not is a personal decision for each donor. In Kazakhstan, there is no unified registry of such organizations. However, if a foundation regularly publishes reports and demonstrates transparency in its activities, trust in it increases. The lawyer also reminds that all auditing companies conducting checks are typically licensed.
By law, any donation to a charitable foundation must be documented, for instance, through a sponsorship agreement. Money is transferred under this agreement.
"Even if a foundation has a purpose to launder money or generate profit, there will still be an official transfer of these funds. There are schemes involving fictitious service contracts, for example, organizing an event, where a company that handles events issues a million-tenge invoice, gets paid, and then these funds are 'washed away.' Sometimes, purchases of services are made through shell legal entities," Aiman Aysina elaborated.
The expert emphasized that such schemes can be utilized not only by foundations but by any legal entities and companies.
Administrative responsibility: warnings and minuscule fines
Article 489-1 of the Code of Administrative Offenses (CAO) addresses "Violations of legislation of the Republic of Kazakhstan on non-commercial organizations."
Part 1 of the article stipulates a penalty in the form of a warning for a non-commercial organization that fails to submit or submits false or deliberately misleading information about its activities, including information about its founders, property composition, sources of formation, and expenditure directions to the authorized body in a timely manner.
If such violations occur again within a year, the organization will be fined 25 MRP (92,300 tenge in 2024). Its activities may also be suspended for up to three months.
Why it is impossible to prohibit fundraising despite the case with Perizat Kairat: opinion
Recall that it recently became known that the FMA is conducting an investigation into activist volunteer movement leader and founder of the public charitable foundation Perizat Kairat. She is suspected of embezzling over 1.5 billion tenge collected to aid citizens affected by spring floods.
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