Real estate and cars: the use and abuse of citizen donations by Lithuanian non-profits

Under a scheme intended to help fund the non-governmental sector, Lithuanians can tell the State Tax Inspectorate to give up to 2% of their income tax to organizations and non-profits of their choice.

Last year, 530,000 used the opportunity to support over 23,000 charities and non-profits. They divided up €4.27 million and, judging by trends, stand to get even more this year.

The law requires that beneficiaries of the support report to the authorities how they use the money. There are certain restrictions on how it can and cannot be used. For instance, the money cannot be spent on funding political parties or campaigns.

Among the top beneficiaries are the Lithuanian Army, the charity organization Bėdų Turgus, three pet shelters, the Mothers’ Union, a basketball school in Vilnius and the Vilnius chapter of the Lithuanian Poles’ Union. While most of these organization have websites, not one has posted a detailed report on how they used the funds.

Subtle differences

One of these non-profits, the Lithuanian Poles’ Union (Vilnius chapter), shares a chairman with another organization, the Electoral Action of Poles in Lithuania, which is a political party represented at the national legislature, Seimas, and the European Parliament.

Valdemar Tomaševski, the chairman, insists that not a cent from the money given as support to the Poles’ Union is spent on political campaigns.

“No, not at all,” he tells DELFI. “The Electoral Action of Poles has its own budget for political activities and does not use the support money.”

He adds that the party spent only a little over half of its campaign budget of 1.5 million Litas (€430,000) during the last elections, including some that Tomaševski, an MEP, donated from his personal funds.

While both organizations have headquarters registered at the same address, Tomaševski also insists they are separate and their activities do not overlap. The Electoral Action of Poles is a political organization, while the Lithuanian Poles’ Union is a community organization, he says.

Most support givers, of whom there are about 10,000, are members of the Poles’ Union. “We spend the money very rationally,” according to Tomaševski.

“We support many cultural, educational, sports events,” he explains.

The organization publishes a detailed financial report in its Vilnius Region Weekly, according to Tomaševski, but DELFI could not locate the issue with the latest data.

Cars and land

Vaimira Jakienė, head of the Supervision Department of the State Tax Inspectorate, says that inspectors identified 16 cases of misuse of support funds in 2015-2015.

“Non-profits do sometimes break tax rules, most notably, by using the support they get for purposes that are not in line with the law,” Jakienė says.

She explains that tax inspectors find irregularities in how the support funds are used each year and sometimes sanction the organizations.

In some cases, the beneficiaries fail to properly document the use of funds or present evidence to support their reports. In other instances, the money is transferred to individuals for their personal use. The support funds could also be spent on covering travel and accommodation expenses or used to refurbish an organization’s offices.

In more serious cases, beneficiaries use the money to buy cars at above-market prices or even to purchase pieces of land from individuals linked to the organization.

“Notably, the State Tax Inspectorate has investigated instances when non-profits are used to pocket funds, allegedly support from corporate entities, without paying taxes,” Jakienė says. “In such cases, we cooperate with law enforcement institutions. Moreover, we cooperate with the Financial Crimes Investigation Service more generally, that is, to supervise activities of non-profits in order to prevent money laundering.”

Only one in three publish financial reports

Inga Langaitė, whose non-profit runs an online donations platform Aukok.lt, says she has researched how many organizations publicly share information about how much support they get and how they spend it. Most do not do it, she says.

“There is definitely too little transparency. If you look at the top 10 beneficiaries, only about a third of them posted financial reports with overall figures on their websites, like how much money of support they got, how much they spent,” Langaitė says.

The same is true of beneficiaries outside the top 10.

“True, most of them submit reports to the Tax Inspectorate, but they are obliged to do that. But after all, if you get support from members of the public, you must report to that public. That is, share information not just with government institutions.”

There can be many reasons why non-profits neglect to share their financial reports with the public as well, Langaitė says.

“For one, some don’t even think of doing it, they believe that submitting a report to state institutions is enough. Second, it is low on their priority list. These organizations might realize that they should be open about the information, but they never get down to sharing it, other priorities take precedence.

“I believe, however, that this should be high on the priority list and it doesn’t take all that much effort to post a report, which is already prepared for the tax authorities, online. Another category of beneficiaries perhaps fear that people will presume they have enough money and will stop donating. This, I think, is short-sighted. On the contrary, if you share information even without being asked, this answers a number of questions or assumptions that people might have when they don’t know the facts,” Langaitė thinks.