To Donate Or Not To Donate?
White
Paper on `Hayastan’ All-Armenian Fund
PART II
By Ara K. Manoogian
This White Paper consists of three parts and is an analysis of a broad
range of issues regarding the activities of `Hayastan’ All-Armenian
Fund. Its structure follows that of a TV interview given by Sarkis
Kotanjian, Executive Director of `Hayastan’ All-Armenian fund
U.S. Western Region. The interview aired on November 12, 2010, during
which he set out to dispel eight key myths about the Fund. The first
three myths and Mr. Kotanjian’s interpretations have been analyzed in
Part I
() of
this White Paper. The current part examines the remaining five
myths. Part III will provide an overall analysis of the `Hayastan’
All-Armenian Fund and possible solutions to the issues it faces today.
As in Part I
(),
below, each of the myths are presented exactly as Mr. Kotanjian worded
them, along with his interpretations, which are termed here as
`Busting.’ The alternative interpretations of the core issues are
presented as `Unbusting.’
MYTH #4: People say that the
administrative expenses of Hayastan All-Armenian Fund are high, I don’t know,
the half of the raised money, this and that and so on.
BUSTING:
In reality, the administrative expenses amount to only 7% or… In
general, if we look at how the money is spent percentage-wise, 20% are
spent on water supply projects; 10%, on gas supply and road
construction; 11%, on social, cultural and other projects; 11%, on
healthcare; 41%, on education; and only 7% on the administrative
expenses, which includes salaries, supervision of all these projects,
because every day… we have about 40 construction sites in Armenia
and Karabakh. And certain people must be present at these construction
sites to supervise and make sure the construction is done
correctly. And all this work has to be supervised, people must be
present, and that is included in the 7%.
UNBUSTING: The data of the U.S. largest evaluator of charities,
Charity Navigator
(),
shows that 7 out of 10 charities they’ve evaluated spend at least 75%
of their budget on the programs and services they exist to provide,
and 9 out of 10 spend at least 65%. Charity Navigator believes that
`those spending less than a third of their budget on program expenses
are simply not living up to their missions. Charities demonstrating
such gross inefficiency receive zero points for their overall
organizational efficiency score.’
Spending of only 7% for administrative expenses puts `Hayastan’
All-Armenian Fund under a completely different category of fundraising
organizations – those that merely serve as fundraising vehicles for
other community-based charities. Their median administrative expenses
percentage, according to Charity Navigator, is 6.9%. This includes
solicitation and collection of donation and excludes supervision of
programs.
Insufficient spending on administrative expenses causes inefficient
management of both the donations and the programs they were intended
for. An example of mismanagement of funds is a delay of program
implementation in favor of earning interest on the donations. In 2001,
Haykakan Zhamanak
()
published a story about the wives of fallen freedom fighters from
Kapan, Armenia who voiced their complaints about `Hayastan’
All-Armenian Fund. The latter had denied them the monthly allowance of
2000 drams ($4) set up for the underage children of fallen freedom
fighters. They had calmly waited for 18 months. When Izmiryan Fund was
announced on TV to have transferred $50,000 to the All-Armenian Fund
for the project in question, the women waited for two more months. And
when they still didn’t receive anything, the women contacted the Fund
but were denied their monthly allowance. `It was a girl who didn’t
introduce herself The girl answered that the money is kept in
the bank to earn interest, and the allowances will be paid from the
interest,’ said Anahit Hambartsumyan, a freedom fighter’s widow who
has two underage children.
Only 7% for administrative expenses might also mean that `Hayastan’
All-Armenian Fund saved by keeping a small staff. But that is not the
impression one gets from the evidence of late philanthropist Vartkes
Barsam, founder of fiber optics program in Armenia, former Board
Member of AGBU, Armenian Assembly and the American University of
Armenia, recepient of Ellis Island Medal of Honor. After helping a
philanthropist from South America ship computers to Armenia, he
decided to check out the office of `Hayastan’ All-Armenian Fund in
Yerevan, the final destination of the computers. `I wanted to go and
see what these girls are all doing. They’re all concentrating on their
computers. All playing games! I was wondering what do they do and why
they need all these computers,’ says Vartkes Barsam in a voice file
() at barsameng.blogspot.com
(), referring to a period of time when
Manushak Perosyan was the Executive Director of the Fund (1992-1998).
If the administrative expenses at 7% do include supervision of
construction work, then its poor quality should not be surprising at
all. But there’s another factor that could have boosted the quality of
the construction work. This takes us back to Part I
() of
our report to pick up where it ended – the third factor, which makes
Grant Thornton less reliable as an auditing firm for `Hayastan’
All-Armenian Fund. In a discussion which unfolded on the Facebook page
of the Policy Forum Armenia (PFA) a few days before the 2010 Telethon,
Sarkis Kotanjian said: `Grant Thornton not only does financial
auditing for Armenia Fund, but also physical audit, meaning it checks
the quality of construction, materials used, correspondence to
construction codes, etc.’ Thus, there is supposed to be double quality
control – one on the part of `Hayastan’ All-Armenian Fund and the
other by Grant Thornton.
The heightened supervision, however, hasn’t resulted in higher quality
in many cases. This means a trifold waste of funds – a portion of
`Hayastan’ All-Armenian Fund’s administrative expenses allocated for
supervision of the construction areas; a portion of the fee for the
services of Grant Thornton, which includes similar supervision,
physical auditing; and poor quality of work, which implies lesser
expenditure on the project than reported.
During the fundraising event of `Hayastan’ All-Armenian Fund in 1996,
it was announced that the cost of one meter of the Goris-Stepanakert
road was $250. Four years later I prepared a proposal for the
Martuni-Stepanakert road, and it came out to an estimated $94 a
meter. Within days I got a call from the Artsakh President’s office
regarding this project, which had been prepared in collaboration with
the architect of the Martuni Region. The President’s concern was that
the project cost was lower than usual, thus they wanted clarification
on how we had calculated our estimate. Once they were satisfied with
my answers, they thanked me and wished me good luck in securing
funding for the project. In fact, looking for funding hadn’t been my
intention, but rather to help `Hayastan’ All-Armenian Fund create a
measuring tool for road construction based on true costs. We’d like to
think that it did affect their future calculations to a certain
degree, since later the Fund’s North-South highway project was
estimated at $100 less per meter.
Getting back to Goris-Stepanakert highway, the estimate of $250 per
meter publicized by `Hayastan’ All-Armenia Fund meant they overpaid
the construction company for the work done, presumably, with the
condition of getting the difference back under the table. This could
explain how Manushak Petrosyan could afford to build a mansion in the
heart of Yerevan, close to the Armenian Assembly building.
Web and newspapers are permeated with thousands of reports on very
poor quality of the most essential achievements of `Hayastan’
All-Armenian Fund – Goris-Stepanakert and North-South highways. I have
personally witnessed how bad the quality of both was whenever certain
segments would open for traffic from 1997 to 2005. I was once
extremely disappointed to see my car jack sink in the asphalt-concrete
when I was trying to change a tire of my lightweight car on the Lachin
segment. I had also found out that the asphalt was incomparably
thinner at the center of the road than at the sides, which was done
perhaps to create a visual illusion that enough asphalt-concrete had
been used for the road construction.
It was a common practice to use regular mountain rocks instead of
specially washed bitumen in asphalting, writes journalist Kristine
Khanumyan in Zhamanak
(), February 3,
2010. Construction companies saved also on the amount of bitumen
required for asphalting. As a consequence, cracks began appearing on
the road within a year; grass was sporadically growing through the
asphalt-concrete.
There is more than one reason why the end result is poor. It is
essential to understand how the whole mechanism works. The immediate
blame for poor quality is on the construction company that was
entrusted with the project. The next logical question is why that
particular construction company was picked for the project.
In Artsakh, as mentioned in the first part of this article, there are
mainly three construction companies that happen to win the tenders –
Vrezh, Chanshin and Karavan, which are owned by Karen Hakobyan, Hakob
Hakobyan and Roles Aghajanyan, respectively. They win despite poor
performance in the past. For the projects implemented in Artsakh,
specialists from Artsakh Government are included in the tender
committee. As mentioned in Part I
(),
these construction companies have the protection of certain
influential Government officials, including Arkady Ghukasyan, then
President of Artsakh. The essential rule of free market economy –
equal opportunities – functions mainly among Government-backed
construction companies. It is not uncommon for a winning construction
company to resell parts of their contract to another construction
company. This practice was initiated by Chanshin, which resold certain
parts of the contract for the Dashbulagh-Khachenaget segment of the
highway to Karavan and Vrezh. The latter two, according to Khanumyan,
later on borrowed this practice. The consequence was even poorer
quality, which eventually became too obvious to turn a blind eye or a
deaf ear.
On May 5, 2006, Arkady Ghukasyan finally decided to voice concerns
about the quality of work supervised by the Fund. According to Aravot
(),
he told journalists in Yerevan that he was unhappy about the quality
of the construction work undertaken by `Hayastan’ All-Armenian
Fund. The former President of Artsakh emphasized that the Fund must
exercise tougher control over the construction work. The issue
triggered a conflict between the Artsakh Government and `Hayastan’
All-Armenian Fund, led by Naira Melkumyan, Executive Director
(2004-07) and former Foreign Minister of Artsakh. She laid the blame
on the Artsakh officials, since it was the Government representatives
who, she claimed, gave the final approval of the construction work
following its completion. This confrontation was a hot topic
throughout the second half of the year 2006. The problem was discussed
at a session of the Board of Trustees, in May 2006. Khanumyan quotes
Nayira Melkumyan in `Fund-NKR: Contradictions Deepen’
() as saying that
`by the instruction of Robert Kocharyan, then President of Armenia and
President of the Board of the Trustees of `Hayastan’ All-Armenian
Fund, the cases of the construction companies, which had performed
poorly, were submitted to the Prosecutor’s Office of Artsakh.’ The
targeted construction companies were Vrezh and Chanshin. To this date
no charges have been brought against these companies.
It is strange that Grant Thornton, the auditing firm, which, according
to Sarkis Kotanjian, is contractually bound to conduct physical audit
and thus has its share of responsibility for the quality of work, but
was never mentioned a party of the conflict between the Fund and the
Government. Why does the Fund pay Grant Thornton extra to conduct
supervision if it’s not going to share the responsibility for the poor
quality of work? And why does the All-Armenian Fund allocate a part of
its 7% administrative expenses on supervision if it’s not effective?
MYTH #5: Most of the money that people donate is used to cover the
production cost.
BUSTING:
It is not so. We organize the Telethon thanks to the complete funding
of our sponsors. And here I want to thank our sponsors. Our
sponsors take care of our organizational expenses, and for that we are
thankful to them. Of course, in return, they are advertised, which is
natural. But each dollar that is donated during the Telethon is
directed to the projects. We closed this topic, too.
UNBUSTING: It indeed is an exaggeration to allege that most of the
raised money is spent on Telethon production cost. However, it is an
equally exaggerated allegation that each donated dollar is directed at
the projects in view of the previous statement about the overhead
totaling 7%. Moreover, Part I
() of
this White Paper on `Hayastan’ All-Armenian Fund shows different ways
the donated money has been manipulated for personal profit. This topic
is not closed, as the next myth is an extension of this one showing
some more ways donated money is managed before reaching the projects.
MYTH #6: They say that 25-30 officials come from Armenia in order to
participate in the Telethon – it is a huge expense, this and that.
BUSTING: This, too, is false information. This year alone, for
example, 5 people are coming, including Bako Sahakyan, President of
Nagorno-Karabakh Republic; Archbishop Pargev, Primate of Artsakh; and
Ara Vardanyan, Executive Director. We’re talking about only five or
six people. And these expenses are also included in the 7%, about
which we have already talked, the administrative expenses. Their
flight, hotel and so on.
Singers are coming, yes, it is true, in order to participate in a
charitable concert on November 21. And we have made a commitment to
cover their flight and 5-day stay at a hotel. But also, let’s not
forget that all these singers are going to sing for free. If all of
them were to submit their bills – which is common practice – we would
be looking at tens of thousands of dollars. But they… it’s their
present to Hayastan All-Armenian Fund and their homeland. Thus… And
these expenses are also included in the Telethon cost, which is
already completely covered by our sponsors. Thus, it’s not a big
group. Only 5-6 people, whose expenses are included in the 7%
mentioned earlier.
UNBUSTING: At the Hilton Hotel in Glendale, a few days following the
2010 Telethon, I personally handed a person from Bako Sahakyan’s team
escorting him in the U.S. a letter of concern about the human rights
situation in Artsakh addressed to the President of Artsakh. And I saw
a few more people from that same team. If the allegation that the cost
of only 5-6 people has been covered by the Fund is true, then either
the bodyguards of the Artsakh President paid for themselves or the
Artsakh budget sponsored their travel and accommodations.
At first Mr. Kotanjian said that the Fund was committed to cover their
flight and 5-day stay at a hotel. And at the end, he added that `these
expenses are also included in the Telethon cost, which is already
completely covered by our sponsors.’ If that were really so, there was
absolutely no need for Mr. Kotanjian to assure the TV audience that
the singers’ cost was not as high as they might think.
The idea of letting sponsors cover the Telethon cost in exchange for
advertising is great. However, it seems to have been implemented only
for the 2010 Telethon. Haykakan Zhamanak
() quoted Hambik Sarafian, Chairman of the
Social Democratic Hunchakian Party (SDHP) US Western Region and a
member of `Hayastan’ All-Armenian Fund in California, on September 29,
2009, as criticizing `the administration of the Fund for recklessly
spending huge amounts of money on the organization of the Telethon,
`instead of using them for real purposes.” That same day, Ara
Vardanyan, current Executive Director of `Hayastan’ All-Armenian Fund,
told journalists that by September 2009 about $22,000 had been spent
only on ordering an anthem for the Telethon.
MYTH #7: As if large sums of money are announced, but are never
collected during the Telethon.
BUSTING: This is also a lie. 95% of all funds announced during the
Telethon is collected. It is only 5% that we are unable to
collect. The reason is very often due to technical issues. That is to
say, someone has changed his/her address and moved to somewhere else,
but hasn’t notified us of the new address. Or his donation has
appeared two times in our computer system. We’re talking about 5%,
whereas 95% of all the announced funds, is collected within a few
months.
UNBUSTING: The problem of collecting less donations than pledged is
perhaps nearly as old as the Fund itself. Vahan Ter-Ghevondyan,
Executive Director of `Hayastan’ All-Armenian Fund (1998-2004),
however, drew a different picture. He told Haykakan Zhamanak
()
in 2002 that
`for instance, 5% of our compatriots living in Los Angeles, as a rule,
break their pledges and refuse to pay their `national tribute’ when
collecting the funds. Moreover, when the organizers of the Telethon
tried to verify the authenticity of certain calls 5 minutes after the
announcement of sizable donations, it turned out that they had been
simply fooled – when introducing themselves during the live TV
broadcast, the callers had provided wrong addresses and phone
numbers.’
In May 2004 Naira Melkumyan complained to journalists about the Fund’s
failure to utilize the full potential of Los Angeles, CA. According to
her, $910 thousand was transferred in 2003 instead of the pledged $1.3
million. `This problem exists: a pledge is given and then is
broken. We must be demanding when it comes to our pledges and
possibilities,’ Naira Melkumyan was quoted by Haykakan Zhamanak
()
as saying.
`Hayastan’ All-Armenian Fund announced in 2005 to have raised $7.7
million, whereas, half a year later, according to Haykakan Zhamanak
(),
had to admit to having barely collected $5 million (about 35% of all
the pledged funds vs. 5% mentioned by Mr. Kotanjian).
The situation didn’t change much four years later. In an interview to
Hetq (), in 2008, Vahe
Aghabekyants, Executive Director of `Hayastan’ All-Armenian Fund
(2007-08) said that the inability to collect the donation is often due
to the donors’ financial situation. Aghabekyants brought the example
of a donor whose company’s shares valued $900 million at the time of
the pledge, but when they dropped to $150 million he was unable to
donate the promised half a million dollars.
However, there’s another mechanism widely used by `Hayastan’
All-Armenian Fund to show large numbers. `Hayastan’ All-Armenian Fund
in 1996 contacted the Monte Melkonian Fund in Los Angeles and asked to
make a donation that had already been intended to be sent to the Monte
Melkonian Fund in Armenia, assuring that the same amount would be
handed back in Yerevan. This was to be done as a show to the world of
how much support was being sent to Armenia and Artsakh from the
Diaspora. As the President of Monte Melkonian Fund at the time, I made
an appearance on the Telethon in 1996, presented a check for $3,000
and talked about our support to the homeland and `Hayastan’
All-Armenian Fund, encouraging people to donate. Later, I learned that
Kirk Krikorian’s Lincy Foundation that was matching donations given to
`Hayastan’ All-Armenian Fund during the Telethon, had matched our
`donation’ with an additional $3,000, which was added to the
All-Armenian Fund’s account. I could only wonder how many others had
been asked to do the same as we had.
Over ten years later, in 2007, I had a discussion with Armo Tsaturyan,
Minister of Territorial Administration of Artsakh, about the
`Hayastan’ All-Armenian Fund Telethon. We particularly touched on the
misrepresentation of donations. He knew of $1 million from Vahe
Garabedian – who had his own fund – being misrepresented as a donation
to the `Hayastan’ All-Armenian Fund. However, he didn’t know that as
much as about $4.5 million fell under this category, including
donations from such major contributors as Kirk Kirkorian and Gerard
Cafesjian. Mr. Tsaturyan said that he and others in the Artsakh
Government weren’t expecting the Diaspora to donate anything due to
the scandals about the quality of work and the ensuing fallout between
Artsakh authorities and `Hayastan’ All-Armenian Fund in 2006. In this
context, they were all astonished to hear `Hayastan’ All-Armenian Fund
announcing the record-breaking amount of $13.7 million. A day after I
wrote down the details of our meeting in my blog, Martuni or Bust!
(),
Armo Tsaturyan called me up sounding quite upset. It turned out that
he had received a call of complaint from the Fund. However, the word
was out already (for details of our conversation following the Fund’s
call, click here
()). It
is still unknown how much of the remaining $9.2 million was, in fact,
intended for the All-Armenian Fund’s projects.
MYTH #8: As if Armenians from Armenia do not participate in the
telethon. By saying Armenian from Armenia, I mean our compatriots who
have come to Los Angeles or the U.S. from Armenia.
BUSTING: It is not so. First of all, I’d like to say that Armenians
from Armenia do the greatest charity. Why? Because, let’s not forget
that all of us, most of us help our families in Armenia. Every month,
be it $50, $100 or… unrelated to `Hayastan’ All-Armenian Fund. And
I encourage them to provide even greater support because these people
have needs in Armenia. But there are many people who, besides that,
also contribute to `Hayastan’ All-Armenian Fund because it administers
large-scale projects, such as water supply. And Armenians from Armenia
amount to 40% of all our benefactors. It’s quite a large percentage.
Thus, let us not try and create problems that do not exist in
reality. Let us not smear this dignified mission. Let each of us
rather support as much as we can, let us not be indifferent.
UNBUSTING: Mr. Kotanjian’s call on the Armenians from Armenia to not
only continue but also increase the support of their families in
Armenia and, in general, the negative outcome of continuing aid will
be discussed in Part III, the final sequel.
As for the alleged 40% of donors, I’d like to share my personal
experience of how that is reached. A share of these contributions
(originating from Armenia and Artsakh) are donations forced by the
administrations of state institutions and public schools. When I lived
in Artsakh, I knew a woman who worked at the Artsakh President’s
office. She had openly refused to allow a deduction from her pay that
was supposed to be contributed to `Hayastan’ All-Armenian Fund as a
voluntary donation in 2003.Oleg Yesayan, then Speaker of the Artsakh
National Assembly and now Armenia’s Ambassador to Russia, who was in
charge of collecting the mandatory donations, ordered a person, who
was collecting signatures of consent for deductions from the woman’s
salary, to sign it on her behalf.
On another occasion, in November of 2004, I was approached with a
request to donate AMD 500 to the Fund. I was then a member of the
collective of skilled workers for the stone factory I had in Martuni,
Artsakh. I refused and was left alone.However, another member of the
same collective, a barber, was treated differently. He and dozens of
other people weren’t even asked whether they wanted to donate or not –
AMD 250 was automatically deducted from their monthly pay. According
to Government officials in Artsakh, the Fund has been using the
mandatory donations collected from Artsakh citizens to show the
better-off Diaspora Armenians that the natives trust the Fund, thus
encouraging them to also donate.
The method of mandatory donation has been widely exercised in the
Republic of Armenia, as well. On November 19, 2003, a mother called
Aravot
()
to sound an alarm about the public school #132 in Yerevan, which
forced its students to contribute AMD 3,000 to `Hayastan’ All-Armenian
Fund. The newspaper found out that neither the Department of Education
of the Mayor’s Office, nor the Ministry of Education and Science had
given any such orders to public schools. The journalist only managed
to speak to the vice-principal, who said that it was just a suggested
donation of AMD 10-20. `In a word, we received the same response from
a school administration as every other time, after alarms about
fundraisers,’ concludes the newspaper.
Tigran Paskevichyan, former head of the Public Relations Department of
`Hayastan’ All-Armenian Fund, expressed his concern regarding a
donation that came from an orphanage in Vanadzor in December 2004. In
his article `All-Armenian Fund Or Rich Man’s Club,’
() which
left Naira Melkumyan, then newly appointed Executive Director of the
Fund, bitter, Mr. Paskevichyan wrote: `Everyone in the world knows
that orphanages themselves function thanks to donations. But an
orphanage in Armenia becomes a donor. The children in the
orphanage, of course, don’t have money; this means that the
administration has cut certain expenses in order to make a
contribution. And that is absurd.’
After the 2007 Telethon, `Hayastan’ All-Armenian Fund announced that
$15 million-worth pledges were received. On December 19, 2007,
Haykakan Zhamanak ()
wrote that for several weeks they kept receiving calls from certain
state institutions, complaining that `2% is deducted from the salaries
of the workers from those state institutions with an excuse that it
was for the Telethon of `Hayastan’ Fund.’ The newspaper staff found
out that over 10% had been deducted from the salaries of Public TV
employees for the needs of the Fund.
These are problems that do exist in reality, and they will continue
`smearing this dignified mission,’ as long as `Hayastan’ All-Armenian
Fund ignores their existence. Having lost its most valuable resource –
trust, the Fund has been forced to look for shady ways to prolong its
existence. It is important to regard the open discussion of these
issues as a refusal to be indifferent and an expression of support for
the Fund.
To be continued…
Ara K. Manoogian is a human rights activist representing the Shahan
Natalie Family Foundation in Artsakh and Armenia, as well as a Fellow
of the Washington-based Policy Forum Armenia (PFA), creator of
From: A. Papazian