The “Children’s Hospital of the Future” project has become a public relations disaster and has overshadowed the former first lady’s other charity works.
The Children’s Hospital of the Future was supposed to be the signature project of Kateryna Yushchenko’s time as Ukraine’s first lady. The $112.5 million, ultra-modern, 27.5-acre hospital was to provide care to the sickest of children in five different medical wings.
But four years after the project was launched in 2006, not a single brick has been laid.
The land plot for the hospital was only allocated near Holosiyivsky Park in Kyiv in February 2009, after an earlier location proved unsuitable. The project has become a public relations disaster and has elicited accusations from her political enemies, calling for criminal investigations into allegedly misspent or embezzled money raised for the hospital.
Kateryna Yushchenko dismissed all accusations of misspent money, saying that every kopeck raised is accounted for publicly.
She did, however, concede to being “overly optimistic” about how quickly the hospital could be built. In more advanced countries, it takes 7-12 years, on average, to build a hospital of this scale.
Kateryna Yushchenko has cited endless permits and procedures for most of the delays. According to her, to date they’ve spent 1,374 days to acquire permits and approvals. The project has needed 211 kinds of permits, approvals, protocols, expert assessments and other documentation from more than 200 different people just to gain access to the construction site. Additional permits and other approvals will be needed if and when construction begins.
The project was groundbreaking as the first large-scale capital fundraising project undertaken by a charity group.
“The general rule in capital campaigns is to have at least 80 percent of the total amount required (government and private) committed before going public.”
-Paulette Maehara, the president and chief executive officer of the U.S.-based Association of Fundraising Professionals.
It had formal support at the highest levels. It was backed by a presidential and government decree, with the Health Ministry and the Association of Pediatricians of Ukraine directly involved in project design.
According to the plan, Kyiv’s city government was to allocate and provide the land while the central government covered shell construction costs. The Children’s Hospital of the Future Foundation was supposed to cover the rest, including design, holding tenders, procuring supplies and equipment, and training medical personnel, among other related expenditures.
The foundation held Ukraine’s first telethon on Dec. 17, 2006, raising Hr 262 million – now worth $32.75 million – short of the target of Hr 600 million. Ninety-four percent of this was also pledged, rather than immediately given, by large donors.
Although impressive, the fund broke with generally accepted Western guidelines by initially not having any privately raised money on hand.
“The general rule in capital campaigns is to have at least 80 percent of the total amount required (government and private) committed before going public,” said Paulette Maehara, the president and chief executive officer of the U.S.-based Association of Fundraising Professionals.
The national government had initially allocated $20 million for construction, but never gave any of it. In 2008, it allocated still less, $8.4 million, and didn’t pay out since the new national budget didn’t allocate anything for the children’s hospital, leaving the foundation with the entire bill of the project.
Hanna Herman, deputy head of the presidential administration, said President Viktor Yanukovych is studying the situation surrounding the hospital project before making any decision to honor the government’s commitment to it.
To make matters worse, the foundation kept all of the money it raised in hryvnia when the currency was strong against the U.S. dollar. Nearly half of it was wiped out since the onset of the global financial crisis, which caused the hryvnia to plunge in early 2008 before settling at its current value of roughly Hr 8 to the dollar.
Oddly, the foundation put all of its money in Transbank, a small financial institution that was never a top 50 bank. The bank was chosen for its high interest rates and the generosity of its owner in donations to the project.
But Transbank became one of 15 banks that had to be bailed out by the Central Bank. Its owner, Volodymyr Kosterin, was investigated by the State Security Service (SBU) for allegedly misusing funds given to it by the Central Bank for re-financing and misappropriating funds belonging to Transbank’s shareholders and depositors. The 3000 Fund said the investigation was not connected with its accounts.
Kateryna Samoilyk, a deputy from the Communist Party, which has always been hostile to the Yushchenkos, on March 12 called on the SBU and prosecutor general to investigate Kateryna Yushchenko for misappropriating funds.
Samoilyk could not be reached for comment and Communist Party leader Petro Symonenko refused to comment on his colleague’s statement.
But Kateryna refuted the accusations, saying: “Every penny is accounted for.”
The Children’s Hospital of the Future Foundation, as of March 17, had just over Hr 83 million held in state-owned Ukreximbank.
It has so far spent Hr 47 million on expenses directly related to project design, documentation on the receipt of construction permits and other approvals, making initial preparations on the construction site. Additional funds have been spent on sending 36 doctors to the U.S. for training and internships.
It has yet to receive approximately $28 million from donors, the majority of which is pledged according to signed agreements and are being given according to schedule.
The largest donors are Ukrainian oligarchs and their businesses: Industrial Union of Donbas, Rinat Akhmetov’s Development of Ukraine Foundation, the Viktor Pinchuk Fund, Vadym Novinsky’s Smart Holding, Borys Kolesnikov, steel mill Zaporizhstal, Kostyantyn Zhevago’s Finance and Credit bank and Arterium Corporation.
The Industrial Union of Donbas, controlled by Serhiy Taruta, has publicly pledged close to $15 million, but has not signed an agreement or payment schedule. The Industrial Union of Donbas has expressed concern with the pace of the hospital project, and has called reasons for its delays unjustified.
A representative in Ukraine for James Temerty, a Canadian millionaire with Ukrainian roots who has helped the project, said he was “less concerned than disappointed.”
Meanwhile, representatives of Akhmetov’s and Pinchuk’s foundations, as well as millionaire Borys Kolesnikov, said they will hold off on making any evaluations until construction starts.
Kateryna Yushchenko’s foundation recently announced that it will initiate a second round of fundraising to cover the rest of the estimated Hr 900 million overall cost of the project and will seek out private partnerships to run the hospital.
Kyiv Staff writer Mark Rachkevych can be reached at [email protected].
