A landmark report on Australia’s philanthropic sector has revealed philanthropists are placing the organisations behind the causes under intensifying scrutiny when determining their funding priorities. Evidence of project outcomes is increasingly important and this places not-for-profits under pressure to improve their levels of transparency and reporting.
Commissioned by the Commonwealth of Australia, Giving Australia 2016 is the most extensive research project on Australia’s philanthropic sector in more than a decade. Findings from the full Philanthropy and philanthropists section of report, released this week, shed light on the evolution of philanthropy in Australia, the current barriers to giving and priorities for the future.
The changing face of philanthropy
The reasons people give echo the findings from Giving Australia 2005, with the key motivators being to make a difference and give back to the community according to personal values.
However, philanthropists have become far more selective in the not-for-profits they choose to fund. Aside from an alignment with personal passions, the quality of governance and perceived competence of an organisation are the main influences behind a decision to donate. Of the philanthropists surveyed, 81% follow a process to review their grantmaking priorities.
“There is an increased emphasis on the quality of governance within not-for-profits. Philanthropists want to find the most effective organisations to invest in, not simply fund projects of interest. It’s an expectation we’re acutely aware of as one of Australia’s largest managers of charitable funds. We distribute over $80m to non-profits annually on behalf of our philanthropist clients, and many of them come to us to help them find organisations that are well governed,” says Caitriona Fay, Perpetual’s National Manager Philanthropy and Non-Profit Services.
Linked to the requirement for better governance, the research found that philanthropists wanted greater transparency and improved reporting from the organisations they supported. Not just to see where their money was going at an individual level – the vast majority of respondents (86%) agreed that greater sharing of data between not-for-profits would help the sector to become more effective.
Barriers to giving
The ‘tall poppy syndrome’ was seen as an ongoing barrier to giving in Australia – donors did not want to be seen as talking themselves up or creating unrealistic expectations about their capacity to give. Respondents recognised their reticence to talk openly about their giving meant they were not encouraging others with the capacity for philanthropy.
The growth of structured giving vehicles like Private Ancillary Funds (PAFs) over the last decade has increased the volume of giving. Despite this, perceptions of high establishment costs and complexity in establishing these funds were cited as an ongoing barrier.
“Structured giving may sound complicated and something that only the very wealthy would consider. But this isn’t the case. A simple, structured giving program can be established with a donation of $20,000. The barrier is often a lack of professional advice on the benefits of structured giving – both in terms of the tax advantages and clarity of where funds are directed. This is the role advisers should play in helping their clients to realise their philanthropic ambitions,” says Caitriona.
Eliminating some of the barriers highlighted in the report is critical to ensuring dollars are available for non-profit organisations for the longest possible time. “Philanthropic dollars can be invested in perpetuity meaning there are funds available for the benefit of the community forever. That’s the power of philanthropy, it’s not just about what it can achieve today it’s also about what those funds make possible in the future”, says Caitriona.
The future of philanthropy
Respondents referenced themes of collaboration and consolidation when commenting on the future of philanthropy in Australia. There was widespread agreement that too many charities in Australia focus on the same – or very similar – causes which duplicates effort and wastes resources. Mergers or strategic partnerships would consolidate effort and significantly reduce administrative costs by sharing fixed costs like property rental.
Capacity building in the not-for-profit sector was also seen as an important foundation for the future of philanthropy. With escalating demand for greater transparency and reporting, respondents recognised there was a requirement for investment in skills training and technology. Current levels of investment were acknowledged as insufficient, largely because of donor expectations that funds should not be used for administrative purposes.
“As the research findings show, the expectations being placed on not-for-profits are intensifying. We see it every day working with our philanthropic clients, managing close to 1,000 charitable trusts and endowments. There’s constant pressure on not-for-profits across all areas of their organisation – from improved governance to the adoption of digital technologies. Delivering on expectations can only be achieved with an investment in the skills of staff,” says Caitriona.
The Giving Australia research was commissioned by the Department of Social Services to assist the work of the Prime Minister's Community Business Partnership. The Australian Centre for Philanthropy and Nonprofit Studies, with the Centre for Social Impact Swinburne and The Centre for Corporate Public Affairs, have partnered to undertake this research project.