HOUSE OF CARDS

Perpetual

During the recent US election, everything about the candidates was placed under a microscope, including their philanthropic contributions and the foundations bearing their family names. There was intense media scrutiny, with much of the resulting coverage being negative and accusatory. This did more than compromise the reputations of Hillary Clinton and Donald Trump – it threatened the very credibility of the non-profit sector.

The US election demonstrated that philanthropy is built on pillars of trust and public confidence. Once the transparency of a high profile philanthropist or not-for-profit is questioned, other donors and organisations risk being tarred with the same brush. It’s an important lesson for Australian philanthropists, because the risks of this happening are just as prevalent here as in the US.

A house of cards – built on trust

Caitriona Fay, Perpetual’s National Manager – Philanthropy and Non-Profit Services, watched the US election closely with respect to reputational risk and what this means for philanthropy. “When philanthropists are suspected of doing the wrong thing, like using their foundations for personal benefit, it can bring down the house of cards.

“First their reputation is called into question, then the reputations of their foundations or the organisations they support. Ultimately the ones who suffer are the most vulnerable of all – the people depending on not-for-profit services.”

So what can we do to prevent this happening in Australia?

Governance protects public confidence

“Good governance is at the heart of protecting public confidence in the important role philanthropy plays, as well as the role of non-profit organisations within our civil society. By ensuring we have a minimum governance standard we bring public confidence to how money is both managed and distributed for the benefit of the community,” says Caitriona.

Australian Charities and Not-for-profits Commission (ACNC) has developed governance standards for how a foundation should be governed – these include how to manage conflicts of interest, approaches to prudent investment and record keeping.

Philanthropists should take the time to read this information and understand what the minimum governance standards are.  Armed with this knowledge and their influence as donors, philanthropists can pressure the organisations they support to raise the bar on governance.

Only as strong as the weakest link

Critics argue the push for increased governance takes away from the joys of giving, making the process too structured and transactional. But the events we’ve seen in the US over the past 12 months show that when one philanthropic organisation is put under scrutiny, all philanthropic foundations are put under scrutiny.

“The chain of philanthropic value is only as strong as its weakest link and strong governance standards are the stress test.

By lifting the bar in philanthropy through governance we protect the crucial role that private resources can play in delivering public good,” says Caitriona.

Professional trustee services

“The ACNC has the powers to gather information and monitor whether charities, some of them philanthropic, are meeting their reporting requirements. In extreme cases the charity’s registration can be revoked, or penalties applied. With a push for increased governance standards, the role of a professional trustee is as important today as it has ever been,” says Caitriona.

At Perpetual we act as Trustee for approximately 1000 charitable trusts and endowments, supporting all our clients with the governance components of their philanthropy so that they have confidence in how they give.

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Perpetual’s Philanthropic Services are provided by Perpetual Trustee Company Limited (PTCo), ABN 42 000 001 007, AFSL 236643. This publication has been prepared by PTCo and may contain  information contributed by third parties. It contains general information only and is not intended to provide you with advice or take into account your personal objectives, financial situation or needs. The information is believed to be accurate at the time of compilation and is provided by PTCo in good faith. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. PTCo does not warrant the accuracy or completeness of any wording in this document which was contributed by a third party. Past performance is not indicative of future performance.