As the Australian economy contracts, the community sector will work overtime as more people enduring fiscal hardship seek its services.

But non-profits will have fewer resources to meet this demand. The amount of responsive giving – occasional donations to fundraisers or appeals – will diminish as people of all levels of wealth focus on their own circumstances. But for high-net-worth donors, there are means of consistently giving through the cycles by committing funds to a carefully managed charitable trust or foundation. By distributing only the earnings of invested capital, these vehicles provide non-profits with a reliable source of income in periods of economic growth and decline.

The Perpetual Foundation, which advocates the use of philanthropic trusts and foundations, regards philanthropy as an investment, rather than charity, “in the creation of social wealth,” says Catherine Baldwin, the former head of the Perpetual Foundation. She says a reliable stream of money enables the boards and management of non-profits to bypass the “scrum” for short-term funding and focus on their social missions. Funding droughts can result in an organisation prioritising their financial targets above their social cause.

It can also cause mission creep as groups apply for funding to undertake projects that are not aligned with their core purpose – only because they need the money. In 2007 the foundation commissioned research from SEEEN, an organisation cultivating leadership and management skills in the social economy, to analyse the importance of governance and decision-making processes in non-profit organisations.

Baldwin says the research finds that, often, a “misalignment with social mission develops because of the almost total preoccupations with finding funding and resources for survival”. One major reason why non-profits go to this extent is that foundations usually give short-term grants rather than support the operational infrastructure of organisations. This irregular, ‘project-only’ funding can impact the working conditions of non-profits and hence their social missions. “In the long run, you can’t have strong programs or projects in weak organisations,” Baldwin says.

The ideal role of a foundation is to act as like marathon runners, rather than relay sprinters, and stay the course rather than pass the baton on to the next foundation after a short sprint, she says. Of course, it is impossible for most foundations to support a large number of causes due to their limited economic resources. Neither do they have the democratic mandate to step in where governments do not.

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