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.

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.

To develop
this closer partnership with non-profits, and also reduce the costs of
assessing many organisations seeking funding, the Perpetual Foundation will
stop conducting annual funding rounds and adopt an “open registration” process
enabling deeper research of charities’ ambitions and their needs, Baldwin says. The model aims to spend more time analysing
the organisations of greatest interest to donors, and allocate grants to the
most suitable charities.

This analysis should identify nonprofits’ needs for
general funding and the costs of developing and maintaining operational
systems. Baldwin says grantmakers should begin
asking: “will funding a particular project or program really advance the
fundamental purpose or would the funding be better applied to operational costs
and infrastructure?” “Non-profits may be able to execute a good project, but
what’s the quality of the underlying organisation?”

“Our approach to
grantmaking will look at funding quality, well-managed organisations with great
leadership, good disciplines and practices, and a focus on achieving positive
societal outcomes.” In their assessments of organisations, funders should look
for certain attributes in non-profits, she says. Since these organisations aim
to cause great outcomes in society, they should be able to clearly explain
their goals and methods and evaluate their progress.

The leadership, processes
and culture of non-profits should also be investigated, as these qualities are
crucial to the fulfilment of the social mission. But funders “should not try to
tell non-profits how to run their organisations or projects,” Baldwin
says. Non-profits should not “be expected to jump through hoops” or undertake specific
projects in order to secure funding.

They may be dependent upon benefactors,
but should never be their playthings. Baldwin
says donors and nonprofits can both benefit by sharing lessons from their own
good and bad experiences in the community sector, and by discussing public
policy and how government actions affect their projects. Those that can
influence civil society to support participate in their causes exert the
highest impact, Baldwin says. The most recent
initiative undertaken by the Perpetual Foundation is to review research on
social and environmental problems in Sydney
with United Way.
The Sydney Community Foundation, Westpac Foundation and the Centre for Social
Impact are also involved.


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