When Australia’s largest manager of charitable trusts, Perpetual, last opened its doors to applications for grants it noticed a somewhat worrying trend amidst the submissions from 800 different charities.

Certain charities appeared to be creating projects simply to meet the requirements of the trusts and foundations that Perpetual managed rather than in accordance with their own mission statement.

Charities in need of funds or projects to occupy their staff were spending time and money preparing detailed submissions that would match the specific or more general charitable bequests under Perpetual’s control but not necessarily be in accordance with their own mission statement.

For example, Perpetual administers charitable trusts that have been set up to provide funding in specific regional areas in NSW, Queensland and Victoria. Perpetual was careful to ensure that the funding went to the appropriate charities that matched the bequest.

It would seem anathema to the concept of giving that charities would be gaming the system by using publicly available information about the terms of trust deeds or wills written more than 50 years ago simply to get funding. But that is exactly what has been happening.

This year Perpetual, which has more than $1 billion in funds under administration in charitable trusts, will introduce significant changes to its assessment criteria for handing out about $40 million in grants.

This includes placing a much greater emphasis on corporate governance.

It will only fund organisations that have quality leadership, a clear strategy and alignment with purpose, a clear understanding of their goals and how to achieve them, strong board participation and good risk assessment.

The changes to Perpetual’s funding approach were based on research commissioned by the Perpetual Foundation from Hugh Morrow of SEEEN on the subject of leadership and management in the social economy. About 1200 people from the not for profit sector, government, business and philanthropy were involved in the research.

Perpetual is created a database of charities in order to streamline its grant giving and ensure that charities with expertise in certain areas are considered for funding when new charitable trusts are put under Perpetual’s management.

As a further effort to improve corporate governance in the sector Perpetual has been working closely with charities and Social Ventures Australia which provides a range of organisational building services to the social sector.

Perpetual’s efforts to improve corporate governance in the sector comes at the same time as the federal government is planning to toughen up its supervision of prescribed private funds (PPFs), which are the tax effective vehicles designed to encourage private philanthropy.

A Treasury discussion paper recommending reforms to the supervision and monitoring of PPFs was published in November. It called for public submissions and comments by January 14.

The key ideas floated by Treasury are: giving the Australian Taxation Office full regulatory control of PPFs, setting a minimum annual distribution rate for PPFS of 15 per cent, forcing PPFs to value assets annually, establishing a minimum PPF size of say $500,000 and publicly disclosing the contact details of philanthropists behind each PPF.

Perpetual, which will make a submission to the Treasury next week, is concerned that a fixed annual distribution rate of 15 per cent will lead to PPFs having a 10 year life span.

Perpetual’s general manager of philanthropy Andrew Thomas says that if a fixed distribution rule had been in place in the past then many charitable trusts managed by Perpetual would not exist today.

He cited the example of a trust that was established in the 1970s with $50,000 that now has $600,000 in assets and distributes grants of $30,000 a year.

It is clear from submissions made to the Treasury that philanthropists are not in favour of having their names disclosed in a public register. It is claimed that they will be inundated with requests for funds from the country’s 20,000 deductible gift recipients.

Perpetual’s Thomas says that Perpetual will this year distribute about $40 million in gifts ranging from $10,000 to $100,000. Applications for Perpetual’s charitable grants opened this week and will close on February 27.

The specific purposes laid down by various trusts and foundations under Perpetual’s control include aid and support for people with disabilities, preservation of animal wildlife, medical research, assistance for homeless, social and educational advancement of Tibetan Buddhism and organisations working within the Jewish community of Victoria.

Thomas is confident the reforms made to Perpetual’s selection criteria will mean there is a stronger link between funding requests, immediate strategies and the long term mission of each charity.

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Peter Fray
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