Simon Mumme takes a closer look at Australia’s philanthropic industry.

During a recent antipodean visit, Kingsley Aitkins, president and chief executive of the Ireland Funds, a global network of philan­thropic vehicles funding social projects in Ireland, outlined the booming philanthropic industry overseas. The world’s 1.4 million non-profits hold $2.2 trillion in assets. Philanthropy, once a cottage industry, has mushroomed globally, Aitkins says. And financial advisers to high net worth (HNW) clients with philanthropic objectives are well-placed to join in the growth.

A surge of “bottom-up” wealth – private, not state, money – has fed philanthropy in recent years, Aitkins says. In 2006 individuals and companies in the United States, the world’s biggest donor to philanthropic projects, piled $295 billion into the sector. Of this, 76 percent was gifted by individuals, 12 percent by foundations and 6 percent through bequests – only 4 percent came from companies. Individual philanthropists illustrate the private sector’s generosity, from Warren Buffett, who last year gave $40 billion to the Bill and Melinda Gates Foundation to Chuck Feeney, an Irish-American businessman and philanthropist who says he wants his cheque to the undertaker to bounce.

In Australia, donations from the private sector have grown steadily. The Centre for Philanthropy and Non-Profit studies (CPNS), based in the Queensland University of Technology, ranks the growth of HNWs in Australia, South Africa, Hong Kong and Singapore as that the worlds’ strongest. In its annual survey of individual Australians’ donations to deductible gift recipients (DGRs), the CPNS found that Australians gave $1.47 billion to charities during the 2004-05 finan­cial year, an increase of $307 million over the previ­ous year. The average amount of tax-deductible giving increased in the decade to 2005, the centre reports. And a small number of wealthy Austra­lians have undertaken a disciplined approach to giving, entrenching philanthropy in their financial and estate plans.

Such private wealth, whether through com­mitments to endowment funds, community foundations or prescribed private funds (PPFs), can supply crucial funding boosts to social projects in Australia. But, to date, this sector has only seen fledgling growth.

“Six hundred PPFs is a very low number rela­tive to the wealth that’s out there,” Christopher Thorn, GoldmanSachs JBWere executive direc­tor of philanthropic services, says, regarding the number of PPFs in Australia, which collectively hold more than $1 billion in assets.

Between 2002 and 2005, they distributed $110 million in grants; marginally more was donated into the funds during the same period.

Warming to the subject

In surveys involving 66 advisers, the CPNS found that in 2002, 14 percent of advisers offered philanthropic advice. In 2005, this proportion rose to 44 percent. A “triple win” is on offer for advisers working in this space, Thorn says: planners win fur­ther business and, perhaps, a pathway into a client’s estate plan; clients receive advice on strategic giving; and the community sector benefits from inflows, which it always craves.

Chris Cuffe, the executive director with Social Ventures Australia, says that while the Australian community sector, including member services clubs, turns over about $50 billion each year, the average non-profit holds only three-to-four months’ worth of working capital.

“They have continuous capital raising needs,” he says.

Compounding funding shortfalls is the amount and, sometimes, obscurity, of non-profits in Aus­tralia. According to Cuffe, there are approximately 700,000 non-profits in Australia. Of these, about 25,000 are DGRs. Donors are often swamped by funding applications.

“There are more people after the same money,” Aitkins says. “It’s the 99:1 rule. There’s more donor fatigue.”

In the corporate world, employees are aware that the output of business is money, Cuffe ex­plains. “In the non-profit world, it becomes other things.”

The term ‘non-profit’ is inaccurate and can be insulting, Cuffe says, since “the currency of the business is different … it builds services for the community. A better term would be ‘community benefit organisation.”

Cuffe says a common database charting all non-profits would be mutually helpful. At the moment, the sector is “very 2-D”, and “the under-workings of it are almost impossible to work out”.

For their part, donors could hone their philan­thropic aims, Aitkins says: “if we were very serious, we’d give to Darfur. But instead we give it to the local art gallery.”

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