The first small steps to giving

The philanthropic universe is tilting. There are no longer clear lines between business, charities, not-for-profits and those who give. Those groups receiving funds realise they are in a competitive market, they must be able to demonstrate the difference they make.

Those who give – whether corporations, groups or individuals – increasingly want to see the result their gift actually delivers. Philanthropy is no longer anonymous, with no expectation or recognition.

"If you begin by taking a few small steps, you'll soon find what resonates with you personally and, before you know it, philanthropy will become a habit and a passion."
Antonia Ruffell, CEO of Australian Philanthropic Services

In this series, BlueNotes talks to prominent figures and representatives of organisations about giving, why they give, how they give, how they started, how they monitor their social impact.

Today, in the third edition, BlueNotes speaks to Antonia Ruffell, the CEO of Australian Philanthropic Services.

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Andrew Cornell, BlueNotes: An increasing number of people want to be involved with philanthropy and to donate but often the first question is simply, “how do you begin?”

Antonia Ruffell: Philanthropy in its broadest sense includes the giving of time, money and expertise.

There are all sorts of ways in which you can help the wider community. You could consider volunteering your time and skills, donating money directly to a charity, setting up a structure for your giving (such as a private ancillary fund or sub-fund in a public ancillary fund) or leaving a bequest in your will. 

The most important thing is simply to get started. Like anything in life, if you begin by taking a few small steps, you'll soon find what resonates with you personally and, before you know it, philanthropy will become a habit and a passion. 

AC: And once you have started, how would you choose a cause? 

AR: Andrew Carnegie, widely regarded as the father of modern philanthropy, said it was "easier to make money than it was to give it away well". 

Philanthropy is hugely personal and making decisions about which charities to support can be daunting. There are so many worthy causes out there, it is worth taking the time to think about what issues you're most passionate about and the ways in which you want to have a positive impact on the community.

Many people give to charities that have touched their life in some way and increasingly people don't just want to write a cheque but want to be involved in the organisation or project they are supporting and help in ways that extend beyond money alone, such as providing networks and expertise.   

Things can get even trickier when you choose to involve other family members in giving decisions but this can also be incredibly rewarding. The approach families take varies enormously. 

Some are united around a common issue or cause while others allocate a portion of money to each family member, encouraging children to do research on charities and put their proposal to other family members to agree which grants the family should make. 

AC: You talk about a structured approach. Are there particular structures? 

AR: An increasingly popular way is to establish a family foundation, most commonly a private ancillary fund (PAF). A PAF is a simple, efficient and cost-effective vehicle that helps an individual, family or organisation take a more planned approach to their giving. 

Put simply, the founder donates capital into their PAF (normally starting with around $500,000) and gets a tax deduction for the donation. The capital is invested and a minimum of 5 per cent of the value of the PAF assets is distributed as grants to charities each year. 

As well as providing a structure around giving, establishing a PAF can help to bring different family members together and embed charitable values across the generations, whilst benefiting the community over the long-term. 

AC: Apart from structure, are there other advantages to a PAF? 

AR: For many people, charity is a bit of an ad hoc, end of the financial year thing which then can be a bit rushed and unplanned. 

Because a PAF introduces the discipline of having to distribute money to charity every year, it ensures more deliberate choices. You can start to think five, 10, 20 years ahead, not just one year. Many PAF founders also talk about the important role their PAF plays in bring the family together around a shared purpose. The whole conversation around your philanthropy becomes richer. 

There are tax advantage as well. But I always remind people, once you put money into a PAF, you can’t get it back. You have become a custodian of the funds that are held for community benefit over the long-term. You have control over what you do with those funds but you no longer own the assets. 

AC: Are there alternatives if a PAF doesn’t fit your plans? 

AR: If a PAF isn’t right for you, there is also the option of opening a sub-fund in a public ancillary fund, such the Australian Philanthropic Services Foundation

This is a communal philanthropic structure and is less complicated and less time-consuming than a PAF as the trustee already exists and handles the administration, investment and compliance, freeing up donors to focus solely on making recommendations on how grants should be distributed to the community. 

A sub-fund in a public ancillary fund can normally be established within 24 hours with a donation of around $50,000. 

AC: There is much talk of social impact investing, of bringing corporate metrics, for example return on investment into philanthropy. But is that appropriate? Do they work? 

AR: Investments that are intended to create positive social impact as well as delivering a financial return are referred to as impact investments. 

One of the great things about impact investments is that they allow people to have an impact over and above their grant-making. 

Many philanthropists in the US focus on ensuring their investments and the corpus of their foundation, as well their grants, are having a positive impact and this is a trend that's set to increase here. 

AC: So how do you judge if you are making a difference? 

AR: This will depend on what you want to achieve. You need to spend the time upfront thinking about the issues or causes you want to address, then narrow your focus, and have a clear vision of the change you want to see. 

For example, if the issue that you feel passionate about is supporting women with breast cancer, take the time to think about what matters to you. 

Do you want to focus on prevention and encouraging health promotion and screening initiatives? Would you like to support women who currently have cancer and their families? 

Do you want to fund hospital treatment and equipment? Or would you like to invest in medical research to find a cure?

Then think about what progress in the area you choose will look like. 

AC: Surely there are, for want of a better term, “positive externalities” with philanthropy that are not captured on spreadsheets. How do you measure those? 

AR: Absolutely. As grant-making professionals, we always looks for the 'X factor'. 

We do our due diligence on a charity, looking at factors such as financial health, clear strategic direction, evidence of social impact and strong leadership. However, you can't underestimate the importance of developing personal relationships and visiting organisations. 

As your knowledge and experience develops, you soon start to get a sense for which projects are going to struggle and which ones are going to fly - and it isn't something you can see from simply studying a grant application or annual report.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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